CMS released the final rule for fiscal year 2010 payment updates to skilled nursing facilities (SNF) on Friday, leaving many industry leaders concerned about the future of long-term care.
A major component of the final rule is the recalibration of the case-mix indexes (CMI), which will reduce Medicare payments to SNFs by $1.05 billion, or 3.3 percent. The CMI recalibration will correct a FY 2006 projection error, which resulted in an unexpected increase in Medicare payments, and will better align reimbursement with the resources used to care for a resident.
Fortunately, this significant cut in Medicare payments will be partially offset by the SNF market basket update for FY 2010, which will result in a $690 million, or 2.2 percent, increase. Thanks to the market basket update, the total reduction in Medicare payment to SNFs in FY 2010 will be $360 million, or 1.1 percent lower than FY 2009 payments.
"Although the payment cuts included in the proposed rule are significant and come at a time when many SNFs are already struggling with tight budgets, CMS believes that the cuts should not affect the quality of care provided," says Diane Brown, a regulatory specialist and Boot Camp instructor at HCPro.
Another important component of the final rule is the finalization of the Resource Utilization Group, Version Four (RUG-IV) for implementation in FY 2011. In the final rule, CMS addressed many comments they received about RUG-IV and provided responses and explanations. Ultimately, CMS plans to implement RUG-IV as it appeared in the proposed rule, with a few minor modifications, such as:
Fever with feeding tube will be added to the Special Care High category
CMS clarified that dehydration has been deleted as a qualifier in any category, including the Special Care and Clinically Complex categories
Respiratory failure in combination with oxygen therapy while a SNF resident will be added to the Special Care Low category
Oxygen therapy while a SNF resident will be moved to the Clinically Complex category
A patient will also qualify in the Special Care Low category if one of the following is present along with two or more skin treatments: two or more venous/arterial ulcers; and one Stage 2 pressure ulcer and one venous/arterial ulcer
"The simultaneous implementation of the MDS 3.0 and RUG-IV will be a major challenge for facilities, but CMS is giving us plenty of time to prepare," Brown says. "To ensure that the transition is as smooth and successful as possible, SNFs should really begin training their staff and adapting their facility processes now."
To view the SNF final rule for FY 2010, visit the Resources page on MDSCentral.
Valinda Rutledge of Greenville, SC, has been named president and CEO of CaroMont Health. She replaces Wayne F. Shovelin, who in February announced his plans to retire. The transition is anticipated in early fall. Since 2003, Rutledge has been CEO of Bon Secours St. Francis Health System, a two-hospital system based in Greenville, and part of the Bon Secours Health System in Marriottsville, MD. She has held that position since 2003. Before that, she was president of St. Anthony Hospital in Oklahoma City, administrator of Brandon Regional Medical Center in Brandon, FL, and vice president-operations for St. Joseph Mercy Hospital in Ann Arbor, MI.
Broward Health North Broward Medical Center has appointed Cheryl Tombo Director of its Neurological Institute. Tombo will oversee the operations of the Memory Disorder Center, Dizziness and Balance Center, Sleep Disorder Center, Neurodiagnostic Lab, Joint Commission Certified Primary Stroke Center, and Joint Replacement Center. Tombo, a Certified Neuroscience RN, has spent the past 30 years working and teaching in the areas of neurological and neurosurgical nursing.
Thomas E. Sibert, MD, has been selected as the new president for Wake Forest University Physicians and CMO for Wake Forest University Baptist Medical Center, a new position created as part of the reorganization that began two years ago. Sibert will begin work Sept. 1. He will report directly to John D. McConnell, MD, CEO of Wake Forest University Baptist Medical Center. Sibert replaces Raymond C. Roy, MD, who stepped down earlier this month as interim WFUP president. Sibert is returning to North Carolina from the University of California-Los Angeles, where he has served as associate vice chancellor and president of the Faculty Practice Group since 2004.
Tenet Healthcare Corp. has named Deborah C. Keel CEO for North Fulton Hospital, a 202-bed hospital located in Roswell, GA, effective Sept. 1. Keel most recently served as CEO for Fountain Valley Regional Hospital and Medical Center, a 400-bed hospital located in Fountain Valley, CA. Before joining Fountain Valley, Keel served as vice president of operations for Tenet's California Region. She also served as chief executive officer at Kenner Regional Medical Center in Kenner, LA.
The ProMedica Health System board has named Randy Oostra, current president and COO, as the new CEO. He replaces Alan W. Brass, who announced his retirement last November. PHS operates 71 corporations, 283 facilities, and 10 hospitals in northwest Ohio and southeast Michigan. Oostra was named president and COO in 2006. He joined PHS in 1997.
Other than cops, prison guards, bounty hunters, soldiers, pro wrestlers, and emergency nurses, there aren't many occupations where the expectation of violence and abuse comes with the job.
A disturbing online survey released last week of 3,465 emergency nurses found that more than half of them say they've been "spit on," "hit," "pushed or shoved," "scratched," and "kicked" while on the job. What's even more disturbing, the nurses say, is the culture of acceptance for violent behavior in the ED that exists nowhere else in the hospital, or in decent society.
"If you went to a restaurant and said you were angry about the wait and punched your waitress, you'd go to jail," says Bill Briggs, RN, president of the Emergency Nurses Association. "Why in hospitals should you be told, 'Well, he was frustrated. It's OK'? It's not OK."
One in four of the emergency nurses surveyed for the ENA's Violence Against Nurses Working in U.S. Emergency Departments has been assaulted more than 20 times in the past three years, and one in five nurses has been verbally abused more than 200 times during the same period.
Briggs tells HealthLeaders Media that ED assaults remain "way under-reported. They're discouraged from reporting because of staff feeling like it will look like a weakness, or the hospital administration or the local police don't want to deal with it as a crime. People who are concerned about customer perceptions and patient satisfaction don't want to deal with it," he says.
As troubling as those responses are, it's a wonder there isn't more violence in the ED. All the ingredients are in place for violence and abuse by a small percentage of the volumes of people that use the ED. Injured, sick people and their relatives enter an intimidating ED environment afraid, confused, and in pain. Some are drunk, drugged out, mentally ill, or all three. Often they face long waits for treatment. Of course, the vast majority of emergency patients are "respectful of the process," Briggs says. Given the increasingly important and growing role that the ED is playing as a healthcare entry point for many Americans, however, hospitals must adopt a Zero Tolerance policy toward ED violence.
Briggs says there are signs that that is already happening among ED staff, where the old school attitude that assault and mayhem are "part of the job" is giving way to a new understanding of the seriousness of the threat. "Younger nurses who are coming from a different generation are saying 'no.' They want balance in their lives. They want to do a good job, but they also want to be safe and go home to their families and not worry about the environment they're working in," he says.
Briggs says there are a number of proactive steps that hospitals can take to provide a secure workplace for ED staff, starting with creating a culture of acceptance for reporting violence. He also recommends that hospitals adopt OSHA guidelines for dealing with hospital workplace violence.
No hospital would tolerate verbal or physical abuse or assault in the ICU, maternity, oncology, or in the gift shop. For whatever reason, the ED is held to a lower standard. This needs to change.
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Hospital stocks are on the rise after Tenet Healthcare and Health Management Associates both raised their 2009 outlook. Tenet and HMA shares have risen 6.4% and 7%, respectively. Tenet Healthcare experienced a 4.5% increase in revenues in 2009's second quarter, compared to the same period in 2008. President and CEO Trevor Fetter attributes the positive results to strong growth in outpatient volumes and solid pricing gains. Still, the company is projecting a $15 million loss for the quarter. HMA says it earned $32.6 million in the second quarter.
I haven't heard of too many hospital systems reaching a $100 million last year. In fact, 2008 was the third year in a row that San Diego-based Scripps Health surpassed the $100 million marker in operating income. That's after investing more than $287 million in community benefit programs.
During a time of unprecedented chaos in the economy and the capital markets, Scripps Health continues to see returns following an overhaul that began in 2001.
When Richard Rothberger, corporate executive vice president and CFO, arrived in August that year, the nonprofit system, with five hospitals (and now 19 outpatient centers), was $15 million in the red and without a credit rating. Rothberger, who was recently named CFO of the year in the large not-for-profit category by San Diego Business Journal, shared with me some of the changes he has made, plans for a $2 billion expansion, and how he's addressing big challenges such as Medicaid and Medicare cuts.
HealthLeaders: What was one key thing you did on day one to put a turnaround plan in motion?
Rothberger: We assessed the entire organization and began to create a list of priorities. At the time, Scripps had hundreds of initiatives and everybody was pretty fractionalized. So I sat down with my boss, our CEO Chris Van Gorder, and said I could see doing a maximum of 10 things and the rest we would come back to later.
HealthLeaders: How did you restructure the finance department?
Rothberger: I reassigned key folks who were very good at what they did, but would be better suited for other key roles. For example, the corporate VP of financial operations was appointed VP of supply chain and we began insourcing our contracting and supply chain folks, and reassessing all of our contracts. I also shifted around the site-based VPs of financial operations and put the stronger ones into more complex roles. I had about 20 direct reports when I got here and over eight years I have moved it down to nine. I also hired new auditors, a new financial advisor, a new investment banker and a new investment consultant because I felt like the individuals and groups that we had prior might have been biased and not as focused on the change that needed to occur.
HealthLeaders: How have you been able to sustain profitability year after year, especially in the past two years where it has been so tough for many hospitals?
Rothberger: We have set up the leadership structure so that the chief executives work for Chris (Van Gorder) and the VPs of finance operations work for me. The chief executives spend 70 percent of their time with the finance operation folks. We have achieved quite a bit from that. Also, I started monthly operating reviews for each business unit, which has made a big difference because rain or shine, we stay focused. We have also established a single signature for all of our managed care contracts for both the clinic and the hospitals, where previously they had been done separately. We cancelled our commercially capitated contracts, and we converted to fee-for-service to both improve the contract yield and reduce our risk of exposure. We also merged one of our smaller hospitals with a larger and stronger hospital, putting them both under one license. We were able to get more federal and state monies and reduce costs by putting in one administrator over both hospitals.
HealthLeaders: How has your relationship with the investment community changed?
Rothberger: When I arrived, Scripps was not rated and had very little external communications. I had a lot of skeptics on Wall Street and out in the field questioning where we were with regard to financials. For eight years in a row we ended the fiscal year ahead of budget projections, and additionally we have shared with the investment community more information and in a more transparent way. I err on the side of sharing information and so does my boss. We are both out there with the good and the bad. We have built credibility with the investment community so that they know we are focused on operating earnings and that in order to achieve borrowing capacity we need to keep that up.
HealthLeaders: You have embarked on a large expansion plan. How is that going?
Rothberger: We're on course for a projected 10-year, $2 billion capital plan to expand our facilities to meet growing patient demand. We were going to go to market this year, but put it off because of the economy. I took out a line of credit to get us over the hump in case we got stuck, but we didn't and I did not have to draw on the line. However, we had to refinance all of the auction rate securities when that market went haywire in 2008. We had budgeted $260 million to spend in 2009 on building expansion, but we will only spend about $150 million. As the market comes back we will start to accelerate if it is affordable.
HealthLeaders: I know healthcare reform is a concern for most right now, but what are your biggest worries?
Rothberger: The challenge that we have now is federal and state reimbursement cuts. We are anticipating 2010 federal cuts of about $15 million and the state cuts are still unclear. The budget was just passed and it looks like Medicaid/Medi-Cal eligibility will be reduced. Although we have a contract for rates with the state of California that can't be changed, there could be fewer Medicaid patients coming through the system. Also, with the government threatening to cut back physician compensation through Medicare and now Medicaid, it will become harder and harder to get physicians to come to California, particularly because it is the single lowest paying state for Medicaid.
HealthLeaders: How will you absorb these cuts?
Rothberger: We have a number of areas that we had not addressed in the past that still have significant opportunity. The single biggest one right now is pharmacy. We have changed our group purchasing organization and are now insourcing pharmacy leadership. We are also in the process of automating medical records and we have a document scanning initiative for all of our paper records that will allow us to reduce costs. We have a list of things that if we execute well, should offset the $15 million of reductions from the federal government. But we can't do that year over year, and I am worried that things can change dramatically in Washington. We want to be successful and to be around for the community for a long time. The only way to do it is by sticking to our knitting and making sure we are an employer and provider of choice.
In our last article, we discussed the major categories of businesses that are eligible for healthcare and other contracts that the federal government "sets aside" in order to benefit small business. In this article, we look at examples of how set-asides affect both small and large businesses.
Generally speaking, contracting agencies work closely with the U.S. Small Business Administration ("SBA") to determine whether certain contracts should be "set aside" for small businesses. Federal procurement law actually requires agencies to set aside purchases for small businesses under certain circumstances: "The contracting officer shall (emphasis added) set aside any acquisition over $100,000 for small business participation when there is a reasonable expectation that (1) offers will be obtained from at least two responsible small business concerns...and (2) award will be made at fair market prices." (Federal Acquisition Regulation (FAR), Subpart 19.502-2(b).
For many healthcare providers, this is an enormously powerful--and legitimate--tool to narrow the competitive field and greatly increase the chances of an award, but you need to understand how set-aside decisions generally are made in order to most effectively take advantage of this aspect of federal healthcare contracting.
Despite the requirement to use small businesses when two or more healthcare groups can apparently meet an agency's requirement for healthcare services, an agency may not always follow this "rule of two."
If you are a physician practicing in a small group, believe you can fulfill an agency’s healthcare needs at a fair market price, and you know of at least one other small business that can do the same, you can approach the agency if they have not yet set aside the procurement and try to demonstrate that the "rule of two" applies to the planned acquisition. If the agency still declines to set aside the procurement, you still have options open to you.
For example, the VA recently issued a solicitation for a contractor to develop and operate a primary care clinic in Ohio. Although originally issued for businesses of any size, using information from a publicly accessible federal database, we demonstrated to the agency that there was a reasonable probability that it would receive at least two bids from qualified small business firms. As a result, the agency reconsidered its previous position and set aside the contract for small businesses, eventually leading to award of the contract to the client.
Companies pursuing federal healthcare contracts also need to be on the lookout for other problematic set-aside situations, such as a procurement in which an agency unreasonably excludes large businesses from competing for a healthcare contract, or one in which a contract set aside for small business is actually awarded to a large business. Several remedies are available in such cases. For example, a large business that can meet an agency's needs for a particular procurement can file a protest with the agency or GAO arguing that the decision to set aside a procurement for small business was not warranted.
Such a protest may be called for, for example, where you are a large healthcare business and have solid evidence that an agency could not have had a reasonable expectation of obtaining at least two offers of fair market prices from small businesses. If successful, such a challenge can "open up" the procurement to allow you to compete. Similarly, the law allows for a protest to SBA if you believe that a contract set aside for small business has been awarded to a company that is not, in fact, a small business under federal contracting rules.
Requirements for set-asides in federal contracting can create significant opportunities for all kinds of healthcare providers. Be alert, however, for set-asides that seem unduly restrictive or, conversely, ones that are unrestricted but should be set aside based on facts known to you. Agencies may be willing to voluntarily consider changes to initial contracting strategies based on a review of objective documentation establishing facts that support a decision to either:
Set aside a contract that was previously open to businesses of any size; or
Remove a previous set-aside to allow businesses of any size to bid.
If the agency is unwilling to voluntarily make a change based on the facts as you understand them, federal bid protest regulations preserve your rights to formally challenge the agency's decision. The regulations contain strict and tight deadlines, so prompt action greatly increases your chances of being able to successfully compete for a contract.
