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 WAYS & MEANS COMMITTEE HEARING
“CARING FOR AGING AMERICANS”
November 14, 2019

STATEMENT FOR THE RECORD

Statement of Toby S. Edelman
Senior Policy Attorney
Center for Medicare Advocacy
1025 Connecticut Avenue, N.W., Suite 709
Washington, DC  20036
(202) 293-5760

The Center for Medicare Advocacy (Center) is a national, private, non-profit law organization, founded in 1986, that provides education, analysis, advocacy, and legal assistance to assist people nationwide, primarily the elderly and people with disabilities, to obtain necessary health care, therapy, and Medicare.  The Center focuses on the needs of Medicare beneficiaries, people with chronic conditions, and those in need of long-term care and provides training regarding Medicare and health care rights throughout the country.  It advocates on behalf of beneficiaries in administrative and legislative forums, and serves as legal counsel in litigation of importance to Medicare beneficiaries and others seeking health coverage.  These comments are based on our experiences talking with and representing hundreds of Medicare beneficiaries and their families who have been caught in observation status.

Introduction

On October 1, 2019, the Centers for Medicare & Medicaid Services (CMS) implemented a new reimbursement system for skilled nursing facilities (SNFs) that receive payment under Medicare Part A.  The new system, called the Patient-Driven Payment Model (PDPM), replaces the reimbursement system that had been in place for more than twenty years, Resource Utilization Groups (RUGs).

PDPM totally changes the financial incentives for SNFs providing care and services to Medicare beneficiaries.  PDPM’s new financial incentives will reduce, and have already reduced, therapy services for residents; will change, and have already changed, SNFs’ admissions and assessment practices; and will undermine, and have already undermined, long-standing eligibility and coverage criteria that govern care and stays in SNFs.

The Center calls on the Committee to closely monitor PDPM and SNFs’ implementation of the new payment program to ensure that Medicare beneficiaries continue to receive the medically necessary care and services they need in SNFs under Medicare Part A and that the costs of care are not inappropriately shifted from the Medicare program to beneficiaries, their families, and the Medicaid program.

PDPM

The new system, which is intended to be budget-neutral, bases payment on resident characteristics, rather than on services provided.  Under PDPM, SNFs assess residents once, by day five after admission, for their need for each of the three therapy disciplines (physical, occupational, and speech therapy), nursing, and nontherapy ancillaries (NTA) (chiefly drugs).  The daily reimbursement rate for a resident’s care is adjusted downward, based, not on the resident’s actual need, but on an automatic, pre-determined percentage.  PDPM reduces payments after day 15 for physical and occupational therapy, and after day four for NTAs. undermines residents’ right to a Medicare-covered stay of up to 100 days in a benefit period.

The reduction of Medicare payment for therapy services was deliberate.  In the preamble to the final rules, CMS cites its own analysis showing that, under RUGs, SNFs classified residents into the highest (and most highly-paying) RUG categories.[1]  In Fiscal Year 2017, for example, more than 60% of Medicare-covered SNF stays were billed for one of three Ultra-High Rehabilitation categories (out of 66 RUG-IV categories).[2]  CMS cites additional studies by the HHS Office of Inspector General and the Medicare Payment Advisory Commission that similarly criticize the RUG system for encouraging excessive therapy and not paying adequately for non-therapy ancillaries (NTA) (chiefly drugs).[3]

PDPM no longer pays higher rates to SNFs that provide more minutes of therapy to residents, as RUGs did.  As CMS expressly confirms in the preamble, PDPM changes the financial incentives for SNFs so dramatically that SNFs actually receive higher reimbursement under PDPM when they do not provide residents with any therapy at all.[4]  CMS writes, “we project that for residents whose most common therapy level is RU (ultra-high therapy) – the highest therapy level, there would be a reduction in associated payments of 8.4% percent, while payments for residents currently classified as non-rehabilitation would increase by 50.5 percent.”[5]

In addition, CMS notes in the preamble that, under RUGS, more than 99% of therapy was provided on an individual basis and that individual therapy “should be considered the primary therapy mode and standard of care in therapy services provided to SNF residents.”[6]  Nevertheless, PDPM allows up to 25% of therapy services, by discipline, to be provided in group or concurrent settings, rather than individually.[7]  Group and concurrent therapy are considerably less costly for facilities because they allow a single therapist to work with multiple residents at the same time.  CMS confirms that a SNF exceeding the 25% limit on group and concurrent therapy will receive only “a non-fatal warning edit,” – a “reminder” that it is out of compliance[8] – but “no penalty.”[9]

The final PDPM rules include two tables describing the impact of PDPM’s changes on residents[10] and on facilities[11] and summarizing some of the most significant changes in payments under PDPM.  According to CMS, rates are higher under PDPM for residents “who have high NTA costs, receive extensive services, are dually enrolled in Medicare and Medicaid, use IV medication, have ESRD, diabetes, or a wound infection, receive amputation/prosthesis care, and/or have longer prior inpatient stays.”[12]  Facilities receive higher reimbursement if they have “high proportions of non-rehabilitation residents.[13]

These tables lay out a roadmap for facilities, describing which beneficiaries and services will bring the highest reimbursement rates.  Although CMS implemented PDPM less than two months ago, facilities have already responded to PDPM’s financial incentives.

Therapy services

SNFs’ reduction of therapy services was swift, following implementation of PDPM.  As reported by the national therapy associations, thousands of therapists lost their jobs or had their hours reduced or were told to report for work on an “as needed” basis.  Many others were directed to shift their therapy from individual therapy to group or concurrent therapy.

The effects on residents are obvious.  Residents are getting less therapy and, more often than in the past, the therapy they are receiving is provided in a group setting or on a concurrent basis.

The Center for Medicare Advocacy is especially concerned about maintenance therapy under the Jimmo v. Sebelius Settlement.[14]  Jimmo, a nationwide class action, confirms that Medicare coverage is available in SNFs (and also in home health and outpatient therapy services) when medically necessary nursing or therapy services, or both, are needed to prevent or slow a patient’s decline or deterioration (and not solely when a beneficiary is expected to improve).  While SNFs did not fully implement Jimmo under RUGs, they are less likely to implement the Settlement under PDPM.

Admissions and assessment practices

SNFs are also already changing their admissions practices to admit beneficiaries who will bring high reimbursement rates.  Facilities that previously denied admission to beneficiaries who use ventilators, for example, are now actively recruiting ventilator-dependent residents.

An industry analysis of PDPM in its first six weeks confirms that SNFs are “marketing” for ventilators:

Another surprise – we did not expect the Special Care High group to be so well represented on day 1.  Respiratory Therapy generated well-deserved attention, with several high-profile service providers marketing RT’s potential Return on Investment.[15]

In other words, the industry analysis identifies that some SNFs are now interested in providing ventilator services that they had not provided before because of the financial windfall available under PDPM.

Unfortunately, recent information suggests that facilities recruiting beneficiaries who use ventilators may be among the poorest quality facilities in the country.  A one-star facility that is on the “candidate” list for the Special Focus Facility program (meaning that CMS and the state have identified the facility as one of the most poorly-performing facilities in the country) announced, through a press release, that it was now providing ventilator care.  In another state, a local ombudsman reported that residents at a poor quality SNF told her they were being moved to another floor to make room for a new ventilator unit.

A rush of poor quality SNFs to admit people with ventilators is especially troubling.  The New York Times reported in September 2019 that drug-resistant infections are prevalent, and deadly, for residents in nursing facilities who use ventilators because of insufficient nursing staff and poor infection control practices.[16]  The Centers for Medicare & Medicaid Services reports that, each year, infections in nursing facilities are responsible for 150,000 hospitalizations, 388,000 resident deaths, and health care costs between $673 million and $2 billion.[17]

The Center for Medicare Advocacy is also concerned that assessment practices are also likely to change.  PDPM pays more money for residents with a diagnosis of and treatment for depression.  The same industry analysis of PDPM that reported facilities’ new interest in respiratory therapy advises facilities that depression may be worth $30-$40 per day in additional payments under PDPM.[18]

Eligibility and coverage criteria

Medicare beneficiaries are eligible for Medicare coverage in a SNF if they need therapy services five day a week.[19]  Medicare may cover a stay in a SNF for up to 100 days in a benefit period.[20]  These eligibility and coverage criteria have not changed.

Nevertheless, PDPM’s explicit reduction of payment for stays exceeding 15 days and for therapy services erodes and undermines beneficiaries’ ability to get their stays in SNFs covered by Medicare.

Additional effects

SNFs’ reducing residents’ lengths of stay in SNFs, in response to PDPM’s financial incentives, is likely to lead to additional troubling consequences.  Shortened Medicare-covered stays may mean premature ending of Medicare coverage in the SNF.  What will beneficiaries do if they continue to need care?  Residents’ care and therapy needs did not change when PDPM changed facilities’ reimbursement incentives.

Some residents will remain in their SNF, paying out-of-pocket for their stays as private-pay residents.  With less Medicare coverage and the need to use private resources to pay for their SNF stay, beneficiaries will spend down more quickly to Medicaid eligibility.

Other residents without private resources of their own and their families will likely leave their SNF too soon, before they are able to return successfully to their homes.  Some of them will inevitably be rehospitalized.

Conclusion

Medicare reimbursement policy, as implemented by the profit-based nursing home industry, is eroding and undermining Medicare eligibility and coverage.  Congress needs to ensure that Medicare beneficiaries and their families are protected.

Nov. 25, 2019

___________

[1] 83 Fed. Reg. 39162, 39183-39184 (Aug. 8, 2018).
[2] 83 Fed. Reg. 39162, 39194 (Aug. 8, 2018).
[3] 83 Fed. Reg. 39162, 39184-39185 (Aug. 8, 2018).
[4] See Table 37, PDPM Impact Analysis, Resident-Level, at 83 Fed. Reg. 39162, 39257-39259 (Aug. 8, 2018).
[5] 83 Fed. Reg. 39162, 39257 (Aug. 8, 2018).
[6] 83 Fed. Reg. 39162, 39238 (Aug. 8, 2018).
[7] 83 Fed. Reg. 39162, 39237-39243 (Aug. 8, 2018).
[8] 83 Fed. Reg. 39162, 39239 (Aug. 8, 2018).
[9] 83 Fed. Reg. 39162, 39250 (Aug. 8, 2018).
[10] 83 Fed. Reg. 39162, 39257-39259 (Table 37) (Aug. 8, 2018).
[11] 83 Fed. Reg. 39162, 39260-39261 (Table 38) (Aug. 8, 2018).
[12] 83 Fed. Reg. 39162, 39257 (Aug. 8, 2018).
[13] 83 Fed. Reg. 39162, 39259 (Aug. 8, 2018).
[14] See http://www.medicareadvocacy.org/?s=Jimmo&op.x=0&op.y=0.
[15] Zimmet Healthcare Services Group, LLC, CORE Analytics, PDPM Reimbursement Analysis: October 2019 Medicare Claims; Financial Impact, Observations, Rate Measures & Comparative Integrity, page 9 (Nov. 18, 2019), https://www.zcoreanalytics.com/wp-content/uploads/2019/11/PDPM-Reimbursement-Analysis-2019.pdf.
[16] “Matt Richtel, Andrew Jacobs, “Nursing Homes Are a Breeding Ground for a Fatal Fungus,” (Sep. 11, 2019), https://www.nytimes.com/2019/09/11/health/nursing-homes-fungus.html?searchResultPosition=1.
[17] 81 Fed. Reg. 68688, 68808 (Oct. 4, 2016) (Final rule), 84 Fed. Reg. 34737, 34746 (Jul. 18, 2019) (Proposed rule) (omitting hospitalization data).
[18] Zimmet Healthcare Services Group, LLC, CORE Analytics, PDPM Reimbursement Analysis: October 2019 Medicare Claims; Financial Impact, Observations, Rate Measures & Comparative Integrity, page 9 (Nov. 18, 2019), https://www.zcoreanalytics.com/wp-content/uploads/2019/11/PDPM-Reimbursement-Analysis-2019.pdf.
[19] 42 C.F.R. §409.34(a)(2).
[20] 42 U.S.C. §1395d(a)(2)(A).

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