• The Senate Healthcare Bill’s Impact on LTACHs and Post-Acute Care Providers;
• MedPAC’s Draft Recommendation to Forgo any Rate Increase for LTACHs for 2011 Rate Year;
• Recommendations for Revising HIPAA Business Associate Agreements by February 17, 2010;
• January 2010 Newsletter Previews;
• Other Recent GreisGuide posts; and
• Upcoming Events

Please click here for a .PDF copy of the Newsletter.

MedPAC evaluated the Medicare profit margin spread of LTACHs for RY 2008 and found there to be a wide spread in profitability, similar to that seen in short-term acute care hospitals, with the bottom quartile of LTACHs having margins of negative 8.2% or less, and the top quartile having margins of 11.8% or more.  Margins for for-profit LTACHs were significantly higher than those of not-for-profit LTACHs.  MedPAC found that lower per-discharge costs, rather than higher payments, drove the differences in financial performance between LTACHs with the lowest and highest margins.  High margin LTACHs also had a shorter average length of stay and far fewer high cost outlier cases and payments.

MedPAC further noted that, with the exceptions of Select Medical’s recent IPO and the RehabCare/Triumph HealthCare merger, LTACHs have accessed relatively little capital and have raised minimal equity over the last year due, in large part, to the financial credit crisis.  MedPAC explained that the current three-year moratorium on new LTACH beds and facilities that was imposed by the Medicare Medicaid and SCHIP Extension Act of 2007 has reduced, although not eliminated, both the opportunities for expansion and the need for capital among LTACHs.

MedPAC also reported concern about the lack of reliable quality measures for LTACHs, and expressed interest in exploring the development of quality measures.  MedPAC plans to convene an expert panel to help identify meaningful measures and the data needed for measurement.  It also plans to work with a contractor to assess the feasibility of risk-adjusted quality measurements, and expressed interest in working with LTACH chains and industry groups that collect and analyze proprietary quality data for purposes of improving both patient care and Medicare payment policy.

Jason S. Greis
McGuireWoods LLP
312.849.8217
jgreis@mcguirewoods.com

The three-station dialysis unit will be able to treat up to six patients per week.  Dr. Jonathan Wolf and the staff of Rockland Acute Services will operate the Unit.  Using state of the art hemodialysis equipment, the unit will operate Mondays, Wednesdays and Fridays.  Summit Park Hospital’s objective in requesting certification of an Acute Renal Dialysis Unit was based on the needs of LTACH patients who also require renal dialysis.

With an on-site dialysis unit, Summit Park patients will no longer need to be transported to community-based dialysis centers, Vanderhoef said.  “This is a very important day in Summit Park’s history,” Vanderhoef said.  “We will now be able to treat patients who need dialysis here in our hospital instead of having them take arduous trips to other facilities for treatment. We’re gratified to expand and improve our medical services in order to provide better care for our patients.”  “This is a wonderful quality of care initiative,” said Dr. Paul Mercurio, Summit Park Hospital’s Medical Director.  ”Our patients can receive their dialysis treatments in the convenience and comfort of our hospital setting, without needing to be transported several miles away.  We are so pleased to be able to offer this service.”

Jason S. Greis
McGuireWoods LLP
312.849.8217
jgreis@mcguirewoods.com

One of the most far-reaching effects of the HITECH Act is its extension of HIPAA security and privacy rules to “business associates” (see HITECH Act sections 13401 and 13404).  Previously, business associates were required (under their business associate agreements with covered entities) to implement administrative, physical and technical safeguards that “reasonably and appropriately” protect protected health information (“PHI”).  Business associates would be liable only for a breach of such security obligations arising under their business associate agreements with covered entities, but not as a result of a violation of HIPAA itself.  The HITECH Act reversed this approach.  Now, all of HIPAA’s security and privacy rules also apply directly to business associates.  This means that business associates may be subject to the same criminal and civil penalties as covered entities if they are found to be in violation of HIPAA’s security or privacy rules. 

The HITECH Act has been interpreted to require covered entities to amend all existing and any new business associate agreements by February 17, 2010 to ensure business associate compliance with HIPAA’s privacy and security rules.  Amending hundred or thousands of business associate agreements strewn across organizations may be a monumental task for some LTACHs.  Other organizations that have a centralized repository of business associate agreements or utilize a data management system to warehouse these agreements will find the task more manageable.

The Act will require LTACHs to make at least two substantive amendments to their business associate agreements, including:

• Adding a provision requiring business associates to comply with the HIPAA security rule (a daunting task for most business associates); and
• Adding a requirement that business associates provide notice of a security breach to the covered entity.  Although business associates were previously required to notify covered entities of a breach, the agreement should be amended to reflect the HITECH Act’s new definition of a “breach,” which is broadly defined as an “acquisition, access, use, or disclosure” of unsecured PHI that is not otherwise permitted under HIPAA “which compromises the security or privacy” of the PHI.

Other revisions are also recommended, including:

• Incorporating a timeframe by when business associates are required to notify covered entities of a breach (i.e., within 3 to 5 days of discovering the breach).  Under the HITECH Act’s interim final regulations published by the U.S. Department of Health and Human Services (“HHS”) on August 24, 2009, a breach is “discovered” as of the first day the breach is known or should have been known, based on the exercise of reasonable diligence; and
• Adding a provision requiring business associates to indemnify a covered entity and bear responsibility for the financial burden of a breach caused by a business associate, since costs associated with breach notification, remedial action, fines and civil monetary penalties have been increased substantially under the HITECH Act.

LTACHs should also review internal policies to determine which policies will need to be modified to comply with the HITECH Act.  In many cases, however, LTACHs are waiting to adopt specific policy revisions until after final implementing regulations have been adopted to ensure that any specific regulatory requirements are properly included.  It is presently unclear when the HHS Office of Civil Rights will release additional guidance to covered entities or the form of such guidance (i.e., form of business associate agreement or F.A.Qs).

The information above is only a summary of the HITECH Act and the interim final regulations.  Please contact me for additional information regarding the manner in which the HITECH Act may impact your LTACH.

Jason S. Greis
McGuireWoods LLP
312.849.8217
jgreis@mcguirewoods.com

The Senate voted against an amendment from Senator John McCain (R-AZ) to cut the Medicare savings from the bill 58 to 42.The $450 billion in savings from Medicare constitute the single largest source of funding for the bill. The Senate did, however, unanimously adopt an amendment proposed by Senator Michael Bennet (D-CO) to ensure that no guaranteed Medicare benefits would be taken away as a result of the legislation.

Several amendments that have not yet been considered will likely cause a great deal of debate. Senator Blanche Lincoln (D-AR) will offer an amendment to limit executive pay for health insurance companies. Senator Ben Nelson (D-NE) will offer an amendment to include Stupak-style abortion funding restrictions, and has said he will filibuster the final bill if it does not contain this language. Senator Mary Landrieu (D-LA) is working on an amendment with an alternative to the public option that would act much like the “trigger” option supported by Senator Olympia Snowe (R-ME).

Senator Tom Carper (D-DE) has also been working on a public option alternative, which would function as a middle ground between the “trigger” option and the immediate implementation of a public option. Under his plan, states that did not meet certain benchmarks would have to implement a public option immediately. And yesterday, Senators Joe Lieberman (I-CT), Arlen Specter (D-PA), and Susan Collins (R-ME) held a press conference to announce their package of bi-partisan cost containment amendments.

The Senate convened a rare Saturday session on December 5 and a group of moderate Democrats and Senator Olympia Snowe (R-ME) continued conversations about a possible compromise on a public plan. President Obama travel  to Capitol Hill today for a meeting of the Senate Democratic caucus.

Mona G. Mohib
VP Gov’t Relations – Federal
McGuireWoods Consulting LLC
202.857.2912
mmohib@mwcllc.com

In July 2009, each of the three defendants pleaded guilty to misdemeanor violations of the privacy provisions of HIPAA and entered into a plea agreement acknowledging that each had unlawfully accessed patient medical records without having any legitimate need to do so.  While the physician admitted viewing patient records only once, the account representative admitted viewing the patient’s files twelve times and the unit coordinator admitted accessing the patient’s file on three separate occasions.  Each party had previously received HIPAA compliance training from their respective employers. 

As a result of this violation:

• The medical director was sentenced to one year of probation, ordered to pay a $5,000 fine and perform fifty hours of community service educating professionals on HIPAA.  The physician was also suspended by the LTACH for two weeks and ordered to complete additional HIPAA training; and
• The account representative and emergency room coordinator were each sentenced to one year of probation and ordered to pay a $1,500 fine, and were ultimately terminated.

Physicians and employees should recognize that the penalties could have been much worse for each of these individuals who could have received a maximum penalty of one year imprisonment, a fine of more than $50,000, or both.  Readers should take away important lessons from this incident, including:

• The Federal government is adding resources in 2010 to ensure HIPAA compliance and to address enforcement concerns, especially since passage of the HITECH Act in February 2009, which dramatically increased HIPAA civil penalties;
• HIPAA compliance training is an ongoing endeavor, which LTACHs may want to consider repeating on a regular basis to comply with law and shield a facility from potential liability; and
• Electronic medical record (“EMR”) systems can be an important HIPAA compliance tool.  Access to EMR system data is password-protected and individually identifying time and date-stamped user log-ons ensure that compliance violations are readily identified.

Please contact me if you have any questions about implementing an effective HIPAA compliance program.

Jason S. Greis
McGuireWoods LLP
312.849.8217
jgreis@mcguirewoods.com

This “first-of-its-kind” state statute is intended to promote responsibility for providing quality care.  It is important to note, however, that the Federal government does not mandate providers to have a compliance program, although the Department of Health and Human Services Office of Inspector General has published a series of compliance guidelines for various industry sectors and, particularly through its enforcement policies, strongly encourages such programs.

Failure to establish an effective compliance program under the new state law will subject both health care providers and their “affiliates,” including board members “in a position of responsibility or authority” to sanctions, including exclusion from participation, limited participation, and censure.  Unlike some states, like New Jersey, that ensure compliance through mandatory education for board members, New York has elected to ensure compliance by making board members responsible through penalties.

This appears to be consistent with the national trend to look to health care providers’ boards of directors—and to directors individually—to take on increased oversight of compliance area in addition to their more traditional roles as stewards of a hospital’s finances.  The Medicare Conditions of Participation for Hospitals, 42 C.F.R. § 482.21(e), make governing bodies responsibile for the quality of care provided.  The OIG’s March 2009 paper, Corporate Responsibility and Health Care Quality, highlights this when it says “quality, and particularly, the board’s responsibility to ensure high quality care” is a critical issue for federal enforcers.

Responsibility for care also is a common law duty, as courts since Darling v. Charleston Community Memorial Hospital, 211 N.E.2d 253 (1965), have found that boards and hospital administrators can be held liable for failure to exercise their fiduciary and corporate obligations to ensure that the medical staff is providing acceptable patient care—a duty, the courts have determined, that boards cannot delegate.

But what enforcement tools do governments have? Assuming that a board has not opened itself to a False Claims Act allegation, the main sanction available to both New York and the federal government for exercising inadequate oversight over quality of care is exclusion from participation in government health programs.  The federal government’s permissive exclusion authority is set forth in 42 U.S.C. §1320a-7(b)(6)(B) and applies to: “Any individual or entity that the [HHS] Secretary determines … has furnished or caused to be furnished items or services to patients … of a quality which fails to meet professionally recognized standards of health care.”

This potentially punitive statute also raises a number of important policy and practical questions since:

• It may dissuade people from serving on community hospital boards thereby making recruitment of qualified board members more difficult;
• Compensation to board members may need to be paid or increase to account for increased personal risk;
• It would be difficult for prosecutors to prove the nexus between a board member’s lack of due diligence in exercising quality oversight and the submission of claims for substandard care; and
• It would be difficult to single out individual directors for exclusion without trying to exclude the whole board.

Jason S. Greis
McGuireWoods LLP
312.849.8217
jgreis@mcguirewoods.com

The bill contains a number of provisions that would impact LTACHs, including among others:

• extension of MMSEA’s LTACH payment protection and LTACH development and bed expansion provisions for a period of 1 year (through December 29, 2011) (see Section 3106), instead of the 2 year budget-neutral extension lobbied for by ALTHA and NALTH and previously included in the Senate Finance Committee bill (see previous GreisGuide postings on this topic.  Posting 1  Posting 2 ).   There is no analogous provision in the House bill.
• a provision that would require LTACHs to submit quality reporting data to CMS beginning in the 2014 rate year (see Section 3004).  Failure to submit quality reporting data would allow CMS to apply a 2% rate reduction to the annually adjusted standard Federal rate for discharges occurring during the rate year;
• a provision requiring CMS to conduct a study on expanding its healthcare acquired conditions policy to payments made to LTACHs and other hospitals excluded from IPPS payment, IRFs, hospital outpatient departments, SNFs, ASCs, and health clinics (see Section 3008(b)).  The report would be due to Congress by January 1, 2012.  There is presently no timeline in the bill for implementing the study’s findings and the application of the healthcare acquired conditions policy in these settings;
• LTACHs would also be included in a national pilot program on payment bundling (see Section 3023) to be established by no later than January 1, 2013.

A more detailed analysis of the bill’s impact on LTACHs will follow shortly.

The bill would cover 31 million Americans who are currently without insurance, as well as adding new benefits to Medicare and imposing new regulations on insurance companies.  It also includes a provision for a public option that would allow states to opt out by passing legislation.  Unlike the House bill, the Senate bill does not include any new restrictions on abortion funding, but like the House bill, it will not provide assistance to illegal immigrants.

The bill pulls funding from a variety of sources, including a tax on higher-end ‘Cadillac’ health care plans, an increase in the Medicare payroll tax on high-income people, and a new five percent tax on elective cosmetic medical procedures (affectionately called the “Bo-tax”).  Individuals are required to have insurance or must pay a fine, starting at $95 in 2014 and rising to $750 in 2016, with a maximum of $2,250 for a family.  Critics of the bill have said this penalty is too weak and will cause many people to forgo insurance. Businesses with more than 50 employees would have to provide insurance or pay a fine of $750 per employee.

The CBO score estimates that 24 million people would still be uninsured in 2019.  About one-third of these people would be illegal immigrants.

Sen. Reid and other Senate leaders are still trying to nail down the 60 votes needed to allow debate to begin on the floor.  Sen. Reid has scheduled the procedural vote for Saturday evening.  Debate on the bill will likely last through much of December.

Jason S. Greis
McGuireWoods LLP
312.849.8217

Mona G. Mohib
VP Gov’t Relations – Federal
McGuireWoods Consulting LLC
202.857.2912
mmohib@mwcllc.com

Limits on Release Scope

The guidelines inform employees of their right to file a charge with the EEOC, even if an employee signs a severance agreement containing a release of all claims. The guidelines also clarify the EEOC’s position that no agreement between an employer and employee can limit an employee’s right to testify, assist or participate in an investigation, hearing or proceeding conducted by the EEOC under the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA) or the Equal Protection Act (EPA) – although employers can have an employee waive his or her ability to recover damages from such participation. In addition, the guidelines specify that an employee cannot be required to return severance pay – or other consideration – before filing a charge.

Exit Incentive & Termination Programs

The guidelines also address disclosure requirements of the Older Worker Benefits Protection Act (OWBPA), an amendment to the ADEA. As most employers are aware, the OWBPA imposes additional disclosure requirements (e.g., 45-day versus 21-day consideration period) when employers request waivers of age discrimination claims from employees age 40 and over who are separated as part of “exit incentive programs” or “other termination programs.”

The guidelines advise that whether a “program” exists depends on the facts and circumstances of each case. However, according to the EEOC, the general rule is that a “program” exists if an employer offers additional consideration – or an incentive to leave – in exchange for signing a waiver to more than one employee. The guidelines also state that if a large employer terminates five employees in different units for cause (e.g., poor performance) over the course of several days or months, it is unlikely that a “program” exists.

OWBPA Disclosures

Finally, the guidelines provide that an employer is required to disclose the following information to employees age 40 and over who are being laid off as part of an exit incentive or other termination program:

• The decisional unit, which is the class, unit, or group of employees from which the employer chose the employees who were and were not selected for the program. Depending on the circumstances of the termination, this unit could include the entire company, a division, a department, employees reporting to a particular manager or workers in a specific job classification.
• Eligibility factors for the program.
• Time limits applicable to the program.
• Job titles and ages of all individuals who are eligible or who were selected for the program and the ages of all individuals in the same job classifications or organizational unit who are not eligible or who were not selected.

Employer Take-Away

The guidelines are a reminder to employers that severance agreements should be drafted with clear terms in a manner that all employees receiving the agreements can understand, regardless of education and business experience. Also, in the past, there has not been much litigation analyzing the OWBPA’s disclosure requirements. Given the amount of layoffs in the past year, this trend is likely to change. Therefore, employers offering severance packages as part of a termination or exit incentive program would be well-advised to review their standard form agreements to ensure that the materials provide enough information about release limits, required disclosures and the factors used in making selections to comply with the EEOC’s expectations.

For assistance preparing for a reduction in force or drafting and updating related severance agreements, please contact the author or any other member of McGuireWoods’ Labor & Employment or Employee Benefits teams.