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RehabCare, Therapy Fraud and Lessons Not Quite Learned

This last week the Department of Justice and CMS announced a $125 million settlement with RehabCare, a subsidiary of Kindred Healthcare, regarding improper Medicare billing.  As in virtually all cases of a similar nature involving false or improper billing to the Medicare program, this matter began with a whistleblower suit (insiders establishing False Claims Act violations perpetrated by the organization).  What is different in this case or unique by comparison, is that RehabCare is not a “provider”.  It did not actually conduct the billing but as alleged, caused the false or improper claims to occur through a certain set of business practices.

RehabCare has been party to a number of improper Medicare billing settlements and enforcement actions. For example, the Arch Care case in New York (I wrote a post on this case in 2015 at http://wp.me/ptUlY-im). In prior cases, RehabCare was tangentially involved as the contract therapy provider.  The enforcement action was taken against the SNF as the “provider” as opposed to the therapy contractor.  Recall that the Government/Provider relationship is between CMS and the SNF as it is the SNF that holds the provider agreement and ultimately submits the claim for the “improper” services to Medicare.  In this most recent settlement, the Government used the insider information provided RehabCare therapists to direct a “conspiracy” action against the company.  Simultaneous to the larger settlement, the Department of Justice announced four other settlements with nursing homes (SNFs) for improper therapy billing, each involving RehabCare as the therapy contractor.  The settlements ranged from $3.9 million to Wingate Healthcare (Massachusetts and New York) to $750,000 for a SNF operated/owned by Frederick County Maryland.

To my knowledge, this is the first time that the Department of Justice has brought a conspiracy type suit against an organization, alleging an intent to defraud the government via the billings of the actual “provider”.   This is a unique twist in the False Claims Act application (as applied to health care fraud) as it does not involve a party that actually “billed” Medicare – the SNF that contracted with RehabCare filed the claim.  The whistleblowers alleged and the government pursued, a case where the allegations ranged from RehabCare setting unrealistic financial goals for its therapists to not allowing discontinuation of therapy services after the therapist recommended discharge to over-treating and upcoding. And while all these allegations may be true, the fascinating element is that the government took the “brunt” action against RehabCare even though the SNFs involved were technically and legally responsible for making sure that the claims submitted to Medicare were proper, legitimate, etc.  Ultimately, it is the SNF (the actual provider) that is responsible for assuring that the Government is not billed for inappropriate, improper, fraudulent, etc. services.  The False Claims Act nuts and bolts language is below:

(a) Liability for Certain Acts.—

(1)In general.—Subject to paragraph (2), any person who—

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;
(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);
The application within healthcare fraud cases has traditionally focused on the actual provider as the actor, even if the elements of fraud included the acts of a contractor or the parties acted in collusion.  The reason?  The provider is the party that is charged with “presenting” or “causing to prevent” the false or fraudulent claim.  Arguably, no provider should allow a contractor such as RehabCare to conduct practices within its operations that would create a climate of fraud or cause the SNF to submit improper claims to Medicare.
Admittedly, what remains unknown is how many additional actions with settlements are pending against SNFs (tangential to this case) that have used RehabCare as their contractor.  These types of cases move slowly and in fragmented pieces as each is unique and within itself, complicated and fraught with elements of discovery and valuation (of the financial impact of the claims).  In short, while some have settled, others may be in the process of settlement and will disclose in forthcoming months.
The lessons or takeaway here may in fact, be too late for some.  The curious nature of whistleblower cases and False Claim actions is they emanate without direct disclosure to the provider.  If the government decides to join the claim, it takes over the case and pursues it while the rights of the whistleblower are protected (as is typically initially, though not always, the identity of the whistleblower(s)).  What this means is that any SNF, using RehabCare or not, may already be on the radar or in the queue for a False Claims act case. This being said, SNFs should not delay in immediately understanding and addressing the following.
  • With RehabCare fallen, do not be surprised that organizations like Genesis are next or already in process.  Any provider (SNF) that uses a national therapy provider for contracting purposes should immediately do all of the following.
    • Review the contract between the SNF and the therapy contractor, especially the liquidated damages clauses.  Meet with the contractor’s representatives and openly discuss concerns.  Undoubtedly, assurances that all is “well” will be offered.  Ask for the same in writing and a revisit to the liquidated damages section to re-craft a shared risk provision.
    • Engage a qualified firm to conduct a full audit of the therapy contractor’s practices, a reasonable sample of Medicare claims, and supporting documentation.  Again, for readers, I have resources here for referrals to the best firms.
    • Use a triple-check.  Anyone who needs resources, contact me.
    • Integrate your billing and Medicare RUGs data into your QAPI.  You want to review monthly, your RUGs distribution, EOTs, COTs, lengths of stay, average daily rate, etc.  Benchmark your date and trends.
    • If you haven’t bid your therapy contract within the last two or so years, plan on it.  Again, best practice is to use an outside consultant who knows the therapy side and contracting to assist with the bidding process.
    • Consider, strongly, going in-h iouse or developing a hybrid partnership for your therapy services.  Again I can provide some resources and direction here.  Partnerships can be as beneficial (SNF with hospital, etc.), done right, as in-house programs and again, can go a long way to minimizing the expansive fraud risk and complications that come (historically) via RehabCare, Genesis, etc.

January 17, 2016 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | Leave a comment

Core Administrative Competency: SNF

As I have written before and readers know, I field as many questions and provide as many resources as I can “free” of charge.  My e-mail is publicly available for contact on this site and on my LinkedIn page.  The title of this post thus, is a reference to the many questions I’ve received as of late regarding a number of issues ranging from fraud, to Medicare, to managed care, to therapy contracts, to quality.  Core Administrative Competency is about what truly, folks in senior administrative positions need to know/develop in order to be more effective in their role(s).

  1. Know How and Why You Get Paid: Sounds fundamental but I have so many conversations with folks that just simply don’t know this subject area very well.  I’m not talking at a technical level like being an MDS expert but at a core level – core enough to understand the relationship between the case-mix, the payment, the RUGs, and to ask clear questions regarding RUG distributions, etc. How about Part B?  Do you know the cap?  Do you know the authorization requirements for cap exceptions? The same is true if your facility takes managed care patients.  Is the payment based on RUGs, levels, other negotiated rate?
  2. Know What you Make from What you Get Paid: Again, sounds fundamental but this one I often find sorely lacking.  The RUG isn’t what the facility makes. The payment either from managed care or Part B.  How about Medicaid?  I have had way too many discussions with SNF administrators and even finance and billing folks where they didn’t realize that they were getting creamed by the insurer and their therapy contractor.  The therapy contract facilities tend to be the most out of line.  The facility is paying the therapy contractor per increment rates – flat for service per the contract.  The facility is receiving then a RUG, a level payment, payment under Part B, etc. Sometimes, the difference between what the facility is receiving via payment and what it is paying out to the therapy contractor for the therapy component, nets the facility zero or less in terms of margin.  This is particularly true with managed care agreements, unless the facility has negotiated variable rates reflective of the payer source.  The same can be true with drugs, medical supplies, etc.  I don’t know how many facilities I have worked with that fail to negotiate “carve-outs” within their managed care agreements for high cost DME (special beds, etc.), certain types of drugs (some antibiotics for example), and wound care supplies.  These elements alone, with RUG based or  level payments, can quickly create losses at the facility level.
  3. Know Your Quality Indicators and Measures: Battling fraud, survey/compliance risk, litigation risk, etc. boils down to knowing your quality and how it stacks up against the industry.  Likewise, these measures are core principles in the upcoming ACO, bundled payment, managed risk environment.  Administrators and DONs should be intimately familiar with and checking on, core quality measures such as infections, falls, hospitalizations, call light wait times, medication and treatment errors, etc.  One of the largest fraud risk areas for any SNF today is over-billing or improperly billing Medicare.  This occurs when the care is substandard or inappropriate for the resident’s needs/condition.  Knowing your quality, being engaged in the QI process is critical to risk prevention and management.
  4. Know Your Contracts for Service: Again, sounds fundamental but all too many administrators that I talk with have never really read their therapy contract.  No wonder they are surprised when they see charges for say, $75 per hour for meeting attendance – at a Care Plan meeting! How about the limitations of liability clauses?  Payments?  QA participation requirements, audit elements, staff retention terms, etc.?  Same is true for pharmacy.  What are the consulting costs and provisions?  What about drug costs?  How are drugs dispensed and in what supply?  Liability for medication errors?  What are the limitations?  Now, extend the same logic to food, other vendors, etc.
  5. MBWA: The goal of all facility administrative staff is to emphasize time spent doing this – known as Management By Walking Around.  The job of an administrator, DON, etc. is not in the office but on the floor, in the meetings at the care level, engaged with patients, physicians, families, and the community. The best prioritize their days around time out of the office.  I often ask administrators how many careplan meetings they sit in, staff education sessions, stand-up meetings, QA, staff meetings, departmental meetings, etc.  I am amazed at the answer (how little).  I am equally amazed and perhaps more, at how few tell me they ever meet with their key hospital referral sources at their peer level.
  6. Know the Industry: The industry is changing rapidly in terms of policy and trends.  Perhaps the largest leadership failure I see “routinely” is administrative personnel (administrators and DONs) that don’t stay current and don’t seek best practices.  Sure, they may attend a trade association conference from time to time, but read, study or explore beyond – rarely.  To be really effective requires being as far ahead as possible; to see the trends and understand the policy, reimbursement, and best practice landscape.  Doing so affords the ability to do gap analysis – where are we vs. where do we need to go.  Doing good gap analysis thus allows development of plans and strategies for improvement.  The biggest risk is getting caught off-guard, behind the times.  For example, being an SNF today with a rehab contract and no plans in place to audit your contractor.  I’ve described “why” and the fraud trends that are rampant on this site.

June 5, 2015 Posted by | Skilled Nursing | , , , , , , , | Leave a comment

SNFs, Therapy Contracts and Fraud: Redux

Yes another SNF, another therapy contract and more fraud settlements.  The only thing that isn’t different is the contractor – RehabCare once again (a coincidence?…not likely). In news released late last week, a Maine SNF settled with the Department of Justice for $1.2 million, allegations of improper Medicare billings for “unnecessary, inflated, and unreasonable” therapy services.  As in the other cases I have covered herein, the therapy services provided at Ross Manor (the SNF) were through a contract with a division of RehabCare. Again, because the overbillings for inappropriate care and/or service are made by the SNF to Medicare under Part A, the liability for the improper payments and thus all remedies, lies with the SNF – not RehabCare.

In their statement, the parent of Ross Manor, First Atlantic Corporation stated that,”Throughout this matter, Ross Manor has worked with the government to understand where it can exercise more oversight of the billing and record-keeping practices of its contractors.” Not to belabor a point but REALLY? The concepts regarding SNF liability for contractor behavior and how to audit and prevent fraud aren’t complicated or difficult  For (likely) the final time, I will reiterate the issues and the processes that encapsulate the SNF/Therapy contractor/fraud issues and how to avoid the same.

  • Under Medicare, the SNF is the PROVIDER – not the therapy company/contractor.  Therefore, any claims submitted to Medicare are submitted by the SNF regardless of who provided the service.  If the claims are fraudulent, the SNF is responsible, not the contractor that provided the service, for repayment and any applicable fines, remedies, etc.  SNFs are free to contract with anyone or entity to  provide skilled nursing services (as defined in the federal Conditions of Participation) but in so doing, as the SNF is the provider, it cannot escape the False Claims liability for claims made to the federal government.  The therapy contractor does not bill the government – the SNF does.  The expectation is that the claim is lawful, correct, and for medically necessary and proper care.
  • The SNF must therefore, provide oversight to assure that all claims are proper and that the care was necessary and legitimate.  How? I recommend the following steps.
    • Contract with an external consultant knowledgeable in therapy and Medicare billing and periodically, audit your therapy contractor.  Review the provision of care, the documentation, and the billing/claims.  For SNFs that don’t know or have connections to such a consultant, feel free to contact me – I DO!
    • Institute a triple-check process for Medicare billing, each month.  This process requires certain parties to each Medicare claim to participate in a review methodology before claims are submitted.  Again, readers who need a triple-check format/framework, contact me and I will provide one at no charge.
    • Benchmark your MDS utilization and review it against regional and local data.  Comparatively, the utilization by RUG, length of stay, and thus Medicare per diem should follow regional and local trends.  If not, an explanation and inquiry is warranted.
    • Utilize your QAPI program to track care outcomes and Medicare related MDS data.  Monitor and follow this data to assure that care is proper and documentation consistent.
    • Institute a weekly Clinical Review program to monitor resident care progress (MDS changes, therapy progress, wounds, falls, discharges, hospitalizations, etc.).  Readers who need help here, contact me.
    • Finally, have MDS certified staff on site and actively involved in the final review and submission of all Medicare claims.  This staff must be employed by the facility, properly trained, and non-financially incented to any reimbursement goals or targets.

Last, I have a few current watch targets and tips for SNFs that use therapy contractors and/or are in the process of bidding or renewing a therapy contract.

  • Watch staff productivity and time – anything above 80% is a red flag.  Demand pay records and time sheets.
  • No resident on admission should immediately be placed into all three therapy disciplines.  I see this a lot and it is an outright harbinger of fraud.  Therapy, like any other service, must be justified by an evaluation, an order, and a treatment plan.  If every resident receives all three (speech, PT, OT), something is amiss.
  • Be wary of Speech being justified for demented residents as “cognitive retraining”.  This is frequently to almost always, a non-justifiable service and one that has no recognized diagnostic correlation or outcome measurement when the underlying disease is dementia. Cognitive retraining makes sense for neurological damage due to head injuries, strokes, etc. but is unwarranted as I see it (often) applied for dementia in an SNF.
  • Be wary of the Ultra High over-utilization.  Be particularly wary of the tendency to routine code to the RUG.  Make sure someone is keenly watching the ADL scoring here and how the minutes are justified.
  • Review your contract and look carefully at the Indemnification Clause(s).  Know your exposure should a False Claims circumstance arise or simpler, a billing audit/probe.  The contract likely (unless you negotiated it differently or had me do it) will only have the therapy company liable for the cost of therapy, not the loss of the Medicare revenue in total.  SNFs have huge exposure here.
  • If you are presently entertaining a contract or renewal, make sure you memorialize any promises made during the “courtship” or “proposal” phase in the final agreement.  I watch SNFs consistently bamboozled with false promises and specious claims of success, support, etc. the same of which never show in “writing” in the final agreement.  Make sure everything is in writing.  For help and a format for contracting, contact me

I do offer/provide numerous tools, forms, etc. free of charge to any reader who contacts me.  I also provide references to vetted, trustworthy sources for services upon request.  To contact me, go to the author page on this site (contact info), comment to a post or e-mail me at hislop3@msn.com.  If you comment to a post and want me to contact you, please leave valid contact information – can’t help without it.

April 7, 2015 Posted by | Skilled Nursing | , , , , , , , | 6 Comments

SNFs, Therapy Contracts and Fraud: Another Warning and Example

I know I sound redundant but clearly, the message is still not permeating through the industry (except for readers here). The Department of Justice and the OIG for the Department of Health are scrutinizing SNFs, their therapy billings, and the use of therapy contractors.  Why?  It is all due to a known and now routinely validated, prevalence of over-billing and thus fraud and/or violations (same thing really) of the False Claims Act.  I have written on this subject on this site multiple times before and those that have heard me speak at various industry events, received the same message. Bottom-line: If you are an SNF and you use a contract therapy company to provide your therapy services, you must monitor the performance of your therapy contractor and assure that all Medicare billing and Condition of Participation requirements are being met.  The acts of the therapy contractor (over-billing, miscoding, improper care, etc.) are the “ACTS” of the SNF as far as the Federal government is concerned.  The SNF is responsible for ALL elements of care provided and the accuracy and compliance elements of any and all claims submitted to Medicare.https://rhislop3.wordpress.com/wp-admin/post.php?post=1138&action=edit#

In another case, recently disclosed, a group of three SNFs in New York (Arch Care) operated by Catholic Health Care System settled improper (false) claim allegations with the Department of Justice for $3.5 million.  The settlement is based on improper and inflated claims submitted to Medicare for unnecessary, erroneous and improper therapy care provided by RehabCare (a division thereof in this case).  The cause of the settlement or the crux of the issue related to the SNFs failure to monitor the therapy provider and to assure that the erroneous/illegitimate claims were not submitted to Medicare.  The result of the claims submission is overpayment and thus, the recovery and settlement.  Noticeably absent is any action taken against the therapy company by the Department as none such can be taken – the therapy contractor did not bill Medicare – the SNF did!

SNFs need to pay attention to these cases – more are assuredly forthcoming.  There are simple remedies to avoid these problems on the part of any SNF or group of SNFs.  Below is just a small sample.  For additional resources, attend the upcoming HcPro webinar that I  am conducting next week (posted on this site) or contact me directly.

  • Implement a triple-check system immediately.
  • If an SNF hasn’t audited its Medicare billings lately via an outside contractor, do so immediately especially if the SNF uses a therapy contractor.  Be prepared if irregularities are found to self-disclose.  Self-disclosure is required and it is the only way to potentially avoid treble damages, criminal liability, etc.
  • Retain an outside auditor and develop a routine audit system. I have checklists which can be used to guide in this process plus sources for auditors.
  • Educate your MDS and billing staff immediately on red-flag issues when it comes to your Medicare billings.
  • Integrate certain outcome and patient/resident/family feedback elements into your QA process.  Seek direct feedback monitor care outcomes and risk areas.

March 5, 2015 Posted by | Skilled Nursing | , , , , , , , , , , | 2 Comments

Upcoming Webinar: SNF Therapy Contracts: Your Risks and What You Need to Know

Join me for this informative webcast to learn how to implement a shared risk arrangement with therapy contractors and discover a strategic way to monitor and limit compliance and monetary risk in terms of billing and liability under Medicare The CMS OIG and the Department of Justice are targeting SNFs with heavy therapy case-mix claims under Medicare. In this webinar, conducted for HC Pro, I will cover the nature of the current levels of compliance risk, False Claims actions, and contractual risks between an SNF and its therapy provider. I will also review current case examples involving Extendicare and RehabCare. Registration and more info. are available via the link below.

http://hcmarketplace.com/snf-therapy-contracts-shared-risk-arrangement-to-reduce-citation-risk?code= EW320945&utm_source=HCPro&utm_medium=email&utm_campaign=YL031015

February 4, 2015 Posted by | Assisted Living, Skilled Nursing | , , , , , , , , , | Leave a comment

SNFs, Therapy Companies, and Billing Risk

Readers, followers (Twitter, etc.) and folks who have attended one or more of my industry conference presentations know that I routinely harp on the “risk/reward” relationship between SNFs and therapy companies (the contract therapy provides).  Last year at LeadingAge’s annual conference in Dallas, the principals from Theracore Management Group and me did a full session on the differences between in-house vs. contracted therapy programs, focusing on the risk areas of contracted therapy programs in the SNF.  In a recent post on this site regarding SNF compliance issues, I covered this topic “briefly” again (http://wp.me/ptUlY-h1 ). Just today, a daily briefing from McKnight’s reinforces “why” I harp on this subject as often as I can.  The article link is here: http://www.mcknights.com/38-million-settlement-shows-nursing-homes-must-oversee-their-therapy-providers-feds-say/article/370169/?DCMP=EMC-MCK_Daily&spMailingID=9388936&spUserID=MTU4ODcyNDAzNjMS1&spJobID=380417055&spReportId=MzgwNDE3MDU1S

Summarizing: Two SNF companies contracted with a division of RehabCare.  In the process of providing therapy services through the SNFs, RehabCare provided inappropriate levels of therapy services to residents covered by Medicare.  The problem here however, is that the liability for the inappropriate care and thus the repayment is the responsibility of the SNF, not the therapy company or in this case, RehabCare.  Why?  The provider of the service under the Provider Agreement with Medicare/Federal Government is the SNF, not the therapy company.  The SNF failed to exercise the required oversight to assure that the bills it was submitting to Medicare were accurate and clinically relevant.  As the same were not in this case, the Department of Justice on behalf of CMS collected $3.8 million in inaccurate payments.  The message (and one I HAVE POINTED OUT TIME AND AGAIN) is the SNF holds all the liability with respect to Medicare billing and the services/care provided.  This cannot be shifted to any contractor – therapy or other.  If the care is determined unwarranted or inappropriate, the SNF has the duty to identify the same, correct it, and file a notice with CMS to provide repayment.  Failure to do so opens the door for Civil Monetary Penalties and other damages, in addition to the amount inappropriately billed and received (see related posts on this site with regard to False Claims Act, Fraud, etc.).

In closing, I have five reminders/recommendations for SNFs on this subject area.  These are my standard “cautions” or action items in this arena but clearly, they bear repeating.

  1. Review in detail, your contract with your therapy provider.  The standard immunity clause in the industry is for the therapy company to immunize the SNF against the cost of therapy for any claim deemed inappropriate and thus, non-paid or requiring repayment from Medicare.  This language means that the therapy company will “write-off” the cost of the therapy services associated with the claim(s) to the SNF – a mere fraction of the overall revenue lost from the denied claim ($450 per day in revenue vs. $125 per day in therapy cost, for example).  The risk is that SNF can lose hundreds per day in this kind of contractual relationship.  Require shared risk agreements between your SNF and the therapy company.  For more on this concept, drop me a note in the comment section of this post with contact information and I’ll follow-up.
  2. Establish a “triple-check” system for all therapy related Medicare claims.  Don’t ever assume that any single claim or case doesn’t require a level of review beyond the RUG determined through the MDS process. This requires the SNF and the therapy company to review each claim.
  3. Have a member or group of members on your team that are MDS Bulls**t proof.  Get current on the MDS process (trained and ideally certified) and task that person or persons with periodic reviews of bills submitted and documentation.
  4. Utilize an outside resource to conduct periodic audits of your Medicare utilization, billed RUGs, etc. plus documentation.  Again, contact me for recommendations.  A few thousand is far “cheaper” than a few million.
  5. Never, never, ever dance the “happy dance” to higher revenue PPDs or greater billed volumes.  Take the skeptic approach which requires the question of, “why us”?  The old adage of something being too good to be true is right-on.  Any utilization pattern that is generating lots of days, lots of Ultra High days, high PPDs, etc. better be justified by your case-mix (high ortho, neuro, etc.) and lots of admission traffic.  If this isn’t reality, then the risk is high that the Medicare “envelope” is being pushed – and inappropriately so.

September 8, 2014 Posted by | Skilled Nursing | , , , , , , , , | 6 Comments

SNF Outlook: 2013

As luck would have it, work interfered with my plans to have all of the industry outlooks for this year complete and published by February 1.  Good news: Ground work is done now I just need to get to the writing and editing on a consistent basis.  With any luck and a bit of fortitude, I’ll have these all done by Valentine’s Day.

Below is my and my firm’s summary of what SNFs can expect in 2013 and into FY 2014 (governmental FY starts 10/1/13 for 2014).

Summary Comments: From a valuation stand point, SNFs are still seeing strong (low) cap rates and solid pricing per bed, as reflected in the M&A arena.  This seems a bit incongruous given the strain on revenues current and forecasted under Medicare and Medicaid.  Additionally, we are seeing upward movement in variable expenses on a PPD basis as food inflation and some wage pressure is creeping into operating costs.  Likewise, we think overall comp inflation is forthcoming if for no other reason that the continued phase-in of the PPACA and its provisions impacting employer sponsored health insurance plans.  It will be interesting to see how larger providers and provider groups respond over the next six months or so. As of today, we don’t have a clear read on how providers will handle their health plans (keep, drop, alter, etc.).  Literally, the “bag” is muddled and mixed. On the positive side, we are seeing some interesting trends among larger provider organizations and larger SNFs toward enhanced quality improvement foci and activities around bundled payment demonstrations, etc.  Those that have pad attention seem to have set a forward course to be engaged in the broader “new world” order in healthcare, focusing on their care transitions, their referral relationships (upward and downward), their unnecessary drugs, etc., developing a more data driven, outcome approach to managing their operations and thus, improving their quality.

Medicare Part AThe outlook summary on Medicare, while it could cover multiple pages, summarized is BLEAK – at least as far as rate is concerned.  The good news is that Medicare will remain a far superior revenue source than alternatives such as Medicaid.  The bad news is that Medicare as an overall revenue source and sustainer of margin is weakening.  The threats and realities are obvious.  First, Sequestration cuts are not off the table and assuming, which seems the prevailing wind, Congress’ content to leave all but Defense cuts on the table, SNFs will see a rate decrease in 2013 and an outlay reduction over the upcoming 10 years of $65 billion. Should this scenario play out, SNFs will see a case-mix adjusted Medicare revenue PPD reduction averaging 2%.

Digging deeper, a number of negative Medicare policy issues remain beyond the looming spectacle of Sequestration.  First, the current Congress is perhaps the most passive when it comes to doing anything and more so, digging direct into programmatic elements within Medicare.  This means that it its hard to see Congress stepping in or up to restore spending reductions for a programmatic element such as SNFs.  Couple the political reality of the times with the fiscal realities of Medicare and entitlement spending and the prevailing and crystal-clear trend is “less” not “more”.  Medpac has called for complete renovation of the SNF PPS and rebasing of rates, stating that SNFs are overpaid and in many cases, abusing the current therapy RUGs to garner higher rates.  Industry arguments concerning the need for higher Medicare revenues to offset Medicaid losses are de facto, played out on the Hill.

Bottom-line: Consesus in our group is for rates in 2013 and then into federal FY 2014 to go down by 2.5%, case-mix adjusted average (meaning more impact felt for higher therapy case-mix and less for a more balanced case-mix on a PPD basis).

Medicare Part B: This analysis is simpler than Part A.  The industry dodged one bullet in December as Congress passed the current sustaining legislation that remedied the immediacy of the Fiscal Cliff, applying another twelve month patch to SGR formula/physician fee-schedule, evaporating the pending cuts that apply to any Part B service connected to the fee schedule (not just physicians).  That is the good news.  The bad news is that CMS continued the MMR process for cap exceptions, left the caps intact and changed, effective in June the MPPR (Multi Procedure Payment Reduction) factor from 25% (applicable to SNFs) to 50%. Again, based on an SNFs utilization of Part B and the types of therapy provided to its caseload, the revenue impact can be fairly steep.  On average, we calculate a 7% reduction but for some scenarios that we ran, the reduction can be double digit.  Providers will need to watch scheduling of multiple therapies and treatment patterns closely and make adjustments where possible, to mitigate the revenue reduction.

Compliance: SNFs will continue to face increasing compliance and survey challenges with respect to billing and care delivery.  Without question, the industry remains tightly regulated and unfortunately, the regulatory process as convened and managed through various state governments remains fraught with inconsistency; inconsistency in application of various codes, inconsistency in interpreations and inconsistency in enforcement. As a major practice area within my firm is dedicated to compliance, we see challenges and survey/certification inconsistency daily.  We also see providers who somewhat impose their own peril by failing to stay current and to adopt a “clear-headed” approach to the industry realities.  Below are the compliance challenges and issues that we see, split between billing and survey/certification, for 2013.

  • Billing: Medpac and the DHHS OIG both have publicly stated that SNFs and their Medicare billing practices demonstrate consistent over-billing in relationship to care provided or required by certain types of patients, primarily those admitted for rehabilitative therapy.  By estimates, the total amount is $1.5 billion of unjustified billing (over-billing).  Stopping short of labeling the findings systemic fraud, DHHS recommended increased audit activity, targeted fraud investigations where the practices seemed consistent within certain organizations, and ultimately, changing the reimbursement mechanisms for therapy RUGs.  The latter in our estimation, will take time but we believe that CMS will continue to move toward re-basing and re-calibrating a modified PPS system for SNFs.  The take-away here is SNFs beware, especially of your case-mix.  We are consistently advising, and have for years, that SNFs need to pay close attention to their Medicare revenue PPD and their billed RUGs distribution.  If there is a skewed trend toward too high of utilization of upper RUG therapy categories, something is wrong.  Benchmark the facility’s distribution and revenue PPD against the region and the locale (easy to do).  If the facility’s distribution is out of kilter, investigation is required.  We also recommend periodic external audits of facility billing practices, matching RUGs billed to the MDS to the documentation of care delivered.  The over-billing, over-utilization of therapy RUGs is a targeted focal area within the OIG workplan and SNFs need to be acutely aware of the False Claims Act consequences for over-billing.
  • Survey/Certification:In addition to the enormity of survey/certification dimensions that already exist for SNFs, some new twists are in-play.  The first that providers need to pay close attention to is unneccessary drugs and particularly, psychoactive medications.  Surveyors are getting directed guidance from CMS to crack-down on the amount and frequency of psychoactive medication use in the SNF population as well as the misuse of medications with Black Box warnings/medications used for inappropriate therapeutic reasons, not intended by the FDA approved usage guidelines.  For most SNFs, this is a big risk area.  With the recent flu outbreak nationwide, we are seeing enhanced survey activity focused on infection control and immunizations.  Again, this is weak area for many SNFs.  Even facilities with solid immunization programs risk peril if they are not using proper isolation, precaution and surveillance practices.  We have seen of late, some significant citations (IJ, G and higher levels) arise from inadequate infection control programs, even where immunization efforts were good.  Finally, while we aren’t yet seeing much directed enforcement or survey activity on facility Quality Assurance programs, this year (FY 2013/2014) comes with new requirements for facilities to have in place, a QAPI (Quality Assurance Performance Improvement) process.  We consistently find that facilities are unaware of this requirement and worse, haven’t yet heard about QAPI.  Note: Readers who want more information on QAPI, e-mail me (contact is on the author page) or comment to this post, providing me with a current e-mail address.  I have resources that I can forward to you.

Medicaid: Little in terms of reimbursement changes lies ahead for the industry, save a consistent trend of states converting their Medicaid programs to managed care.  In states where this is occurring, providers face less rate challenges in terms of rate reductions more, programmatic structural changes in terms of billing requirements to MCOs, enrollment issues for their MA residents, and new rules regarding prior authorizations, continued authorizations and formulary changes for prescriptions.  This presents a unique hodge-podge of similar but different issues state to state.  Each state has nuanced differences when they implement managed Medicaid and each state has unique networks and in some cases, different MCOs.  From a strict financial outlook, Medicaid remains structurally problematic and will for the next years.  State budgets are far from flush and with the loss of enhanced FMAP last year, most states are far from capable of pushing any more funding into Medicaid.  The prospects are mixed for most states with regard to Medicaid Expansion under the PPACA.  While some states welcome expansion as it theoretically brings a ton of federal money in the form of 100% funding of “expansion”, others are leery, questioning the Federal government’s ability to sustain the funding commitment.  Lack of clarity regarding current federal budgets, debt ceiling and entitlement reform only augments state hesitancy to embrace expansion.

February 8, 2013 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , | 1 Comment

Medicare Outpatient Therapy Rates: Part B

I have a schedule or table if you prefer, of 2013 Part B Therapy Rates applicable to common SNF codes.  It is applicable as user selects, for the entire U.S.  As rates are only available on a “guesstimated” basis right now and somewhat subject to slight modifications, the version is not 100% guaranteed.  I do believe that little modification will occur.  Anyone with interest in this schedule, please drop me a note (contact on the Author page) or comment to this post, providing a useable e-mail address.  I will forward the schedule with applicable directions for use.

January 23, 2013 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , | 3 Comments

Health Policy News: Too Good to be Quieted by Election Coverage

With all of the election news blaring (thank goodness the end is soon here), some important health policy issues have been somewhat lost in the milieu.  Below is a quick summary of what has caught my attention as of late (a heads-up for readers).

Medicare/SNF Class Action Settlement: This is profound on a number of levels though I have seen very little analysis on the decision.  A nationwide “group” of Medicare beneficiaries and their families, all suffering (some passed) from one or more chronic illnesses, sued the Federal government on a class-action basis alleging denial of Medicare coverage based on the “improvement” criteria imposed by Medicare intermediaries.  The gist of the case is as such.  In each instance, a SNF resident was admitted meeting the qualifying criteria (three day prior hospital stay, requiring skilled services).  In each instance, Medicare benefits were subsequently denied to these residents, even though the skilled service requirement remained, as the resident’s condition stabilized or failed to show improvement.  The suit further alleged that in certain cases, care levels diminished or skilled services reduced or ended as the individuals involved, were not able to pay for additional care privately.  Briefly, without the presumption of Medicare coverage, the presumption of continuation of skilled services like therapies evaporates, requiring the resident to then pay privately for continuation of service.

The settlement arose when Medicare officials agreed to re-write the claim adjudication manuals to make “clear” that Medicare coverage is only conditioned upon Medicare eligibility, a three day prior inpatient qualifying stay (hospital) and the requirement and delivery of, daily skilled services (as presently defined).  Denial of continued coverage should only occur when the skilled service is no longer required based on the resident’s care needs, not based on improvement or lack thereof.  Nowhere in existing Medicare regulations is there a requirement for “improvement” yet the standard has been universally applied by Fiscal Intermediaries (Medicare claims adjudication contractors).

The case, coming out of Vermont, is expected to be published soon and the class encompassing more than 10,000 beneficiaries nationwide.  The implication is that this group, as well as other beneficiaries, can appeal coverage decisions (where coverage was discontinued) for claims prior to January of 2011 (when the suit was filed).  Note: This will limit claim review exposure unless the decision provides greater detail due to Medicare’s 18 month limit for re-filing claims (18 months from denial or service discontinuation if denial is implied).  Additionally, many residents in the class will no doubt be dead with closed estates, thereby limiting a reconsideration of coverage claim.

What I don’t know yet is how this decision will impact claims going forward.  I am awaiting details on the following questions/concerns.

  • Appeal information as applicable from intermediaries.
  • Coverage guidance to providers to continue to bill Medicare as long as a skilled service is still required.
  • Any RUG guidance and assessment guidance for interpretation of therapy services in particular.  Ordinarily, some assumption of continued therapy hinges on documentation of improvement of some type and guidance is necessary to document minutes for other reasons (prevention of decline, safety, etc.).
  • When intermediaries will be instructed by Medicare on the “revised” interpretation of coverage.

Medpac Recommends Cut to Part B Therapy Caps: In their November 1 report to Congress, Medpac recommends a 33% reduction to the current Part B Outpatient therapy cap; presently $1,880 reduced to $1,270.  Additionally, Medpac is recommending that the Manual Medical Review process expand to all “therapy” services including those provided in hospital outpatient departments, whenever a cap is exceeded.  Currently, the process kicks-in at $3,700.  Set to expire at year-end is the exception process with hard-caps going into place in January of 2013, unless Congress acts to extend the cap limits and the exception process.  Medpac’s report is the first shot at creating a recommended action for Congress prior to the January date.  Medpac further recommended, in conjunction with their continuation of the manual review process, a streamlined review approach.  Core to this recommendation is a ten-day turnaround and the use of two MAC contractors nationwide for consistency and focus.  Anyone who wishes to view the report, e-mail me at hislop3@msn.com or leave a comment on this post with your contact e-mail and I will forward it to you.

Medicare Sued for Inappropriate Setting Determination Denials: This one fascinates me particularly as it is the first suit I am aware of implicating Medicare’s RAC contractors and post-care denials.  In this case, the American Hospital Association, joined by four other healthcare providers sued HHS and CMS for allowing RAC contractors to retrospectively, deny outpatient claims filed under Part B determining that the care should have been rendered inpatient and the claim submitted via Part A.  The suit alleges illegality in denial of payments when cases are retrospectively reviewed.  What is interesting is that “inappropriate location” of care is an odd justification for denial, especially when the setting is less costly to Medicare.  While it has always been illegal to improperly bill Medicare, including under-billing, rarely have I seen (in fact never) claims denied retrospectively as inappropriate, simply based on the use of a lower cost or alternative setting.  Typically, a claim properly billed has never been reversed or denied based on location and certainly not a judgment call such as this appears – seemed more appropriate inpatient.  No allegation or substantiation is provided as to whether the care rendered was inadequate, merely wrongly located.  Why this case bears watching is that the RAC issues are brewing in terms of the programs costs, its inter-relationships and lack of impartiality, and the incentivized methodology that exists to “recover” overpayments.  Denials of this nature and the appeals are incredibly expensive for providers and clearly, the suit incorporates by description, the cost vs. benefit insanity of having to appeal denials of this nature.

November 5, 2012 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , | 1 Comment

What’s Trending: Catching Up

Probably the biggest trend as of late is my tardiness in getting these posts out on-time…sorry.  My end of the week (last week) got distorted as I needed to attend a meeting with regard to a Medicaid shift in Kansas from fee-for-service to “managed”.   As I have been through these conversions or switches before, it’s always interesting to watch provider reaction, the MCO presentations, etc.  I hate to be cynical about these transitions but past-experiences suggest that the Kansas experiment will suffer from the same issues I have witnessed in other states – a rather bumpy take-off.  States that have a large rural Medicaid population tend to struggle to get networks built and enrollment in-place “timely” (ala Kentucky’s issues).

In one regard, I’m actually glad I’m a tad behind as this weekend produced some rather interesting political news sure to focus debate more directly on healthcare.  This said, below is what I am following now and expect to follow as a trend for a while yet.  In addition, this week’s Fall Out issues are a tad different as they come from readers and industry insiders and thus, are a shade different “in perspective”.

Politics and Healthcare: Moving on from last week, politics remains on my radar for a few reasons.  First, as I admitted last week, I’m a policy and politics “junkie”, fascinated by the mix of fact and fiction and what “sticks” where.  Second, there is a great deal of healthcare meat on the table and with the inclusion of Paul Ryan on the Republican ticket, the Medicare/Medicaid political barbecue has just been lit.  As a confession, I do know Paul quite well and have worked on past campaigns on his behalf.  He’s an oddity in political circles as his substance is far greater than his political profile.  So as the gloves start to come off, my watch is how the issues regarding entitlement spending play out.  The cold hard reality is this: Entitlement spending on Medicare, Medicaid and Social Security is greater than the total revenue intake of the Federal government from all sources.  Healthcare reform via the ACA widens this gap for minimally, the next ten years.  After this ten-year period, its anybody’s guess as to where the spending line will level.  Embedded in the ACA is a series of cuts to Medicare of $700 plus billion to make the numbers sort-of work.  What we don’t know is the impact of Medicaid expansion and how state’s will respond (either in favor of or against).  The debate forthcoming is about as stark of a difference in approaches as found in recent political cycles.  Romney/Ryan would eviscerate as much of the ACA as possible, opting for a managed, fee-for-service landscape that includes primarily federal block grant funding and privatized initiatives to contain costs and assure access.  The ACA as we all know by now, is more directive in its approaches, utilizing governmental policy and insurance plans to garner greater levels of coverage while funding ideal innovations in delivery (ACOs, etc.).  I liken the ideological difference to hands-on and hands-off.

Med B Therapy Exception Change: Like many, I’ve been waiting to see how this rolls-out and now we have some answers.  CMS has foretold of changes to the current outpatient therapy cap exception process under Part B, moving the process from a “deemed” exception methodology to one requiring authorization from a Medicare contractor (ala prior authorization beyond the cap).  Providers will be able to submit exception requests to a designated contractor every 20 days and per the law, receive a decision within 10 days.  If no decision is made in the 10 day window, the request is deemed “granted”.  Denials with reasons are given to the provider with a chace to re-submit.  This first-phase rolls out October 1 and providers can begin processing requests in mid-September.  The current cap limit is $3,700, separated between PT/Speech and OT (non-aggregated).  On my radar is the industry reaction and how providers will begin to formulate their strategies for attaining exceptions via this new process.  I’ll be more interested to see how many exceptions are denied initially, come mid-September/October 1 as I suspect the number to relatively high and variable between contractors.  Rarely do these initiatives work as intended and rarer still is uniformity of decisions between the Contractors.

Medicare Cuts and Sequestration: In the heart of the political season, the Obama administration is required within the next 30 days to announce the implementation of a 2% Medicare cut, effective January 1, 2013.  This “cut” is the result of current legislative failures (and no legislation presently on the table) to produce a $1 trillion package of deficit reduction.  Recall, last year’s Super Committee created a legislative compromise to raise the debt ceiling via an either-or approach: Either find a deficit reduction package or automatic cuts would occur.  This is the “sequestration” implication; required action without new legislation.  Within the next month, the Obama administration is required to report to Congress its plan for implementing the 2% cuts – Medicaid is not part of the cuts.  Congress then must decide to accept the plan or revise the plan.  What I am watching is less the substance of the report (where the cuts come from) and more the political drama that will ensue.  Congressional dysfunction is engrained in Washington so I am doubtful that a plan revision is even possible.  I suspect a piece of legislation that evaporates the issue via bi-partisan delay (the Potomac two-step) until after the elections.

Medicaid Expansion:Back on my radar thanks to one small piece of news from Washington this past week – a kinder, gentler tone on how state’s can or cannot expand and the CMS reaction to such a decision. Essentially, CMS has taken the tone of “doesn’t really matter to us” and states can somewhat take their time.  The new “position” came from the CMS head of Medicaid and CHIP.  The message is that states can choose to expand as early as January 1, 2014 or delay if desired.  Her only message is that delay will result in non-optimized federal funding (additional dollars from the Feds to implement expansion).  In effect, the message is take-it or leave-it and we’re fine with either – a stark difference from earlier messages that incorporated threats fof dire funding cuts for states that didn’t get on the expansion bandwagon.  The Supreme Court’s decision clearly changed the CMS rhetoric.  My watch now is how states decide to craft their bargain with the Feds for FY 2013.  As I have mentioned in prior posts, state budgets are a mess and full funding of expansion is tantalizing to some and to others, a scary proposition.  Again, I think November’s elections are the make or break point for many “red” governed states.

My Fall Out issues this week come from readers and industry insiders.  Here is their take on what they see;

  • From a reader and colleague in the Infusion/DME industry in response to my last week’s What’s Trending….To your point on audits within each sector of healthcare, us infusion providers are being hit with CERT, ADR, and now PERM audits.  We have decided to stop sending certain claims to Medicare because every claim is triggering a CERT audit.  Wonderful effect on my cash flow.  The PERM audit put me over the edge…I need to send the medical record to the PERM contractor due to a $1.90 payment.  That’s right, one dollar and ninety cents.  I called the contractor in Baltimore, and asked if I could just send a check for the money in question, because it will cost more in electricity to print paper copies from our EMR…the person was not amused. They have no sense of humor.  Seriously, these audits are putting a major crunch in resource allocation.  Each CERT request is generating 30-40 pages of documentation.
  • From a colleague who reads and who I often discuss economics and policy issues with (he’s a risk consultant)….  

% of the 2012 Federal Budget of $3.8 Trillion

Medicare, Medicaid and Other Healthcare          $ .836 Trillion              22%

Social Security                                                               .798 Trillion              21%

Defense                                                                            .722 Trillion              19%

Interest on the Federal Debt                                       .228 Trillion                6%          (sub total 68%)

——–

Other Welfare Programs                                      .722 Trillion              19%

Education                                                                .152 Trillion                 4%

Foreign Affairs                                                       .038 Trillion                 1%

All Other Government Spending        .              .304 Trillion                  8%

——————            ———–

2012 Total Federal Spending                             $3.800 Trillion             100%

2012 Total Tax Revenues                                       2.473 Trillion               65%

———————

$1.327 Trillion               35%              (Federal Deficit for 2012)

$16.400  Trillion                                  (Total Federal Deficit)

Let’s add up just 1) Medicare/Medicaid, 2) Social Security, 3) Defense and 4) Interest on the National Debt. (22% + 21% + 19% + 6% = 68%)  These 4 items total 68% of the Federal Budget.

We could shut down the ENTIRE FEDERAL GOVERNMENT except for these 4 programs and WE STILL DON’T BALANCE THE BUDGET !!!

What are our Presidential and Congressional Candidates saying:

1. Just cut government waste.

2. Just lower taxes and the economy will grow its way out of this fiscal mess.

3. Just control government spending

4. Just tax the a) rich and b) big corporations more

5. Just cut Entitlements and things will be all right. Obviously, these individuals are using such slogans to get elected. What will it take to fix things?  This is the magic question. It will probably require all of the following:

a. Significant cuts in Entitlement programs and Defense

b. Tax increases most likely significant increases for all of us who pay taxes.

c. Significant changes/cuts in government employee pension and retiree health insurance benefits.

d. Spending cuts across the board in all other government areas

What about Welfare programs?  How much can we cut?  Another good question.  Cuts will need to be made here too.  However, do you want to live in a society where the disabled, sick, aged, poor, unemployed and other disadvantaged individuals live like they do in India, Haiti, South Africa?  Is there welfare fraud in these programs?  Yes.  Is it pervasive and widely abused?  I don’t think so. 

The medicine to fix this mess will not be pleasant. We all must suffer.  No exceptions.  The rich, middle class and poor.  Government employees including the police, firefighters, teachers and military.  Wall Street investors, bankers, doctors, lawyers.  Big corporations, small and medium sized businesses.  All of us. The trick will be how to do it in a fair and equitable way.  Good luck with that.

Will our elected officials have the political will to act before it is a crisis?  Unfortunately, there is no evidence of it.  There will need to be a crisis.   

So, we are basically SCREWED no matter who we elect.  There is an old saying “People get the government they deserve.”  Needless to say, we deserve the medicine we will be forced to swallow in the coming years for not paying attention to what was happening in Congress, the state legislatures, county boards and municipal council chambers.

And this is only the Federal budget.  God help us when all the other levels of government finish with us, i.e. State, County, City, Village, Township.  Each of these have their own financial troubles to deal with.  Guess how they will fix these?  Same song different verse.

  • Finally, from a reader and colleague in the hospice industry….What went wrong?  Those of us in hospice for the past twenty plus years were kind of like kindergarten teachers; we did it because we loved it and thought what we were doing was noble and proper.  We never intended to make a ton of money on caring for the terminally ill and in reality, we never did.  We raised money to make ends meet and we never thought of drumming up business by hanging out at nursing homes and telling the nursing home that we could make them money by taking their Medicaid/Medicare residents and putting them on hospice.  When we went to a nursing home and took care of someone, it was because the  person was truly dying and proof of point, they generally did in short-order.  I am truly depressed to see these mega-corps tarnish what I love and think of as the most important service on earth and all because shareholders just want more return.  What happened to “care” coming first and profit coming to those who put “care” first?

Until next time and as always, keep the feedback coming and keep the faith!

August 13, 2012 Posted by | Hospice, Policy and Politics - Federal | , , , , , , , , , , | 2 Comments