Continuing Care Medicare Updates

Medicare Rate Refinements

Effective October 1, 2006, the Centers for Medicare and Medicaid Services (CMS) implemented the following significant changes to the skilled nursing facility Prospective Payment System (PPS), now consisting of 53 RUG groups:

• Full transition to the Core-Based Statistical Area (CBSA) based wage index values (as opposed to the blended MSA/CBSA rates used in FY 2006). Depending on each facility’s geographical location, this could have a significant impact on Medicare reimbursement.
• A full market basket increase of 3.1% (NO adjustment is required to correct previous forecast errors).

CMS indicated they continue to consider potential modifications to the skilled nursing prospective payment system as reported in the previous federal register. However, no significant changes were made as of October 1, 2006.

Provider Tax Program

Congress passed legislation preserving the Provider Tax Program through 2011 at the maximum rate of 5.5% of industry revenue .

Therapy Caps and Exception Process

The Medicare Part B therapy caps exception process was scheduled to end January 1, 2007, but was extended through December 31, 2007. Physical therapy and speech therapy combined has a cap of $1,780 in 2007. In addition, occupational therapy services has a cap of $1,780. This limit applies to services provided in a location other than an outpatient hospital.

2008 Budget Proposal

The Bush Administration released their 2008 budget proposal on February 5, 2007 which included the following changes that directly affect the long term care industry:

• Elimination of the FY 2008 market basket increase for skilled nursing facilities. Including a reduction of the annual update to the market basket minus .65 percent from 2009 through 2012.
• Elimination of all Medicare bad debt reimbursement.
• Assessment of a re-visit fee on Medicare and Medicaid SNFs requiring a follow-up survey.
  Medicare Part A Bad Debts

If a Medicaid or private pay resident pays less than 100% of the Medicare Part A deductible/coinsurance amount, the unpaid deductible/coinsurance can be claimed as a reimbursable Medicare bad debt on the Medicare cost report. In order to be reimbursed for the bad debts, the following may be required to support the claims when Medicare audits the cost report:

• Documentation verifying the facility’s collection process is consistent for all payor types.
• If Medicaid was responsible for the unpaid deductible/coinsurance, RA documentation may be required to support the bad debt.
• If a resident was responsible for the unpaid deductible/coinsurance, documentation showing a good faith effort was made to collect the unpaid funds (at least three bills sent over 180 days, etc.) or a calculation proving the resident was indigent and unable to pay the balance, may be required to support the bad debt.

2007 OIG Workplan

The mission of the Office of Inspector General is to improve the Department of Health and Human Service effectiveness and efficiency by conducting inspections to provide timely and accurate information to decision makers. As in prior years, the 2007 workplan includes several items focused on long term care. There are many ongoing studies included in the workplan. Below are some of the new studies related to long term care:

• Imaging and Laboratory Services in Nursing Homes. Through a sample and utilization review, the OIG will analyze whether imaging and laboratory services provided to Medicare beneficiaries in skilled nursing facilities (SNF) were medically unnecessary or over billed.
• Nursing Home Residents’ Minimum Data Set Assessments and Care Planning. The study will analyze the relationship between nursing home deficiencies and Minimum Data Set Assessments and care planning.
• Submission of Skilled Nursing Facility No-Pay Bills. The OIG will determine whether SNF’s are properly submitting no-pay bills and review their procedures to ensure the bills are submitted. For those not submitted, they will determine how this contributed to inappropriate calculations of Medicare SNF benefit periods and any amount of inappropriate Medicare payments.
• Billing for Medicaid Nursing Home Patients Transferred to Hospitals. Through a review of States’ Medicaid claims data, the OIG will determine if a State erroneously paid the hospital or the skilled nursing facility when a resident was transferred to or from the hospital.

Reduction of Private Pay Residents

• The National Investment Center for the Seniors Housing & Care Industry (NIC) recently reported there has been a significant decrease in the percentage of private pay residents in our nation’s nursing homes.
• According to the NIC, during the third quarter or 2004, 14.2% of all residents were paid primarily through private sources. That percentage has decreased to only 10.8% by the end of the third quarter in 2006.
• This signifies a 24% reduction of private pay nursing home residents over the course of the last two years.

Pressure on Nonprofit Organizations

On June 1, 2006 Sen. Charles Grassley (R-Iowa), Chairman of the Senate Finance Committee sent letters to the IRS calling for increased scrutiny of the tax-exempt nonprofit organizations. His areas of concern for the nonprofits included:

• Pricing, billing and debt collection, use of tax-exempt bond proceeds, payment of excessive compensation, definition and calculation of charity care and community benefit, definition of joint ventures involving tax-exempt hospitals and reporting and transparency with respect to all of these.
• Grassley’s proposal resulted in 63 audits, and over half of those audited either lost their tax-exempt status or are in jeopardy of losing it.
• Nonprofit organizations are strongly encouraged to revisit and adopt stronger governance standards, and to document their community benefit activities that include outreach and education programs that benefit the community.

HFMA Statement 15 – Bad Debts and Charity Care Presentation

Due to the increase in un-reimbursed care, the need to clearly identify proper treatment for the reporting of uncompensated care grows. Confusion in classification between charity care and bad debts along with wide range of accounting treatment has made it difficult to follow proper guidance regarding appropriate reporting practices. The Principles and Practices Board has updated its accounting guidance and produced a statement, HFMA Statement 15, detailing the correct way to measure and report these two components of uncompensated care. The statement concentrates on:

• The criteria for charity care policies
• The valuation, recording, and disclosure of charity care and bad debt
• The classification of receipts relating to charity care
• According to Statement 15, bad debt should really only include costs that result from a resident who has the financial capacity to pay for such healthcare services but is unwilling to settle the claim.
• Charity care includes costs of providing services to residents who meet specific eligibility criteria that demonstrates the inability to pay for healthcare services. Charity care results from an entity’s decision to forego revenue for services provided to low income individuals.
• Statement 15 advises providers to omit bad debt from charity care or “community benefit” classifications. If Medicaid should pay less than the provider’s cost of rendering services, the difference can be disclosed as community benefit, but should not be identified as charity care.
• All types of healthcare providers need to differentiate bad debts from charity care. Separating charity care from bad debt is critical to the disclosure of charity care and community benefit reports.

In recent times, the ability to provide sufficient accurate records to support the amount of “community benefit” has helped nonprofit organizations to defend their rights to be exempt from property taxes. It is likely similar challenges will be made in the future, therefore the proper implementation of charity care policies which capture and report uncompensated care will continue to be important.