Long-Term Care Regulatory and Practice Changes: Impact on Care, Quality, and Access

Dr. Stefanacci served as a CMS Health Policy Scholar for 2003-2004; is a faculty member of Jefferson School of Population Health, Thomas Jefferson University, Philadelphia, PA; a Mercy LIFE physician, Philadelphia, PA; and is chief medical officer, The Access Group, Berkeley Heights, NJ.

Dr. Spivack is the founder of the Connecticut Geriatrics Society, and is on the medical staff of Greenwich Hospital, Greenwich, CT.
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Long-term care (LTC) is undergoing major changes sure to impact all LTC providers. These changes are occurring as a result of a focus to decrease LTC costs, which are expected to occur through reductions in both LTC utilization as well as reimbursement. These cuts are occurring not directly through Medicare and Medicaid but through private payers, such as managed care organizations and other groups newly responsible for LTC services. Skilled nursing facilities (SNFs) and other LTC facilities succeeding in the face of these regulatory and practice shifts will be those that understand these changes and have developed processes to efficiently and effectively deliver care under these new rules, especially regarding a reduction in the use of emergency and hospital services for SNF residents. Specifically, this will require SNFs to deliver outcomes for which they are being held accountable. In addition, SNFs will need an enhanced focus on medication management because of several regulatory and environmental changes in this area. Success in this new world will only come to those LTC providers who understand these changes and are prepared to act. This article briefly reviews bundled payment changes, Accountable Care Organizations (ACOs), managed Medicaid, pay-for-performance requirements, and the increased complexity of medication management.

Bundled Payments

The move to decrease LTC costs is a focus of the Bundled Payments for Care Improvement (BPCI) initiative, which were announced on January 31, 2013.¹ BPCI organizations can enter into payment arrangements that include financial and performance accountability for episodes of care. There are four models of care that link payment for multiple services that beneficiaries receive during an episode of care; according to the Centers for Medicare & Medicaid Services (CMS), these models are anticipated to lead to “higher quality, more coordinated care at a lower cost to Medicare.”¹

The model that is most relevant to our discussion is the third model—Retrospective Post-Acute Care Only—which entails that an episode of care is triggered by an acute care hospital stay and will begin at initiation of post-acute care services with a participating SNF, inpatient rehabilitation facility, LTC hospital, or home health agency. The post-acute care services included in the episode must begin within 30 days of discharge from the inpatient stay and will end either a minimum of 30, 60, or 90 days after the initiation of the episode. Participants in model three can select up to 48 different clinical condition episodes, which are listed at https://innovation.cms.gov/initiatives/bundled-payments.

There are currently 43 participants/awardees who are involved in testing the BPCI third model. If the CMS Innovation Center finds testing to be successful, they will introduce this program on a national basis such that all Medicare funds for subacute services could be directed through the hospital. This would require SNFs to be contracted directly with their local hospitals as Medicare subacute payments would flow through the health system/hospital. SNFs operating in the most efficient and effective manner with regard to length of stay and reduction in avoidable hospital readmissions will benefit, as these will be the providers that hospitals seek out as partners.

Medicare currently makes separate payments to providers for the services they individually furnish to beneficiaries for a given illness or course of treatment, which has led to fragmented care with minimal coordination across providers and healthcare settings.¹ With this approach, payment has been based on the extent of services (ie, how much a provider does), rather than on the outcome of that care. Research has shown that bundled payments can better align incentives for providers—hospitals, post-acute care providers, doctors, and other practitioners—to partner closely across all specialties and settings that a patient may encounter to improve the patient’s experience of care not only during a hospital stay for acute care, but also during discharge recovery.^2-4

In the third model, the bundle will include physicians’ services, care by other post-acute providers, related readmissions, and other related Medicare Part B services included in the episode definition, such as clinical laboratory services, charges for durable medical equipment, prosthetics, orthotics and supplies; and Part B drugs.⁵ This means that physicians caring for subacute residents will be tied to the SNF for payment just as SNFs will be tied for their payment to health systems/hospitals. This will likely increase the use of the so-called SNFist, a physician who specializes in the care of patients in skilled nursing settings. In fact, since the payment and relationship starts with the health system/hospital, the role of the SNFist will likely be played by hospitalists given that they already have a position with the payer source.

Under the third model, a target price is set that is based on historical fee-for-service payments for the participant’s Medicare beneficiaries in the episode and will include a discount. Payments are made at the usual fee-for-service payment rates, after which the aggregate Medicare payment for the episode is reconciled against the bundled payment target price. Any reduction in expenditures beyond the discount reflected in the target price would be paid to the participant and may be shared among their provider partners. Any expenditure that is above the target price would be repaid to Medicare by the health system/hospital.¹

Accountable Care Organizations

To review, an ACO is a provider network typically run by hospitals, physicians, and, sometimes, nursing homes that share the responsibility of managing and coordinating care of the Medicare fee-for-service beneficiaries assigned to them and are willing to be held accountable for the quality, cost, and overall care of these individuals. Under the Affordable Care Act, an ACO is responsible for at least 5,000 Medicare beneficiaries for at least 3 years.⁶ Medicare continues to pay the providers in an ACO for services they provide on a fee-for-service basis; however, if the ACO is able to provide better care at significant cost savings to Medicare, then the ACO providers ultimately share in those savings. The benefit of an ACO to the patient is that it reduces the incentive for providers to treat, test, and perform more procedures for the purpose of making more money. This translates into greater healthcare savings yielded from keeping individuals out of healthcare settings for unnecessary reasons.

The importance of LTC settings in ACO partnerships has been increasingly recognized since October 2011, when CMS issued a final regulation to include nursing homes in ACO participation. With the goal of providing high quality LTC and reducing hospital readmissions, nursing homes are in the position to save their ACO considerable amounts of money. However, nursing homes trying to align themselves with an ACO may require more work than others to stand out in a competitive marketplace; for instance, an ACO may not want to partner with a nursing home that has a low quality rating or does not have an electronic health records (EHRs) system in place, for example. As a recent commentary put it, “In the ACO [world], one physician, one nursing home, or one hospital participant in the ACO that performs poorly could affect the bottom line by reducing the amount of the shared savings from the government.”⁷ The hope is that the benefits of inclusion in an ACO may motivate nursing home administrators to further quality improvement efforts.

Medicaid Managed Care and SNF Room and Board Reimbursement

Increasingly, states are moving to mandatory managed care for all Medicaid beneficiaries. According to data collected by CMS, 74.2% of the more than 57 million Medicaid beneficiaries in the United States in 2011 were in a managed Medicaid program.⁸ Historically, Medicaid beneficiaries who reside in SNFs had been exempt from the requirement for managed Medicaid, but that is rapidly changing. As a result, we are seeing programs emerge, such as New York State’s Fully Integrated Dual Advantage. New York is one of 15 states to receive a federal grant to develop a demonstration program to coordinate care for “dual eligibles” (ie, individuals with both Medicare and Medicaid). The initial enrollment for this New York program was scheduled for July 1, 2014 but has now been moved back to January 1, 2015. The program is being funded through the Federal Coordinated Health Care Office, which is housed in the CMS Innovation Center.⁹ These programs are responsible for all LTC services, including the payment of the SNF room and board component and other Medicaid benefits. These programs will require SNFs to contract with each of their states’ Medicaid LTC managed care plans for their reimbursement, meaning that once again the most cost-effective SNFs will be sought out for inclusion in these limited networks.

Nursing Home Value-Based Purchasing

While there are many model programs being tested, this does not assure that they will be introduced as national programs. One demonstration project that recently concluded with limited success is the Nursing Home Value-Based Purchasing (NHVBP) Demonstration.¹⁰ The NHVBP was launched in July 2009 as a 3-year CMS demonstration. This was meant to test the concept of value-based purchasing in nursing home settings in three states: Arizona, New York, and Wisconsin. Value-based purchasing is a payment methodology that rewards quality of care rather than volume of services through payment incentives and transparency.

In the final evaluation, it was concluded that the NHVBP demonstration neither lowered Medicare spending nor improve quality for nursing home residents.¹¹ The evaluation report noted that the results may have revealed more about specific flaws in the design of the demonstration rather than actual problems with pay-for-performance. The report offered six potential changes to optimize response to payment incentives to improve quality for Medicare programs that wish to move forward with pay-for-performance models in nursing homes; modifications to the design of any future NHVBP program might include:

1.   Simplified payment and reward rules

2.   Increased payout pools

3.   Relaxation/elimination of budget neutrality restrictions such that the likelihood of payout does not hinge on the efforts of other participating facilities

4.   Offering more immediate payouts

5.   Real-time feedback on performance and quality activity results

6.  Providing increased education and guidance on best practices to providers, such that the program could become more prescriptive by mandating that participating providers undertake specific training or utilize best practices in order to qualify for a reward payment.¹¹

Despite the miss of the NHVBP, the direction of CMS and states is clear: to push SNFs to deliver care in a more efficient and effective manner especially with regard to length of stay, hospital readmission rates, and overall facility-based LTC services.

Meaningful and Useful?

The CMS incentives to increase the use of EHRs will turn into penalties in 2015. A 1% Medicare pay cut will be applied to qualified providers who do not demonstrate meaningful use of a certified EHR by October 2014 unless they have applied for a hardship exemption.¹² Qualified providers are those who are considered ambulatory providers, meaning that more than 10% of one’s patient encounters are outside of a hospital.¹³ Post-acute care and LTC settings are counted as ambulatory.

The hardship exemption can be applied if more than half of a physician’s encounters are in the SNF and those settings do not provide or support EHR technology that meets meaningful use criteria. In these situations, a physician cannot utilize their own EHR. The bottom line for SNF providers is that the SNF’s record system must be utilized whether by EHR or paper; if the SNF uses a paper-based record system, the physician would be exempt. For assisted living communities, since they are not required to maintain records, the physician would be required to use his or her own records system and, as such, could not be exempt simply because the assisted living facility does not have its own EHR.

There are also penalties for failing to actively participate in the Physician Quality Reporting System (PQRS). PQRS is a reporting program that uses a combination of incentive payments and payment adjustments to promote reporting of quality information by eligible professionals.¹⁴ CMS describes the program as providing incentive payment to practices that satisfactorily report data on quality measures. Eligible professionals who do not satisfactorily report data on quality measures for covered professional services are subject to a payment adjustment under PQRS beginning in 2015. Specifically, those penalties will result in a payment adjustment in 2015 of 1.5% of those providers’ total Medicare payments. For 2016 and subsequent years, the payment adjustment is 2.0%.¹⁵ These two penalties mean that an LTC provider who fails to deliver on their PQRS and EHR requirements would see a 2.5% reduction in their total 2015 Medicare payments; increasing to 3.0% in 2016.

For example, an LTC provider with $225,000 in Medicare payments would see a reduction of $5,625 in 2015 and $6,750 in 2016. It is important to note that while this number is deducted from total Medicare payments, it ultimately comes out of the physician’s salary. In this example, an LTC provider previously collecting $225,000 in Medicare payments who has expenses of $50,000 for malpractice, billing, and other operating expenses, will take home less than $170,000 compared with $175,000. Avoiding these penalties will require LTC providers to submit the required documentation to CMS in a timely and accurate manner.

Medication Management

Focusing on the delivery of accountable outcomes is critical, but there are several changes occurring in the area of medication management that may stand in direct opposition to delivery of quality care in SNFs. These issues involve the management of medications for hospice residents, residents in need of pain medications, and the use of biologics, each of which is explained below. Developing an efficient and effective process to manage each one of these issues will help SNFs to assure optimum outcomes for residents and limit the facility’s financial and legal liability. This can be best accomplished with the assistance of the institutional pharmacy provider and consultant pharmacist.

Hospice Pharmacy Coverage

Providers should be aware of the limits that the CMS is placing on Part D coverage for analgesics, antinauseants, laxatives, and antianxiety drugs in hospice care. In July 2014, the CMS issued revised guidance stating that they expect Medicare Part D sponsors to use hospice prior authorization on four categories of drugs identified as nearly always covered under the hospice benefit.¹⁶ The categories of drugs that will require hospice prior authorizations are analgesics, antiemetics, laxatives, and antianxiety drugs. Prior authorization requirements on other categories of drugs will no longer be required from Part D sponsors as directed in previous guidance released in March, which outlined hospice pharmacy coverage as follows¹⁷:

As you may be aware hospice is responsible through their payment under Medicare Part A for covering all drugs or biologicals for the palliation and management of the terminal and related conditions. Drugs and biologics covered under the Medicare Part A per-diem payment to a hospice program, therefore, are excluded from coverage under Part D. However, the practice had been that Medicare Part D covered those medications not covered by hospice.

In the the guidance above, CMS was making it extremely difficult for there to be coverage under Medicare Part D for hospice beneficiaries. Although the revised guidance limits access to four categories, this is an improvement from the previous guidance that forced prior authorization on all Part D drugs for hospice patients. For prescription drugs to be covered under Part D when the enrollee has elected hospice, the drug must be for treatment of a condition that is completely unrelated to the terminal illness or related conditions; in other words, the drug is unrelated to the terminal prognosis of the individual. CMS has stated that they expect drugs covered under Part D for hospice beneficiaries to be unusual and exceptional circumstances. In fact, CMS specifically states that Part D plans should place beneficiary-level prior authorization requirements on all drugs for beneficiaries who have elected hospice to determine whether the drugs are coverable under Part D.

This means that all analgesics, antinauseants, laxatives, and antianxiety drug orders for hospice residents will be automatically denied by their Part D plan. The impact of this guidance on LTC hospice residents will mean that obtaining needed analgesics, antinauseants, laxatives, and antianxiety drugs could result in delays as well as the resident being financially responsible for the cost of the medication. Of course, it could also mean that the facility may be responsible for failing to prevent an untimely delay in the execution of a prescriber’s order in the nursing home setting. LTC facilities would be best served in developing their own policy and procedures for dealing with accessing medications for all hospice residents.

Increasingly Painful Pain Management

In August 2014, the Drug Enforcement Administration issued a final rule in the Federal Register to reschedule hydrocodone combination products from schedule III to schedule II of the Controlled Substances Act.¹⁸ This rule went into effect on October 6, 2014. The action is expected to dramatically increase the restrictions on prescribing and dispensing practices for hydrocodone combination products and could significantly increase issues already encountered by LTC providers when ordering opioids and other schedule II controlled substances. That process requires, in most situations, a signed prescription by a physician prior to the pain medication being dispensed. The significance of this on SNF resident pain management was highlighted several years ago in front of the US Senate Special Committee on Aging in a session titled The War on Drugs Meets the War on Pain: Nursing Home Patients Caught in the Crossfire.¹⁹ As senator and committee chairman Herb Kohl said in the opening statement of the session, “It’s safe to say that most laws are created to prevent suffering. In the case of the US Drug Enforcement Administration’s recent crackdown of nursing homes, it appears that the law exacerbates it. The hours it may take for a nursing home to fully comply with DEA regulations can feel like an eternity to an elderly nursing home resident who’s waiting for relief from excruciating pain.” To alleviate this pain, LTC providers will need to develop efficient and effective processes to assure the timely dispensing of all schedule II controlled substances to residents in need of pain relief.

Use of Biologics in Long-Term Care

Although there are no regulatory changes related to the use of biologics in LTC, this category of medications is becoming increasingly difficult to access in the LTC setting. Biologics often require unique handling, the use of specially trained providers, and often cost many thousands of dollars, and LTC facilities are finding it increasingly difficult to manage these medications for a growing number of residents. While specialty pharmacy providers can assist in this process, they cannot overcome the financial mismatch between Medicare Part A subacute reimbursement and the cost of these medications. In most cases, this will leave nursing homes in the difficult position of refusing care or taking a substantial loss, unless an effective process for managing these increasingly common treatments is developed.

Conclusion

Success for LTC providers in the days ahead will depend on a clear understanding and execution of the why, what, when, who, and how. The why is based on an understanding of why CMS and other payers are making changes in reimbursement and accountable outcomes. This basis is critical to planning one’s own strategy for success. Based on the why, one can develop a specific offering of services—core services—for which the facility is a recognized expert; this is the what.

Then comes the when and who: the when requires an understanding of one’s own market such that it can be determined when to change from a volume-based fee-for-service system to one focused on delivering on quality outcomes. In addition to the when is the matter of who within one’s market the facility will seek to form partnerships. The when and who will differ greatly from market to market based on maturity, competition, and local network of payers and providers.

Last is the how: how will your LTC facility deliver on the outcomes for which your facility will be held accountable? There are many resources available to help you answer this question; for example, the quality improvement program INTERACT, your facility’s consultant pharmacist, AMDA–The Society for Post-Acute and Long-Term Care Medicine, and the American Geriatrics Society. In the end, future success will be based on knowing and executing a plan based on the above five domains. LTC providers who understand these issues will not only survive, but will also be highly sought out as successful LTC partners.

References

1.     Bundled Payments for Care Improvement initiative: general information. Centers for Medicare & Medicaid Services website. https://innovation.cms.gov/initiatives/bundled-payments. Accessed October 8, 2014.

2.     Delisle DR. Big things come in bundled packages: implications of bundled payment systems in health care reimbursement reform. Am J Med Qual. 2013;28(4):339-344. 

3.     O’Byrne TJ, Shah ND, Wood D, et al. Episode-based payment: evaluating the impact on chronic conditions. Medicare Medicaid Res Rev. 2013;3(3).

4.     Chandra A, Dalton MA, Holmes J. Large increases in spending on postacute care in Medicare point to the potential for cost savings in these settings. Health Aff (Millwood). 2013;32(5):864-872.

5.     Fact sheets: bundled payments for care improvement initiative fact sheet [news release]. Baltimore, MD: Centers for Medicare & Medicaid Services; January 30, 2014.  www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2014-Fact-sheets-items/2014-01-30-2.html. Accessed October 15, 2014.

6.     Changes in ACO participants and ACO providers/suppliers during the agreement period. Centers for Medicare & Medicaid website. Updated August 27, 2014. Accessed October 8, 2014.

7.     Bilimoria NM. ACOs and long-term care: it’s all about readmissions. Readmissions News. 2013;2(2):1,5,6. www.setma.com/In-The-News/pdfs/Readmissions-News-Feb-2013.pdf. Accessed October 8, 2014.

8.     Centers for Medicare & Medicaid Services. Medicaid managed care enrollment report: summary statistics as of July 1, 2011. www.medicaid.gov. Accessed October 15, 2014.

9.     Federal coordinated health care office. Centers for Medicare & Medicaid website. www.cms.gov/About-CMS/Agency-Information/CMSLeadership/Office_FCHCO.html. Updated August 1, 2014. Accessed October 15, 2014.

10.   Nursing home value-based purchasing demonstration. Centers for Medicare & Medicaid Services website. Accessed October 15, 2014.

11.   Evaluation of the Nursing Home Value-Based Purchasing Demonstration: Year 3 and Final Evaluation Report. Washington, DC: L&M Policy Research LLC, 2013. https://innovation.cms.gov/Files/reports/NursingHomeVBP_EvalReport.pdf. Accessed October 15, 2014.

12.   Are there penalties to providers who don’t switch to electronic health records? HealthIT.gov. www.healthit.gov/providers-professionals/faqs/are-there-penalties-providers-who-don%E2%80%99t-switch-electronic-health-record. Updated January 15, 2013. Accessed October 15, 2014.

13.   Eligibility. Centers for Medicare & Medicaid website. www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eligibility.html. Updated May 2012. Accessed October 15, 2014. 

14.   Physician quality reporting system. Centers for Medicare & Medicaid Services website. www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/index.html. Updated June 2014. Accessed October 15, 2014.

15.   Payment adjustment information. Centers for Medicare & Medicaid Services website. www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/Payment-Adjustment-Information.html. Updated September 2014. Accessed October 15, 2014.

16.   Larrick AK, Wilson L. Part D payment for drugs for beneficiaries enrolled in Medicare hospice [memorandum to all Part D plan sponsors and Medicare hospice providers]. Baltimore, MD: Centers for Medicare & Medicaid Services; July 18, 2014. Accessed October 15, 2014.

17.   McCutcheon T, Wilson L. Part D payment for drugs for beneficiaries enrolled in hospice: final 2014 guidance [memorandum to all Part D plan sponsors and Medicare hospice providers]. Baltimore, MD: Centers for Medicare & Medicaid Services; March 10, 2014. www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/Hospice/Downloads/Part-D-Payment-Hospice-Final-2014-Guidance.pdf. Accessed October 15, 2014.

18.   Schedules of controlled substances: rescheduling of hydrocodone combination products from schedule III to schedule II. Federal Register. Published August 22, 2014. https://federalregister.gov/a/2014-19922. Accessed October 15, 2014.

19.    The War on Drugs Meets the War on Pain: Nursing Home Patients Caught in the Crossfire, U.S. Senate Special Committee on Aging, 111th Cong, 2nd Sess (2010) (statement of Herb Kohl, chairman). www.aging.senate.gov/imo/media/doc/3242010.pdf. Accessed October 15, 2014.