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The Connection Between Quality and Revenue

In nearly all provider segments of health care, revenue maximization and integrity are directly tied to compliance and quality ratings. In home health, submission of quality data via the OASIS (known as HH CAHPS) is required.  Agencies that fail to submit the required data experience reimbursement reductions of 2%.  For SNFs, reporting of QRP data is required. Failure to meet the 80% threshold reporting requirement on quality measures equals a 2% payment reduction (beginning October of 2019).  The cut-off date to meet the compliance level for the period 10/1/18 to 12/31/18 was May 15, 2019; too late for facilities that under-performed.

Many SNFs (73%) are currently experiencing Medicare reimbursement reductions due to poor quality performance with respect to 30 day re-hospitalization results. Combining this reduction with a potential QRP reduction of another 2% by October 1, certain facilities will experience a 4% reduction in Medicare payments.  For an industry already strapped financially, this could be a nail in the coffin.  Instead of the inevitable conclusion however, the penalties are wholly avoidable.

Yet not robust, the data reporting via CMS (using facility supplied data) is sufficient enough to trend performance weakness/strengths and thus, the revenue connections. By revenue connections, I mean the places where revenue can be made or lost.  And, while the CMS data is not real time, it is close enough to give an SNF a basis by which to track and thus trend, the key data markers.  For instance, facilities can research and compare their short-stay and long-stay measures in the following categories.

  • Hospital admission/re-admissions
  • ER/ED utilization/transfers
  • Falls with injury
  • Decline in functional status
  • Improvement in functional status
  • Pressure injuries (not pre-admission acquired)
  • Spending per Medicare beneficiary
  • Infections

Each of the above have unique implications on revenue and expense; singular and combined. The revenue and expense connections follow.

Today, quality data management in an SNF setting is an integral component of revenue maximization and revenue integrity. Consider the following data implications tied directly to reimbursement (increases or decreases due to data management, reporting, and interpretation).

  1. Value-Based Purchasing: The focus is on hospital readmissions within a thirty day window post SNF admission. The data is now publicly displayed in an SNF’s QM section on the Five Star report. Poor performance on this measure (below the standardized benchmark) creates a reimbursement penalty equal to 2%. Conversely, exceptional performance creates a bonus payment of up to 1.5%
  2. Quality Reporting Program: SNFs need to report via the MDS, quality measure data. Simply failing to report at the 80th percentile level (not what data, just reporting the data) equates to a 2% reimbursement reduction beginning October 2019.
  3. PDPM: It’s all about the assessment and coding come October 1. Facilities need to gather data, starting at the hospital end, to paint the best, clearest picture of the patient and his/her care needs. The focus is on capturing all levels of diagnoses and functional status. Miss the data, miscode the data, or inadequately apply the data and the result can be, a significant payment level gap (under-reimbursed) via a lower than actually applicable, per diem amount. Being able to analyze the clinical data and apply it to the MDS can mean tens of thousands of dollars…one way or the other.
  4. Referrals, Narrow Networks and Market Share: SNF revenue is totally a function of beds occupied by the best payer source. Facilities that do well know this. Being in a position to garner the most referrals connected to the best payers requires a posture of exceptional quality, demonstrated via data. The best SNFs lever their data to achieve maximum occupancy and referrals. Narrow networks in most markets today are eliminating poor performing SNFs from their preferred referral lists, some with Bundled Payment programs completely eliminating certain SNFs (poor performance) as options. As SNF performance data in terms of survey compliance, staffing levels, re-hospitalization rates, and quality measures/outcomes is public, comparisons among facilities is common. The best stand out because their measures are better than others and thus, they gain the preferred referrals and the revenue in-turn.

The simplest conclusion for an SNF today is quality and performance data equals revenue: either maximized or reduced. The connection however, is not just at the top-line. The impact flows to the bottom line as well. Consider the following elements as bottom-line impactful when it comes to quality and data.

  1. Insurance premiums for liability coverage are risk-rated. If the SNF quality is low, the premium is higher as is the deductible. Higher expenses here reduce margin.
  2. For an SNF looking to borrow money, banks and lenders today impute risk/poor quality into the lending terms and thus, into interest rates and debt to equity levels (how much can be borrowed). Higher interest expense reduces margin.
  3. Recruitment and retention costs for employees are directly influenced by quality performance. Study after study demonstrates that employees prefer to work for high-performing organizations and stay in jobs where the quality is valued and high. Given that labor is the greatest cost an SNF bears, being as efficient as possible in the recruitment and retention arena enhances margin.
  4. Survey performance directly impacts the bottom-line, especially where fines and often, resultant legal action are involved. Today, the survey format is heavily influenced by facility quality data – the QIS (Quality Indicator Survey) protocol. Poor quality and thus, poor survey performance can lead to enormous fines. An Immediate Jeopardy citation comes in minimally (fines), at $1,000 per day for each day, the jeopardy remains (from the date the jeopardy situation began). The Plaintiff’s Bar scans public survey data and recruits negatively affected residents and families as litigants in cases involving sub-standard care and potentially, claimed wrongful and preventable death. The result, for substandard performance, is hugely negative to the bottom-line and thus, margin.

The message or take-away for providers is that data matters – at the top-line and at the bottom-line. Facilities must know their quality data, have processes in-place to monitor the data, report the data and assure data integrity if they wish to maximize their revenues and ultimately, their margin. It is easy to do with proper knowledge and planning and conversely, too easy without, to experience revenue reductions due to poor performance and poor data management.

Revenue maximization and integrity is not a vacuum concept. Complexity surrounds the ultimate billing and recovery/payment for care provided to patients. Medicare today exists in a pay-for-performance environment and the performance expectations are increasing. The performance metrics are quality measures and the same uniquely, controllable at the facility level. From staffing to re-hospitalizations to falls, infections, survey results (remember, the new SNF survey is principally data driven in the QIS format) to length of stay, ICD-10 codes and patient satisfaction measures, facilities that mine their data, know how it relates to care and use a QAPI process to monitor and improve their outcome numbers, will succeed from a revenue perspective and a market share perspective.

Catch this session (and me) and other great sessions at the Revenue Integrity Symposium in October (15-16) in Orlando!

http://hcmarketplace.com/revenue-integrity-symposium?webSyncID=5c56a212-852b-635d-aad0-430216e04a7e&sessionGUID=c59e2226-ca5d-5741-7187-a3390bc28582

 

 

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June 14, 2019 Posted by | Uncategorized | , , , , , , , , , , | Leave a comment

Governance and PDPM: What Boards Need to Know

I spend a good (ok, large) amount of time working with non-profit and privately held health care, post-acute and seniors housing organizations.  Nearly all of my work is at the C-level and above and frankly, my career as an executive was there as well (25 plus years).  Boards/governance bodies play a key role in the success and/or failure of an organization.  The same also mitigate or increase risk to the organization, depending on their behavior.   I have witnessed bad boards absolutely devastate once great, market dominant organizations simply through their failure to stay structurally in-tune with industry trends, market conditions, public policy, and patient care and service requirements (from compliance to outcomes and satisfaction).  Naïve, insular and narrowly focused Boards have taken down some of the largest and most prominent companies in any industry.  Health care, with its unique ties to government programs (Medicare, Medicaid, etc.) and regulatory structures, requires a governance model that reflects the industry challenges and mitigates the risks inherent in regulated, reimbursed health care.

Boards have as their primary duty, a fiduciary obligation to the organization.  This duty is best described as an obligation to act and behave solely, in the best interest of the organization and its shareholders/stakeholders.  In non-profit parlance: best interest in the mission of the organization.  To be an effective fiduciary then, the Board must seek to eliminate conflicts of interest and to learn about the risks or potential harms that are inherent to the organization via the business it is in.  The common definitions associated with a Board’s fiduciary obligation is the duty of care, the duty of loyalty and the duty of obedience.  Simply,

  • Duty of Care:  To act as a prudent person and to be engaged in their duties as Board members in the preservation and protection of the organization.  The actions include attending meetings, reading, questioning, and obtaining industry education
  • Duty of Loyalty: Removing self promotion and personal interest (including personal business interest) from Board duties/responsibilities.  Acting only in the collective best interest or the organization and its mission/shareholder/stakeholders.
  • Duty of Obedience: To assure the organization is compliant with all federal, state and local laws and is conducting business in a compliant manner with other rules and regulations as applicable (e.g., bond/debt  covenants).

With PDPM about to change the entire Medicare fee-for-service reimbursement program for SNFs while presenting broader payment change implications (down the road) for Medicare Advantage and even Medicaid (note that Medicaid payment systems always trend-off Medicare programs), Boards need to start NOW to understand PDPM and its certain, organizational impacts.  Each of the above “duties” are in-play but most acutely, the duty of care and the duty of obedience.

To maintain clarity and a certain amount of brevity and readability, below is my Board education/implementation framework for PDPM.

  1. What is PDPM? Explain at a macro-level what the new program impacts (Medicare A, fee-for-service) and how it works compared to the current Medicare RUGs-based system.  I would avoid the jargon and technical while sticking to the core differences.
    • Differences in patient classification and payment level assignment
    • Differences in the role of therapy and the payment thereof
    • Variable payment differences
    • Clinical incentives and behavioral changes
  2. PDPM Impact for the Organization, Part 1? What should the Board know about how PDPM will impact the organization.
    • Revenue impact?  The Board should see and understand, quantified revenue impacts.  Note: Organizations should be modeling the changes NOW to their reimbursement
    • Any technology changes and investments that are necessary prior to October 1
    • Any staff changes, staff education costs, need to budget for consultants, etc.
    • Changes in therapy contracts or therapy provision necessitated by PDPM
    • Changes in care delivery and why such as more group and concurrent therapy, shorter lengths of stay, possible change in clinical acuity
  3. PDPM Impact for the Organization, Part 2? What the Board should know that doesn’t change under PDPM?
    • No changes to other payer sources and programs expected (e.g., Medicare Advantage)
    • No compliance or regulatory changes (survey regulations)
    • No other program changes such as QRP, VBP, etc.
    • No impact to other services or programs the organization may have (home health, hospice, Assisted Living, Pace, etc.)
  4. PDPM Risks: What to Monitor? The Board needs to assure that the organization’s preparation for PDPM and the changes will be implemented and managed such that the organization will stay compliant with all applicable laws, rules and requirements.
    • Will the revenue changes impact bond/debt covenants (negatively)?
    • How will therapy provision be monitored, especially if therapy is provided via a contractor?  CMS has warned that drastic changes in minutes provided and/or treatment levels (from almost exclusively 1 to 1 to group and concurrent) will lead to targeted audits and potential penalties
    • Revenue changes not adequately predicted to the Board
    • Patient satisfaction changes (negative).  PDPM places a premium on efficiency of stay, especially given the variable payment dynamic.  Will care be complete and patients satisfied or will corners be cut adversely impacting satisfaction?
    • Compliance changes (adverse) or performance changes adverse due to PDPM. Has the organization’s performance metrics such as rehospitalizations, falls, infections rates, etc. changed? Any adverse survey changes or serious citations occurred? The Board must be actively engaged in QAPI and should be monitoring quality of care data
    • Budgets and investments met/made to assure smooth and supportive transition to PDPM
  5. PDPM: Other? The Board should require periodic updates across an extended period of time on how the transition to PDPM has impacted the organization, positively and negatively.  Similarly, as with all other major industry changes, PDPM should impact strategic plans and the same, should adjust for the impact PDPM will have.

Given that PDPM will implement October 1, organizations that haven’t at least begun Step 1 above are behind.  Step 2 should occur ASAP, especially since many organizations will likely see some negative revenue impact, if they have a disproportionate Medicare book of therapy of ultra-high RUGs and longer lengths of stay.  Any organization with a therapy contract (not employed, in-house) will need to get into discussions NOW regarding PDPM and their contract terms.  PDPM changes are sweeping and shouldn’t be ignored and/or, under sold and misconstrued to the Board or governing body.  The risks are too great and the organizational peril, too high.

 

January 31, 2019 Posted by | Uncategorized | , , , , , , , , , | Leave a comment

PDPM and Therapy Contracts Webinar

On February 6 at 1:00 PM eastern, my rehab specialty partner Dean Freeland, PT and  I will be conducting a webinar on PDPM and Therapy.  This live (and recorded) event will cover the new SNF Medicare fee-for-service reimbursement program (PDPM) going into effect on October 1 of this year.  As the new system substantially changes how SNFs are paid under Medicare, we will review preparation strategies and contract strategies for SNFs that use rehabilitative therapy contractors for PT, OT, and Speech.  Even if your SNF is using in-house/employed therapists, this webinar is worthwhile as we will cover the mechanics of payment categories and the nuances of PDPM that are critical to capturing the proper levels of reimbursement.

To participate in this event/program, click on the link below for registration details.  Hope you all can attend!

http://hcmarketplace.com/pdpm-therapy-contracts

 

January 28, 2019 Posted by | Uncategorized | , , , , , , , , , , | Leave a comment

The Real Impacts of Poor Quality, Inadequate Compliance and Weak Risk Management

A number of interesting information drops occurred this past week or so reminding me that from time to time, the obvious isn’t always so obvious.  The seniors housing and skilled care industry today is going through a rocky patch.  A solid half of the SNF industry is severely hurting or struggling mightily due to Med Advantage, softer demand, pervasive reliance on Medicaid for census, labor shortages, rising wage pressure, tight Medicare reimbursement, new regulations, etc. (I could elaborate for a stand-alone article).  While not as pervasive in its struggles as the SNF industry, Assisted Living is facing challenges due to softer census, too much capacity, rising resident acuity, labor costs and shortages and gradually increasing regulatory scrutiny.  The relative strength in the overall seniors housing and post-acute sector is home health and independent housing.  Notice, I did say relative as home health demand is good but regulatory over-burden is still present along with tight reimbursement.  Home health is also experiencing labor challenges, the same as SNFs and ALFs.  The relative strength that is found in independent housing tends to be more on the market and sub-market rent side.  Many, many high-end providers are still struggling with census challenges and soft demand in certain markets.

As I have written and counseled many times to investors and clients alike, there is something to learn from the national trends but health care and seniors housing is still, a local reality.  What this means is that in spite of some rocky water for the industry, there are providers that do well and are bullish about their fortune in their respective industry segments.  Not to seem too convoluted, the national trends matter but as I like to think, in the context of what they truly mean.  In this regard, what they truly mean is how the trends impact providers on a macro basis as well as on a micro, behavioral basis.

As I started, this past week or so included some interesting information drops.  The first and not too surprising, is another alarm from a major, publicly traded provider organization that it was on the narrow ledge to failure.  Five Star Senior Living provided notice that given its financial condition now and as forecasted, it would not be able to meet its continuing obligations in the form of debt or timely payment of operating expenses.  When I say half the SNF industry is in battle to survive, I’m not kidding.

In unrelated drops, CNA (the major national commercial insurance provider) released its 2018 Claims Report for Long-Term Care/Senior Living.  The claims in this case are liability related.  Following CNA’s release, Willis Towers Perrin (major insurance brokerage and consultancy firm) provided their outlook for liability insurance noting that Long-Term Care and Seniors Housing should expect liability premium increases of 5% to 30%.  Anecdotally and unrelated, we are seeing steep property/casualty increases in the industry as well due to extreme weather losses over the last twelve to eighteen months.

While not absolute but substantial in nature, there is a direct correlation between providers that are struggling and the quality of care and service they provide to their patients.  The core competencies required to provide superb care are tied directly to compliance and risk management.  I have never seen an organization that delivers excellent care have poor compliance trends (billing, survey, other) and weak risk management leading to high levels of worker’s comp cases, lawsuits, liability insurance claims, etc.  Lately, there is the same correlation developing between quality and financial results.  As more quality payer source referrals and higher reimbursement with incentive payments connect to patient care outcomes, a gap is evident between the providers that are thriving and those that are dying.  That gap is the quality divide.

There is a spiral effect that is visible today in the SNF industry.  This effect has been visible for some time in hospitals.  It occurs as follows.

  • Care delivery is inconsistent and in most cases, not great.  Service is the same.
  • Complaints and survey results demonstrate the same and are reflected in star ratings.
  • Consumers and referral sources catch wind that care is not good.
  • Staff turnover accelerates, including key personnel that take with them, a disparaging message regarding care.
  • Quality mix erodes slightly.  Medicaid census increases as the “next best” alternative to an empty bed.
  • Financial results start eroding and losses occur or come into view.  Cash margins are getting tighter.
  • Expenses become an issue and cuts are necessary.  The cuts are incongruous to improving care.
  • With limited resources, quality suffers even more.  No money is available for capital and equipment upgrades.  Staff morale suffers and staffing levels are lower.  Productivity wanes as morale is poor and patient care follows.
  • Survey results are very poor and fines now happen.  The fines are expensive, removing more resources away from patient care.
  • Costs are growing rapidly related to higher insurance premiums, poor worker’s comp experience, unemployment costs, turnover, and legal costs to defend the facility.  These costs are removing resources away from patient care.
  •  Finally, because the resources are too depleted to make the necessary changes to rebuild quality, staff levels, etc. and no lender is available to front any more capital, the enterprise collapses.  The names are becoming familiar….Signature, ManorCare, Five Star, Genesis, Kindred are all SNF providers whose future is extinction or “almost”.

Arguably it takes money to have and deliver quality.  Equally as arguable today is that without quality, money won’t be made sufficient enough to stave-off failure due to…poor quality.  When quality isn’t the primary objective, compliance and risk management work as dead weights that the organization must carry; and the weight increases over time.  Why this isn’t obvious yet in the post-acute and seniors housing industry is beyond me.  An analogy that  I have used time and time again is the restaurant analogy.  Successful restaurants are laser-focused on their products – food and service.  They know that poor marks in either category or an outbreak of food borne illness can be death to their livelihood. In a crowded market of diners, price or value ties to quality and experience across a myriad of options.  What is common among the restaurants that succeed is their quality meets and exceeds, the customer’s realization of value (getting equal to or more satisfaction for the price paid).  When this occurs, money flows in increments sufficient to reward investors, pay employees, invest in equipment, and to reinvest in the products and services that customers buy.  Simple.

Seniors housing and post-acute care aren’t too different or disparate from the restaurant analogy.  The market is crowded with options…too many actually. Yes, the customer relationships are a bit different but the mechanics and economic levers and realities identical.  Providers that give great care, equal to or higher than the price points/reimbursement levels are GAINING customers via referrals.  The customers they are gaining are coming with good payment sources.  Money in the form of cash flow is strong enough to invest in plant, property, equipment and staff.  Doing so reinforces quality and service and allows the referral cycle to optimize.  As the market continues to shrink in terms of number of providers due to failure, the few that are exceptional continue to see their future and fortune improve.  Again, simple.

What we know is the following and the message should be clear today for those who still can control how they approach and manage their quality and customer experience.

  • Poor quality costs money disproportionately more than the dollars required to deliver “high quality”.  The costs are erosive and ongoing.
    • Higher insurance premiums
    • Poor compliance results with fines (the federal fines today are steep and immediate for SNFs)
    • Higher capital costs (yes lenders are now looking at quality measures as a measure of credit risk)
    • Increased litigation risks which when realized, contribute to higher insurance premiums.
  • All of the reimbursement incentives today and going forward are only available to providers that can deliver high quality, efficient patient outcomes.  Value-based purchasing rewards good care (limited rehospitalizations) and punishes poor care.  The impact is just being seen today and in the years forward, the impact is greater – both ways (reward and punishment).   The same is true under the new and forthcoming, case-mix payment models.  The high quality, adept providers will be able to provide the care rewarded highest, under these new payment models (PDPM, PDGM).  Those that don’t have the clinical infrastructure will languish.
  • Referrals today are more and more, skewed toward quality providers.  With hospitals and narrow networks looking for select post-acute providers that won’t increase their risks in value-based purchasing or bundles/ACOs, poor providers in terms of quality are increasingly seeing diminished referrals.
  • The Plaintiff’s Bar is watching the SNF and seniors housing industry carefully and with optimism.  The CNA report I referenced includes these snippets.
    • 22.6% of closed claims relate to pressure injuries (an almost entirely avoidable negative outcome).
    • Death from or related to pressure injuries is the highest average claim by cost.
    • 14 out of the 15 highest cost claims occurred in for-profit facilities.
    • Assisted Living claims cost more on average than SNF claims.
    • Falls continue to represent the lion share of liability claims – 40+%.  The vast majority tie to SNF care.
    • The frequency of claims is increasing.
    • Independent Living is not immune.  The report contains claim data on fall and pressure injury cases from Independent Living.

While no organization is immune from a law suit, the reality remains that organizations with exemplary quality history, high satisfaction levels, and processes that focus uniquely on the elements of great care and service (staffing levels, staff competency, good management, proper equipment, IT infrastructure, etc.) provide less of a target, if any.  No matter where, negative outcomes still occur but in “quality” organizations, they are an exception.  Because care is primary and service right behind, there is far less of a motivation for patients and families to litigate as by reason, the organization wasn’t negligent.  Again, the connections are rather ‘simple’.

November 16, 2018 Posted by | Assisted Living, Home Health, Senior Housing, Skilled Nursing | , , , , , , , , , , , | Leave a comment

Home Health Final Rule: Rate Increases plus PDGM

While I was in Philadelphia speaking at LeadingAge’s annual conference, CMS released its 2019 Home Health Final Rule.  As I wrote in an earlier post regarding the proposed rule, the topic of interest was/is a new payment model – PDGM.  As has been the case across the post-acute industry, CMS is advancing case-mix models crafted around a simplified patient assessment, less therapy oriented more nursing/medically balanced.  The industry lobbied for modification or delay in PDGM, primarily due to some underlying behavioral assumptions CMS embedded in the proposal (more on this in later paragraphs).

The most relevant, immediate impact of the final rule is rate increases (finally) for the industry – 2.2% or $420 million.  The industry has experienced rate cuts and rebasing consistently since 2010 as a response to fast growth and high profit margins exhibited by companies like Amedysis (the center of a Congressional hearing in 2011).

PDGM is slated to take effect “on or after January 1, 2020”.  The ambiguity in this language is worth noting as there are some that believe modification, even delay is possible.  Compared to the proposed rule, the final rule includes 216 more Home Health Resource Groups due to bifurcating Medication Management Teaching and Assessment from previous group alignments. The following key changes are a result of PDGM.

  1. As with PDPM on the SNF side, PDGM removes the therapy weight/influence separately from the assessment and payment element weights for HHAs.  The clinical indications or nursing considerations are given more weight along with patient comorbidities.
  2. Coding becomes a key factor in payment mechanics, particularly diagnoses and co-morbidity.
  3. Functional status is given a higher weight, as is the case today with all post-acute payment model reforms.
  4. Episode lengths are halved – down from 60 days (current) to 30 days.
  5. PDGM is budget neutral meaning that when fully implemented,, the cost to the Federal government for Medicare HHA payments in the aggregate is no greater than current (inflation adjusted for time).  To get to budget neutrality, certain behavioral assumptions about provide reactions to the changes are used.  As one would suspect, this is a subject of concern and debate by the HHA industry.

The behavioral assumption issue referenced in #5 above is an imputed reality in all payment model changes.  In fact, it is an economic model necessity when attempting to address “how” certain changes in reward (payment) will move activity or behavior toward those places where reward or payment is maximized.  It is a key economic behavioral axiom: What get’s rewarded, get’s done.

In effect, CMS is saying that budget neutrality is achieved for a 30 day episode when payments for the episode equal $1,753.68.  Getting to this number, CMS assumed that agencies would react or respond quickly to payment changes (areas where increases are found) in co-morbidity coding, clinical group assignment and reduction in LUPA cases.  However, if CMS models slower reactions or limited reactions by the industry (operating norms as current persist), the payment impact is an increase of 6.42% or $1,873.91.  Because budget neutrality is mandated concurrent with PDGM, the concerns providers are raising relates to how payments will ultimately be determined and when if necessary, will adjustments be made IF the anticipated behavioral changes don’t manifest as factored.  Simply stated, this collective concern(s) is the reason the industry continues to lobby for delay, more analysis and further definitional clarity with the PDGM funding and payment assumptions prior to implementation.

One final note with respect to PDGM dynamics.  Readers of my articles and attendees at lectures, webinars, other presentations have heard me discuss overall post-acute payment simplification and the movement within Medicare reimbursement to site neutrality.  PDGM is an interesting payment model from the standpoint that it parallels in many ways, the PDPM movement for SNFs.  It is diagnosis based, more clinically/nursing driven than the previous system and more holistic in capturing additional patient characteristics (co-morbidities) than before in order to address payment relevance. With assessment simplification and a growing focus on patient functional status at various points across a post-acute global episode (from hospital discharge to care completion), an overall framework is becoming more visible.  Expect continued work from CMS on payment simplification, more calls from MedPac for site neutral payments for post-acute care. The policy discussions are those that reinforce payment that follows the patient, based on patient clinical needs, unattached to any site dynamics or locations, save perhaps a coding modifier when inpatient care is warranted to account for the capital and equipment elements in the cost of care.  When looking globally at the overall health care payment and policy trend that is occurring sector by sector, the future of payment simplification and movement to site neutrality is certain.  One question remains: By when?

November 6, 2018 Posted by | Home Health, Policy and Politics - Federal | , , , , , , , , , , , , | Leave a comment

Site Neutral Payment Update

In early October, I wrote an article regarding CMS 2019 OPPS (outpatient PPS) proposed rule, specifically regarding site neutral payments.  The purpose of the article was to address the site neutrality trend that CMS is on, streamlining payments to reduced location of care disparities for the same care services.  Succinctly, if the care provided is technically the same but the costs by location are different due to operating and capital requirements, should payments vary?

Yesterday, CMS pushed forward the OPPS final rule, maintaining the concept of site neutrality despite heavy hospital lobbying.  The gist of the rule is as follows.

  • Hospital off-campus outpatient facilities will now be paid the same as physician-owned or independently owned/operated outpatient facilities for clinic visits.  No longer will there be a hospital place-of-care premium attached to the payment.
  • Off campus is defined as 250 yards or more “away” from the hospital campus or a remote location.
  • For CY 2019, the phase-in/transition is a payment reduction equal to 50% of the net difference between the physician fee schedule payment for a clinic visit and the same payment for a hospital locus clinic or outpatient setting.  The amount is equal to 70% of the OPPS (hospital outpatient PPS rate).
  • For CY 2020, the amount paid will be the physician fee schedule amount or 40% of OPPS rate, regardless of location.
  • Final Rule text is here: 2019 OPPS Final Rule

What CMS noted originally as the need stemmed from a Medpac report where a Level 2 echocardiogram cost 141% more in a hospital outpatient setting than in a physician office/clinic setting. This final rule is part of an expected and continuing trend to simplify and streamline payments among provider locations.  Similarly, CMS is following a path or theme laid forth by Medpac concerning payments tied to care services and patient needs rather than settings or places of care.  The 2019 OPPS payment change is a $760 million savings in 2019 expenditures.

Finalization of the OPPS rule with site neutral payments cannot be overlooked in significance. As I wrote in the October article, this is a harbinger of where CMS and Medicare policy makers are heading.  Hospitals lobbied hard and heavy against this implementation claiming a distinction in payment was not only required by dictated by patient care discrepancies.  Alas, there appeared to be no common ground found within that argument.

I suspect now that the door is opened just a touch wider for site neutral post-acute payment proposals to advance.  Under certain case-mix categories, there truly is very little difference in care delivered and no difference in outcomes (adversely so) between SNFs, IRFs, and LTAcHs yet there is wide payment difference.  With lengths of stay declining and occupancy rates the same (declining) among these provider groups, CMS will no doubt (my opinion) push forward a streamlined proposal on site neutral payments in the next three years.  I anticipate the first proposal to concentrate almost exclusively, on SNFs, IRFs and perhaps, some home health case mix categories.  If hospitals can’t budge CMS away from the site neutral path, there is zero likelihood that IRFs and LTAcHs can divert CMS from site neutral proposals in the near future.

 

November 2, 2018 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , | Leave a comment

Don’t Miss Event: Webinar on Reducing Rehospitalizations

A week from today, I am conducting a webinar on reducing/avoiding unnecessary rehospitalizations.  With SNFs just experiencing the VBP impact (Medicare incentive or reduction) starting October 1, this event is extremely timely.  I’ll cover the health policy and reimbursement implications regarding rehospitalizations plus new QRP and QM updates.  I’ll also touch on PDPM implications.  Some great tools are available for attendees as well.

Register here at a super price – $59 for the session and the tools!

http://hcmarketplace.com/reducing-readmissions

 

November 1, 2018 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | Leave a comment

Post-Acute, Site Neutral Payment Upcoming?

In the 2019 OPPS (outpatient PPS) proposed rule, CMS included a site neutral payment provision.  With the comment period closed, the lobbying (against) fierce, it will be interesting to see where CMS lands in terms of the final OPPS rule – maintain, change, or abate.  The one thing that is for certain, regardless of the fate of this provision, site neutral proposals/provisions are advancing.

CMS has advanced a series of conceptually similar approaches to payment reform.  Site neutral approaches are a twist on value-based care as they seek to reward the efficiency of care by de-emphasizing a setting value.  This is loosely an approach to “payment follows the patient” rather than the payment is dictated by the locus of care.  Assuming, which isn’t always in evidence, that for many if not most outpatient procedures, the care required is the same such that one setting vs. another isn’t impactful to the outcome, then a site neutral payment seems logical.  Managed care companies have been using this approach overtly, attaching higher cost-share to certain sites or eliminating payment altogether for procedures done in higher cost settings. In the OPPS proposal, the savings is rather substantial – $760 million spread between provider payments and patient savings (deductibles).  To most policy watchers, there is a watershed moment possible with this proposal and its fate.  The fundamental question yet resolved is whether hospitals will continue to have a favorable payment nuance over physician practices and free-standing outpatient providers.  Hospitals arguing that their administrative burden and infrastructure required overhead, combined with patient differences (sicker, older patients trend hospital vs. younger, less debilitated patients trending free-standing locations), necessitates a site different payment model (such as current).

In the post-acute space, payment site neutrality has been bandied about by MedPAC for some time.  Up to now, the concept of payment site neutrality has languished due to disparate payment systems in provider niches’.  SNFs and their RUGs markedly different from Home Health and its OASIS and no similarity with LTACHs in the least. Now, with post-acute payments narrowing conceptually on “patient-driven” models (PDPM and PDGM) that use diagnoses and case-mix as payment levers, its possible CMS is setting a framework to site neutral payments in post-acute settings.

In its March 2015 report to Congress, MedPAC called for CMS to create site neutrality for certain patient types between SNFs and IRFs (Inpatient Rehab Facilities).   While both have separate PPS systems for payment, the IRF payment is typically more generous than the SNF payment, though care may look very similar in certain cases.  For IRFs, payment is based on the need/extent of rehab services then modified by the presence or lack of co-morbidities.  IRFs however, have payment enhancements/ additions for high-cost outliers and treating low-income patients; neither applies in the SNF setting.

The lines of care distinction between the two providers today, certainly between the post-acute focused SNFs and an IRF, can be difficult to discern.  For example, both typically staff a full complement of therapists (PT, OT, Speech), care oversight by an RN 24 hours per day, physician engagement daily or up to three times per week, etc.  Where IRFs used to distinguish themselves by providing three hours (or more) of therapy, SNFs today can and do, provide the same level.  As a good percentage of seniors are unable to tolerate the IRF therapy service levels, SNFs offer enhanced flexibility in care delivery as their payment is not predicated (directly) on care intensity.  What is known is that the payment amounts for comparable patient encounters are quite different.  For example, a stroke patient treated in an IRF vs. an SNF runs $5,000 plus higher.  An orthopedic case involving joint replacement differs by $4,000 or more.  Per MedPAC the difference in outcomes is negligible, if at all.  From the MedPac perspective, equalized payments for strokes, major joint replacements and hip/femur related surgical conditions (e.g., fracture) between IRFs and SNFs made sense, at least on a “beta” basis.  With no rule making authority, MedPac’s recommendation stalled and today, may be somewhat sidelined by other value-based concepts such as bundled payments (CJR for example).

So the question that begs is whether site neutral payments are near or far on the horizon for post-acute providers.  While this will sound like “bet-hedging”, I’ll claim the mid-term area, identifying sooner rather than later.  Consider the following.

  • Post-acute care is the fastest growing, reimbursed segment of health care by Medicare.
  • The landscape is changing dramatically as Medicare Advantage plans have shifted historic utilization patterns (shorter stays, avoidance of inpatient stays for certain procedures, etc.).
  • Medicare Advantage days as a percentage of total reimbursed days under Medicare are growing. One-third of all Medicare beneficiaries were enrolled in a Medicare Advantage plan in 2017.  Executives at United Healthcare believe that Medicare Advantage penetration will eclipse 50% in the next 5 to 10 years.  As more Boomers enter Medicare eligibility age, their familiarity with managed care and the companies thereto plus general favorability with the product makes them quick converts to Medicare Advantage.
  • Managed care has to a certain extent, created site preference and site based value payment approaches already.  There is market familiarity for steering beneficiaries to certain sites and/or away from higher cost locations.  The market has come to accept a certain amount of inherent rationing and price-induced controls.
  • At the floor of recent payment system changes forthcoming is an underlying common-thread: Diagnoses driven, case-mix coordinated payments.  PDPM and PDGM are more alike in approach than different.  IRFs already embrace a modified case-mix, diagnoses sensitive payment system. Can homogenization among these be all that far away?
  • There are no supply shortage or access problems for patients.  In fact, the SNF industry could and should shrink by about a third over the next five years, just to rationalize supply to demand and improve occupancy fortunes.  There is no home health shortage, save that which is temporary due to staffing issues in certain regions (growth limited by available labor rather than bricks and mortar or outlets). Per MedPac, the average IRF occupancy rate pre-2017 was 65%.  It has not grown since.  In fact, the Medicare utilization of IRFs for certain conditions such as other neurologic and stroke (the highest utilization category) has declined. (Note: In 2004 CMS heightened enforcement of compliance thresholds for IRFs and as a result, utilization under Medicare has shrunk).
  • Despite payment reductions, Home Health has grown steadily as has other non-Medicare outlets for post-acute care (e.g., Assisted Living and non-medical/non-Medicare home health services).  Though the growth in non-Medicare post-acute services has caused some alarm due to lax regulations, CMS sees this trend favorably as it is non-reimbursed and generally, patient preferred.
  • Demonstration projects that are value-based and evidence of payment following the patient or “episode based” rather than “site based” are showing favorable results.  In general, utilization of higher cost sites is down, costs are down, and patient outcomes and satisfaction are as good if not better, than the current fee-for-service market.  Granted, there are patient exceptions by diagnoses and co-morbidity but as a general rule, leaving certain patients as outliers, the results suggest a flatter, site neutral payment is feasible.

If there is somewhat of  a “crystal ball” preview, it just may be in the fate of the OPPS site neutral proposal.  I think the direction is unequivocal but timing is everything.  My prediction: Site neutral payments certainly, between IRFs and SNFs are on the near horizon (within three years) and overall movement toward payments that follow the patient by case-mix category and diagnoses are within the next five to seven years.

October 2, 2018 Posted by | Home Health, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , , , , , | Leave a comment

Upcoming Webinar: Reducing Hospitalizations and SNF Reimbursement Implications

I am conducting a webinar on Thursday, November 8 regarding the strategies SNFs can and should employ to reduce unnecessary hospital transfers/hospitalizations (E.R. visits and inpatient admissions).  Value-based purchasing has just taken hold in the SNF realm with facilities about to experience their first outcome October 1, 2018 (incentive or reduction).  I’ll cover the policy implications but moreover, review upcoming reimbursement issues beyond just VBP, delving into the care transition (hospitalization) implications that are woven in PDPM.  For example, with PDPM instilling a critical focus on length of stay via imbedded payment reductions after day 20, facilities will naturally look to shorten lengths of stay perhaps at the peril of VBP (Value-Based Purchasing) implications.

During the hour-long session, I’ll address;

  • Reimbursement and policy related implications associated with unnecessary care transitions/hospitalizations under VBP but also, tangential to QRP, PDPM, Five Star QMs, survey and relative to the IMPACT Act.
  • Proven strategies with tools to identify transition risk, monitor performance and benchmark an SNF against its peers.
  • How to leverage good performance in a competitive market and to gain market share in a bundled payment, Medicare Advantage, pay-for-performance environment.

More information and registration information is available at this link.

http://hcmarketplace.com/reducing-readmissions

 

September 13, 2018 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , | Leave a comment

SNF PPS Final Rule 2019

Yesterday I wrote a quick post regarding the news that CMS was about to issue the SNF Final Rule for Fiscal Year 2019.  Today, the text is available.  Official publication in the Federal Register is set for August 8th.  Readers may access the text here: SNF 2019 Final Rule

I will have analysis and more information available regarding the Final Rule implications for providers later today.  NOTE: Biggest implications center on the shift away from RUGS IV to PDPM (new payment model).  That shift/change occurs 10/1/19 unless otherwise delayed.  On this site, on the Reports and Other Documents page, there is a PDPM calculation worksheet for download.  You can also access it here via this link: PDPM Calculation for SNFs

The worksheet is a good tool/review to grasp the basic mechanics of PDPM and how rates are/will be derived.

August 1, 2018 Posted by | Skilled Nursing | , , , , , , , , , , , | 1 Comment