Washington Update: Monday, May 8, 2023
AHA Convenes Post-Acute Council for first in-person meeting since COVID.
The AHA’s Post-Acute Care Steering Committee met in Chicago last week. This was the first in- person meeting of this group since before the COVID-19 global pandemic. Chris Carey from the Select Medical Washington office attended the meeting and summarized the discussions:
AHA’s Post-Acute group consists of the nation’s best post-acute players.
The AHA Post-Acute Care Steering Committee is AHA’s senior group that coordinates IRF, LTCH, SNF and HHA policy. It is composed of representatives of AHA’s largest and most prestigious post-acute members, including Select Medical, Encompass Health, Scion Health, Good Samaritan Society, LHC Group, LifePoint Health, ChristianaCare, Community Hospital Corporation, MedStar Health, Post-Acute Medical, Spaulding Rehabilitation and the Shirley Ryan AbilityLab. It also includes representatives of leading hospital systems, such as Ascension Health and the Cleveland Clinic.
Chicago’s Jim Prister chairs the AHA Post-Acute committee.
The council is chaired by Jim Prister, the CEO of RML Specialty Hospital, a leading LTCH with two locations in the Chicago area. RML is part of the Advocate Health System, the largest health system in Illinois. Jim is a long-time LTCH community leader. Throughout the meeting he stressed how damaging the proposed high-cost outlier (HCO) change would be to the nation’s LTCH community.
CMS policymakers presented on recent FY2024 Regulations
CMS staff provided the AHA members an overview of the recently published proposed FY2024 rules. CMS discussed the LTCH high-cost outlier (HCO) proposals and argued they have little flexibility in setting HCO payment policy as the statute requires CMS to use 7.975% of total LTCH payments for the HCO pool. The LTCH community argues that CMS has great flexibility in phasing-in such changes. Jim Prister and others told CMS that, if the HCO threshold is not adjusted, many LTCHs will likely close – especially with the end of the pandemic-era policy waivers also ending this month.
The AHA reported that reducing the HCO threshold is a top advocacy priority, and that they have hired Greg Watson to double-check CMS’ methodology in developing the FY2024 HCO threshold projections, and to identify potential methodological or data changes that would mitigate the increase in the threshold. Concerns were also expressed about the failure of market- basket increases to keep up with inflation in recent years, and the lack of any remedy when CMS’ forecasted market-basket adjustments are later proven to be too low, compared to actual cost increases.
AHA President Rick Pollack presented to AHA’s Post-Acute members.
To stress the importance of post-acute providers, AHA President Rick Pollack attended the meeting and spoke. He emphasizing the continuing financial struggles facing most hospitals and post-acute providers due to the pandemic and cost inflation. Rick also underscored the looming health workforce crisis, citing a recent study saying 87% of nurses have indicated that they are contemplating retirement within the next three years.
Another challenge: Discharging patients in a timely manner
AHA’s Joanna Hiatt Kim (VP, Payment Policy) discussed the challenges many acute care hospitals are having discharging patients in a timely manner. She reported that the AHA is exploring the potential of asking Congress for, add-on, “boarding” payments from Medicare in some instances.
AHA Analysis: Healthcare providers face steep rising costs due to clinical labor shortage.
AHA commissioned consulting firm KaufmanHall to look at the national operating environment. The data reveal several general trends for all post-acute providers, including system-wide labor shortages, ongoing increases in labor costs, still-recovering patient volumes from pre-pandemic levels, and a more rapid recovery of outpatient volumes as compared to inpatient volumes coming out of the pandemic.
According to KaufmanHall’s dataset, all PAC providers continue to struggle. As compared to 2019, they estimate median operating margins are down (-60%) for SNFs, down (-51%) for home health, down (-52%) for LTCHs, down (-31%) for IRFs, and up 17% for outpatient therapy.
The KaufmanHall presentation was based on a nationwide sample of actual financial data from approximately 15% of all post-acute providers, representing all four PAC venues of care. (While geographically representative, the sample data is almost exclusively from non-profit providers.)
Additional notes from KaufmanHall’s (KF) presentation:
Reported LTCH net operating revenue and patient days are down 13% since 2019, while LTCH ALOS is up 4%. Total reported LTCH expenses are up 7% since 2019, while total expenses per patient day and total labor expenses per patient day up 20%.
IRF net operating revenue is up 23% and total patient days are up 6% since 2019. However, ALOS is down 10%, and total expenses are up 18% from pre-pandemic 2019 levels. According to KF’s data, total labor costs in IRFs is up 23%, and purchased services costs are up an astronomical 500% since 2019. Similarly, total expenses per patient day are up 38%, while labor expense per patient day are up 47% since 2019.
STACH operating margins continue to be depressed and have been down month over month for a year – with overall median operating margins down 32% since 2019. According to KF’s data, STACH total expenses and labor expenses up 17% since 2019, with fewer patients being admitted, but they are sicker and staying longer on average
with STACH ALOS up 6% since 2019. KF says this reflects increasing challenges STACHs have discharging patients to a PAC setting.
SNF volumes (patient days) remain 22% below 2019 levels, while total expenses per patient day are up 29% and labor expenses per patient day are up 42% since 2019.
Lastly, KF noted that the number of hospital sector M&A deals has dropped considerably, but that the average size of the deals that are being done continues to grow.
New/Revised Quality Measures
Staff previewed the AHA’s likely comments on several proposed changes to the quality measures used in Medicare’s post-acute payment systems. While they expect to express continued support for vaccines and for appropriate vaccine-related quality metrics, they have concerns about the proposed use of new Covid-19 vaccine measures that seek to encourage both staff and patient uptake in Covid-19 boosters, and that would be tied to the latest CDC recommendations. They noted the proposed Covid measures have no exceptions (like the flu measure), and that it was likely data reported via the measures would lack consistency and lag significantly behind actual conditions on the ground – and possibly even changes in CDC guidance. They also expressed some concern about the proposed new functional improvement measure for LTCHs, noting that progress on the measure may be misinterpreted and viewed as lacking simply due to the nature of (typically quite ill) LTCH patients.
SNF Minimum Staffing Rule Still Expected
It was also reported that CMS continues to signal that it will be issuing new minimum staffing requirements for skilled nursing facilities – likely later this spring. Council members representing SNF providers expressed ongoing concerns about the potential impact of the rule – noting it will only compound what in many cases are already acute problems recruiting and retaining sufficient staff.
Important New Provisions in MA Policy Rule
AHA staff reviewed several, important new regulatory provisions included in the recently finalized Medicare Advantage (MA) final policy rule, including new provisions clarifying that MA plan may not use coverage criteria (including third-party administered coverage requirements) that conflict with the coverage criteria specified in law for the Traditional Medicare fee-for-service program. Similarly, the new rule requires greater transparency into MA plans utilization management policies and will require MA plan claim reviewers to have expertise in the clinical areas involved in a claim. AHA emphasized that the real benefit of the rule remains to be seen – but that they will be monitoring the rule’s implementation and CMS’ enforcement of the new requirements in the coming months. To this end, they invited all members to continue sharing any concerns or examples of bad plan behavior.