Quality Credentialing or Why Should a Long Term Care Facility Pay Attention to Health Care Reform?

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1 Quality Credentialing or Why Should a Long Term Care Facility Pay Attention to Health Care Reform? Richard J. Brockman, Esq. Susan D. Doughton, Esq. I. Introduction The Patient Protection and Affordable Care Act ( PPACA ), Pub. L. No , became law on March 23, Among PPACA s sweeping changes to America s health care delivery system are expanded access to underserved individuals, reduced Medicare spending, increased fraud and abuse protections, and an individual mandate requiring all Americans to have health insurance by 2016 (at the latest). This law was quickly followed by the passage of Health Care and Education Reconciliation Act of 2010, Pub. L. No , which made many small, yet substantive, changes to PPACA. The combined effects of these bills accomplish what is commonly known as Health Care Reform. 1 Although it contains some substantive provisions, much of Health Care Reform simply creates a framework for change. For instance, PPACA itself calls for over 150 different studies to be conducted by the Center for Medicare & Medicaid Services ( CMS ) and the Office of the Inspector General ( OIG ). It is clear, however, that long term care will be impacted profoundly by Health Care Reform. In the coming years, long term care providers will be under increased federal scrutiny with higher regulatory burdens. Payment methodologies will change. Medicare payments will decrease, and will be tied more closely to quality outcomes. In sum, long term care providers need to understand the major provisions of Health Care Reform that will affect their businesses and plan for change. The common thread running in these changes is the emphasis to motivate better quality outcomes and contain costs. Therefore, it is essential that long term care providers take the steps necessary to demonstrate that they are high quality, low cost providers of health care. II. Behavior Follows Reimbursement: A Look at DRGs When Medicare was established in 1965, Congress adopted the private health insurance sector s retrospective cost-based reimbursement system to pay for hospital services. Under this system, Medicare made interim payments to hospitals throughout the hospital s fiscal year. At the end of the fiscal year, the hospital filed a cost report and the interim payments were reconciled with allowable costs which were defined in regulation and policy. 1 The terms Health Care Reform and PPACA are used interchangeably in this paper.

2 Medicare s hospital costs under this payment system increased dramatically; between 1967 and 1983, costs rose from $3 billion to $37 billion annually. Medicare Enrolled Population and Expenditures 1967 and 1985 Year Number of Enrollees Expenditures Percent of Health Care Expenditures million $4.7 billion 9.2% million $72.3 billion 16.9% The following table shows Medicare hospital payments from 1967 to Two factors were blamed for the rapid growth in expenditures: 1. Payment methodologies that paid providers based on their charges for providing services and consequently created an incentive to provide more services; and 2. Increases in costly medical technology. The Social Security Amendments of 1983 mandated the prospective payment system (PPS), effective in October of Fiscal Year The system was intended to motivate hospitals to change the way they deliver services. This system is a per-case reimbursement mechanism under which inpatient admission cases are divided into relatively homogeneous categories called diagnosisrelated groups (DRGs). In this DRG prospective payment system, Medicare pays hospitals a flat rate per case for inpatient hospital care so that efficient hospitals are 2

3 rewarded for their efficiency and inefficient hospitals have an incentive to become more efficient. From 1970 to 1980, Medicare hospital payments increased by 88 percent. After the implementation of the PPS, the rate of growth for Medicare hospital payments steadily declined until In 1987, the administrative payment system was changed. This resulted in an increase in the payment rate. Also, in 1987, legislative changes increased the amount of reimbursement to hospitals for medical education, capital costs, and disproportionate share payments. From 1985 to 1990 the payment rate decreased by 52 percent, and from 1990 to 1995 the payment rate decreased by 37 percent. 2 Based on these statistics, it appears that DRGs were at least partially responsible for a certain amount of cost saving within the system. III. Is CMS Poised to Make Similar Revisions to the Medicare Payment System? The Center for Medicare and Medicaid Innovation was created by Section 3021 of PPACA. This organization was created for the express purpose of testing and developing new payment models. If a model that the Innovation Center has been deemed effective, its expansion must be accomplished through normal rulemaking processes. PPACA suggests twenty possible payment models for testing; several items in these models make it clear that long term care providers will be part of the payment bundle. For instance: 1. Contracting directly with groups of providers of services and suppliers to promote innovative care delivery models, such as through risk-based comprehensive payment or salary- based payment. 2. Utilizing geriatric assessments and comprehensive care plans to coordinate the care (including through interdisciplinary teams) of applicable individuals with multiple chronic conditions and at least one of the following: i) An inability to perform two or more activities of daily living; or ii) Cognitive impairment, including dementia 3. Promote care coordination between providers of services and suppliers that transition health care providers away from fee-for-service based reimbursement and toward salary-based payment. 4. Establishing community-based health teams to support small-practice medical homes by assisting the primary care practitioner in chronic care management activities, including patient self-management. 2 OIG, Office of Evaluation and Inspections, Region IX, August 2001 OEI

4 5. Allowing States to test and evaluate fully integrating care for dual eligible individuals in the State, including the management and oversight of all funds under the applicable titles with respect to such individuals. 6. Improving post-acute care through continuing care hospitals that offer inpatient rehabilitation, long-term care hospitals and home health or skilled nursing care during an inpatient stay. 7. Promoting greater efficiencies and timely access to outpatient services (such as outpatient physical therapy services) through models that do not require a physician or other health professional to refer the service or be involved in establishing the plan of care for the services, when such service is furnished by a health professional who has the authority to furnish the services under existing State law. 8. Utilizing a diverse network of providers of services and suppliers to improve care coordination for applicable individuals... with two or more chronic conditions and a history of prior year hospitalization.... The Innovation Center will develop payment methodology and performance measures once a payment or service delivery model is deemed beneficial and ready for testing. Testing occurs through RFP or grant type process called Innovation Partnership Opportunities. These IPOs are to be posted on the Innovation Center s website, innovations.cms.gov. IV. What is Quality Credentialing? Quality credentialing is a way to describe health care providers reaction to the various health care reform intiatives that reward good quality outcomes and penalize preventable poor outcomes. Under PPACA and other CMS sponsored programs, health care providers are encouraged to develop provider and supplier networks. ACOs and bundling are two examples. 3 Each of these permits some form of shared cost savings to be divided among network participants. To qualify, the network must not only achieve measured cost savings, but also meet certain quality standards. 1. What are these intiatives? a) Shared cost savings or gain sharing among participants of Accountable Care Organizations and bundling programs. b) Penalties for unnecessary hospital readmissions and so-called never events. c) Grants to community based organizations to prevent unnecessary hospital readmissions. 3 These programs are more particularly described later in this outline 4

5 2. What are these reactions? The gain share or shared cost savings initiatives in these provider network programs generally have two requirements. First, certain quality standards must be achieved. Second, there must be actual cost saving. Thus, as organizers form provider networks (such as ACOs or bundling), the network organizers will be looking to limit affiliation to those providers who are likely to help the network achieve its goals of good quality outcomes and lower costs. V. Accountable Care Organizations, Payment Bundling, and PACE Programs Health Care Reform encourages a number of different approaches for providers and suppliers to form networks to achieve the prime goal of promoting good quality outcomes and containing costs. This section contains a brief description of those most being considered. 1. ACOs: The advent of the Accountable Care Organization in PPACA represents a partial return to managed care. Much has been written about ACOs in an attempt to accurately describe them. ACOs are a product of the shared savings program contained in Title III, Subpart A of PPACA. Under the shared savings program, participating providers can group together to form an Accountable Care Organization. PPACA According to CMS, an ACO is: an organization of health care providers and suppliers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee for service program who are assigned to it. Medicare Fact Sheet, What Providers Need to Know: Accountable Care Organizations, Mar. 31, 2011, available at Sheet-for-Providers.aspx (last visited July 14, 2011). ACOs will track Medicare patients throughout their treatment process from doctor s office visits to post-hospitalization care and share the risks and benefits of the quality of those patients treatment. To participate in the shared savings program, eligible providers must form or join an ACO and apply to CMS. Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, 76 Fed. Reg (November 2, 2011) (to be codified at 42 CFR pt. 425). Eligible providers and suppliers with established mechanisms for shared governance: Physicians in group practice arrangements Networks of individual practices of physicians Partnerships or joint venture arrangements between hospitals and physicians 5

6 Such other groups of providers of services (e.g., SNFs) and suppliers as the Secretary determines appropriate 4 Each ACO must have a governing body that represents its members and monitors the care that the ACO delivers. Additionally, ACOs must analyze and report data to CMS on a quarterly and annual basis. An ACO is required to serve at least 5,000 Medicare patients and must agree to participate in the shared savings program for a period of three years. PPACA Under the proposed rule, ACO providers would continue to receive payments as usual under the Medicare payment program. CMS would then develop a benchmark for each ACO to measure its performance. The benchmark is an estimate of what the total Medicare expenditures for ACO beneficiaries would have been in the absence of the ACO. If the ACO s expenditures are less than the benchmark, then the ACO may receive a portion of what Medicare saved. If the ACO s expenditures exceed the benchmark, then the ACO may be accountable for Medicare s losses. 2. Payment Bundling Payment bundling is another Medicare pilot program intended to alter the way that health care facilities are paid. Under this program, a group of providers will receive a single payment for a single episode of care. PPACA This payment is intended to be shared between the providers across the treatment continuum, and is intended to align the varying incentives across the disparate payment systems within that continuum. For example, hospitals receive only a single payment for treating a patient, regardless of their incurred costs. Hospitals therefore have an incentive to discharge patients as quickly as possible. Physicians are paid separately from hospitals, on a pervisit basis. Likewise, nursing homes are paid on an entirely different system, which encourages over-diagnosis to increase payments. With a single bundled payment, CMS intends to give providers a common incentive: to provide efficient, quality care without avoidable readmissions. PPACA s bundling provision directs the Secretary to establish a pilot program by January 1, 2013 to investigate the effectiveness of payment bundling. The law contemplates an expansion of the program, as the Secretary is directed to report to Congress within three years of the pilot program s launch if the program is successful. The Center for Medicare and Medicaid Innovation began the Bundled Payments for Care Improvement Initiative on August 23, The initiative is carried out through specific programs that are implemented through a competitive application process, that is, providers apply to become part of the program. 4 Nursing Facilities by themselves can not form an ACO, but can be part of an ACO network 6

7 A bundled payment is a single payment for a defined group of services. Payment may include services provided by a single entity or by groups of providers. There are four models in the initial program announcement. submit applications for any of the four programs. Providers may 1. Inpatient Stay Hospital Services only 2. Inpatient Stay plus Post Discharge Services 3. Post-Discharge Services only 4. Inpatient Stay Hospital and Physician Services only All models except #4 include some sort of fee for service payment to providers. An additional gain sharing payment is made if the total of all fee-for-service payments is less than the targeted, projected price for the bundle of services. It is important to note that post-discharge models include related hospital readmissions in the service and cost bundle. 3. Program of All-inclusive Care for the Elderly (PACE): The PACE program is a comprehensive care model targeting above age 55 persons mainly those who are dual eligible for Medicaid and Medicare. Forms of the PACE program have been in place for over 40 years. It began in 1971 as an innovative care model to help the frail ethnic Chinese population in the San Francisco CA area. It was redefined in 1986 into a program called On Lok. It was further refined in the 1997 Balanced Budget Act (Pub. L ) when it was described as a permanent Medicare provider and allowed states to pay for PACE services under Medicaid. In the 2005 Deficit Reduction Act (Pub L ), Congress encouraged PACE expansions into the rural areas by authorizing grants. Even with all of these refinements and incentives, there are less than 40 PACE in place. PACE is a capitated (at risk) program providing its beneficiaries with comprehensive services. The PACE provider receives a negotiated capitation fee from Medicare and Medicare for each enrolled eligible beneficiary. The beneficiary must be eligible for nursing home level care. The range of services are: Adult day care that offers physical, occupational and recreational therapy Physician medical care Home health and personal care assistance All necessary prescription drugs Social services Medical specialties (e.g., audiology, dental, optometry, podiatry, and speech therapy Hospital and nursing home care (when necessary) Durable medical equipment 7

8 Transportation Respite and end of life palliative care Quality assurance and Program Improvement The PACE contracts with providers to ensure these services are available and has flexibility in negotiating reimbursement. For a variety of reasons, there are only a handful of PACE programs. The tenets of PPACA, however, have raised interest levels and we may see more PACE projects being established in the next few years. VI. Existing Hospital Incentives and Penalties for Quality Care 1. Penalties for Excessive Readmissions. Beginning in fiscal 2013 (October 1, 2012) CMS will impose 30-day readmission penalties. These penalties represent one of the first major attempts by CMS to hold hospitals accountable for patient outcomes, even those that are outside the control of the hospital. Hospitals with excessive rates of 30-day readmissions of Medicare patients with Acute Myocardial Infarction, Heart Failure, and Pneumonia will face a penalty of up to 1% of all Medicare payments (not just on the cases with readmissions). The penalty ramps up year by year, topping out at 3% in fiscal See Modern Healthcare Avoiding the penalty box New rules on readmissions push hospitals, post-acute providers into closer collaboration, Jessica Zigmond January 28, Penalties for Never Events. Hospitals are not allowed to bill CMS for care rendered as a result of 11 so-called never events. Most of the never events relate to occurrences/conditions that arise solely as a result of acts or omissions that take place in the hospital (wrong-site surgery, hospital acquired infections) but the cause of and responsibility for pressure sores (also a never event ) is not so clear-cut. 3. Value-Based Purchasing. Also beginning in fiscal year 2013, CMS will automatically hold back 1% of its payments to hospitals on every case billed. Hospitals have the opportunity to earn back the 1% withhold plus up to an additional 1% based on above average performance in 12 Clinical process measures (weighted 70% in the formula) and 8 patient experience measures (HCAHPS, weighted 30% in the formula). Hospital performance is rated relative to all other hospitals participating in Medicare. VII. What Are Hospitals Doing to Gain the Incentives and Avoid Penalties? Hospitals understand that regardless of the program, avoiding never events and unnecessary readmissions are key to future success. In some cases, it is clear that some intervening omission or commission in a hospital caused the never event or unnecessary readmission by either discharging too soon, not providing the right care, or sending the patient into the wrong post acute care setting (e.g., home instead of a SNF or LTACH). In many others, however, these issues may have been influenced by factors unassociated with the care rendered in the hospital. For example, the readmission could be caused by: (i) a patient not following post discharge instructions, (ii) an intervening 8

9 medical onset unassociated with the care rendered by the hospital, or (iii) a post acute provider not adequately providing treatment. To mitigate this ambiguity hospitals are taking steps to: 1) Develop quality measurements and action plans to promote better outcomes. For instance, develop programs that focus on issues affecting the elderly patient such as ACE (Acute Care for the Elderly) programs Separate hospital units (think pediatric unit) where staff is specially trained and focused on conditions and recovery paths for the elderly. Focus on issues from special dietary needs to fall prevention, skin issues, mental well being, and discharge planning. 2) Choose to refer to and work with post-acute providers who have demonstrated they provide good quality care. 3) Monitor the source of readmissions and evaluate post discharge results. 4) If developing an ACO, payment bundling program or other episodic payment environment, look for post-acute providers who can be good partners in the objectives of good quality outcomes throughout the episode of care and who can foster cost savings. 5) Put in place systems (human and electronic) that can coordinate and monitor care after a hospital discharge. VIII. What Should Long Term Care Facilities be Doing? With the pressures on hospitals to avoid unnecessary readmissions and provide better outcomes when measured through the entire care episode, there will be a more focused willingness to create alliances with post acute care providers. As described above, this willingness will be tempered by the hospital s desire to find those post acute care providers who perform best. This means that post acute care providers should take steps to demonstrate that they can function at the desired level. Long term care facilities should develop programs and procedures aimed at avoiding unnecessary hospital readmissions. For instance: 1) When possible, during the preadmission evaluation, be mindful to develop care objectives aimed at mitigating readmission. This includes ensuring the long term care facility has the right records, test results, and prognoses to make the evaluation. Using this evaluation, upon admission, develop an action plan for each hospital admission so staff (especially evening and night staff) can anticipate issues in a proactive manner. 2) Train staff to anticipate issues a newly admitted resident may have to create a more proactive system. 9

10 3) Consider 24/7 RN coverage or employing physician extenders. 4) Develop affiliations with local hospital specialty physician groups (orthopaedic, heart, pulmonary) to provide facility staff with better access to deal with condition changes or other events in a resident s care. 5) Be prepared for electronic health records. 6) Track and trend each hospital discharge to create a usable matrix of the rationale for each discharge. This can be used for both program improvements and to demonstrate to referring hospitals the effectiveness of your programs. This includes tracking costs and charges. 7) Develop materials that show the weaknesses in the so-called 5-star rating system or other such systems, as some referral sources may be employing this system as a determinative of a post acute setting s abilities. 8) Many long term care facilities already have separate and distinct units for various types of residents Even if these exist, revisit physical plant configuration to determine if there are reasonable physical plant improvements or equipment purchases that could be made to better accommodate care. Separate branding of these units may help set a facility apart and enhance market share. IX. Conclusion The Health Care Reform initiatives are focused on measuring the outcomes for the care rendered to patients during an entire episode of care. Programs such as ACOs and payment bundling are encouraging providers to form networks to provide care from hospital admission through post acute care discharge. As these programs gather momentum, providers will be looking to partner with those providers who have dependable track records for good quality outcomes and can help bring down the cost of care. Those post acute care providers that position themselves to function in this environment will do well. Those that continue to function as before may not fare so well. 10

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