august 2016 florida's long term … · 2019. 4. 29. · however, cjr participation is...

FLORIDA'S LONG TERMCARE REPORTER

COLE, SCOTT & KISSANE, P.A.

FROM THE FLORIDA OFFICES OF COLE, SCOTT & KISSANE, P.A.

A U G U S T 2 0 1 6W W W. C S K L E G A L . C O M

2 F l o r i d a ’ s L o n g T e r m C a r e L i t i g a t i o n

C S K | A U G U S T 2 0 1 6

Introduction

The Bundled Payments for Care

Improvement initiative is seeking

ways to reduce Medicare and Medic-

aid spending. The Initiative is devel-

oping new Medicare and Medicaid

payment models, one of which is the

Comprehensive Care for Joint Replace-

ment Rule. The Rule is mandatory and

places hospitals in charge of the over-

sight, management, and quality control

of patients who receive hip and joint

replacements. This article will explore

some of the potential impacts the Rule

may have on skilled nursing facilities

and their ability to earn income from

providing physical, occupational, and

speech therapy to patients who receive

hip and joint replacements.

1. Brief overview of the Comprehensive Care for Joint Replacement its pur-pose, and some financial details

A. The Rule — 42 CFR §510 (2016)

The Comprehensive Care for Joint

Replacement (“CJR”) Rule was promul-

gated by the Centers for Medicare &

Medicaid Services (“CMS”), and re-

quires hospitals to regulate, oversee,

and ultimately be held accountable for

the quality and costs of care provided

to Medicare beneficiaries for lower ex-

tremity joint replacement procedures.1

This Rule provides a new payment

model and will change the way hospi-

tals, skilled nursing facilities, and other

medical providers will be paid under

Medicare Part A and B for performing

lower extremity joint replacements.2

Hospitals will receive bundled

payments for episodes of care related

to lower extremity joint replacements

and the bundled payments will be all

the money Medicare will pay on behalf

of the beneficiary for the entire hospi-

tal stay and for 90 days post hospital

discharge.3 The bundled payments will

include outpatient care, skilled nursing

facility care, physical and occupational

therapy, physician services, and any

other care that is provided to patients

who receive a joint replacement from

90 days post hospital discharge.4

This Rule became effective on

January 15, 2016, but the first perfor-

mance model period began on April 1,

2016.5 This new payment model has

been implemented in 67 geographical

areas defined by metropolitan statisti-

cal areas which are defined as urban

areas that have a population of at least

50,000.6

B. Purpose

CMS’ goal is to provide efficient

care for Medicare patients who receive

hip and knee replacements.7 The CMS

believes that this knew payment mod-

el will encourage hospitals, physicians,

and post-acute care providers to col-

laborate together and provide stream-

lined care from the initial hospitaliza-

tion through recovery.8 However, the

Medicare Bundle Payment Initiative — Potential Impact for Skilled Nursing Facilities

by Jeffrey Gionet

3F l o r i d a ’ s L o n g T e r m C a r e L i t i g a t i o n

A U G U S T 2 0 1 6 | C S K

overarching goal is of course — to save

money.9

In 2014 over 400,000 Medicare

patients received a hip or knee re-

placement costing more than $7 bil-

lion for the hospitalizations alone.10

The average amount of money spent

on hip and knee replacements from

surgery to recovery varies among geo-

graphical locations, but ranges from

$16,500 to $33,000.11 According to the

American Hospital Association 37%

of costs associated with joint and hip

replacements take place at post-acute

care.12 Also, post-acute care was the

single largest factor driving geograph-

ic variation in Medicare per-beneficia-

ry spending.13

C. Financial details

The Rule provides a formula as

to how much money a given hospital

will receive for any particular Medicare

beneficiary — this is called the “target

price.”14 If a hospital stays below the

target price then the hospital will re-

ceive a “reconciliation payment.”15 If a

hospital spends more than the target

price, then the hospital will have to

pay back some or all of the money it

spends above the target price.16

How much money a hospital has

to pay back for overages and how

much it can receive in reconciliation

payments is limited.17 In the payment

model’s current and most recent form,

by year 4 of the payment model’s im-

plementation a hospital will receive a

20% bonus of the target price for stay-

ing under the aggregate target price;

conversely, a hospital will have to pay

back 20% of the target price for spend-

ing over the aggregate target price.18

For example, if a hospital treats 10

patients with hip or knee replacements

and the target price is $10,000 for each

patient, for a total of $100,000, and ac-

tual spending across all 10 patients is

$65,000, then the hospital would qual-

ify for a reconciliation payment of 20%

of the aggregate target price equaling

a $20,000 bonus.19

On the other hand, if a hospital

treats 10 patients with hip or knee

replacements and the target price is

$10,000 for each patient, for a total of

$100,000, and actual spending across

all 10 patients is $200,000, then a hos-

pital will have to pay Medicare back a

total of $20,000. 20

2. What this means for Skilled Nursing Facilities

A. Incentives for Hospitals

Since the CJR payment model pro-

vides bundling payments to the hospi-

tals who will manage both the patient’s

care and the financial costs associated

with the patient’s care, hospitals will

be the “gate keeper” of CJR payments.

It is certainly foreseeable that nursing

homes will be provided with less pa-

tients who are admitted for physical,

occupational, and speech therapy. If a

hospital already provides these ser-

vices then it has almost no incentive

to send a patient to a skilled nursing

facility for rehabilitation services. By

not doing so — at least from the hos-

pital’s point of view — it can control

how often a patient receives therapy

and how much it will cost.

Alternatively, if a Hospital does

not offer physical, occupational, or

speech therapy it now has a very large

incentive to expand its development

and offer said therapy, which will al-

low the hospital to control how much

therapy a patient receives and how

much it will cost.

B. Increase use of home health-

care services after joint replace-

ments

Alternatively, if a hospital does

not provide therapy services and

would like to cut costs, then it may

consider using home healthcare ser-

vices. Home healthcare services are

likely a cheaper resource to provide

therapy services because their over-

head costs are significantly lower

than the costs of operating a skilled

nursing facility. Lower operating costs

will allow home healthcare services

to provide various therapy sessions at

a cheaper rate and still create a profit.

C. Skilled Nursing Facility 3-day

Rule

The Rule states a skilled nursing

facility cannot receive a patient who

has had a hip or knee replacement


C S K | A U G U S T 2 0 1 6

and provide the patient with physical,

occupational, or speech therapy ser-

vices unless the patient, post-surgery,

stayed at the hospital for at least three

consecutive days.21 Hip and knee re-

placements are becoming less invasive

and physicians are becoming more

proficient in their techniques. In some

instances, hip and knee replacements

are performed in outpatient care.22

Thus, if a patient has a hip or knee re-

placement and the hospital discharges

the patient within 3 days then the gen-

eral rule is that the patient may not be

referred to skilled nursing facility for

rehabilitation services.23

However, there is an exception

to the Rule. A skilled nursing facility

may receive a patient who had a knee

or hip replacement and is discharged

from the hospital within 3 days if the

skilled nursing facility has an overall

rating of three stars or better as deter-

mined by the Five-Star Quality Rating

System for skilled nursing facilities on

the Nursing Home Compare Website

for at least 7 of the 12 months pre-

ceding the patient’s surgery based on

the most recent rolling 12 months of

skilled nursing facility star rating data

available for the calendar quarter that

includes the date of the patient’s ad-

mission to the skilled nursing facility.24

The CMS will post the list of qualified

skilled nursing facilities quarterly on

the CMS website.25

D. Collaborators

The CMS allows a hospital who is

a part of the CJR program to execute

risk-sharing agreements with a “Col-

laborator.”26 Collaborators are specific

healthcare providers who can partner

with hospitals and engage in risk-shar-

ing agreements.27 One such possible

healthcare provider who can become a

Collaborator is a skilled nursing facil-

ity.28 The CJR provides that a Collabo-

rator and the hospital must engage in

a “Participation Agreement” and the

Hospital must establish quality criteria

that Collaborators must meet in order

to engage is gainsharing payments

from the hospital.29

However, there is a limit as to how

much finical risk a CJR hospital is al-

lowed to share with any given Collabo-

rator.30 A CJR hospital must maintain at

least 50% of the risk of possibly having

to make repayments to CMS.31 Further,

a CJR hospital may not share more

than 25% of its responsibility with any

single Collaborator.32

For example, a skilled nursing fa-

cility can become a Collaborator with a

CJR hospital if (1) it engages in a par-

ticipation agreement with the hospital

and (2) it meets the established quality

criteria that the CJR hospital designs.33

Once a skilled nursing facility is a Col-

laborator the max risk it can be as-

signed is 25% of the total repayment

owned to CMS.34

How this will ultimately affect the

skilled nursing home will be governed

by the contractual agreement. A skilled

nursing home that is a Collaborator

may be eligible for profit sharing or bo-

nus payments but only if the contract

calls for it. Likewise, the Collaborator

may be responsible for having to pay

back money to the CMS if the costs for

the patient are above the target price

if the contract calls for it, but only up

to 25%.

3. Conclusion

The CJR is quite controversial.

Many of the bundling programs that

the CMS has designed are voluntary.

However, CJR participation is manda-

tory for all hospitals in the identified

67 metropolitan statistical areas. The

mandatory requirement places health-

care facilities in a position where they

could lose millions of dollars if the

bundling payment model is unsuc-

cessful.

The CJR also designates hospitals

as the entity responsible for bundle

performance and control over gains

earning from managing expenditures.

It remains to be seen what kind of ef-

fect bundling will have on the care

and services rendered to patients who

have received hip and knee replace-

ments. Nevertheless, this designation

shows that the CMS believes hospitals

are equipped for the task more so than

skilled nursing facilities who special-


A U G U S T 2 0 1 6 | C S K

ize in delivering therapy to patients.

Further, it seems very likely that

skilled nursing facilities will be receiv-

ing fewer patients from hospitals who

have had knee or hip replacements

and providing them with physical, oc-

cupational, or speech therapy. This

is problematic as skilled nursing fa-

cilities across the country receive mil-

lions of dollars in providing therapy to

Medicare patients who have received

hip or knee replacements.

Also, skilled nursing facilities, if

they wish to receive such patients, will

have to enter into participation agree-

ments with hospitals and meet spe-

cific criteria that the hospitals set. This

could cost the industry hundreds, if not

millions, of dollars depending on what

the hospitals demand. Skilled nursing

facilities have very little negotiation

power as the CJR provides hospitals

with the right to choose their bundling

partners. Hospitals will also dictate

how much money a skilled nursing fa-

cility can charge for providing therapy

to patients. If a skilled nursing facil-

ity cannot meet a hospital’s demands,

then the hospital will simply send the

patients to a different skilled nursing

facility or utilize home healthcare pa-

tient services to undercut costs.

Overall, the CJR payment model

likely means skilled nursing facilities

will be receiving less patients that

need rehabilitation services for joint

replacement. They will have to imple-

ment potentially expensive policies

imposed by hospitals via participa-

tion agreements. Finally skilled nurs-

ing facilities will be forced to limit the

amount it spends on providing reha-

bilitation services to patients with hip

or knee replacements, likely costing

the industry millions of dollars nation-

wide.

Should you wish to obtain ad-

ditional information as to how the

Medicare bundling programs affect

the long term care industry, please feel

free to contact John Coleman or Colin

Riley in the Miami office of Cole, Scott,

and Kissane.

(Endnotes)

1 See 42 CFR §510 (2016).

2 Id.

3 American Health Care Association (AHCA) “Comprehensive Care for Joint Replacement (CJR) Final Rule Summary;” 42 CFR §510 (2016).

4 Id.

5 42 CFR §510 (2016).

6 Centers for Medicare & Medicaid Services https://innovation.cms.gov/initiatives/cjr

7 Id.

8 Id.

9 See Id.

10 “CMS Finalizes Bundled Payment Initiative for Hip and Knee Replacements” http://www.hhs.gov/about/news/2015/11/16/cms-final-izes-bundled-payment-initiative-hip-and-knee-replacements.html

11 Id.

12 American Hospital Association “Medicare’s Bundled Payment Initiatives: Considerations for Providers”

13 Id.

14 42 CFR §510 (2016) (Target prices vary among geographical locations. The CMS sets target prices and takes into account regional financial factors).

15 Id.

16 Id.

17 Id.


19 American Health Care Association (AHCA) “Comprehensive Care for Joint Replacement (CJR) Final Rule Summary;” See 42 CFR §510 (2016).

20 Id.

21 42 CFR §510 (2016).

22 Campbell Clinic http://www.campbellclinic.com/index.php/patient-resources/campbell-surgery-center/outpatient-hip-replacement-at-csc/

23 42 CFR §510 (2016).

24 Id.

25 Id.

26 Id.

27 Id.

28 Id.

29 Id.


31 Id.

32 Id.

33 Id.

34 Id.


C S K | A U G U S T 2 0 1 6

Did you know that 92% of long

term care facilities employed at least

one or more individuals convicted of

a crime?1 Nearly half of those facilities

employed five or more individuals with

at least one conviction.2 The troubling

fact is that while many nursing homes,

home health care providers, and other

nursing agencies do have their own

background check system in place

when it comes to the hiring process,

unavoidable gaps in the system have

enabled the troubling backgrounds

of certain individuals with to go un-

noticed. As of 2009, only ten states

required nursing facilities to conduct

both an FBI and statewide background

check for prospective employees, while

thirty-three states required nursing

facilities to conduct only a statewide

background check.3 The lack of consis-

tency across state lines prompted the

issue to be addressed in the Affordable

Care Act (“ACA”).

When the ACA was passed on

March 23, 2010, the federal govern-

ment established the National Back-

ground Check Program (“NBCP”) in an

effort to curb nursing home abuse. The

NBCP is a voluntary program, in which

states conduct national and state

background checks4 of prospective

long-term-care employees in settings

such as nursing facilities, home health

agencies, and hospices, in exchange

for grant awards.5 The NBCP program

is intended to ensure that long-term-

care employees undergo a minimum

level of screening to protect patients.6

Under the nationwide pro-

gram, disqualifying information can

be either a conviction for any state or

federal crime or a “finding of patient

or resident abuse.”7 The NBCP also re-

quires a state to implement a “rap back”

system, which is a mechanism that al-

lows a state criminal justice agency

to immediately notify the NBCP state

agency of any new post-hire criminal

investigation or action against an em-

ployee. Once the state agency is noti-

fied, it is responsible for notifying the

employer.8 Legislation is currently si-

lent as to whether the NBCP applies to

employees who were working prior to

the implementation of the ACA.

Now in its fourth year, and as more

states continue to enroll in the nation-

wide program, there has been varying

Federal Background Checks for PotentialNursing Home Employees

By Jordan Bachenheimer


A U G U S T 2 0 1 6 | C S K

levels of success.9 25 states have im-

plemented the NBCP. Of the 25 states

that received grants, only six have sub-

mitted sufficient data to the Centers

for Medicare & Medicaid Services to

calculate the percentage of prospec-

tive employees who were disqualified

because of their background checks.10

In light of this data, Florida, the

state with the most nursing home

lawsuits in the country and high pro-

portion of elderly residents,11 provides

us guidance on the effectiveness of

the NBCP on potential long-term-care

employees. Prior to the enactment of

the ACA, Florida only conducted back-

ground checks on a statewide level.12

For example, if a Florida applicant has

been convicted of a crime in Georgia,

even a violent crime, it would not have

shown up on the state background

check and the employee would be

eligible to gain employment in a long-

term-care facility.

Since opting into the NBCP, Florida

has monitored criminal history on both

a statewide and federal level.13 At

this time, the federal government has

not compiled enough data to deter-

mine whether the federal background

checks have resulted in a decrease in

allegations of abuse or neglect. That

said, an interim report was prepared

in January 2016. Specifically, Florida

background checks found that of the

787,683 potential employees, 26,007

(3.3%) were found to be ineligible

for employment due to prior criminal

charges.14

Despite the lack of data, it is clear

that federal background searches will

have a substantial effect on long term

care litigation. Whether a long term

care facility is required to comply with

state or federal background checks,

the importance of properly screening

potential employees is crucial to deliv-

ering quality care and avoiding allega-

tions of abuse. Potential Plaintiffs will

be seeking to ensure that employees

are properly screened prior to their hir-

ing. In the future, the compilation of

data will determine the effectiveness

of the program and its effect on litiga-

tion. While it is unlikely that federal

background checks will completely

preclude allegations of abuse, properly

screening potential employees is an

important tool to minimizing liability

for long term care facilities. The NBCP

program is a step in the right direction

for accurate screening of employees

and its implementation will likely in-

crease moving forward.

Should you wish to obtain ad-

ditional information as to how the

NBCP program could minimize liability,

please feel free to contact John Cole-

man or Colin Riley in the Miami office

of Cole, Scott, and Kissane.

(Endnotes)

1 OFFICE OF THE INSPECTOR GEN., U.S., DEP’T OF HEALTH & HUMAN SERVS., NURSING FA-CILITIES’ EMPLOYMENT OF INDIVIDUALS WITH CRIMINAL CONVICTIONS, available at http://oig.hhs.gov/oei/reports/oei-07-09-00110.pdf.

2 Id.

3 Id.

4 42 U.S.C. § 1320a-7l(a)(3)(A) (a full back-ground check includes searching: abuse and neglect databases of the prospective em-ployee’s current home state and any prior states where he/she resided; state criminal history records; disqualifying information from informal proceedings; and a fingerprint check to search federal criminal history re-cords).

5 Patient Protection and Affordable Care Act (ACA), Pub. L. No. 111-148, § 6201, 124 Stat. 119, 721 (2010) (to be codified at 42 U.S.C. § 1320a-7l(a))

6 National Background Check Program (NBCP) For Long Term Care Facilities and Providers https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/Sur-veyCertificationGenInfo/downloads/back-groundcheckqanda.pdf

7 42 U.S.C. § 1320a-7l(a)(3)(A).

8 P.L. No. 111-148, § 6201(a)(4)(B)(viii).


10 Id.

11 MALPRACTICE PAID LOSSES AND FINANCIAL PERFORMANCE OF NURSING HOMES, avail-able at http://strategygen.com/wp-content/uploads/Malpractice-Paid-Losses.pdf.


13 National Background Check Program for Long-Term-Care Employees: Interim Report http://oig.hhs.gov/oei/reports/oei-07-10-00420.pdf

14 National Background Check Program for Long-term-care Employees: Interim Report available at https://oig.hhs.gov/oei/reports/oei-07-10-00420.asp


C S K | A U G U S T 2 0 1 6

• John D. Coleman

• Rhonda Beesing

• Lee Cohen

• Richard Cole

• Fadi Chakour

• Temys M. Diaz

• Sarah Egan

• Tullio Iacono

• Gene Kissane

• Aram Megerian

• Jonathan Midwall

• Rochelle J. Nuñez

LONG TERM CARE GROUP

MiamiCole, Scott & Kissane Building

9150 South Dadeland BoulevardSuite 1400

Miami, FL 33156Telephone: 305.350.5300

Fax: 305.373.2294

Ft. Lauderdale East110 Tower, 110 S.E. 6th Street

Suite 2700Ft. Lauderdale, FL 33301 Telephone: 954.703.3700

Fax: 954.703.3701

Ft. Lauderdale WestLakeside Office Center

600 North Pine Island Road, Suite 500Plantation, FL 33324

Telephone: 954.473.1112 Fax: 954.474.7979

West Palm BeachEsperante Building

222 Lakeview Avenue, Suite 120West Palm Beach, FL 33401

Telephone: 561.383.9200 Fax: 561.683.8977

Key WestCole, Scott & Kissane Building

617 Whitehead StreetKey West, FL 33040

Telephone: 305.294.4440 Fax: 305.294.4833

Naples800 Fifth Avenue South

Suite 203Naples, FL 34102

Telephone: 239.403.7595 Fax: 239.403.7599

Bonita Springs27300 Riverview Center Boulevard

Suite 200Bonita Springs, FL 34134 Telephone: 239.690.7900

Fax: 239.738.7778

Tampa4301 West Boy Scout Boulevard

Suite 400 Tampa, FL 33607

Telephone: 813.289.9300 Fax: 813.286.2900

OrlandoTower Place, Suite 400

1900 Summit Tower Boulevard Orlando, FL 32810

Telephone: 321.972.0000 Fax: 321.972.0099

JacksonvilleCole, Scott & Kissane Building

4686 Sunbeam Road Jacksonville, FL 32257

Telephone: 904.672.4000 Fax: 904.672.4050

PensacolaCole, Scott & Kissane Building

715 South Palafox Street Pensacola, FL 32502

Telephone: 850.483.5900 Fax: 850.438.6969

OFFICE LOCATIONS

• Paula Lozano

• Barry Postman

• Colin Riley

• Randall Rogers

• Sherry Schwartz

• James Simmons

• Daniel Shapiro

• Sanjo Shatley

• Sally Slaybaugh

• Robert Swift

• Joy Zubkin

We hope this report has been helpful and informative.As always, the attorneys of Cole, Scott & Kissane are ready to

answer any questions you may have regarding the above. We will

strive to keep you updated on any future developments regarding

cases or legislation impacting Long Term Care Facilities.

References of each article are available upon request.

For Further Information or Inquiries,CONTACT:John D. ColemanPhone: (305) 350.5307 email: [email protected]

august 2016 florida's long term … · 2019. 4. 29. · however, cjr participation is...

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