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Senior and Post-Acute Healthcare News and Topics

The SNF 800 lb. Gorilla – Medicaid

There is an old joke/riddle that goes like this: “Where does an 800 lb. gorilla sit? Answer: Anywhere it wants to”. For SNFs and REITs today, that gorilla is Medicaid.  Sure, there are numerous industry headwinds that SNFs face in terms of financial performance;

  • Rising percentage of Medicare Advantage patients as part of the payer mix with implied discounts to fee-for-service of 10% or more.
  • Additional regulatory costs stemming primarily from the new Conditions of Participation, released in 2016.
  • Value-based purchasing.
  • Five Star system savvy referral managers that are steering volumes to certain providers
  • Rising labor costs, primarily at the lower end of the labor pool (CNA, food service, housekeepers, etc.) representing the 50th or more percentile of the SNF labor budget
  • Bundled payments in certain markets
  • Growing diversion of former non-complicated orthopedic patients away from IRFs and SNFs to home health and outpatient

Yet is spite of this list, not one or even a combination is as crippling as the impact of a high percentage of Medicaid patients within an SNF payer mix.

Take Genesis for example.  Genesis stock trades at just above $1.00 per share.  Genesis’ average payer-mix across its SNFs is 73% Medicaid.  This means that 27% of  the remaining payers must make-up for a negative break-even margin rate of no less than 30% for each Medicaid patient.  In some states, the disparity is greater.  In other states, the disparity might be less but the state budget woes delay payments or issue IOUs (Illinois) causing the SNF to finance its own below-cost receivables.  Recent news that Genesis may be the next significant REIT holding default is far from fantasy.

The seemingly large, formerly well-capitalized SNF chains are in peril.  HCR ManorCare is in default to HCP (its primary REIT) to the extent that HCP is seeking receivership for the HCR holdings.  The portfolio has a rent coverage ratio of .76x at the facility level and less than 1x globally.  Signature is in the same boat.  Both have compliance problems with Signature having so scarce a margin that it cannot adequately staff or provide for residents in certain locations such as Memphis (facility denied payment, residents relocated).  HCR faces federal Medicare fraud action(s) that will likely lead to settlement payments, etc. for over-billing in excess of $100 million.

Among these troubled SNF providers, one common thread persists – high average Medicaid census (above 66%) as the primary payer mix in their buildings.  With this high mix of Medicaid patients comes staggering facility level losses or revenue shortfalls that must be made-up by other payers.  Consider Wisconsin as an example.  Wisconsin is a state that maintains a balanced budget and generally, a surplus.  It has no issues paying its bills so SNFs do receive timely payment.  Wisconsin however, grossly underpays its SNFs for their Medicaid residents to the tune of an average of a daily loss of $60 per day in 2013.  Between 2013 and 2015, Wisconsin provided no Medicaid rate increase.  All tolled, Wisconsin facilities experienced a Medicaid loss in this period exceeding $300 million.  This gap is exceeded only by the states of New York and New Jersey.  In Wisconsin, the Medicaid loss for an average SNF patient is made up (if possible) by other payers.  That amount today is well over $100 per day, excluding the cost of an imputed bed tax.  As the average Medicaid census is 65%, 35% of all other payers must pay $100 more to cover the Medicaid loss, before any other margin is applied.

Doing the math: A 100 bed facility with 100 residents has 65 covered by Medicaid. The State pays $175 per day for each Medicaid resident, on average.  The Facility costs are $60 per day higher or $235 per day.  In total, the Medicaid loss per month then is $60 x 65 x 30 (30 day month) or $117,000.  To break-even for the month, the remaining 35 patients must pay $346.43 per day or $235 per day in facility costs plus and additional $111.43 per day to recoup the loss from the Medicaid census. This of course does not include any additional costs related to a bed tax or account for any margin.

While the example is illustrative, it is not an atypical story state to state, save the unique twists that are part of every state program.  For example, Kansas chose to convert its Medicaid program to a “managed” program (in 2014) believing it could run more efficiently, save dollars on administrative costs and still provide adequate reimbursement.  As most states, Kansas chose to “bid” its program to various third-party administrators (insurers such as United Healthcare).  Unlike most states, Kansas chose to convert its entire Medicaid program rather than take a phased-in approach.  For SNFs, this approach has been a disaster.  The bulk of Kansas Medicaid recipients are rural.  Enrollment has been a nightmare and qualification of eligibility even more so. None of the participating administrators were prepared and had systems in-place to qualify promptly, newly eligible residents.  The net is many SNFs face technical payment delays due to having to manage multiple payers plus, difficulty in getting approval for residents that are Medicaid “pending”.  Receivables in total and days in receivable have skyrocketed and the state has yet to make many facilities current or whole.  And, because rate is an issue as is the state budget, the bed tax was increased by $800 per bed, per year.  In doing so, any facility with less than a 50% Medicaid census loses money on the bed tax (additional rate generated by Medicaid less than the bed tax increase).

Where this issue resolves is not apparent.  Proposals from Congress to block grant Medicaid to the states almost universally conclude with Medicaid rate reductions for SNFs.  For some states such as Kansas and Missouri, the outlook is a nominal reduction of 2 to 3% (though this is hardly nominal for the SNFs) in Medicaid spending/support.  The reason?  Rates and program expenditures are meager and lean to begin with.  In Colorado and New Jersey, overall Medicaid spending would reduce by as much as 20% translating to a crippling rate reduction without any additional state support (added state funding).  Both states were Medicaid expansion states under the ACA.

As for the survival and fortune of the SNF industry, the outlook for certain segments and providers is rather bleak.  The Medicaid story does not come with additional dollars for rate support or spending – just the opposite.  While block grants may give states renewed opportunities for innovation, the costs that drive SNF spending are not within the purview of a state to change – namely regulation, capital and staff.  The greatest flexibility a state may have is to infuse additional dollars and spending into SNF diversion programs – namely Home and Community Based Services.  These programs are wonderful for certain levels of care needs but for those frail seniors that typify the long-term resident in a SNF today, they offer no hope or savings.  Like it or not, SNF care for some is very cost-effective and necessary due to the needs of the resident (multiple chronic health problems, lack of family and social supports, mental/cognitive impairments, etc.).

In a recent call with an investment analyst from a private equity group, I was asked if “all was lost” for the sector.  The answer I gave is “no” but for some, the ship is definitely taking on water and it may be too late to avoid sinking.  This is definitely true for HCR ManorCare and perhaps for Genesis.  The question today is the collateral damage that may inure to REITs and other investors.  In brief;

  • Facilities with Medicaid census in excess of 50% will find it exceptionally difficult to generate enough revenue via other sources to cover the Medicaid losses.  Medicare simply is not sufficient in patient volume or rate to offset the losses.
  • Reducing Medicaid occupancy is difficult and not quick.  States do not provide a clear-path for this process and federal regulations don’t allow facilities to simply shed residents because of inadequate payments.
  • Many of the facilities with large (proportionate) Medicaid census are older and typified by bed counts above 75, semi-private rooms, and to a large degree, deferred cosmetic and maintenance issues.  In short: they are below the current market expectation for a paying SNF customer.
  • Taking over the operations or acquiring a number of these facilities with high Medicaid census, doesn’t change the fortunes of the same, directly or quickly.  While fixed costs in the form of rent payments may reduce, the operational headwinds remain the same.  A new operator cannot simply transfer out, Medicaid patients.  Even with a bed reduction plan approved by the State, the SNF is responsible for each resident, relocation, etc.  This process if not fluid or inexpensive.  Changing payer mix is difficult, slow and while occurring, expensive.  Frankly, I have never seen the same done to a facility that was predominantly, Medicaid.
  • The market for these facilities is minimal at best. For REITs, expect valuation changes (negative) as the holding value current is based on acquisition cost and income valuation tied to higher rent multiples.  Clearly, with rent coverage levels below 1, re-basing and re-balancing is next (if not already starting).

August 21, 2017 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , | 4 Comments

Bundled Payment Update

CMS has released the text of the proposed rule with regard to bundled payment status (see my post from earlier today).  The link is here – https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-17446.pdf

In summary, here are the high points.

  • No advance of the cardiac and upper femur fracture/traumatic joint repair/replace bundles for 2018.  The reason? As stated in my earlier post.  Lack of consensus on the part of the hospital and provider community in terms of rate and structural episode accuracy is the major cause of collapse.  The complexity to convert crossing DRGs into one episode payment across multiple physician providers was simply too much.
  • With the end of the cardiac bundles, it appears that the cardiac rehab incentive payments have entered limbo.  We’ll await additional rule-making for more guidance and possible restoration.
  • On the existing hip and knee replacement bundles (aka CJR) that are in-effect and mandatory in 67 MSAs, CMS is proposing to cut the mandatory MSA participation in half (34 to remain).  The remaining 34 MSAs are per CMS, higher cost areas that may show efficiencies and care improvements over-time.  Recall in my earlier post that this is one of the problematic elements regarding BPCI – no real evidence of savings and improvement overall.
  • Finally, CMS will give participation flexibility to low volume hospitals and rural hospitals in the remaining CJR mandatory MSAs.

In closing, text in-hand, the news earlier is confirmed and pretty much as expected.  CMS is proffering language around renewed flexibilities, commitment to engage providers and more voluntary models as the future.  At least for now, mandatory and expanded bundled/episode payment models are on semi-permanent hiatus.

August 15, 2017 Posted by | Policy and Politics - Federal | , , , , , , , , , , | Leave a comment

SNFs and Stranded Assets

Lately I’ve written rather extensively on what is occurring in the SNF sector to (rather) dramatically shift the fortunes for companies such as HCR/ManorCare, Kindred, Genesis, Signature, et.al. and a series of REITs that hold SNF assets (physical).  In addition to my writings, I’ve consulted/conversed with numerous investment firms concerned and interested in this shift.  Underlying all of my written thoughts and my discussions is a harsh reality check: A solid third of the industry today (SNF) has assets that I and other industry-watchers would consider/define as stranded.

I have embedded a link to a great article that covers the concept of “stranded assets”.  It is from the HFMA and the focus is on hospitals but the issues are directly analogous to SNF physical plants.  The link is here: http://www.hfma.org/Content.aspx?id=54453

The underlying issues that created this unique asset status are as follows.

  • An SNF physical plant has value if the corresponding cash flow generated from the operations attached to the asset is positive with a margin.  The HFMA hospital reference point is an EBITDA margin of 6% or higher.  Depending on the age of physical plant, deferred maintenance and interest and tax costs, 6% is likely a “non-coverage” situation.  For SNFs owned by REITs, we are seeing EBITDAR equal to a coverage ratio of 1 or less (cash to pay or cover rent costs).  I contend that in this scenario, the asset (SNF) plant is now stranded.
  • Stranded effectively means that the asset (the SNF) has no strategic or business value in the current state (with an EBITDAR coverage equal to 1 or less).  Without significant changes to operations to increase the cash coverage margin, the value of the asset is impaired and by GAAP, should be written down.  NOTE: I am not an accountant/CPA so I will leave any further reasoning or discussion on GAAP requirements, asset impairment and write-downs to the accountancy profession.
  • Important to note about assets/SNFs that are stranded is that short-term advances/improvements in their cash flow may change this status by definition but the same is only temporary.  The market, health policy and other  business shifts away from certain types of institutional care and lower-rated providers is permanent.  SNFs not properly positioned from an asset and operating perspective for these market changes will return to stranded status again and rather quickly.  The point here is this: An asset that is stranded is characterized by,
    • An aged physical plant with deferred maintenance
    • A plant that is not current in terms of market expectations (private rooms, open dining, bistro areas, coffee bars, exercise and therapy gyms, etc.)
    • A plant that is inefficient from a staff and resource perspective (too many units, too spread out, etc.)
    • An asset with operations that have a poor history of compliance, rated below 3 stars, and with marginal to sub-par quality measures.

Today, the strategic value of the asset is tied directly to its ability, along with paired operations, to generate positive cash margins sufficient to cover debt payments or lease payments plus required capital improvements (funded or sequentially incurred period over period). If an asset is truly stranded, changing that position is a strategic and long-term endeavor: An approach that requires wholesale repositioning.  For many SNFs, this approach may not be feasible.

  • The dollars required to reposition the asset from a physical plant perspective are greater in total than the remaining Undepreciated Replacement Value of the plant.  In other words, the cost to reposition is greater than the value of the asset.
  • The return generated from the repositioning is insufficient from an ROI perspective (less than the cost of capital plus the imputed life-cycle cost of depreciation of the improvements).
  • The operations of the asset are also impaired such that the compliance history and Star ratings, etc. are poor (historically) and changing the same would/will require a long-term horizon whereby, the same does not net cash flow improvement during the process.  Referrals and permanent cash-flow improvements are the result of revenue model changes and the same can not occur overnight when Star ratings and compliance improvements are required.  Changing Star ratings from a 3 to 4 for example, can take twelve months or longer.

The take-away points for the industry are simple.  The industry has an abundance of buildings/assets that fit the stranded definition today and a good number reside in REIT portfolios.  These assets/buildings, because of the points above, literally and figuratively, cannot be repositioned.  Their value has shrunk precipitously and there is nothing regarding the circumstances that caused this shift that will change.  Repositioning to avoid or change the stranded status is improbable due to the facts at-hand;

  • The asset is old by current business-need standards, has moderate to significant deferred maintenance issues and improvement to the current standard will cost in-excess of the undepreciated replacement value of the asset.
  • The operations tied to the asset are not highly rated, with strong compliance history and exceptional quality measure performance.
  • The operations and asset together, are incorrectly matched within a market that has higher rated competitors with better outcomes and newer, better positioned physical plants.  The preferred referrals for quality payers has moved to these competitors and the drivers such as bundled payments, value-based purchasing, Medicare Advantage plans, etc., plus a movement away from institutional care (to shorter stays, fewer stays) has altered the demand factors within the market.

In all probability, the above foreshadows a shrinking scenario combined with a valuation-shift (negative) for the SNF industry.

 

June 21, 2017 Posted by | Skilled Nursing | , , , , , , , , , , , | 2 Comments

SNF Outlook, REITs, Kindred and Where to From Here

As the title of this post implies, a review of the status of the SNF industry is as much about current issues begat by past issues influenced by an outlook that is finally, starting to congeal.  Writing that (sentence) was convoluted enough and that is exactly, where the bulk of the industry issues are.  To begin, an operative “influences” framework is required.

  • Federal Conditions of Participation: After years of work and inaction, a final rule updating the Federal Conditions of Participation was released in September of 2016.  These Conditions haven’t updated (substantively) since the early 90s via implementation of OBRA and PPS.  Suffice to say, the update is sweeping; so much so that implementation of the revisions is in year over year phases.  Complying with all of the Conditions will cost SNFs tens of thousands of dollars, if not more.  Implementation and survey activity on the new Conditions begins November 2017.  Reference posts from this site are here: http://wp.me/ptUlY-kL    http://wp.me/ptUlY-kU    http://wp.me/ptUlY-lf
  • Value-Based Purchasing: Pay for performance is coming (or almost here) as the measurement period for SNFs has occurred and the timeframe for making improvements in performance, particularly on avoidable readmissions is NOW.  For SNFs, this is about reducing or eliminating, avoidable hospital readmissions (within 30 days of SNF admission from a hospital).  The observation period has already concluded for payment adjustments (negative to positive), beginning in 2018.  The initial adjustment is 3% ranging to 8% in 2022.
  • IMPACT Act and QRP: This is all about the reporting of quality data and quality measures across all post-acute settings.  The implication for SNFs is the disclosure of these measures, tethered to a benchmark.  Performance below (the measurement period is past), the SNF is encouraged to improve to the benchmark.  Failure to improve nets a 2% reduction in Medicare payments.  High performers will receive an incentive payment.  Specifics are here:  http://wp.me/ptUlY-lx
  • Bundled Payments: Elective Hip and Knee replacement is up and running in 67 metropolitan regions.  In bundled payments, providers acute and post-acute are essentially paid based on an episode of care.  The episode is a benchmark for the region and provider costs based on billed charges, matched against the target.  Additionally, providers are tasked with quality measurements and satisfaction measurements.  The goal is to produce outcomes that are lower in cost than the benchmark  and at or above, desired quality levels.  Providers (hospitals initially) that can do so, will receive incentive payments.  The implication for SNFs is the need to control costs, provide high quality outcomes and potentially, participate in risk-sharing agreements with the hospital for a piece of the incentive “action”.  Cardiac and upper femur fracture bundled payments set to begin March 1 of this year are delayed to October 1.  More on this subject here: http://wp.me/ptUlY-k2  http://wp.me/ptUlY-kv
  • Star Ratings: Because of the issues above, mostly influenced by Bundled Payments and readmission penalties for hospitals, Star ratings (the CMS Five Star system) matter.  Providers that have lower Star ratings (3 or less) are watching referrals for quality paying patients (primarily Medicare) dwindle.  In some cases, in markets with ample 4 and 5 Star providers, referrals patters have shifted by as much as 30% (away from 3 Star and lower facilities).
  • Market and Referral Shifts: Without question, there is a distinct movement away from institutional post-acute care.  In some markets, an abundance of SNF beds has led to an overall reduction of ten plus points in average occupancy (supply exceeding demand).  Home health is the biggest benefactor as patients previously sent to SNFs for lengthy rehab stays have shifted to home health for the entire stay or for the back-half or better of the traditional stay.  This has hurt occupancy.  Couple this effect with the issues noted before and market and referral pressures are enormous for many SNFs.  A five to seven point reduction in the quality mix occupancy is enough to erode margins from negative to positive.  With increasing cost pressure due to the new Conditions of Participation, et.al., and limited revenue increases due to rate, the fortune for many SNFs is dim.
  • Possible New Payment System for Medicare: Within the past week, CMS floated a proposed rule for comment that would “gut” the current RUGs system, replacing it with a Resident Classification System.  The overall theme is to reduce the reward tied to maximizing therapy services and length of stay.  The new system would categorize residents based on overall needs, combine reimbursement for PT and OT and enhance payment for nursing related needs.  More to come on this topic.

With the above headwinds, none of which are all that new or “newsworthy”, the industry is quaking or trembling or at least fifty plus percent is.  Consider the following as reasons;

  • Medicaid remains the dominant payer for skilled nursing care.  With the likelihood of continued rate pressure state by state for providers (Medicaid structural funding issues), the prospect of enhanced payment now or in the near future is ZERO. Fifty plus percent of the SNFs in the industry have a census that is predominantly, Medicaid (50 plus percent).  The net Medicaid margin (negative) for most providers is 20%. For higher quality providers, the margin (negative) is 30%.
  • The make-whole relief has come from Medicare and to a lesser extent, private pay.  In effect, providers have subsidized their Medicaid losses via Medicare.  The loss offset plus margin has come from maximizing Medicare census and Medicare reimbursement, via higher therapy utilization and length of stay.  The net difference per patient day between Medicare and Medicaid (on average) is $275 per day (varies state to state).  For most providers with large Medicaid census, a Medicare day is worth 1.7 Medicaid days (one Medicare is 1.7 times more “revenue” valuable than a Medicaid day).  Illustrated a bit more: A 100 bed facility with 50 Medicaid needs 29.4 Medicare residents to offset the Medicaid loss.  Add a few private pay, and a margin is possible.
  • With VBP, QRP, bundled payments and census pressure, the ability to attract the Medicare volume to offset the Medicaid losses for a growing number of facilities has eroded.  Facilities at or below the 3 Star level in most major metropolitan markets are seeing referral “shrinkage” and thus, census reductions.  The effect is directly on the Medicare census.
  • The outlook as result of new Conditions of Participation is for steadily rising costs to comply, at least in the short to near term.  New regulations drive costs up.
  • A future that includes a payment system overhaul focused less on therapy and RUGs maximization, more on classifying residents’ needs globally, foretells great peril for the sector of the industry that has relied heavily on maximizing therapy volumes and related RUGs as margin subsidy.  These SNFs need a new revenue and business model and time for the same is not on their side.

Given the above and the factors operative, it is no wonder Kindred has decided to abandon the SNF market and potentially, explore a sale for their entire business.  The Kindred reality is/was for their SNF business, a portfolio heavily occupied by Medicaid, facilities with aged, inefficient and out-scale physical plants, so-so market locations, and virtually all subject to leases to Ventas and other REITs.  Combine these factors with an average Star rating at 3 or lower (not a lot of 4 and 5 star facilities) and the outlook is challenging.   There simply was and is, no business justification to invest millions upon millions of dollars (literally hundreds of millions likely) to upgrade physical plants (plants that were too old and improperly scaled) and to embark on a census development and Star improvement strategy, none of which will/would bear fruit for at least 5 years if not more. And of course, the fruit that is produced is insufficient in net margin to justify the original expenditure and meet ROI (Return on Investment) requirements.

The Kindred news that it may seek a sale of the entire business is a strategic, preemptive hedge to what has occurred (is occurring) to Brookdale. The parts of Kindred in certain cases may be worth more than the whole.  Overall, the revenue pressure (down) on the post-acute industry is heavy with the heaviest pressure set to bear on institutional providers; particularly those with aged and improperly positioned/scoped assets.  Revitalizing these assets is expensive, in some cases more so than rebuilding the asset properly, in its entirety.  In short, Kindred is asset wealthy but the cash flow future from the heavy institutional element is marginally poor.

Transitioning to REITs that hold large SNF portfolios, the same or an analogous picture is operative.  The bulk of REIT holdings are three Star and lower.  Quality mix has eroded for these facilities along with census.  As cash flow pressure has increased, the  need has arisen to restructure lease payments (lower).  Lower lease payments reduce REIT earnings.  Without a large volume of facilities that are four and five Star, there simply is no place to shift rate and thus, earnings pressure.  Four and five Star facilities can and generally do, have enough cash flow to pay leases with coverage ratios at 1.2 and better.  Below the three Star level, the pressure today is for leases to move to 1.1 or 1 – not a good future for a REIT’s earnings.

A concomitant problem for REITs is the value decline of the SNF assets they hold.  While industry Cap rates have been decent, the deal volume is very small and the deals done, cash flow focused – typified by four and five Star rated providers or newer assets.  REIT assets tend to be older buildings, larger buildings and parts of chain or system organizations such as LifeCare and Manor Care.  Simply stated: Without a quality mix, strong cash flow, good market location and solid to better assets (not too large, primarily private room, modern, etc.), the underlying brick and mortar value is minimal.  There are not buyers today for these types of assets and the operators willing to assume these assets with leases are disappearing as well.

Given all of these issues, challenges, etc., one could surmise an outlook for the SNF industry that is rather bearish.  My view is a bit bifurcated.  For a large portion of the industry, I am bearish;

  • Older physical plant that is larger, not fundamentally all private rooms, inefficient to staff, not having modern dining and therapy space, etc.
  • Rated at three Stars or less
  • Medicaid census at 40 percent or higher of total bed capacity
  • Debt or lease payments greater than 20% of net revenue
  • In rural locations, unaffiliated with a larger parent or provider organization (staffing is difficult at best)

For providers that don’t fit this profile, there is a decent future if they stay ahead of the trends.  Consider the following;

  • Quality referrals are migrating aggressively to four and five Star providers
  • Payment incentives for strong quality outcomes are forthcoming (next year to three)
  • In good market locations, these providers will be able to negotiate terms in narrow networks and with Medicare Advantage plans as the other providers fall-off.
  • Properly capitalized with a good capital structure and cash flow sufficient to keep physical plant from aging (depreciating) via proper maintenance and investment

Granted, the number of providers that meet this profile is not large in number and almost entirely today, non-profit, health system affiliated or regional, privately held.  The real challenge is to be nimble and constantly vigilant on quality.  The movement as I have written and publicly stated in speeches and lectures, is to pay only for high quality and efficiently determined outcomes.  Providers that can deliver this level of care will succeed and win in the new “environment”.  Those that aren’t at this level yet have likely, run out of time.  Three Star or lower ratings take a long time today to convert to four and five Stars.  By the time the conversion has occurred, the referral patterns in the market will have permanently changed.

May 4, 2017 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | 1 Comment

Health Systems, Hospitals and Post-Acute Providers: Making Integration Work

Early into the Trump presidency and health care/health policy is front and center.  The first “Obamacare repeal and replace” attempt crashed and burned.  The upcoming roll-out of the next round of bundled payments (cardiac and femur fracture) is delayed to October from the end-of-March target date.  Logically, one can question is a landscape shift forming? Doubtful.  Too many current realities such as the need to slow spending growth plus find new and innovative population health and payment models are still looming. These policy realities beget other realities. One such reality is that hospitals and health systems must find ways to partner with and integrate with, the post-acute provider industry.

In late 2016, Premier, Inc. (the national health care improvement organization) released the results of a study indicating that 85% of health system leaders were interested in creating expanded affiliations with post-acute providers.  Interestingly, 90% of the same group said they believed challenges to do so would exist (Premier conducted the survey in summer of 2016 via 52 C-suite, health system executives).  Most of the challenges?  The gaps that exist “known and unknown” between both provider segments (acute and post-acute) and the lack of efficient communication interfaces (software) between the segments.

On the surface, bundled payments notwithstanding, the push for enhanced integration is driven by a number of subtle but tactile market and economic shifts.

  1. Inpatient hospital lengths of stay are dropping, driven by an increasing number of patients covered by managed care.  Today, the largest payer source contributor of inpatient days, Medicare, is 30.6% “managed”…and growing.  Medicaid is 62.7% and commercial, nearly 100% (99%). Source: http://www.mcol.com/managed_care_penetration
  2. Payment at the hospital end is increasingly tied to discharge experience – what happens after the inpatient stay.  The onus today is on the hospital (and growing) for increasing numbers of patient types (DRG correlated) to discharge the patient properly such that the same does not beget a readmission to the hospital.  Too many readmissions equal payment reductions.
  3. Population health, focused-care models such as ACOs are evolving.  Their evolution is all about finding the lowest cost, highest quality centers of care.  Other BPCI (bundled payment) initiative projects such as Model 3, focus directly on the post-acute segment of care.  Unlike CJR (and the recently delayed cardiac bundles), the BPCI demonstration that began in 2013 covers 48 episodes of care (DRG based) and has participating providers (voluntarily) operating programs in all four model phases, nationwide.
  4. Patient preference continues to demand more care opportunities at-home.  Never mind the increased risk of complication with longer inpatient hospital stays (the risk of infection, pressure injuries, weight loss, delirium, etc. increases as stays increase), it is patient preference to discharge quickly and preferably, to home with services (aka home care).

Regardless the fate of Obamacare now or in the near future, these trends are unlikely to change as they have been moving separate from Obamacare.  Arguably, the ACA/Obamacare accelerated some of them.  Nonetheless, the baked-in market forces that have emanated from ACOs and care episode payments illustrate that even in infancy, these different models produce (generally) more efficient care, lower costs and improved patient satisfaction and outcomes.

As with any integration approach such as a merger for example, cultural differences are key.  The culture of post-acute care is markedly different from that of acute/hospital care.  For hospitals to appreciate this difference, look no farther than the two key determinants of post-acute culture: regulation and payment.  The depth and breadth plus the scope of survey and enforcement activity is substantially greater on the post-acute side than the acute side.  As an example, observe the SNF industry and how enforcement occurs.  Hospitals are surveyed for re-accreditation once every three years.  The typical SNF is visited no less than four times annually: annual certification and three complaint surveys.

In terms of payment, the scope is drastically different.  While hospitals struggle to manage far more payers than a post-acute provider, the amount that is paid to a hospital is substantially larger than that paid to a post-acute provider.  At one point years back, the differences were substantiated largely by acuity differences across patients.  While a gap still exists, it has narrowed substantially with the post-acute provider world seeing an increase in acuity yet lacking a concomitant payment that matches this increase.

Given this cultural framework, post-acute providers can struggle with translating hospital expectations and of course, vice-versa.  Point-of-fact, there is no real regulatory framework in an SNF under federal law for “post-acute” patients.  The rules are identical for a patient admitted for a short-stay or for the rest of his/her life.  Despite the fact that the bulk of SNF admissions today are of the post-acute variety, the regulations create conformity for residency, presumptively for the long-term.  Taking the following into consideration, a challenge such as minimizing a post-acute SNF stay to eight days for a knee replacement (given by a hospital to an SNF) is logical but potentially fraught with the peril presented by the federal SNF Conditions of Participation.  The SNF cannot dictate discharge.  A patient/resident that wishes to remain has rights under the law and a series of appeal opportunities, etc. that can slow the process to a crawl.  At minimum, a dozen or more such landmines exist in analogous scenarios.

Making integration work between post-acute and acute providers is a process of identifying the “gaps” between the two worlds and then developing systems and education that bridge such gaps. Below is my list (experiential) of the gaps and some brief notes/comments on what to do bridge the same.  NOTE: This list is generally applicable regardless of provider type (e.g., SNF, HHA, etc.).

  • Information Tech/Compatibility: True interoperability does not yet exist.  Sharing information can be daunting, especially at the level required between the provider segments for good care coordination.  The simple facts are that the two worlds are quite different in terms of paper work, billing requirements, documentation, etc.  Focus on the stuff that truly matters such as assessments, diagnoses, physician notes, plans of care, treatment records, medications, diagnostics, patient advance directives and demographics.  Most critical is to tie information for treating physicians so that duplication is avoided, if possible.
  • Regulatory Frameworks: This is most critical, hospital/physician side to the post-acute side, less so the other way.  Earlier I mentioned just one element regarding an SNF and discharge.  There are literally, dozens more.  I often hear hospitals frustrated by HHAs and SNFs regarding the “rules” for accepting patients and what can/cannot be done in terms of physician orders, how fast, etc. For example, it might be OK in the hospital to provide “Seroquel for sleep or inpatient delirium” but it is not OK in the SNF.  HHAs need physician face-to-face encounters just to begin to get care moving, including orders for DME, etc.  There is no short-cut.  Creating a pathway for the discharging hospital and the physician components to and through the post-acute realm is critical to keep stays short and outcomes high… as well as minimize delays in care and readmissions.
  • Resource Differences: Understanding the resource capacities of post-acute, including payment, is necessary for smooth integration.  What this means is that the acute and physician world needs to recognize that stay minimization is important but so is overall care minimization or better, simplification.  Unnecessary care via duplicative or unnecessary medications, tests, etc. can easily eat away at the meager margins that are operative for SNFs and HHAs.  For example, I have seen all too many times where a patient has an infection and is discharged to an SNF on a Vancomycin IV with orders for continued treatment for four more days.  Those four days are likely negative margin for the SNF.  A better alternative?  If possible, a less expensive antibiotic or send the remaining Vancomycin doses to the SNF.  Too many tests, too many medications, too much redundancy erodes post-acute margin quickly.  Finding common ground between providers with shared resource opportunities is important for both segments to achieve efficiency and still provide optimal care.
  • Language Differences: In this case, I don’t mean dialect.  Industry jargon and references are different.  I often recommend cheat-sheets between providers just to make sure that everyone can have a “hospital to SNF to HHA” dictionary.  Trust me, there is enough difference to make a simple working dictionary worth the effort.
  • Education/Knowledge: The gap between staff working in different environments can be wide, particularly as the same relates to how and why things are done the way they are.  For example, therapy.  Physical therapy in a hospital for the acute stay is markedly different than the physical therapy in a home health setting or a SNF setting.  Care planning is different, treatments similar but session length and documentation requirements are vastly different.  The clinical elements are surprisingly similar but the implementation elements, markedly different.  The notion that one staff level is clinically superior to another is long dispelled.  SNF nurses can face as many clinical challenges and perhaps more due to no/minimal immediate physician coverage, as a hospital nurse.  True, there are specialty differences (CCU, Neuro ICU, Trauma, etc.) but at the level where patients flow through acute to post-acute, the clinical elements are very similar.  The aspect of care differences and the how and why certain things are done in certain settings is where interpretation and education is required.
  • System and Care Delivery: While the diagnosis may follow, assuring proper integration among the various levels or elements of care requires systematic care delivery. The best language: clinical pathways and algorithms.  Developing these across settings for an episode of care creates a recipe or roadmap that minimizes redundancy, misinterpretation, and lack of preparation (all of which create bad outcomes).  With these in-place, common acute admissions that beget post-acute discharges, places every care aspect within the same “playbook”.

 

March 28, 2017 Posted by | Home Health, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , , | 2 Comments

Seniors Housing/CCRC Outlook plus Lessons from Brookdale

Now that the real estate dynamics have shifted on-balance to par or better (majority of markets can liquidate inventory at stable or rising prices with constant or modestly increasing demand), the outlook for Seniors Housing (IL, AL and CCRC) is less murky. The recessionary of the last 7 to 8 years has lifted.  What is visible, while still fairly complex market to market, is a picture that is illustrative for the next ten or so years – ample to adequate supply and average to slightly soft overall demand.  Perhaps, this is the Brookdale lesson?

Amplifying the above; what we know statistically is that demand has globally peaked and now, flattened.  Recall that Seniors Housing is very much local and regionally biased/impacted so some markets may be hotter in terms of demand than others.  By example, in 2010 (full recession impact), occupancy in the sector was 86.7%.  By the end of 2014 and since, occupancy has recovered but only to an average of 90% (per the National Investment Center).  During this same later period, new unit production has increased to an average of 3,200 per quarter (trailing seven quarters since end of 2016).  This is a 50% increase over the prior eight quarters.  The cause? Less about occupancy reality, more about a growing optimistic economic outlook, improving real estate dynamics (the leading cause) and more accessible capital, particularly as nontraditional sources have entered the sector with vigor (private equity).  A quick translation is for an increase of approximately 5,000 additional units in the top 31 MSAs (could be as much as 6,000 depending on where the units are in the development cycle).  This additional inventory is entering a market that is showing signs of over-supply (again, is there a Brookdale lesson here?).

occupancy-web

In multiple articles, I have written about phantom or perhaps more accurate, misunderstood economic and demographic trends.  Seniors housing global demand is very elastic, particularly for IL and CCRC projects that are at or above market (where the bulk of the industry is).  Demand elasticity exists where and when, price directly impacts the number of and the willingness of, consumers to consume a particular good or service. As price rises, the number decreases.  As price falls, the number increases.  For seniors housing, the elasticity wanes and trends toward inelastic demand when the price mirrors “rent controlled or modest income” housing.  In this case, demand is constant and actually inverse proportionately (more demand than supply). Better real estate economic conditions and improved investment market conditions (stock market, investment returns, etc.) influence to a lesser extent, the demand outlook as stronger or stable wealth profiles for consumers reduces the anxiety of purchase, especially where entrance fee models are concerned.

From a demographic perspective, the issue at bear is the actual or real number of seniors in the target age range with an economic wherewithal to consume (have the financial capacity).  Only (approximately) ten percent of all seniors 75 and above reside in seniors housing specifically (IL or CCRC) and a slightly larger (aggregate)number now reside in quasi-seniors housing projects (age limited housing developments ala Del Webb).  Between 2010 and 2016, the 75 plus population grew at an anemic rate of 1.8%.  The expected rate of growth for this cohort over the next five years increases to 3.8%.  More telling, for this same period, the subset of 75-79 grows at a rate of 5.7%.  These numbers present a bit of optimism but in real terms, the demand change (within the demographic) doesn’t create sufficient opportunities for absorption of the inventory growth, if the same remains at its present pace.  The demographic fortune doesn’t really begin to change dramatically until 2021 and beyond.  At 2021, the group turning 75 represent the start of the baby boomers (2021 -75 = 1946).  Prior to this point, the demographics of seniors 75 and above still reflect the World War II trend of birth suppression.

To Brookdale. The operative lesson is that Brookdale has far too much supply for the real organic demand that exists for plus market rate, congregate seniors housing. In my outlook comments below, readers will note how the demand around seniors housing and the congregate model is actually shifting slightly which has negatively impacted Brookdale. The acquisition of Emeritus has since offered proof of some age-old adages regarding Seniors Housing: local, not conforming to retail outlet strategies, very elastic demand, tough to price inflate for earnings and margin, asset intense and thus capital re-investment sensitive, and of course, full of me-too projects that are difficult to brand differentiate.  In the Emeritus acquisition, economies of scale and cultural assimilation proved difficult but frankly, such is always the case. The real crux is that the retail outlets (the Emeritus properties) were not accretive -seniors housing doesn’t quite work that way.  While the asset value of Brookdale skyrocketed, the earnings on those assets retrenched.  With soft demand and a lot of congregate projects highly similar and no room at the ceiling for price elevation, a fate accompli occurred.  The lesson?  Certain types of Seniors Housing is about played out (vanilla, above market projects) and a heavy concentration of this in a portfolio will evidence occupancy challenges and rental income return challenges (no price inflation).  Demand is also soft for reasons mentioned above, primarily demographic but also still, economic in some instances.  Similarly, as I mentioned above, seniors housing is very local.  A retail brand strategy simply (the Wal-Mart concept) won’t work.  Residents identify brand to local or at best regional – national means nothing.  If the market isn’t supportive regardless of who or what it is, the project will be challenged.  Emeritus brought too many of these projects into the Brookdale portfolio.

Below are my key outlook points for 2017 and the next five or so years for IL and CCRCs (non-affordable housing).

  • Demand across most property types will remain soft to stagnant.  This means 90% occupied is a good target or number.  Of course, rent controlled projects will continue to experience high demand, particularly if the projects are well located and well-managed.  Regional and local demand can and will vary significantly.  The projects that will experience the softest demand are above market, congregate, non-full continuum (non-CCRC).  Projects with the best demand profile contain mix-use, mix-style accommodations with free-standing and villa style properties.  While highly amenitized projects will attract traffic, demand isn’t necessarily better due to price elasticity in the segment.
  • Improving economic conditions/outlook will undergird and help bolster demand, though the demographics still trump (no pun intended). Some notes to consider.
    • The real estate economy can benefit, even with a slightly higher interest rate trend, if employment and wages continue to strengthen and de-regulation of some current lending constraints occur.  I think the latter two points offset any interest rate increases in the near to moderate term.
    • Rising interest rate fortunes help seniors more than stock market returns, though this trend is changing as seniors have been forced to equities to bolster return.  Still, most seniors are highly exposed to fixed income investments and a somewhat improving interest rate market will improve income outlooks.  Better or improved income does psychologically impact the consumption equation, “positively”.
    • Capital access will remain favorable/positive and banking de-regulation to a certain extent, may push banks back to the sector (they have been shy to seniors housing for the last 5 to 8 years).
    • Even with improved economic conditions, the mismatch between demand and supply (discussed earlier) will restrain rent increases in the near term.  This could present some modest operating challenges for the sector as price inflation on wages, etc. will occur before any opportunity to raise fees/rent.  The net effect is a modest erosion in margin.  I don’t see much opportunity to fight this effect with increased occupancy.
  • Increasing occupancy or in some cases, staying at current occupancy levels will continue to require incentives.  Incentives negatively impact revenue in the short-run.
  • The average age for residency on admission and across the product profile will continue to move up as a general rule.  In addition, the resident profile will continue to slide toward additional infirmity and debility.  Providers will continue to work to find ways to keep projects occupied by offering aging-in-place services.  While this is a good strategy to a certain extent, the same does harm or impact negatively, the ability to market and sales-convert, units to a more independent resident profile.  I liken this to a “rob Peter to pay Paul” approach.  It works but not without side-effects and perhaps, unintended consequences that can be very deleterious “down-the-road”.
  • The additional inventory that is coming into the sector won’t slow down for another two or so years.  This is in-spite of a weak to stagnant demand.  Some investors and developers are willing to be somewhat ahead of the baby-boomer curve even though I believe this is unwise (see next point).
  • The reason I believe the baby-boomer impact for the sector will be modest and actually, disheartening is that the demographic shift doesn’t equate to product demand directly.  Boomers have an increasingly different view of the world and a different set of housing and lifestyle expectations plus economic capacity.
    • The first group of Boomers was hurt the hardest by the most recent recession.  They lost a great deal of wealth and income profile as many were the first displaced as jobs eroded (oldest employees, highest paid). They also have less employment time to recoup any income/savings losses.
    • Generationally, their savings rate is significantly less than their parents.  These folks, while still more modest in comparison to Boomers born five to ten years later, didn’t delay gratification or extravagance the way their recession-influenced parents did.  Less overall wealth negatively impacts their ability to afford higher-end seniors housing.
    • Congregate living (apartments) is less their style.  They are the first age group (Boomers) used to a more expansive living arrangement.  While they’ll move eventually, they will not see 1,200 sq. feet at $4,000 a month as attractive (not even at $3,000). They will have unfortunately, mismatched expectations in terms of “size” versus cost.  They’ll want larger but for less rent than realistic.
    • They are generally healthier with a different view of age related to retirement and retirement residency.  Don’t look for 75 year older Boomers to be horribly interested in a CCRC or Seniors Housing development, particularly if their health is good.  They’ll wait until 80 or older to trigger a move.
    • Boomers are more mobile and more detached than their parents.  This means in-market moves and the traditional radius markets/math will be less applicable year-over-year with Boomers.  They will be willing to shop broader and do so more for value and price – more for less or at least, a perception of the same.  They are nowhere near as homogeneous by social construct as their parents.
  • Greater pricing flexibility will continue to evolve.  This means different entry-fee options, monthly service options with/without amenities, more ala carte, etc.  Service infrastructure for certain communities may suffer as residents will continue to want more choice but less bundle (won’t pay inflated fees for what they perceive as things they don’t use or want).
  • Because the sector is highly influenced and trended local, some markets will continue to thrive while others will continue to struggle, regardless of national trends.

 

March 3, 2017 Posted by | Senior Housing | , , , , , , , , | Leave a comment

Post Acute Resolutions for 2017

With a new year upon us and (perhaps) the most amount of free-flowing health policy changes happening or about to happen in decades, it seems appropriate to create some simple resolutions for the year ahead.  Similar to the personal resolutions most people make (get healthy, lose weight, clean closets, etc.), the following are about “improvements” in the business/operating environments.  They are not revolutionary; more evolutionary. Importantly, these are about doing things different as the environment we are in and moving toward is all about different.

First, a quick overview or framework for where health care is and where it is going.  A political shift in Washington from one party to another foretells of differences forthcoming.  It also tells us that much will not change and what will is likely less radical than most think.  Trump and the Republicans can’t create system upheaval as most of what the industry is facing is begat by policy and law well settled.  Similarly, no political operatus can change organically or structurally, the economic realities present – namely an aging society, a burgeoning public health care/entitlement bill, and a system today, built on a fee-for-service paradigm.  Movement toward a different direction, an insight of a paradigmatic shift, is barely visible and growing, while slow, more tangible.  In short: where we left 2016 begins the path through 2017 and beyond.

The road ahead has certain new “realities” and potholes abundant of former realities decaying.  The new realities are about quality, economic efficiency and patient satisfaction/patient focus.  The former realities are about fee-for-service, Medicare maximization, and more is better or warranted. The signs of peril and beware for the former is evident via today’s RAC activity and False Claim Act violations pursuit.  Ala Scrooge, this is the Ghost of Christmas Future – scary and a harbinger to change one’s behavior or face the certainty of the landscape portrayed by the Specter.

So, resolution time.  Time to think ahead, heed the warnings, realize the future portrayal and make plans for a different 2017.

Resolution 1: The future is about measurable, discernible quality.  No post-acute provider, home health or SNF, can survive (much) longer without having 4 or higher Star ratings and a full-blown, operational focus on continuous quality improvement.  The deliverable must be open, clear and transparent, visible in quality measures and compliance history.  FOCUS ON QUALITY AND IN SPECIFICS INCLUDING HAVING A FULL-BLOWN, FULLY INTEGRATED QAPI PROGRAM.

Resolution 2: The future is about patient preference and satisfaction.  For too many decades, patients have gotten farther detached from what health care providers did and how they (providers) did it.  No longer.  Compliance and new Conditions of Participation will require providers to stop paying lip-service to patient centered-care and start now, to deliver it.  The new environment is no longer just what the provider thinks the patient wants or should have but WHAT the patient thinks he/she wants and should have.  TIP: Brush-up on the Informed Consent protocols! FOCUS ON PATIENT PREFERENCES IN HOW CARE IS DELIVERED, WHAT PATIENT GOALS ARE, AND THEIR FEEDBACK/SATISFACTION WITH SERVICE. 

Resolution 3: Efficiency matters going forward.  This isn’t about cost.  It is about tying quality to cost and to a better outcome that is more economically efficient.  The measurement here is multi-faceted.  The first facet is utilization oriented meaning length-of-stay matters.  The quicker providers can efficiently, effectively and safely move patients from higher cost settings to lower costs settings, is the new yardstick.  The second facet is reductions in non-necessary or avoidable expenditures such as via Emergency Room transfers and hospitalizations/rehospitalizations.  NOTE: This ties back to the first resolution about quality. MANAGE EACH ENCOUNTER TO MAKE CERTAIN THAT EACH OF LENGTH OF STAY IS OPTIMAL, AT EACH LEVEL, FOR THE NEEDS OF THE PATIENT AND THAT ANY COMPLICATIONS AND AVOIDABLE ISSUES (FALLS, INFECTIONS, CARE TRANSITIONS) IS MINIMIZED.

Resolution 4: The new world going forward demands that we begin to transition from a fee-for-service mindset to a global payment reality.  This transition period will represent some heretical demands. While fee-for-service dies slowly as we know it, its death will include interstitial periods of pay-for-performance aka Value-Based Purchasing.  Similarly and simultaneously, new models such as bundled payments will enter the landscape.  Our revenue reality is moving and thus, a whole new set of skills and ideas about revenue capture and management must evolve. RESOLVE TO STOP LOOKING AT HOW TO EXPAND AND MAXIMIZE EACH MEDICARE ENCOUNTER.  THE NEW REALITY IS TO LOOK AT EACH PATIENT ENCOUNTER IN TERMS OF QUALITY AND EFFICIENCY FIRST, THEN TIE THE SAME BACK TO THE PAYMENT SYSTEM.  REVENUE TODAY WILL FOLLOW AND BE TIED TO PATIENT OUTCOMES, ETC.

Resolution 5: To effectuate any kind of permanent change, new competencies need development.  Simultaneous, old habits non-effective or harmful, need abandoning.  The new competencies required are care management, care coordination, disease management, and advanced care planning.  Reward going forward will require providers to be good at each of these.  Each ties to risk management, outcome/quality production, and transition efficiency.  Remember, our rewards in the future are tied to efficiency and quality outcomes.  Advanced Care Planning for example, covers both.  Done well, it minimizes hospitalizations while focusing on moving patients through and across higher cost settings to lower cost settings. THIS IS THE YEAR OF BUILDING.  RESOLVE TO CREATE CORE COMPETENCIES IN ADVANCE CARE PLANNING, CARE COORDINATION AND THE DEVELOPMENT AND IMPLEMENTATION OF BEST-PRACTICE, DISEASE MANAGEMENT ALGORITHMS AND CARE ALGORITHMS IN AND ACROSS COMMON DIAGNOSES AND RISK AREAS (e.g., falls, skin/wound, heart failure, pneumonia, infections, etc.).

Resolutions 6: The world of post-acute is changing.  To change or adapt with it requires first and foremost, knowledge.  Too many providers and often, leadership within don’t understand the dynamics of the environment and what is shifting, how and when.  Denial cannot be operative and as Pasteur was famed to say, “chance favors the prepared mind”.  Opportunity is abundant for those providers and organizations that are up-to-speed, forward thinking and understand how to use the information available to them.  RESOLVE TO EDUCATE YOURSELF AND THE ORGANIZATION.  KNOW HOW THE 5-STAR SYSTEM WORKS.  KNOW WHAT VALUE-BASED PURCHASING IS ALL ABOUT.  KNOW THE MARKET AREA YOUR ORGANIZATION IS IN AND HOW YOUR ORGANIZATION COMPARES FROM A QUALITY PERSPECTIVE (MEASURED) TO OTHERS.  KNOW THE HOSPITAL PLAYERS AND THE NETWORKS.  KNOW YOUR ORGANIZATION’S STRENGTHS AND WHAT IMPROVEMENTS NEED TO BE MADE.

Happy 2017!  The beauty of a New Year is that somehow, we get a re-start; a chance to do and be different than what we were in the prior year.  For me, I like the CQI approach best which is more about constant evolution than a wholesale, got to change now, approach.  Success is about doing things different as realities and paradigms shift.  We are certainly, from a health care and post-acute industry perspective, in a paradigm shift.  Take 2017 and brand it as the Year to Become Different!  The Year of Metamorphosis!

January 4, 2017 Posted by | Home Health, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | Leave a comment

Presentation Available: New Conditions of Participation for SNFs – Phase 1 Implementation

On the Reports and Other Documents page ( http://wp.me/PtUlY-4g ), I have uploaded a Power Point presentation my firm has made available to clients covering the new Federal Conditions of Participation for SNFs and the implementation elements that are part of Phase 1 (titled “New COPS for SNFs Phase 1”).  The presentation covers what is happening in terms of the new regulations arising out of the law, focused on Phase 1 requirements which began November 28.  The presentation will also alert providers, etc. to Phase 2 issues as applicable.

Additional background information on the Phases and the Rule can be found on this site at these post references: http://wp.me/ptUlY-kU

http://wp.me/ptUlY-kL

As always, questions, etc. can be forwarded to me via a comment accompanying this post or via e-mail (contact information on the Author page).  Remember, if you wish a reply/response, please include a valid e-mail address/contact with your post or question.

Happy Holidays!

 

December 19, 2016 Posted by | Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , | 2 Comments

Webinar – Post-Election Healthcare Policy: What to Expect

Join me as I host a one-hour webinar and conference call regarding post-election healthcare policy.  The program/call is set for Wednesday, December 14 at 1:00 PM EST/noon CST.

With uncertainty looming, providers are wondering what will change as the Inauguration approaches and a new Congress settles in. We will review the ACA, Medicaid and Medicare, and related policy issues including;

  • Value Based Purchasing
  • CMS Center for Innovation/Alternative Delivery Models/Bundled Payments
  • Additional Quality Measures and Quality Reporting
  • Inter-Program and Payment Reform – Rate Equalization for Post-Acute Providers
  • IMPACT Act
  • ACO Expansion

The program is sponsored by HCPro and the registration link is below;

 http://www.longtermcarebillers.com/content/join-us-quarterly-biller%E2%80%99s-association-webcast

 

December 6, 2016 Posted by | Policy and Politics - Federal | , , , , , , , , , , , , , , | Leave a comment

The Election is Over….Now What?

We knew that sooner or later, the first Tuesday in November would arrive and with that, a new President and changes (many or few) to Congress. The outcome certain, we move to uncertainty again concerning “what next”?…or as applicable here, what next from a health policy perspective.

With Donald Trump the incoming President-Elect, only so much from a policy perspective is known.  Hillary Clinton’s path was easier to divine from a “what next” perspective as fundamentally, status quo was the overall direction. Trump’s likely direction and thus, changes to current policy, etc. are hazy at best.  Thematically, there are points offered throughout the campaign that give some guidance.  Unfortunately, much that drives current reality for providers is more regulatory begat by legislative policy than policy de novo.

Without divining too much from rhetoric, here’s what I think, from a health policy perspective, is what to expect from a Trump Administration.

  1. ObamaCare: Trump ran on a theme of “repeal and replace” ObamaCare aka the Affordable Care Act. This concept however, needs trimming.  Repealing in total, existing federal law the magnitude of the ACA is difficult if not nearly impossible, especially since implementation of various provisions is well down the road.  The ACA and its step-child regulations are tens of thousands of pages.  Additionally, even with a Republican White House and Republican-majority Congress, the Congressional numbers (seats held) are not enough to avoid Democratic Senate maneuvers including filibuster(s). This means that the real targets for “repeal and replace” are the insurance aspects namely the individual mandate, Medicaid expansion, certain insurance mandates, the insurance exchanges, a likely the current subsidy structure(s).  The other elements in the law, found in Title III – Improving the Quality and Efficiency of Health Care, will remain (my prediction) – too difficult to unwind and not really germane to the “campaign” promise.  This Section (though not exclusively) contains a slew of provisions to “modernize” Medicare (e.g., value-based purchasing, physician quality reporting, hospice, rehab hospital and LTACH quality reporting, various payment adjustments, etc.).  Similarly, I see little change made, if any to, large sections of Title II involving Medicaid and Title IV involving Chronic Disease.  Bottom line: The ACA is enormous today, nearly fully intertwined in the U.S. health care landscape and as such, too complex to “wholesale” eliminate and replace. For readers interested in exploring these sections (and others) of the ACA, a link to the ObamaCare website is here http://obamacarefacts.com/summary-of-provisions-patient-protection-and-affordable-care-act/
  2. Medicaid: The implications for Medicaid are a bit fuzzier as Trump’s goals or pledges span two distinct elements of the program.  First, Trump’s plan to re-shape ObamaCare (repeal, etc.) would eliminate Medicaid expansion.  As mentioned in number 1 prior, this is a small part of the ACA but a lipid test for Republican governors, especially in states that did not embrace expansion (e.g, Wisconsin, Kansas, etc.).  Second, Trump has said that he embraces Medicaid block-grant funding and greater state autonomy for Medicaid programmatic changes (less reliance on the need for states to gain waivers for coverage design, program expansion, etc.).  It is this element that is vague.  A series of questions arise pertaining to “policy” at the federal level versus funding as block grants are the latter.  The dominant concern is that in all scenarios, the amount of money “granted” to the states will be less than current allocations and won’t come with any matching incentives.  With elimination of the expansion elements, how a transition plan of coverage and care will occur is a mystery – federal assistance? state funding mostly?  What I do predict is that Medicaid will only suffer the setback of a restructure and replacement of the Medicaid expansion elements under the ACA.  I don’t see block grants happening any time soon as even Republican governors are opposed without a plan for wholesale Medicaid programmatic reform.  Regardless of the approach, some initial Medicaid changes are in the offing, separate from the Block Grant issue.  The Medicaid Expansion issue is no doubt, a target in the “repeal and replace Obama Care”.  The trick however is to account for the large number of individuals that gained coverage via expansion (via eligibility increases due to increased poverty limits) – approximately 8 million impacted.  This is less about “repeal” and more about “replace” to offset coverage lapse(s) for this group.
  3. Related Health Policy/ACA Issues: As I mentioned earlier, the ACA/ObamaCare is an enormous law with tentacles now woven throughout the health care industry.  The Repeal and Replace issues aren’t as “clean” as one would think.  The focus is the insurance mandate, the subsidies, the mandated coverage issues and to a lesser extent, Medicaid.  That leaves fully 80% of the ACA intact including a series of policy changes and initiatives that providers wrestle with daily. These issues are unlikely to change in any substantive form.  Republicans support alternative delivery projects, value based purchasing, etc. as much if not more than Democrats.  Additionally, to repeal is to open a Pandora’s Box of agency regulations that tie to reimbursement, tie to other regulations, etc.  For SNFs alone, there exists all sorts of overlap between Value Based Purchasing, Bundled Payments, new Quality Measures and quality reporting (see my post/presentation on this site regarding Post-Acute Regulatory Changes).  The list below is not exhaustive but representative.
    • Value Based Purchasing
    • CMS Center for Innovation/Alternative Delivery Models/Bundled Payments
    • Additional Quality Measures and Quality Reporting
    • Inter-Program and Payment Reform – Rate Equalization for Post-Acute Providers
    • IMPACT Act
    • ACO Expansion

As providers watch the inauguration approach and a new Congress settle in, the wonder is around change. Specifically, what will change.  My answer – bet on nothing substantive in the short-run.  While Mr. Trump ran partially on a platform that included regulatory reduction/simplification, the lack of overall specifics regarding “which or what” regulations on the health care front are targets leaves us guessing.  My guess is none, anytime soon.

The Trump focus will be on campaign specific agenda first: ObamaCare, Immigration, Taxation, Foreign Trade, Energy, etc. – not health policy per se.  There is some flow-through gains providers can anticipate down-the-road that can be gleaned from the Trump campaign but these are a year or more off.  If Trump does deal with some simplification on drug and research regulation (faster, cheaper, quicker approvals), funding for disease management and tele-medicine and a fast-track of some Republican policy “likes” such as Medicare simplification, Medicaid reform at the program level, and corporate tax reduction (will help for-profit providers), then gains will occur or opportunities for gains will occur.

From a strategic and preparatory perspective, stay the course.  Providers should be working on improved quality outcomes, reducing avoidable care transitions/readmissions, looking at narrow networks and network contracting/development opportunities and finding ways to reduce cost and improve care outcomes.  Regardless of what a Trump Administration does first, the aforementioned work is necessary as payment for value, bundles/episodes of care, and focus on quality measures and outcomes is here to stay and to stay for the foreseeable future.

November 18, 2016 Posted by | Home Health, Hospice, Policy and Politics - Federal, Skilled Nursing | , , , , , , , , , , , , | Leave a comment