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“Bye Felicia” – Closing Your Doors To a Skilled Nursing Facility May Not Be So Easy – You Better Follow the Law Or You May Get “Sniffed!”

There are more than 15,000 nursing homes across the country. Even as the elderly population balloons, more and more nursing homes are closing. The main reason is that Medicare covers little at a nursing home, but Medicare does cover at-home and community-based services; i.e., personal care services at your house. Medicare covers nothing for long term care if the recipient only needs custodial care. If the recipient requires a skilled nursing facility (SNF), Medicare will cover the first 100 days, although a co-pay kicks in on day 21. Plus, Medicare only covers the first 100 days if the recipient meets the 3-day inpatient hospital stay requirement for a covered SNF stay. For these monetary reasons, Individuals are trying to stay in their own homes more than in the past, which negatively impacts nursing homes. Apparently, the long term care facilities need to lobby for changes in Medicare.

Closing a SNF, especially if it is Medicare certified, can be tricky to maneuver the stringent regulations.  You cannot just be dismissive and say, “Bye, Felicia,” and walk away. Closing a SNF can be as legally esoteric as opening a SNF. It is imperative that you close a SNF in accordance with all applicable federal regulations; otherwise you could face some “sniff” fines. Bye, Felicia!

Section 6113 of the Affordable Care Act dictates the requirements for closing SNFs. SNF closures can be voluntary or involuntary. So-called involuntary closures occur when health officials rule that homes have provided inadequate care, and Medicaid and Medicare cut off reimbursements. There were 106 terminations of nursing home contracts in 2014, according to the federal Centers for Medicare and Medicaid Services (CMS).

Regardless, according to law, the SNF must provide notice of the impending closure to the State and consumers (or legal representatives) at least 60 days before closure. An exception is if the SNF is shut down by the state or federal government, then the notice is required whenever the Secretary deems appropriate. Notice also must be provided to the State Medicaid agency, the patient’s primary care doctors, the SNF’s medical director, and the CMS regional office. Once notice is provided, the SNF may not admit new patients.

Considering the patients who reside within a SNF, by definition, need skilled care, the SNF also has to plan and organize the relocation of its patients. These relocation plans must be approved by the State.

Further, if the SNF violates these regulations the administrator of the facility and will be subject to civil monetary penalty (CMP) as follows: A minimum of $500 for the first offense; a minimum of $1,500 for the second offense; and a minimum of $3,000 for the third and subsequent offenses. Plus, the administrator could be subject to higher amounts of CMPs (not to exceed ($100,000) based on criteria that CMS will identify in interpretative guidelines.

If you are contemplating closing a SNF, it is imperative that you do so in accordance with the federal rules and regulations. Consult your attorney. Do not be dismissive and say, “Bye, Felicia.” Because you could get “sniffed.”

CMS Proposes Mandatory Bundled Medicare Reimbursements: Financial Risk on Hospitals!

A new CMS proposal could transform durable medical equipment (DME) Medicare reimbursements to hospitals. The proposal, if adopted, would implement a mandatory bundled Medicare reimbursement for hip and knee replacements or lower extremity joint replacements (LEJRs).

CMS has proposed this change to be piloted in 75 metropolitan areas prior to being implemented nationwide.

This mandatory bundled Medicare reimbursement will be unprecedented, as, thus far, CMS has only implemented voluntary bundled reimbursement rates. However, CMS has stated that its goal is to have at least 50% of all Medicare fee-for-service reimbursement to be paid under an alternative payment model by 2018, and, in order to meet this objective, CMS will need to implement more  mandatory alternative payment models.

Another first is that CMS proposes that hospitals bear the brunt of the financial risk. To date, CMS has not targeted a type of health care provider as being a Guinea pig for new ideas, unlike the other proposed and implemented Bundled Payments for Care Improvement (BPCI) initiative where there are many types of providers that can participate and bear risks.

Will this affect NC hospitals?

Yes.

Of the 75 metropolitan areas chosen as “test sites” for the new bundled payment plan, 3 are located in NC.

1. Asheville
2. Charlotte
3. Durham-Chapel Hill

Apparently, CMS believes that Durham and Chapel Hill are one city, but you got to give it to them…by hyphenating Durham and Chapel Hill, CMS gets both Duke and UNC health systems to participate in the mandatory trial. Other large metro areas included in the trial are Los Angeles, New York City, and Miami.

LEJRs are the most frequent surgeries in the Medicare population. The average Medicare expenditures for LEJRs, including surgery, hospitalization, and recovery, can range from $16,500 to $33,000.

The mandatory bundled reimbursement will become effective January 2, 2016; however, the hospitals will not carry the financial risk until January 1, 2017.  So, hospitals, you got a year and a half to figure it out!!

What exactly will this bundled reimbursement rate include?

Answer: Everything from an inpatient admission billed under MS DRG 469 or 470 until 90 days following discharge.

And we are talking about everything.

Thus, you will be reimbursed per “Episode of Care,” which includes:

“All related items and services paid under Medicare Part A and Part B for all Medicare fee-for-service beneficiaries, including physicians’ services, inpatient hospital service, readmissions (subject to limited exceptions), skilled nursing facility services, durable medical equipment, and Part B drugs.”

What should you do if you are a hospital so graciously selected to participate?

1.  Assess your protocol as to discharging patients.  Where do your patients go after being discharged?

2. Determine whether you want to partner with any critical care facilities, skilled nursing agencies, or home health agencies.

3.  Assess your current reimbursement rates and analyze what current delivery patterns must be revamped in order to maintain profitability.

4. Determine future care management and clinical reprogram needs.

5. Analyze ways to provide more efficient delivery components.

6. Communicate with your DME vendors.  Discuss ways to decrease spending and increase efficiency.

7.  Plan all ways in which you will follow the patient after discharge through the 90 day period.

8. Consult your attorney.

If you would like to comment on the proposed rule, you have until September 8, 2015 at 5:00pm.

Proposed Federal Legislation Will Provide Relief to Hospitals and Medicare Patients in Need of Post-Acute Care

The Center for Medicare and Medicaid (CMS) announced that the new RAC contracts in North Carolina should be ready by the end of the year.  This means that, next year, RAC audits on hospitals and other providers will significantly increase in number. Get prepared, providers!!

However, there is proposed federal legislation that could protect hospitals and Medicare patients if passed.

Hypothetical: You present yourself to a hospital. The hospital keeps you in observation for 1 day. You are then formally admitted to the hospital as an inpatient for 2 more days. Under Medicare rules, will Medicare now cover your post-acute care in a skilled nursing facility (SNF)?

Answer: No. Observation days in hospitals do not count toward the Medicare 3-day requirement.

On November 19, 2014, Congressman Kevin Brady introduced draft legislation that would allow hospital observation stays to count toward establishing Medicare eligibility for post-acute services, as well as improve and supervise the RAC program.

You are probably wondering…Why would a hospital keep me in observation for a full day without admitting me as an inpatient when hospitals are reimbursed at a significantly higher rate for inpatient versus outpatient?

Answer: To avoid RAC recoupments.

In recent years, recovery audit contractors (RACs) have been exceedingly aggressive in post payment review audits in challenging hospital claims for short, inpatient stays. The RACs are motivated by money, and all of the RACs are compensated on a contingency basis, which leads to overzealous, sometimes, inaccurate audits. Here in North Carolina, Public Consulting Group (PCG) retains 11.5% of collected audits, and Health Management Systems (HMS) retains 9.75%.  See my blog: “NC Medicaid Extrapolation Audits: How Does $100 Become $100,000? Check for Clusters!”

Why have RACs targeted short-stay admissions in hospitals? As mentioned, one-day inpatient stays are paid significantly more than similar outpatient stays. Because of the financial incentives, RACs often focus audits on whether the short-stay is appropriate because this focus will yield a larger overpayment. As a result, hospitals become hesitant to admit patients as an “inpatient” status and, instead, keep the patient in outpatient observation for longer periods of time.

Keeping a person in observation status rather than admitting the person could impact the person’s health and well-being, but it will also impact whether a Medicare patient can receive post-acute care in a SNF (or, rather, whether Medicare will pay for it).

In order for a Medicare patient to receive covered, skilled nursing care after a hospital stay, Medicare requires a 3-day inpatient stay.  With the onslaught of RAC audits, hospitals become leery to admit a person as an inpatient.  When hospitals are tentative about admitting people, it can adversely affect a person’s post-acute care services.

To give you an idea of how overzealous these RACs are when it comes to auditing Medicare providers, there are over 800,000 pending Medicare appeals. That means that, across the country, RACs and other auditing companies have determined that over 800,000 providers and hospitals that accept Medicare were improperly overpaid for services rendered due to billing errors, etc. Over 800,000 providers and hospitals disagree with the audit results and are appealing. Now, obviously, all 800,000 appeals are hospitals appealing audits findings short-stay admissions not meeting criteria, but enough of them exist to warrant Congressman Brady’s proposed bill.

The proposed bill will significantly impact RAC audits of short-stay admissions in hospitals.  But the proposed bill will also extend the current short moratorium on RAC audits on short-stay admissions in hospitals.  Basically, the RACs became so overzealous and the Medicare appeals backlog became so large that Congress placed a short moratorium on RACs auditing short-stay admissions under the two-midnight rule through the end of March 2015.   The proposed bill will lengthen the moratorium just in time for NC’s new RACs to begin additional hospital audits.

The moral of the story is…you get too greedy, you get nothing…

Remember “The Goose That Laid the Golden Eggs?”

A man and his wife owned a very special goose. Every day the goose would lay a golden egg, which made the couple very rich.  “Just think,” said the man’s wife, “If we could have all the golden eggs that are inside the goose, we could be richer much faster.”  “You’re right,” said her husband, “We wouldn’t have to wait for the goose to lay her egg every day.”  So, the couple killed the goose and cut her open, only to find that she was just like every other goose. She had no golden eggs inside of her at all, and they had no more golden eggs.

Too much greed results in nothing.

Similar to the husband and wife who killed the goose who laid the golden eggs, overzealous and inaccurate audits cause Congress to propose a temporary moratorium on RACs conducting audits on short-term hospital stays until the reimbursement rates are implemented within the same proposed bill (which, in essence will lengthen the moratorium until the rates within the bill are implemented, which also includes additional methods to settle RAC disputes).

The proposed bill, entitled, “The Hospitals Improvements for Payment Act of 2014,” (HIP) would revamp the way in which short hospital stays are reimbursed and how observation days are counted toward Medicare’s 3-day rule for post-acute care; thereby alleviating these painful hospital audits for short inpatient stays. Remember my blog: “Medicare Appeals to OMHA Reaches 15,000 Per Week, Yet Decisions Take Years; Hospital Association Sues Over Medicare Backlog.”

HIP would create a new payment model called the Hospital Prospective Payment System (HPPS) that would apply to short-term hospital stays.

What is a “short stay?” According to the proposed bill, a short stay is a: (1) stay that is less than 3 days; (2) stay that has a national average length of stay less than 3 days; or (3) stay that is “among the most highly ranked discharges that have been denied for reasons of medical necessity.”

Proposed HIP would also require the Department of Health and Human Services (HHS) to establish a new base rate of payment, which will be calculated by blending the base operating rate for short stays and an equivalent base operating rate for overnight hospital outpatient services.

The draft bill would also repeal the 0.2 percent ($200 million per year) reduction that CMS implemented with the two-midnight rule, which is the standard that presumes hospital stays are reasonable if the stay covers two midnights.

The proposed bill also mandates more government supervision as to the RACs.

This proposed bill comes on the cusp of an increased amount of RAC audits in NC on hospitals. As previously discussed, our new RAC contracts will be awarded before the end of this year. So our new RACs will come in with the new year…

The moral of the story?

Expect hospital RAC audits to increase dramatically in the next year, unless this bill is passed.