Reg's Blog

Senior and Post-Acute Healthcare News and Topics

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 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

Medicare SNF Cuts: Fact, Fiction, Probability

In early May, CMS released its proposed rule for FY 2012 concerning Medicare PPS reimbursement for SNFs.  As most followers of the industry from investors, to operators to developers know by now, CMS dropped a “bomb” to the industry indicating bluntly, a warning of a parity adjustment (reimbursement or payment reduction) of 11.3% or $3.94 billion.  In typical convoluted CMS fashion, the logic behind this foreboding news is scattered; an analysis of the agency’s inability to adequately anticipate provider behavior, utilization patterns, and to appropriately create a reimbursement mechanism that ties the cost of care required by current SNF patients with the costs and delivery systems necessary to provide the care.

Initially, the interpretation from many inside the industry was that CMS was overreacting, using only one-quarter’s worth of claims data to substantiate a “sky is falling” conclusion.  More recently, six month’s worth of claims data became available and analysis proved the trend correct and even a shade worse or better stated, more prevalent than originally assumed.  In short, the implementation of MDS 3.0 and RUGs IV missed the budget mark (budget or expenditure neutral) by $2.1 billion or 16%.

In the last week to ten days, the OIG (Office of Inspector General) for CMS stepped into the debate, stating its opinion that the overpayments must be stopped immediately.  Interpreting the OIG’s qualification of “immediately”, the timeframe at issue is next fiscal year.  In essence, the core of the problem continues to be the structural flaws within the RUGs system predominantly, that disproportionately pays more for rehabilitation therapy than for other primary care modalities.  A major intent of CMS during the switch from RUGs III to IV was a reallocation of the incentives (higher payments) from therapy to other resident care requirements.  Suffice to state, the methodology failed.  Below is a simple illustration of how on a pure rate basis, the RUGs III to IV therapy categories compare.

Table 1: Average Amount That Medicare Pays SNFs per Diem for Each Level of Therapy, FYs 2010 and 2011
Level of Therapy Number of Therapy Minutes Provided During Assessment Period Average per Diem Payment FY 2010 Average per Diem Payment FY 2011 Percentage Increase From FY 2010 toFY 2011
Low 45 to 149 $288 $430 49%
Medium 150 to 324 $369 $488 32%
High 325 to 499 $364 $532 46%
Very high 500 to 719 $418 $594 42%
Ultra high 720 or more $528 $699 32%
Source: OIG analysis of unadjusted per diem urban rates for FYs 2010 and 2011. See 74 Fed. Reg. 40288, 40298–40299 (Aug. 11, 2009) and 75 Fed. Reg. 42886, 42894–42895 (Jul. 22, 2010).

Reviewed on-the-face, it is logical to see how CMS could miss the targeted expenditure mark by the margin it has, even in-spite of the “methodology” changes that occurred in the conversion from 2.0 to 3.0 and RUGs III to IV.  Providers, being logical creatures of certain habits, moved accordingly to grab the payments at the highest attainable levels or in short, fulfilled the economic axiom of, “what gets rewarded (paid for) gets done”.  The expectation on the part of CMS that utilization trends would fall-off from the higher paying therapy categories, necessitating a higher re-balanced rate to negate a revenue “shock” to the SNFs was poorly thought through.

Quickly reviewing “what” occurred to produce such a variance from assumption to actual is easy. Getting to the core takes a bit more thought and digging.  In summary fashion; CMS assumed that by restructuring how therapy minutes were calculated for concurrent therapy (therapy provided to two individuals) from a two-equals one basis to an equal half, would reduce the ability of providers to meet the higher per minute category qualifications, necessitating more one to one therapy sessions (the previous concurrent therapy rules allowed providers to have two people in the same therapy session with the total session time allocated to both participants equally).  Similarly, CMS assumed that ending the look-back provision to establish reference dates and care requirements would more accurately stage the resident’s acuity and care needs to the point of admission (or proximally forward from admission) to the SNF.  Additional tightening of the extensive services qualifier rules would also, as assumed, reduce higher RUG scores and thus, payments.  Of these changes and assumptions, only the look-back period changes combined with the changes in qualification for extensive services provided any material classification changes (lower payments) though such changes were far less in total dollars than the dollar increase CMS imputed on the corresponding RUGs III to RUGs IV therapy payments. Providers however, merely switched to the remaining “open ground”, providing more therapy on an individual basis and most noticeably, on a group basis.  On a group basis, minutes are counted collectively, not split in equal parts among the participants – a provision CMS did not change from RUGs III to RUGs IV.  While the modifications made to the extensive services qualifier and the look-back period provision did impact providers, CMS completely misunderstood the application and prevalence within the provider community of these two provisions under RUGs III and as played-out, found that providers could still code residents into higher payment groups/categories in spite of the changes.

To understand what might happen next, one needs to look at how this mess occurred.  As I’ve typically found, the answer lies in both camps; providers and CMS.  In my recent work, its clear that many providers don’t understand the transition from RUGs III to RUGs IV and as I have looked at “oodles” of Medicare claims, I dare say a large number are still frought with “up-coding” and questionable therapy-minute counting practices.  This is not to say that the whole of the industry has behaved in this fashion but arguably, and CMS understands this as do both major trade associations, providers have not totally changed their business models to reflect the changes in payment systems.  One needs only to look at how claims trended under RUGs III and how they now are trending under RUGs IV.  The trend is too consistent to support an assumption of SNFs; a) staffing substantially more therapy personnel to capture the minute requirements via individual treatment or, b) SNFs moved a sizable share of their Medicare case-load into group therapy.  The latter, while I’m certain it has occurred on a broad basis as the OIG report suggests, is problematic from a care delivery perspective for a large range of diagnoses that truly require individual therapy sessions.

CMS continues to remain fundamentally inept at developing reimbursement systems that provide adequate payment for the care and services required by SNF residents.  I have yet to see, across my 25 years in the industry, any period or any system devised by CMS that didn’t under-support or over-support, one type or category of patient versus others.  It is also illogical that CMS cannot develop the audit tools and claims management infrastructure that both educates providers and pre-emptively kicks-back claims clearly evidencing up-coding.  I am consistently amazed at “what” gets paid and for how long.  In short, CMS is apparently willing to consistently miss the mark, make wholesale adjustments and reallocation of dollars, only to over-correct past inconsistencies while producing new ones.  Such will not doubt occur with this latest blunder.

While I won’t claim to have a crystal ball in terms of forecasting “what happens” next, experience and ongoing dialogue with individuals on Capital Hill and within CMS gives me some decent insights.  With debt ceiling/deficit reduction talks mired in politics, it is unlikely any substantial cuts to entitlement spending are forthcoming.  Senate Democrats and the President are sufficiently dug-in on cutting Medicare spending by any measurable amount thus the target on this issue (Medicare SNF spending) has moved away from the current political fracas.  The remaining Washington impetus for cutting SNF reimbursement  resides within CMS.  In spite of the OIG’s report,  enacting cuts of the magnitude suggested is a political issue.  CMS can propose all the spending cuts its desires but Congress has the final say.  Rarely if ever, although given today’s climate an exception may be possible, has Congress sustained reimbursement cuts of this magnitude.  Synthesized, my view of what happens next, based on what I know to date, is:

  • Providers and their trade association are willing to capitulate to a modest adjustment in the therapy categories.  This symbolic give-back will play well politically.  Net of a market-basket/inflation update, cuts of 2% to 4% are possible in a “cut scenario”.
  • In a scenario that involves no real cuts, rates will be flat.  CMS will institute additional refinements and perhaps, even re-calibrate or fine tune payments by RUGs category, moving dollars within the RUGs system, without reducing payments.  In this scenario, the attempt on the part of CMS to is to “patch the potholes” and let the system itself reduce payments via tightening the requirements and re-allocating dollars within the RUGs categories.
  • A most probable scenario involves, as is typical, a bit of both.  CMS will cut the therapy rates using some language about re-basing.  At the same time, a series of corrections will be made regarding the counting of minutes for group therapy, assessment windows, etc.  Overall, payments to SNFs across all RUGs IV categories will be flat or targeted as a reduction equaling 2-4%.  The pull-back on the therapy RUGs rates could be as steep as 8% to 10%.  Even at this level, the remaining rate will be higher than the former RUG III rate.

July 24, 2011 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , | Leave a comment

MDS 3.0, RUGs IV, RUGs III, Hybrid: A 45 Day Review

Forty- five days past the October 1 conversion to MDS 3.0 and the interim RUGS IV payment groups and I still am getting a great deal of requests for analysis tools, questions on payments, liabilities, dates and rates for the Hybrid (RUGs III) groups, maps between RUGs III and RUGs IV, etc.  While I lost track of how many spreadsheets I have e-mailed and how many questions I’ve tried to answer, I have managed to keep track thematically of the issues and ongoing needs of the folks that contact me.  To that end, it seems appropriate to consolidate the information I have, the questions I’ve gotten (and continue to get) and the issues as I hear them and provide my readers, colleagues and clients with a forty-five day recap.  Many thanks to Brett Seekins at Baker Newman Noyes who has passed along his insights based on ongoing conversations with principals at CMS.

RUGs III Hybrid

As of today, the Hybrid grouper is still not functional and CMS states that it is still undergoing development and testing.  I have confirmed this from numerous sources and CMS still is providing no hard date or date range when the Hybrid grouper may be functional.  Per a contact that Brett Seekins from Baker Newman has at CMS,  a crosswalk between RUGs III and RUGs III Hybrid was supposed to be posted on the CMS SNF web page by today.  As of now, it is still not posted but when it does become available, I will get it, analyze it and make it available to anyone who requests it.  NOTE: There is no crosswalk document between RUGs IV and RUGs Hybrid although there is a crosswalk between RUGs III and RUGs IV which I have and continue to make available to anyone who requests it.  Based on what I see when I gain access to the RUGs III to Hybrid crosswalk, I may be able to make some sense of a crosswalk strategy between RUGs IV and Hybrid.

Retroactive Adjustments/Overpayment Collections

This is a hot topic and one that remains very much in limbo.  First, CMS has made no definitive statements on how and if, repayments or retroactive adjustments will be handled when the switch is ultimately made between RUGs IV and Hybrid.  Recall that when MDS 3.0 went into effect on October 1, RUGs IV was the only grouper system that worked with 3.0 and thus, is being used to pay providers.  The issue that remains is for CMS to construct the Hybrid grouper and then, to determine how and if, overpayments occurred in the interim while RUGs IV was used.  The “how” and “if” determination will drive what CMS does with respect to retroactive adjustments or recoupment of overpayments.  My take on this subject is that CMS is a bit politically stuck at the moment as it, like the provider side of the business, is waiting to see if Congress steps forward and retroactively implements RUGs IV as law effective October 1, 2010.  This step would be huge and eliminate a ton of complications.  As to how likely this is, my guess is a shade better than 50/50.  Despite the present “lame-duck” session where historically, little of great significance is accomplished legislatively, a Medicare ticking time bomb exists.  This time bomb has to do with the pending cuts to the physician fee schedule, an issue I wrote extensively about in late spring and early summer.  Recall, that Congress created a temporary series of patches, the last creating a modest increase in the fee schedule (and related Part B services such as rehabilitation therapies) while pushing the scheduled cuts back to November 30.  The cuts are a result of a law passed by Congress years ago tying the increase or decrease in physician fees (and related Part B services) to a sustainable growth formula or more simple, a formula that is based on economic growth and overall program spending in Medicare.  Due to a languishing economy, the formula in-place calls for cuts in physician fees by 21% in 2010 with another forecast for additional cuts in 2011 (the current fiscal year).

Considering the physician fee schedule issue, Congress now must address this problem or face an enormous potential crisis with physicians and other providers reducing their services to Medicare beneficiaries.  The good news here for RUGs IV is that legislation regarding Medicare will be drafted if for no other significant purpose than to address the fee schedule problems, leaving room for other program changes to slip in such as those involving the implementation of RUGs IV.  In any other lame-duck session scenario, I would say that the chances of the RUGs IV issue being addressed would be “slim and none”.

On a final note, CMS has their hands full with getting the hybrid system in-place and therefore, retroactive adjustments are a far distant priority.  Remember, RUGs III and RUGs IV are pegged at budget neutral or in other words, RUGs IV is not supposed to cost Medicare any more dollars than the cumulative outlays under RUGs III.  In reality, because of the complexities of the new MDS assessment and the resultant changes to the case-mix weights that drive payments under RUGs IV, I believe CMS will spend less money initially under a RUGs IV system.  It will take providers a year or two to learn the intricacies of the new system and to adjust their operations, coding and billing practices accordingly.  This means that CMS will be under minimal pressure to recoup overpayments as few will likely exist.  I believe a greater probability is that CMS will make a technical adjustment in their annual rate setting for SNFs in July/August next year, reducing potential increases by a small factor for overpayments during the transition period.  Again, this only occurs if Congress fails to address the implementation date of RUGs IV back to October 1, 2010.

Establishing a Liability for Overpayments

Given the above discussion on retroactive adjustments, I have advised providers to prudently establish a liability for overpayment based on their Medicare utilization since October 1.  Here is what I am advising people to do regarding this transition and hybrid period. First, obtain a calculator with RUGs III hybrid rates and use it to establish a liability on the balance sheet for overpayments.  The calculator allows you to enter your utilization by RUGs III and/or RUGs IV claims and produces results for each payment system.  I have a calculator tool that I make available. Second, run a month end manual test on your claims by using the published hybrid rates. CMS released these in August. The manual test is as easy as a quick sample of claims for the month, mapped against the hybrid categories. Where a hybrid category does not exist, use the RUGs IV category – CMS has said it will use RUGs IV categories where no RUGs III hybrid exists. Third, compare your results and adjust your liability up or down by the error percentage (how much your sample said you were over or under) for the next month and error on the side of being conservative.  If in fact, Congress acts or CMS chooses not to recoup payments from individual providers, the liability simply evaporates to income once the issue is resolved.  The sole side-effect temporarily, is that income is slightly understated by the effect of the liability.

Monitor Performance and Progress

Regardless of where an SNF feels it is on the journey post October 1, the number of questions I am still getting plus the number of tools that I still send out suggest that providers are still transitioning.  This is to be expected given the enormity of change and the ordinary bumps in the road caused by CMS and its intermediaries.  My advice is that SNFs check their progress on the transition by doing the following.

  • For any SNF that is using a therapy contractor or rehab company, audit your contractor/rehab company. The largest change that occurred under the switch to MDS 3.0 and ultimately RUGs IV is in the provision of and payment for therapy.  Recall that the therapy company is not the Medicare Part A provider; the SNF is.  Any liabilities that arise from billing problems, overpayments, etc. are ultimately the responsibility of the provider with the agreement with CMS or in other words, the SNF.  I have seen tons of therapy company contracts with very limited indemnity clauses, typically not worth much in the event of a major billing probe, upcoding issues, fraud investigations or recoupment of overpayments.  In virtually all of these clauses, the indemnification back to the SNF from the therapy company is for the cost of the therapy charged by the therapy company to the SNF; not for the lost revenue and/or fines and penalties that can occur.  It is the SNF’s responsibility to assure that Medicare is appropriately billed and care is correctly provided and documented as assessed on the MDS.  The simplest way for an SNF to assure that such is the case is to audit the therapy company’s performance.  I have an outstanding partnership relationship with a therapy management firm (not a therapy company) that can provide such a service, cost-effectively and efficiently.  The principals are all MDS 3.0 certified and have decades of experience as therapists in the long-term care industry.  I advise any SNF that hasn’t audited their therapy provider to do so ASAP.  Even for SNFs that provide their therapies via employees, it makes sense to have an expert come-in, review current practices and to provide guidance where improvements can be made.  Feel free to contact me for a referral.
  • Periodically, check your utilization patterns as occurred under RUGs III and now, under RUGs IV.  Use a crosswalk tool to see exactly how your claims under RUGs IV are trending compared to what they were under RUGs III.  In 45 days, a significant change should not occur as for most providers, case-mix evolves rather slowly.  If you are seeing big jumps or changes, something is amiss (for example, Ultra High rehab patients should still conform accordingly under the RUGs III method and then group accordingly under RUGs IV).
  • Monitor your MDS completions and the time it is taking to complete the assessment.  MDS 3.0 is heavily driven by interviews and accordingly,  a provider should see a shift in time taken with direct patient interviews.  Likewise, the ultimate shift under RUGs IV significantly changes therapy minute counting, especially concerning concurrent therapy.  Provider should see movements toward more individualized therapy time and elimination of look-back assessments.
  • Sample some new admissions looking for a match between clinical charting and MDS coding.  What is being coded on the MDS should correlate tightly with what is reflected in the resident clinical record.  If there is a gap, time for re-training.


I have a number of tools that I can forward to make the analysis, budgeting, forecasting, checking, etc. easier.  For example, I have current Hybrid rates, RUGs IV rates by region/location, a RUGs III, Hybrid and RUGs IV calculator by region/location, a RUGs III to RUGs IV crosswalk and hopefully soon, a RUGs III to Hybrid crosswalk.  Feel free to e-mail me and request any or all of these tools or comment to this post with a valid e-mail address and I will get them to you ASAP.  My e-mail is  Likewise, feel free to drop me a question and I will do the best I can to answer it or point you in the right direction.

November 15, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | 3 Comments

RUGs III to RUGs IV: The Core of “Need to Know”

In the past month with October 1 looming closer, I’ve been fielding lots of questions regarding the transition from RUGs III to RUGs IV.  Instead of listing the questions and trying to recap my answers (my memory is good but not that good), I’ve settled on an overview or “summary”; the core of what SNFs need to know or if nothing else, get up to speed on quickly.  To organize this post, I’ve used headlines for expediency.

Overview: Difference Between RUGs III and RUGs IV

Simply put, the major difference applies to therapy at the expense of nursing or clinical care needs.  CMS became concerned that changes in the SNF population and patient needs altered industry practices and the allocation of resources, principally away from clinical nursing to rehabilitation therapy.  Via the engagement of 205 nursing homes across 15 states, CMS completed a time study to analyze the required resources provided to patients versus the clinical needs of patients.  The end result was an update to RUGs III known as RUGs IV.  RUGs IV consists of 66 groups divided into 16 categories (two were added) versus 53 under RUGs III.  To utilize the RUGs IV groups for payment, CMS revised the standardized assessment tool known as the MDS to version 3.0.  The final implementation rule published by CMS includes assurance that in calculating RUGs IV, the goal of payment parity is maintained.  In other words, the historical distribution of total payments to SNFs, based on 2007 claims data applied to RUGs IV, creates the same level of total PPS expenditure for SNFs as would occur under RUGs III.  Of course, this is not an assurance to any particular SNF that upon transition, revenues under RUGs IV will be equal or greater than revenues received under RUGs III.  The average rate, per CMS under RUGs IV will be $431.71 compared to $420.42 under RUGs III.

Financial Impacts Under RUGs IV

As with all changes of this magnitude, there are or will be, winners and losers. The losers in terms of financial impact are facilities that have run high levels of non-clinically complex rehab patients, treating on a concurrent therapy model.  Clearly, the bias under RUGs IV is for facilities to provide one-to-one therapy.  Under the concurrent therapy rules, the total treatment minutes are divided between the two patients (max that can be treated concurrently is two).  For example, one hour of therapy equals 30 minutes per patient.  The clear impact is that overall treatment minutes are reduced, reducing the RUG level and/or the SNF will need to increase the overall amount of therapy provided to patients (not practical or clinically viable) concurrently.  For example, an ultra high rehab under RUGs IV is divided into three groups based on ADL scores;  RUC, RUB, and RUA. The requirement, regardless of the ADL score, is for the resident to have a rehab diagnosis requiring a minimum of 720 minutes per week, receive 1 discipline 5 days per week and a second discipline 3 days per week.  Doing the math, meeting this criteria with concurrent therapy is virtually impossible.  Via CMS’ own analysis, the predicted percentage of patients that fall into RUC, RUB, and RUA under RUGs IV vs. RUGs III declines from 17.8% of all days of stay (RUGs III) to 8.9% of all days of stay (RUGs IV).  Not surprising however, is that the rate does increase under RUGs IV for these groups by an average  of more than $100 per day.  While contract therapy companies will give me continued grief for saying this, facilities that have contract therapy providers fall predominantly into this risk category; much heavier emphasis on concurrent and group therapy treatment models as a means of maximizing staff resources and maintaining high levels of productivity (benefits to the contract therapy company).

Another clear category of losers is facilities that took significant advantage of the hospital look-back provisions under RUGs III to establish diagnoses, rehab and clinical care plans.  RUGs IV and MDS 3.0 eliminate this provision entirely ( an exception exists for ventilator patients).  I like to use the example of “former” treatments such as IVs for fluids or medications present in the hospital.  Facilities that used the presence of IVs while a patient was in the hospital under the “look-back” provision could justify an extensive services qualifier to a high rehab group, capturing a high rehab plus extensive services RUG under RUGs III, even if the IV was gone when the patient was admitted to the SNF.  Under RUGs IV, no IV present on admission becomes the assessment basis plus, IVs for nutrition/hydration and medications now qualify as Clinically Complex rather than Extensive Services.  Extensive Services qualifiers under RUGs IV only include ventilator care, tracheostomy care, or isolation for an active, infectious disease.  The patient must also have an ADL score of 2 or higher.

The clear winners under RUGs IV are facilities that care for clinically complex patients and patients that are more ADL dependent.   For example, and in follow-up to the paragraph above, SNFs that provide ventilator care, tracheostomy care, care for infectious diseases, etc., plus provide rehab, can win “big”.  For example, a ventilator patient receiving 325 minutes of therapy per week from 1 discipline 5 days per week (Speech and/or OT are the most common here) would be categorized as an RVX under RUGs IV with a corresponding urban federal rate (payment rates are by regions) of $786.66.  An RVX under RUGs III pays $467.62.  A similar relationship holds true across the categories for facilities that provide care to more ADL dependent patients.  Higher ADL dependency scores increase payments rather rapidly.  There is a note of caution here though as today, I routinely see ADL scoring that is speculative at best (typically upped) as the MDS 2.0 is less sensitive about ADL scores to generate a RUGs rate.  Under MDS 3.0, the ADL assessments are far more sensitive and detailed, designed to truly qualify ADL deficits.  I believe a fair number of facilities will find their ADL scores decreasing rather than increasing over time.

As I indicated previously, RUGs IV increases the nursing index weights at the expense of rehab.  Essentially, facilities that typically bill below average rehab utilization (days) under RUGs III stand to come out ahead under RUGs IV, provided their clinical complexity is average or higher.  For example, an SSB for wounds under RUGs III correlates under RUGs IV to HD1 or HD2, depending on the presence (lack of) depression.  The clinical weight index jumps by  .50 under HD1 or by 1.0 under HD2, creating a positive revenue impact of $90 to $140 per day respectively.  Fundamentally, facilities that provide more clinical nursing care to a population with higher ADL deficits, cognitive impairments, and maintain an average rehab profile as expressed through utilization, will fare better under RUGs IV than RUGs III.

Assessing the Impact of RUGs III to RUGs IV

In order to assess the financial impact or revenue impact of payment under RUGs III vs. RUGs IV, a provider needs to essentially map their current/historic Medicare case mix as determined under MDS 2.0 (paid under RUGs III) to RUGs IV.  To date, there are two ways to do this and neither are easy.  The first is to complete an MDS 3.0 for each current resident under Medicare.  I don’t advise doing this as it is cumbersome and in many cases, providers are still learning the nuances of 3.0 assessments.  The second option is to use a cheat sheet and a somewhat simplified method.  The method is as follows.

  • Pick a fairly consistent utilization period such as the last six months to a year.  Across that period, total the number of patients billed under each applicable RUGs III category, including the days billed.  Obviously, not every group will be used.  For example, if during a set period such as six months, the facility had 42 patients in RHA with respective lengths of stay ranging from 22 days to 36 days,  I’d list 42 RHA with a calculated average length of stay.
  • For each RUGs III group with billed patient days, pull the corresponding MDS’ for each patient.  Analyze the MDS’ to develop a consistent profile of the patients that fit into the corresponding categories.  The profile should be specific enough to cover typical ADL scores, significant clinical issues (wounds, IVs, etc.), therapy disciplines and minutes, etc.
  • Next, using a spreadsheet that I can provide (drop me a note at including your e-mail address and I will send it out), map your RUGs III profiles as created in steps one and two to RUGs IV groups.  Note: An RVX under RUGs III will not likely correspond to an RVX under RUGs IV as to qualify,  a patient under a RUGs IV RVX must have a ventilator, require tracheostomy care or have an active infectious disease.  Also, be very conscious of the concurrent therapy minute changes under RUGs IV when mapping your therapy minutes.  Remember, under RUGs IV, concurrent therapy is divided equally among the two residents/patients (i.e., two residents in PT treated concurrently for an hour does not equal 60 minutes of therapy for each resident but 60 minutes total, 30 minutes allocated to each resident).
  • Once the facility has mapped each RUGs III profiled group  to corresponding RUGs IV groups, you can analyze the revenue impact.  Multiply the number of residents per RUGs III group times the average length of stay for the group times the applicable RUGs III rate.  This is your RUGs III revenue average.  Next, do the same calculation for the RUGs IV groups (if you need the RUGs IV rates, drop me a note at and I can provide them to you).  Finally, compare the two sets of revenue numbers.

IMPORTANT: The second method gives you a good generalization of the revenue impact but it is not exact.  To be more precise, one would need to analyze each billed encounter under the RUGs III system and then, translate the same profile to RUGs IV.  Additionally, the only true exact method is to reassess each patient under MDS 3.0.  Because of the significant changes under RUGS IV to ADL scoring, look-back periods, and therapy minutes (concurrent vs. one on one vs. group) and the weighting of clinical issues (IVs no longer qualify as “extensive”, etc.), it is very difficult to map precisely, the financial impact of transitioning from RUGs III to RUGs IV.

Important Points to Consider/Remember

Based on my varied and numerous conversations with providers, I’ve created this brief list of issues and/or important points regarding the transition from RUGs III to RUGs IV.

  • RUGs IV and MDS 3.0 will change “how” SNFs do business or it should, unless the SNF wants to see Medicare revenue shrink.  Extremely key to remember and plan for;
    • No look-back period
    • Concurrent therapy rules
    • Highest Rehab groups (extensive services)  require the patient to be on a ventilator or require tracheostomy care or have an infectious disease.
    • Next  highest rehab groups will be difficult to meet the minute and discipline requirements if your current standard for rehab relies heavily on concurrent therapy.
    • Emphasis on ADL scoring is key in terms of attaining higher groups within categories as is the documentation of depression (if present).
    • Assessments under MDS 3.0 are longer and meeting dates is critical to avoid default rates – more work, more staff time and time sensitive dates.
  • If an SNF is using a contract therapy provider or company, the time to review and gain understanding about the transition to RUGs IV is NOW.  The SNF needs to make certain that the therapy company is capable of providing the necessary staff resources to principally deliver one to one therapy.  The SNF also needs to understand the financial impact to its operations that occurs when the therapy company adds staff (if required).  Further, and this point can’t be ignored: Medicare billing liability for all claims under Part A and B follows or stays with the owner of the provider number.  In a relationship between an SNF and a therapy company, the SNF is the Part A and predominantly, the Part B provider – not the therapy company.  Under the law, the requirement to assure accurate and timely billing falls to the SNF.  Any OIG enforcement, RAC activity, etc., will focus all fines, penalties, recovery, etc. on the SNF, not the therapy company as the SNF is the owner of the Part A provider number.  Implication: Don’t let your therapy contractor “drive the bus” on the transition to RUGs IV.  This needs to be a partnership and one where each party knows the rules, knows the impacts and has clear duties spelled out in the contract with clear remedies.  SNFs should not rely on standard therapy company indemnity clauses as the clauses I have seen typically limit the damage to the SNF for claims rejections, etc. to the “charges” the therapy company passed on to the SNF for providing services under the contract as applicable to the specific claim.  In short, the SNF bears the loss of the revenue for the claim plus if applicable, any fines or penalties, even if the therapy company personnel and their actions were the primary reasons the Medicare claim was denied, rejected, and/or deemed fraudulent.
  • The weighting within RUGs IV and thus the dollars, skew to the nursing side of things, away from rehab.  The weighting has shifted to clinical from therapy and as a result, gaining dollars and better reimbursement will come from a) changing your patient profile to one that has more clinically complex patients, and/or b) capturing the true clinical needs of your patients and their depression, ADL dependency, etc., on the MDS 3.0.  I always urge caution about (b) as the daily documentation better support the picture portrayed under the MDS or the implication is that the MDS was created to take advantage of payment which, if not matched by a patient with those needs, is Medicare fraud. 
    • Providers that wish to alter their patient profile need to explore the full ramifications of doing so financially and operationally.  More clinically complex and dependent patients may generate more Medicare revenue under RUGs IV but they also come with a cost.  The cost is typically in higher medication use, supply use, and staff resources.  Suffice to say, this population requires more nursing staff and perhaps, different nursing staff in terms of qualifications and training.  Additionally,  more clinically complex and dependent patients require more Social Service time and are more potentially problematic from a survey standpoint as there is more “stuff” going on with them.  An SNF moving in this direction needs to evaluate fully, the risks, costs and benefits associated with such a strategy.
  • While CMS says that overall Medicare spending on SNF care remains the same under RUGs IV and RUGs III, don’t believe it.  The distribution as forecasted is clearly toward a particular patient profile that is different than current or, a RUGs IV profile patient is different than the current RUGs III profile patient.  MDS 3.0 is a lot of work and will require facilities to adapt how and when they do their assessments and what resources they allocate to the assessment process.  In short, to make a smooth transition between RUGs III and RUGs IV requires planning – a lot of it.  It is less about groups and assessments and more about “how” the SNF does business.  Understanding the core concepts behind MDS 3.0 and RUGs IV is akin to understanding the rules of the game.  No game can be played successfully and efficiently without first, fully understanding the rules.

September 3, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , | 22 Comments

Doc Fix Survives, Medicaid Ehanced Match Doesn’t

In another procedural vote on the revamped Jobs bill in the Senate, Democrats fell short of mustering 60 votes to end a Republican filibuster, effectively ending for now, legislative efforts to extend unemployment benefits.  The vote count was 57 to 41 to continue debate.  Dying with the extension of unemployment benefits are a series of pro-business tax cuts, tax increases on domestically produced oil and on investment fund managers as well as the extension of the enhanced Medicaid match provided in the Stimulus bill, set to end December 31 of this year.

In an attempt to keep the bill alive, Senate democrats removed the provision related to Part B/physician fee schedule cuts and crafted a smaller, temporary fix (see my posts from last week on this same subject).  This separate “temporary” patch provides for a 2.2% increase in the Part B fee schedule and delays any cuts to physician fees until November 30.  Prior legislative efforts deferred the fee schedule cuts, pegged at 21%, until June 1 of this year.  This past week, CMS began paying claims incurred after June 1 at the reduced fee schedule rate.  In response to an enormous push-back from physicians and the health care community in general, the House passed this temporary Senate measure, sending the bill to the President for signature.  Assuming the President signs the bill, providers that have submitted claims for services provided after June 1, will have to re-submit their claims to assure correct payment, including the modest increase of 2.2%.

What’s next (as I have been asked routinely over the past two-weeks)?  Is the enhanced Medicaid match extension dead?  Legitimate questions, no doubt.  In brief, here’s my take or EWAG (educated, wild-assed guess).

  • Typically, when legislation such as this stalls, there is a single, two-ton elephant that needs to be circumnavigated or removed from the room in order for things to proceed.  In this case, there are three elephants in the room.  First, and larger in size than the other two, is the upcoming mid-term elections.  The current “tone” in electoral politics is not good for Democrats and decidedly, anti-incumbent, anti-big government, and bail-out weary.  Any legislation that looks-like and feels-like a bail-out is perceived as poisonous by incumbents headed toward a November election date.  Even seats once believed safe, are up for grabs and some, such as Sen. Boxer in California and Sen. Reid in Nevada, are considered bell-weather contests marking a shift in electorate sentiment (assuming losses on the part of Boxer and Reid).  The second elephant is the rising federal debt, now at $13 trillion and climbing.  This elephant is a cousin of the first and the Democrats are beginning to feel ownership, correctly or incorrectly, of  this elephant.  With the EU struggling with an enormous debt load, principally due to burgeoning social welfare programs and a slow economy, economists, the Fed, and investment rating agencies such as Moody’s, are warning that the U.S. debt load could pose the same level of risk to the economy as is present across much of the EU.  In fact, the U.S. debt load is perilously close to the value of the GDP; an indicator of a level of negative economic wealth (more debt than assets).  Saving an economic lesson for later, the rising debt load is potentially crippling in so many ways to a recovering economy (enough said for now).  The third elephant is the moribund U.S. economy, incapable of soaking up large additional amounts of debt and virtually non-responsive to the government’s deficit spending in the form of targeted stimulus.  Simply put: The Stimulus and the continued bail-out packages coming from Washington have done virtually nothing to stimulate recovery while adding billions to the debt level.  Arguably, the instability and the spending levels have hurt the recovery more than helped.  With these three elephants present today in the House and in the Senate chambers, very little prior to November (mid-term elections) can get done and what will get done will be temporary in nature (the doc-fix for example).
  • I’m not sure that the enhanced or extension of the enhanced Medicaid match is dead but it is definitely, on life-support in its current form.  It seems that the tone of this Congress  now is to avoid issues that include big price tags unless such an issue is immediately pressing (the doc-fix) and can be pushed every so slightly, down the road, but just by a bit.  The problem here is that many states are stuck with June 30 fiscal years and/or balanced budget requirements.  For these states, the uncertainty of additional Medicaid match dollars from the Feds requires establishing a plan that includes cuts, reimbursement and benefit levels combined.  The real devil in some cases, is for states that have expanded their Medicaid programs via the use of added match funds through the Stimulus, as the expansion components cannot be cut by law.  The additional funds via the Stimulus bill came with “golden handcuffs”, requiring states that used the funds via expansion, to maintain these services.  In short, Medicaid is a real mess but frankly, that is nothing new given how ridiculous its financing provisions are and how “federal” money hungry the states have become, selling their fiscal stability souls for additional federal funds and then shifting budget problems elsewhere, hoping new or additional federal money would continue, bailing out their current spending sins.
  • The logic of once again deferring the Part B cuts, now to November, is to buy Congress time to craft a permanent solution.  Anyone who buys this rhetoric needs professional counseling.  This issue is nowhere close to a permanent fix as such a fix requires political willpower (non-existent today), a revisit to the recently passed PPACA where the budget numbers are already out of whack, and finally, a commitment to spend new money as part of the solution.  Fixing the problem means abandoning the flawed sustainable growth formula, recasting the actual costs associated with the PPACA (estimates of deficit reduction relied heavily on unsustainable and impractical Medicare cuts), and finding new money within the budget, deficit or not, to create parity and stability within the Part B fee “world”.

June 25, 2010 Posted by | Policy and Politics - Federal | , , , , , , , , , , , , | Leave a comment

Senate Doubles Back on “Doc Fix” Legislation

After a mid-week roadblock was established on a procedural vote all but derailing the American Jobs and Closing Tax Loopholes Act and the integrated provisions that included a “doc fix”, the Senate doubled-back on Friday and passed a separate measure that patches the pending cuts (21%) in the physician fee schedule set for June 1.  The latest temporary measure stalling cuts as required by the sustainable growth formula underpinning the current Medicare reimbursement calculations for Part B services (physician fees, therapy rates, etc.) expired on June 1.  In the interim, in anticipation of another patch to the cuts, CMS directed its fiscal intermediaries to “hold” or pend claims after June 1.  The Senate legislation now must return to the House where as of today, reception as indicated by Speaker Pelosi is not likely to be “warm”.

The Senate’s fix calls for a 2.2% increase to the current fees (non-cut) through November 30 at a price tag of $6.4 billion.  Integral within this temporary measure are funds to not only augment the physician fee schedule but to also impute the same increase to other health care services tied to Medicare Part B such as outpatient therapies.  Come November 30, Congress will have to either have a more permanent solution in-place or additional temporary measures will be required.

Physician reaction was as expected; frustration and mixed anger.  Physicians continue to grow more hostile toward Congress’ strategy of temporary payment fixes, calling for a revamp of the convoluted and antiquated formula known as the “sustainable growth formula”, tying Medicare reimbursements under Part B to economic growth in proportion to overall Medicare outlays.  During health care reform discussions and in the initial Senate version and subsequent House version of the Jobs and Closing Tax Loopholes Act, longer term fixes to the fee schedule were integrated with larger costs.  Politicians from both parties, worried about rapidly increasing deficit levels, systematically gutted these longer-term measures to the point where no legislation addressing the pending cuts was in place until late Friday.

The lengthy delay in addressing the pending cuts of June 1 caused CMS to extend a “hold” on claim adjudication, effectively stalling claims from June 1.  On Friday however, CMS directed its fiscal intermediaries to begin adjudicating claims using the discounted fee schedule.  In short, claims from June 1 will now be processed with a 21% reduction.  CMS’ reasons for starting to pay claims at the discounted level are two-fold: First, longer delays in adjudicating claims will produce a significant back-log in claims, headed into the 4th of July holiday period; and second, the Senate legislation must return to the House for passage and preliminary indications from the House are that passage in its current version is unlikely. Claims can ultimately be re-processed once a permanent (or more lengthy temporary) fix is reached however, such re-processing is neither quick nor without additional work on the part of providers and CMS’ intermediaries.

There is no question that physicians as well as other provider groups are growing tired of Congress’ inability to resolve the Part B fee schedule issues.  With health care reform a less than fully embraced law and policy analysts and economists pushing Congress on rising deficits, the political willpower to address Medicare issues involving “new” deficit spending is almost gone.  In fact, many policy analysts and economists, including myself, have consistently pointed out that Congress lacks the political will to pass along the steep Medicare cuts imbedded in the PPACA and integral to its claim of “deficit reduction”.   The “doc fix” saga is clear evidence of Congress’ inability to live up to the spending cuts it created under the PPACA.

June 19, 2010 Posted by | Policy and Politics - Federal | , , , , , , , , , | Leave a comment

Part B Therapy Cuts Delayed to June 1

As a follow-up to a post from last week regarding pending cuts in Part B therapy rates, last evening the House passed a bill that the Senate had passed earlier in the day, included within is a provision to delay the pending cuts to the physician fee schedule until June 1.  The provision is tucked within a broader bill that extends COBRA subsidies and unemployment benefits to long-term unemployed individuals.  The provision covers the period from April 1 to June 1.  A prior measure, tucked into a jobs bill, delayed the cuts until April 1.  Congress was on recess for the Easter Holiday, returning this week.  It was expected that upon return, Congress would institute another temporary fix, pushing the reduction out for at least another month; in this case, two months.

The rates for Part B therapy are tied to the physician fee schedule which is targeted by law, for a 21% reduction.  The fee schedule formula is a sore issue for Congress and physicians both, at times for opposite reasons.  In periods of economic expansion, the annual inflation mechanism built into the formula can adjust the fee schedule dramatically upward, in excess of consumer inflation.  In periods of economic contraction, the formula produces dramatic cuts, such as the case set for 2010. (1)  Congress has sought for years to amend the economically contrived formula that produces such wild swings but has failed to find a middle ground approach that physicians can agree upon.  During the debate over health care reform legislation, fixes to the fee schedule problem were imbedded within inital legislation passed by the House as a permanent solution and manipulated by the Senate in a more limited method in its version.  The real crux of the issue boiled down to the costs associated with a permanent solution, estimated at $250 billion or more.  With little price-tag wiggle room as reform became final in the Patient Protection and Affordable Care Act, the fixes to the physician fee schedule dilemma moved to a side issue.  Given that the Part B therapy rates are mired within the fee schedule issue, the same fate of potential cuts also remained unaddressed at the time the President signed the final reform legislation into law.

The temporary delay in cuts, now set to sunset on May 31 only moves forward the same damning set of political issues.  Congress and the President are trying to commit to a reform mantra that is “savings” driven.  As the political landscape is clearly divided and mid-term elections loom closer, additional unfunded spending is the last element any “up for re-election” politician wants to come close to.   Congressional Democrats have crafted a middle-ground approach that would delay the cuts to October 1 (the start of the new federal fiscal year)  or perhaps out into 2015, freezing Medicare rates for the duration.  Physicians, preferring a complete revision to the formula and deficit hawks, preferring to let the reductions occur in large part, oppose the Democrats approach.

Tackling the funding and the fee schedule/Part B issue separately as a single new piece of legislation, in my estimation, won’t occur this year.  What I believe is likely to happen is that a longer term fix, perhaps until the end of the year, will get tucked into another broader spending bill, delaying once again, the core problems associated with the fee schedule and Part B.

(1) The physician fee schedule increases are tied to an economic sustainability formula that applies the Medicare Economic Index to a target called the Sustainable Growth Rate.  Essentially, the Index is a measure of inflation designed to reflect the costs physicians face with respect to their practice and to wage levels.  The Growth Rate is calculated based on medical inflation, the projected growth in the economy and the projected growth in the number of Medicare fee-for-service beneficiaries plus any changes in rules, laws or regulations as applicable.  Congress has tinkered with the application of this formula, freezing the implementation of cuts at 0% , most recently through March 31, 2010.

April 16, 2010 Posted by | Assisted Living, Home Health, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , | Leave a comment

Part B Therapy Rate Reductions Return

With Congress on recess, the temporary extension of the Part B therapy rate cuts ended on March 31.  As of today, with Congress still on “holiday”, the Part B therapy rate cuts remain in effect.  Best knowledge has it that Congress is working on another temporary extension that would retro to April 1 and last through April 30.  When President Obama signed the Patient Protection and Affordable Care Act in March, the exception process to the Part B cap was extended through the end of 2010.

Medicare Part B therapy rates are directly tied to the physician fee schedule set for a 21% fee reduction in January.  Congress while muddling through health care reform, has passed a series of temporary patches to stave off the cut.  The belief is that a more permanent fix to the physician fee schedule issue is “in the works” however, the cost of such a fix is an issue.  The House passed a fix in late 2009 but the legislation died in the Senate.  The Senate has been less inclined to address a permanent fee schedule fix fearing the price-tag would produce additional political damages during a period of existing unrest regarding the health reform bill and the rising debt levels.  Additionally, and not without a tremendous amount of political foresight, the Democrats and the President left the fee schedule fix on the side-lines during health reform passage fearing that its sizeable price tag ($250 to $500 billion depending on the scope and permanency of the fix) would push the CBO score to the wrong side of neutral.  In summary, the physician fee schedule issue trumps the Part B therapy rate issue and thus, in typical Washington fashion, both hang in legislative limbo.

For now, CMS has indicated that it is willing hold claims pertaining to services under the fee schedule for ten days; from April 1 forward.  CMS believes that this temporary hold is better than adjudicating claims concurrent with the existing law (cut in effect) and then having to re-adjudicate another submission once Congress, upon their return on the 12th of April, passes another temporary extension.  Per CMS, this will not impact provider cash flow as clean claims (electronic) are not paid prior to fourteen days.  For any claims previously tied-up in limbo during the last period prior to the exception grant (signed by the President on March 2 as part of a “jobs’ bill) backdated to January 1 and ending March 31, CMS has instructed facilities to re-submit claims to the regional contractor adding the KX modifier.  In effect, the ” claims limbo” that occurred for the period between January 1 and March 31 should be cleaned-up by now for CMS and their regional contractors.  Facilities should be on top this and getting their claims properly modified, submitted and promptly paid.

Stay tuned for what happens after Congress returns on the 12th and what the lay of the land looks like post April 30th – the likely deadline for the next temporary extension.

April 7, 2010 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , | 1 Comment