The Current Status of the Long-Term Care Industry

Presented to the 2008 TNhfma Fall Institute

Park Vista, Gatlinburg, TN October 28, 2008

Learning Objectives

Discuss changes affecting Medicare long-term care reimbursement

Discuss the changes in TennCare reimbursement for long-term care providers

Discuss ways to improve reimbursement Discuss the alternatives to institutional care Discuss options for financing care

Changes Affecting Medicare

Changes to the Nursing Home quality measures Change in RUG categories Change in market basket calculation Changes in MDS

Quality Measures

QIO program was established Part B of Title XI of the Social Act and was amended by the Peer Review Act of 1982

The are now in the 9th Scope of Work Mission is to:

..to improve the effectiveness, efficiency, economy, and quality of services delivered to Medicare beneficiaries.

Quality Measures (continued) Requirements of the QIO program:

Improve quality of care Protect the integrity of the Medicare Trust Fund Protect beneficiaries

Address complaints Address provider-issued notices And other QIO responsibilities

Quality Measures (continued) Current proposal for a “Five Star” ratings system.

President Bush wants a system similar to the way hotels and restaurants are rated.

Ratings would be published on CMS website Will encourage providers to improve quality Could be used to tier reimbursement to favor high

quality providers

Change in Market Basket Methodology From inception of SNF PPS have used 1997 data

trended forward using inflation factor For 2008 FFY will use 2004 data Why is this important?

RUG Categories

Increased from 44 to 53 in FFY 2007

New categories deal with increased patient acuity RUX,RUL, RVX, RVL,RHX, RHL, RMX, RML

Look for more changes in the future

MDS 3.0

Currently providers us MDS 2.0 to evaluate patients.

CMS is set to introduce MDS 3.0 Will collect additional data on patient condition

and resource utilization

FFY 09 Payment Changes

Market basket increase of 3.4 % Recalibration of certain payment categories is

delayed 09 Proposed Rule- “changes needed to establish

payment rates that more accurately meet patient needs.” (bureau-o-speak)

What it really means is, “ we botched this in making the refinements budget neutral.”

Changes affecting TennCare

Changes to add-on payments More dependence on Medicare Part D More detailed review of cost reports Schedule H State budget concerns

TennCare Rate Add-onsTennCare Rate Add-ons

• Cost Containment Incentive ( this is Cost Containment Incentive ( this is good)good)

• Sprinkler adjustment (what’s up Sprinkler adjustment (what’s up with this)with this)

• Minimum wage adjustment ( no Minimum wage adjustment ( no longer available)longer available)

• Bed tax pass-through ( hasn’t Bed tax pass-through ( hasn’t changed in years)changed in years)

Medicare Part D

• Previous TennCare Pharmacy program– Seven scripts per month– Advocate lawsuits– Rising cost of prescription drugs

• Federal Prescription Drug plan (MMA)

• TennCare now requires all eligible patients to participate in Medicare Part D

More Detailed Cost Report Review Now require all of the following be filed with cost

report: Working trial balance Depreciation Management contract Leases Detailed analysis of anything “other.”

More Detailed Cost Report Review(continued) Adjustment of free meals “Reasonableness” adjustments Overhead (see Schedule H) Possible future adjustments;

“Excessive” benefits Certain types of benefits Otherwise reasonable expenses Things that the reviewer does not understand

Ways to Improve Reimbursement Careful completion of the MDS Accurate assignment of cost on the cost report Push for a Nursing Home specific wage index Accurate and complete bad debt logs Appropriate charge structure

MDS Completion

Involve an interdisciplinary team Clinical members Financial members

Capture all clinical data about the patient

Make sure all ADL needs are identified

Cost Report assignment

Make sure ancillary charges are captured Assign cost to appropriate cost centers Proper overhead allocations

Assign where overhead departments used Do not assign if no overhead, e.g. Outside pharmacy

Wage Index

SNFs currently use the hospital wage index Rationale is that the nursing home data is not

accurate SNFs do not use the occupational mix portions of

the hospital wage index Wage disparities are not the same

Medicare Bad Debts

Electronic maintenance of logs encouraged by CMS

Complete all required columns Accumulate supporting documentation “as you

go” Apply collection policies consistently Capture non-dual eligibles

Charge Structure

Appropriate routine charge has significant impact on TennCare Level I reimbursement

Allows for a more accurate distribution of cost to various payors

May have a positive bottom line effect Many nursing home providers fail to capture

ancillary charges for TennCare patients.

Alternatives to Traditional Services Home and community based services Assisted living facility Residential housing Adult day care services Facility-based home care and private duty

services

Methods of Financing Care

State budget constraints will limit increases in TennCare

Medicare is eventually curtail “cross subsidization” of TennCare patient cost

More affluent boomers coming into the nursing home age population will be more likely to have long-term care insurance.

Tennessee Long-Term Care Options Plan The legislation is officially titled, “ Long-Term

Care Community Options Act of 2008.” (LTCCOA 08)

Bill’s nickname, “Bubba Caring for Granny Act” Has three key components:

Create consumer-directed options (Friends and Family) Simplified process for access (Single point of entry) “Whole-person” care coordination ????????

What LTCCO 08 Act Addresses Limited access and options

Over reliance on nursing homes More options

Fragmented LTC services and system complexities Opens up Home and Community Based Services Simplifies entry

What LTCCO 08 Act Addresses (continued) Limited available resources

Reduces dependence on costly services Seeks more cost-efficient services providers Work to reduce use of more costly services later Utilize natural support networks (Bubba)

Predicted Outcomes of LTCCOA 08 Existing providers will change their delivery

models Potential for abuse will require specific oversight Patients will have more options The Act will provide more options and if properly

funded will address the real problem, increased demand.

Questions and Contact Information

William C. Matheney FHFMA, CPA, MBA

Matheney Stees & Associates PC

6136 Shallowford Road Ste. 101

Chattanooga, TN 37421

Phone 800-556-1076 ext. 105

Fax 800-556-1075

email bmatheney@matheneystees.com