Over 440,000,000 views on Youtube?! The Scorpions’ Wind of Change music video (below) has been viewed a lot. It’s probably not the best anthem for the post-acute world, but the title sure seems to fit. If there’s anything that’s constant for skilled nursing providers, it’s that things are always changing.
BPCI/CJR Loses Steam
Last year, I wrote about how the best operators are able to adjust or “change tack” to shifting winds/regulations. (mixing boating metaphors)
I also wrote specifically about one such shift that was causing a lot of concern for providers (and investors), Bundled Payments.
In recent days, we’ve seen the wind change direction again. And, while nobody should be surprised, I think most of us are surprised.
- CMS is Overhauling the Medicare Fraud Audit Process
- CMS is canceling the expansion of CJR
- CMS is eliminating the Mandatory nature of CJR
- CMS is reducing the number of CJR markets from 67 to 34
It’s critical that operators who are currently being affected by the CJR program to get in touch with their hospitals to discuss what, if any, impact this will have on how the hospital is operating or is preparing to operate vis-a-vis these patients.
Skilled Nursing groups are applauding the news. IF this gives providers more time to get their BPCI act together, then that’s great. But, the point is … they still need to act like BPCI is coming. BPCI behavior that better health plans and hospitals are looking for is:
- Proactive communication around readmission and outcomes
- Integration of hospital’s modalities into the SNF
- Strong reporting systems
- Proactive cost containment (shortening length of stay if possible)
- Partnering with the best home health agencies who understand BPCI as well
Investors are looking for operators who are not just fluent in BPCI but has already (or is actively) implemented those BPCI Behaviors.
RUG IV to RCS1
In my opinion, a much bigger wind of change, if implemented on October 1, 2018 as targeted, is the shift from RUG IV to RCS1. I attended a conference on that last week by Zimmet Healthcare Services Group in Atlantic City, NJ.
According to Mark Zimmet (https://www.zhealthcare.com/), the announced pre-rule for RCS by CMS (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) earlier this year will dramatically change the way SNFs are operated — specifically replacing the REHAB/Minutes economic engine of operations with a Patient Characteristics economic engine. Now, Medicare A reimbursement is driven mostly my rehab minutes (type and quantity). In the proposed RCS 1 model, rehab minutes are completely excluded from the calculation. There is a PT/OT and an ST component in the formula. But, minutes are NOT part of it. In other words, under RCS 1, the facility will be paid the same amount for Patient John Doe whether the SNF provides 10 minutes of therapy or 1,000 minutes. Panelists predict therapy spend will shrink AT LEAST 50%.
The driver of reimbursement shifts away from rehab minutes to patient clinical characteristics. RCS starts with WHY is the patient here. Which of the 10 categories?
- Major Joint or Spinal
- Acute Neurologic
- Non-surgical orthopedic/Musculoskeletal
- Orthopedic Surgery (Except Major Joint)
- Acute Infections
- Cardiovascular & Coagulations
- Medical Management
Then, it looks at the functional and cognitive scores, co-morbidities, non-therapy ancillaries.
- The change isn’t final and may very well change before it’s implemented.
- There’s time to recalibrate your structure and competency to hit the ground running if/when the change is made.
- I would be talking now with your rehab provider about this. The message from this conference is that Rehab Co’s in skilled nursing are Dead Man Walking.
- Stay up to date on the CMS conference calls, updates.
If RCS 1 is implemented as structured today, I would expect the use of therapy services to change and be reduced. In a word, I believe therapy will be more EFFICIENT. Unfortunately, CMS now incentivizes inefficiency since providers are paid for the minutes they take to deliver therapy. Does this get abused? Sadly, yes. Do we sometimes see a patient who needs rest to recover from illness get dragged into the rehab gym to get our minutes in? Sadly, yes. I’m totally open to viewpoints on this … Is this better for the patient or worse? Can you see operators cutting the newly labeled “cost center” of rehab and giving less than what the patient could benefit by since Medicare isn’t paying for minutes anymore? I can. But, I can also see operators providing a lot of therapy (but still less than before) under RCS 1 since they’re ultimately judged based on outcomes. Almost all admissions to SNFs now are for short-term rehab to get strong enough to go home. If you cut rehab to save money, you might benefit in the very short-run, but after a couple months, your readmission rate and patient satisfaction and length of stay will suffer. I can’t imagine a world without Rehab being an essential part skilled nursing, RCS 1 or not.
So, look at Nursing under the RUGs system. Nursing minutes/hours are not currently reimbursed — like rehab won’t be in the future. The way operators staff their nursing departments, I believe, will be a predictor of how they staff their rehab departments under RCS 1. Some Medicaid shops run as lean as possible b/c there simply isn’t enough revenue to support more. Yet, short-term rehab shops, staff way higher than state minimums because quality care/outcomes/readmission rates/etc. demand it. I believe that will be the case for Rehab.
CMS is infamous for unintended consequences. They consistently underestimate operators ability to quickly adapt to the moving goal posts. So, while CMS predicts this will be budget neutral, I wouldn’t be surprised if it resulted in an increase in Medicare spend (and bottom line performance for SNFs), resulting in quick adjustments like we saw in 2011 and 2012.
Here are 3 videos I took of the presenter going through the calculator that shows the new formula at work (note: no input in the new calculator for minutes):