Obamacare, Medicare Cuts Could be Death Knell for Up to 50% of Nursing Homes
by Alyssa Gerace
While some herald the Affordable Care Act as a much-needed reform bill that will change the face of the healthcare industry, others say it may contribute to forcing up to half of the nation’s hospitals and long-term care facilities into a merger or out of business altogether in upcoming years.
A lot of factors play into the possibility of widespread distress among smaller hospital systems and skilled nursing facility operators, including ongoing pressure on state Medicaid budgets, past Medicare cuts to the skilled nursing industry, and the $716 billion taken from Medicare in the next decade to help fund President Obama’s monumental healthcare reform bill.
“I think the smaller facilities will have a very difficult road going forward, and up to half of the hospitals and long-term care facilities are probably not going to make it,” says William Day,president and CEO of Pennsylvania-based St. Barnabas Health System. “The single-purpose facilities that only offer nursing services will be the most vulnerable.”
Both non-profit and for-profit senior care communities and hospitals that are smaller and already have small margins may be in a particularly tricky situation.
“There have been a lot of mergers already, even with hospitals,” Day says. “Sometimes we can predict the future by seeing what’s happening with ‘sister’ institutions. Hospitals have been joining together for a long time now, because they think it’s better for their survival, in terms of centralized purchasing and other economies of scale. Will that happen in the long-term care industry? No doubt.”
In the next 10 years, the skilled nursing industry will essentially contribute $14.6 billion to healthcare reform in the form of Medicare cuts, says Paul Bach, executive vice president at Genesis Health Care.
“While the industry wants to participate with other healthcare provider groups with the reform, at the same time, we’re concerned with the viability of the industry, coupled with other factors,” hes ays, citing frozen Medicaid rates as an example. “That has a significant impact on nursing facilities. There’s significant concern around the industry’s sustainability.”
In order to avoid the vulnerability that can accompany offering only one type of skilled nursing service, Genesis is looking for ways to prepare for what’s ahead.
“There’s a lot of focus on cost reduction: how can we make cuts to operating costs in our facilities that will not lead to a negative impact on quality, and how can we do that without experiencing much in the way of a reduced workforce?” Bach says.
At the same time, Genesis is positioning its communities to take advantage of other, more beneficial aspects of the ACA that can result in shared cost-savings. This includes participating in accountable care organizations (ACOs) and partnering with health systems and home healthcare agencies as part of a larger managed care movement to reduce hospital re-admissions,thereby helping hospitals avoid reimbursement penalties from Medicare for re-hospitalizations above a certain threshold.
Many larger skilled nursing chains are taking similar steps, but not all nursing homes have the scale or ability to do this.
“For smaller operators, they’re under the same pressure large, multi-location facilities are under,and there’s a need for them to be progressive and proactive in how they plan to respond to what’sin the ACA,” says Bach. “We expect there would be more consolidation within the industry as aresult of reimbursement cuts and the types of policy innovations that are taking place.”
At this point, it’s hard to tell how exactly healthcare reform, along with the fiscal cliff andMedicare and Medicaid-related budgetary concerns, will impact the skilled nursing industry.
“[The ACA] is a landmark reform that can change the landscape [of the industry] in unseen ways,” says Daniel Bernstein, an analyst with Stifel Nicolaus. “It will take a couple years to play out and see how operators adjust. There are pressures, and there’s a lot of speculation with consolidation within the industry. There are going to be some changes to the industry structure in the next couple of years.”
Those changes could come from large operators who want to continue to gain more scale, he says, or from family-run operators who don’t want to deal with the rapid changes that are happening with reimbursements and healthcare reform.
Although many of the major healthcare REITs are tending to avoid skilled nursing—mindful of valuations they’re given for diversifying into non-publicly reimbursed assets such as medical office buildings or senior housing assets—others, such as Omega Healthcare Investors(NYSE:OHI) and LTC Properties, Inc. (NYSE:LTC) are taking advantage of the lack of interest in skilled nursing assets to buy them at good yields, says Bernstein.
“REITs are still the primary consolidator of healthcare real estate across all the asset classes,including skilled nursing,” he says. “You could see some acceleration of M&A at some point depending on how healthcare reform and budget concerns shape up. With additional reimbursement pressure on operators, you’re likely to see more consolidation.”
Hospitals Face Pressure to Avert Re-admissions
By JORDAN RAU
After years of gently prodding hospitals to make sure discharged patients do not need to return,the federal government is now using its financial muscle to discourage re-admissions.THE NEW OLD AGE New Efforts to Close Hospitals’ Revolving Doors Spurred by new financial penalties that Medicare started imposing on places with too many re-admissions, hospitals are doing more outreach to make sure patients are following their discharge program. Medicare last month began levying financial penalties against 2,217 hospitals it says have had too many re-admissions. Of those hospitals, 307 will receive the maximum punishment, a 1 percent reduction in Medicare’s regular payments for every patient over the next year, federal records show. One of those is Barnes-Jewish Hospital in St. Louis, which will lose$2 million this year. Dr. John Lynch, the chief medical officer, said Barnes-Jewish could absorb that loss this year, but “over time, if the penalties accumulate, it will probably take resources away from other key patient programs.” The crackdown on re-admissions is at the vanguard of the Affordable Care Act’s effort to eliminate unnecessary care and curb Medicare’s growing spending, which reached $556 billion this year. Hospital inpatient costs make up a quarter of that spending and are projected to grow by more than 4 percent annually in coming years, according to the Congressional Budget Office. The readmission penalties will recoup about $300 million this year. But the goal is to pressure hospitals to pay attention to what happens to their patients after they walk out the door. The penalties have captured the attention of hospitals, and many are trying to improve their supervision of discharged patients’ recoveries. “I’ve been doing this for over two decades and talking to hospital leaders about re-admissions, and I used to get polite but blank stares,” said Dr. Eric Coleman, a professor at the University of Colorado Anschutz Medical Campus who has devised widely adopted methods to reduce hospitalizations. “Now they’repaying attention.” With nearly one in five Medicare patients returning to the hospital within a month — about two million people a year — re-admissions cost the government more than $17 billion annually. Hospitals’ traditional reluctance to tackle re-admissions is rooted in Medicare’s payment system. Medicare generally pays hospitals a set fee for a patient’s stay, so the shorter the visit, the more revenue a hospital can keep. Hospitals also get paid when patients return. Until the new penalties kicked in, hospitals had no incentive to make sure patients didn’t wind upcoming back. The maximum penalty is set to double next October and then reach 3 percent of reimbursements in October 2015. Medicare also is expanding the list of conditions it will assess in setting punishments. Right now it only evaluates re-admissions of heart attack, heart failure and pneumonia patients, counting every rebound, even ones not related to the original reason for hospitalization. The penalties are based on readmission rates in the past and applied to future payments for all Medicare patients. Researchers say that while some re-admissions are unavoidable, many are caused by the short shrift hospitals have given patients on their way out.Jonathan Blum, principal deputy administrator for the Centers for Medicare and Medicaid Services, said the penalties had helped galvanize hospitals’ efforts to avoid re-admissions. “We’ve seen a small but significant reduction,” he said. “That tells me we’ve focused the industry on improvement.” Medicare’s tough love is not going over well everywhere. Academic medical centers are complaining that the penalties do not take into account the extra challenges posed by extremely sick and low-income patients. For these people, getting medicine and follow-up care can be a struggle. At Barnes-Jewish Hospital, Dr. Lynch said physicians from all over the Midwest referred their sickest heart patients to his facility for transplants and other major interventions. But those patients can skew his hospital’s re-admissions numbers, he said: “The weaker your heart, the more advanced your emphysema, the more likely you are to be re-admitted to the hospital.” Dr. Lynch said Barnes-Jewish set up follow-up appointments for patients who didn’t have their own doctors. But about half of the patients never showed up, he said, even after the hospital made reminder phone calls and arranged for free rides. Sending nurses to see patients at home did not significantly reduce readmission rates either, he said. “Many of us have been working on this for other reasons than a penalty for many years, and we’ve found it’s very hard to move,” Dr. Lynch said. He said the penalties were unfair to hospitals with the double burden of caring for very sick and very poor patients. “For us, it’s not a re-admissions penalty,” he said. “It’s a mission penalty.” Various studies, including one commissioned by Medicare, have found thatthe hospitals with the most poor and African-American patients tended to have higher re-admission rates than hospitals with more affluent and Caucasian patients. But the studies also determined that some safety-net hospitals performed better than average, showing that hospitals can overcome the challenges posed by the kinds of patients they treat. In some ways, the debate parallels the one on education — specifically, whether educators should be held accountable for lower rates of progress among children from poor families. “Just blaming the patients or saying‘it’s destiny’ or ‘we can’t do any better’ is a premature conclusion and is likely to be wrong,” said Dr. Harlan Krumholz, director of the Center for Outcomes Research and Evaluation at Yale-New Haven Hospital, which prepared the study for Medicare. “I’ve got to believe we can do much,much better.” Some researchers fear the Medicare penalties are so steep, they will distract hospitals from other pressing issues, like reducing infections and surgical mistakes and ensuring patients’ needs are met promptly. “It should not be our top priority,” said Dr. Ashish Jha, a professor at the Harvard School of Public Health who has studied re-admissions. “If you think of all the things in the Affordable Care Act, this is the one that has the biggest penalties, and that’s just crazy.” With pressure to avert re-admissions rising, some hospitals have been suspected of sending patients home within 24 hours, so they can bill for the services but not have the stay-counted as an admission. But most hospitals are scrambling to reduce the number of repeat patients, with mixed success. A few days after Eda Laurion was discharged from the Banner Del E. Webb Medical Center near Phoenix after treatment for her congestive heart failure in August,a nurse showed up at her house. “She helped explained the medicines I’m taking, the side effects,what they do for you,” said Ms. Laurion, 91, of Sun City West. Still, re-admissions can’t always be prevented. The nurse, Sue Koner, sent Ms. Laurion back to the hospital after two weeks for dangerously low sodium caused by an un-diagnosed kidney problem. However, Ms. Laurion avoided re-hospitalization in October when Ms. Koner deduced that her hallucinations were a reaction to an antibiotic. Overseeing former patients is expensive and time-consuming, so many hospitals are relying on financing from community health organizations and foundations. Ms. Koner works for Sun Health, a foundation-supported nonprofit. Since Sun Health started its program in November 2011, only nine of 213 patients have been readmitted. Dr. Krumholz said hospitals should think of re-admissions as a challenge to overcome. “One day, we’ll look back,”he said, “and we’ll be incredulous that one out of every five patients ended up back in the hospital.”
The Ten Most Common Nursing Home Violations
By Long Term Care Solutions
Pro Publica analyzed 262,500 deficiencies with its u Nursing Home Inspect tool, which includes deficiencies identified by government regulators and the U.S. Centers for Medicare and Medicaid Services over the past three years. Since releasing this information on its website this summer,has added details of historical violations found in nursing homes. The agency now releases narrative reports of these problems from a home’s last three inspection cycles — or about three years. Here is their list of the 10 regulations most commonly violated by nursing homes:
• Facility is Free of Accident Hazards: 17,331 • Facility Establishes Infection Control Program: 14,186 • Provide Necessary Care for Highest Practicable Well-Being: 13,401 • Store/Prepare/ Distribute Food Under Sanitary Conditions: 11,746 • Develop Comprehensive Care Plans: 9,070 • Services Provided Meet Professional Standards: 8,986 • Clinical Records Meet Professional Standards: 7,962 • Not Employ Persons Guilty of Abuse: 7,288 • Drug Regimen is Free from Unnecessary Drugs: 7,040 • Dignity: 6,605
OIG Issues Compendium of Unimplemented Recommendations
from Dixon Health Care Solutions, Inc.
The Office of Inspector General issued is Compendium of Unimplemented Recommendations. It summarizes significant monetary and non monetary recommendations that, when implemented,will result in cost savings and / or improvements in program efficiency and effectiveness. This includes two unimplemented issues for home health agencies, three unimplemented issues for hospices, and an unimplemented issue for Recovery Audit Contractors. For more information please utilize the following link:
https://oig.hhs.gov/reports-and-publications/compendium/files/compendium2012.pdf
Avoiding Sexual Harassment by Residents
by Ted Boehm
A recent lawsuit filed by the U.S. Equal Employment Opportunity Commission (“EEOC”)against a healthcare facility in Virginia highlights a legal liability to which nursing homes and other long-term care facilities are particularly vulnerable: harassment of employees by residents.The lawsuit in question was filed under Title VII of the Civil Rights Act and it alleged that a female receptionist was subjected to a “sexually hostile work environment” on the basis of harassment by a resident. The lawsuit further alleged that the employee made numerous complaints to her supervisor about the harassment yet the employer failed to take proper corrective action.
Harassment Problems Specific to the Resident Care Arena
Sexual harassment is a difficult issue in any employment setting, but perhaps nowhere more sothan in the resident care arena. A number of different nursing home employees have regular,physical contact with non-employees – primarily the residents for whom they care (and the familymembers of those residents). Under Title VII, nursing home employees are protected fromharassment by residents just as they are from co-workers and supervisors. Hospitals, nursinghomes, assisted living facilities and other patient-care entities are responsible for providing aworkplace free of sexual harassment, regardless of whether the harassment is perpetrated by aco-worker or by a paying resident. Most nursing home employers have experienced episodes inwhich a resident acts out in an inappropriate manner. Often, the inappropriate behavior is due tothe resident having a deteriorated mental condition such as dementia or Alzheimer’s. As a resultof this condition, residents may not understand that their actions are inappropriate. However, thismental condition does not act to shield nursing home employers from liability.
How Employers Can Minimize the Risk of Harassment
Where sexual harassment has been alleged, a court will likely first look to whether the employerknew or should have known about the harassment and whether the employer did anything tocorrect the offending conduct. Of course a nursing home employer is somewhat constrained inhow it can respond to complaints of sexual harassment by residents. For example, a residentcannot be transferred unless the transfer complies with the Bill of Rights for Residents ofLong-Term Care Facilities. However, this constraint does not mean an employer should donothing. While it may not be possible to completely prevent harassment in the long-term caresetting due to the mental conditions of residents, employers can take steps to address andminimize the risk. First, employers should maintain a policy that addresses harassment byresidents or other third parties. The policy should specifically address how employees can reportthe harassment when it occurs. Maintaining a “reporting” policy is critical for another reasonbecause it provides employers with important legal defenses in situations involving allegedharassment by a supervisor. Second, employers should regularly train its employees on how toreact when they are harassed by a resident. Because the duties of a nursing home employee oftenrequire him or her to work in close contact with residents, there is an increased potential forharassment. If employees are trained to react properly and promptly, the unwelcome conduct maybe stopped before it becomes “severe or pervasive” – the standard used by courts in analyzingsexual harassment claims. Third, employers must respond to complaints appropriately. While theresponse will depend on the circumstances of the complaint, there are several “best practices”that employers should consider. For example, employers could make staffing adjustments so thatthe employee does not care for the resident by his or herself. Other options include assigning theresident to another employee’s care or discussing with the employee whether he or she wants totransfer to another part of the facility.
Respond to Complaints – But Do Not Retaliate
While it is critical for an employer to respond meaningfully to a complaint, it is just as importantthat the response does nothing to permit an employee to argue that he or she was retaliatedagainst for making the complaint. Retaliation claims have increased within all industries in recentyears and the long-term care industry is no exception. An employer should not take any actionthat is “materially adverse” to the employee -such as transferring the employee to a position thathas more onerous job duties. The most effective way to minimize the risk of harassment in yourlong term care facility is to conduct regular training on your policies or to implement policiesnow if they do not exist.
Why Long-Term Care Facilities Need to Embrace Change David Rubenstein, a speaker at the marcus evans Long-Term Care CXO Summit Spring 2013, on how long-termcare facilities need to move along with the industry. Interview with: David Rubenstein, Chief Operating Officer, AdCare Health Systems “Do not be static,” is the message that David Rubenstein, Chief Operating Officer at AdCareHealth Systems wanted to convey to long-term care (LTC) facility directors. The healthcareindustry is changing, and facilities have to embrace that to take advantage of businessopportunities, he commented. Ahead of the marcus evans Long-Term Care CXO Summit Spring 2013, in Los Angeles,California, January 28-29, Rubenstein exchanges his ideas on ensuring a LTC facility is patientcentered and evolving with the industry. Q: How can LTC facilities build a person-centered culture? DR: It is important to remember that we do not make products in this industry, but take care ofpeople. A lot of facilities get wrapped up in numbers, rules and regulations, but at the end of theday, our job is to take care of people. I always encourage management to walk the floors of theirfacility every morning before they go to their office and start dealing with all the technical issues,to keep that person-centered focus. Q: How is culture change best done? What do employees resist the most and what is the wayaround it? DR: Most people get into a rhythm of doing things the way they have always done. The problemis that the healthcare industry is constantly changing, whether it is the regulations, referralsources or the types of residents we admit. The facilities that do not embrace change are thosethat typically end up having problems or cannot achieve their goals. They will not achieve themif they do things the way they did ten years ago. LTC facilities need to be ahead of the curve. Weencourage folks to adapt their policies and procedures, so things are not static. For employees to embrace change, the leaders must spend a lot of time communicating andexplaining the game plan. Too often they send out budgets or expectations, without explainingthe rationale behind them. Q: How could LTC facilities be more profitable? What opportunities can they capitalize on at themoment? DR: Each facility needs to assess every department, expenditure, and resident before they comein. The margins in this business are not so large that they can overlook some expenses.Establishing par levels and expectations for supplies and commodities, such as food, could proveeffective. There is also value in outsourcing certain services, housekeeping and laundry forexample, to specialists who can do a better job. It is important to be as efficient as possible on the expense side, and to ensure that the facility isable to attract residents. Q: How will President Obama’s re-election impact the LTC industry? DR: All aspects of healthcare are going to be affected. The nursing home industry is the smallestsector of the healthcare budget, and we have gone through some radical adjustments in theMedicare payment rates over the last few years. We need to meet with our state leaders andlobbying groups to make sure they understand that right now a nursing home is the lowest costalternative for a patient who needs the services we provide. Interview by: Sarin Kouyoumdjian-Gurunlian, Press Manager, marcus evans, Summits Division About the Long-Term Care CXO Summit Spring 2013 This unique forum will take place at the Westin Long Beach, Los Angeles, California, January28-29, 2013. Offering much more than any conference, exhibition or trade show, this exclusivemeeting will bring together esteemed industry thought leaders and solution providers to a highlyfocused and interactive networking event. The Summit includes presentations on AccountableCare Organizations, reimbursement maximization, staff recruitment and retention, and electronicmedical record implementation. For more information please email d.drey@marcusevansch.com, or alternatively, feel free to call416-800-2481.
