Several government agencies have voiced concerns related to the level of therapy services necessary to care for residents of Skilled Nursing Facilities (SNFs). The level of therapy services indicated for SNF residents affects the resource utilization groups (RUGs), which in turn determine the reimbursement that SNFs receive under Medicare Part A for providing care to residents. The more acute a resident’s physical therapy needs are, and the more therapy minutes are provided in assessment periods to determine RUG rates, the higher the resident’s RUG rate and the higher the SNF’s reimbursement will be.
Both the Office of Inspector General (OIG) and the U.S. Centers for Medicare and Medicaid Services (CMS) have expressed skepticism with regard to the accuracy of assessments that result in the higher levels of coding, and the U.S. Department of Justice recently extracted a $10 million settlement payment from a SNF chain related to the issue as part of a $38 million total settlement payment—the largest ever paid by a SNF to resolve alleged False Claims Act (FCA) violations.
OIG and CMS Concerns
Both the OIG and CMS have expressed skepticism regarding the proportion of residents needing higher levels of (and thus more expensive) therapy. The recently released OIG 2015 Work Plan notes that Medicare Part A billing remains a topic of interest and that the OIG intends to explore therapy utilization trends. As in the 2014 Work Plan, the OIG has indicated that its prior work reflected that SNFs “increasingly billed for the highest level of therapy even though beneficiary characteristics remained unchanged.”
CMS, in comments to the FY 2015 SNF prospective payment system (PPS) Rule—in both Proposed and Final forms—echoed these concerns. In the Proposed Rule, CMS noted that the percentage of SNF residents classified into Ultra-High Rehabilitation groups has increased “rather steadily.” CMS also observed that many patients are receiving the minimum minutes of therapy to qualify for a given RUG. In the Proposed Rule, CMS stated that it would continue to follow and analyze these trends and requested comments regarding such “observations.”
In the Final Rule, CMS observed that “given the comments highlighting the lack of medical evidence related to the appropriate amount of therapy in a given situation, it is all the more concerning that practice patterns would appear to be as homogenized as the data would suggest.” CMS also noted that it found certain commenters’ explanations for the therapy trends “troubling and entirely inconsistent with the intended use of the SNF benefit.” For example, CMS cited a commenter who noted that the minimum minutes for a RUG level are often perceived as maximum minutes and that some providers might implement internal rules that prohibit clinicians from providing therapy above RUG level minimums contrary to their professional medical judgment. “Specifically, the minimum therapy minute thresholds for each therapy RUG category are certainly not intended as ceilings or targets for therapy provision.
In a separate discussion in the Final Rule, CMS stated that it is currently working with contractors to “identify potential alternatives to the existing methodology used to pay for therapy services received under the SNF PPS,” but such research, and the potential subsequent implementation of a new payment model, has no set timeframe.
The OIG and CMS sentiments parallel increased scrutiny of SNF therapy services and billings by federal prosecutors. Two recent False Claims Act (FCA) cases—one of them ongoing—illustrate the issues SNF operators should evaluate to reduce regulatory and enforcement risks. Both cases were originally filed not by federal prosecutors, but by “relators,” i.e., private citizens whom the FCA allows to sue on the U.S. government’s behalf to seek appropriate remedies for FCA violations, including money damages.
The Ongoing Life Care Centers of America Case
In 2008, Relator Glenda Martin filed an 11-page FCA Complaint against Life Care Centers of America (LCCA) based on her alleged observations when working at LCCA SNFs in Tennessee and North Carolina. She alleged that LCCA, which operates about 200 SNFs, violated the FCA by submitting false claims for payment whereby LCCA staff would examine residents and propose care plans, which physicians approved “without any detailed examination of the patient,” and which focused “sole[ly]” on “increas[ing] payment.” She alleged that SNFs falsely documented the care that they provided, and provided therapy care even when residents did not or could not benefit from the therapy.
In 2012, after deciding to intervene in the case, federal prosecutors filed a 48-page Complaint. It included in two separate counts the same FCA claims (alleging submission of false claims and making and/or using false statements for the purpose of causing the government to pay false claims) and added claims for unjust enrichment, payment by mistake and conversion.
About 15 pages of the government’s Complaint outlined LCCA efforts to set “targets” for high RUG levels “with little regard to the individualized needs of Medicare patients,” to “push” facilities to achieve those targets, and to “award” and “recognize” facilities and managers who achieved those targets (although such recognition, according to the Complaint, was symbolic and not financial).
The Complaint characterized these efforts as “corporate pressure” that allegedly caused LCCA to engage in the following behaviors, among others:
- Providing unneeded care or unnecessarily extending resident stays to continue to provide therapy that residents allegedly did not need
- Billing for care that was not actually provided
- Billing for therapy care that was not “skilled”
- Providing care to residents who could not tolerate the care, could not benefit from it or both
- “Ramping up” care provided during assessment periods, which would then allow for higher RUG rates and higher reimbursement following those assessment periods, regardless of the minutes actually provided after the assessment periods
LCCA is contesting these allegations, and is actively litigating the case.
The Extendicare Case and Settlement
In 2010, Relator Tracy Lovvorn filed an FCA Complaint against Extendicare in the U.S. District Court for the Eastern District of Pennsylvania. The Complaint named as defendants both the real estate investment trust that operates more than 140 Extendicare SNFs in the United States and the Extendicare division that provides physical therapy services at those facilities.
Lovvorn had been a rehabilitation director at Extendicare facilities in Pennsylvania and Delaware, and alleged that the defendants violated the FCA by submitting false claims for payment, making and/or using false statements for the purpose of causing the government to pay false claims, and retaining payments on false claims rather than refunding them to the government. She alleged that the false claims were for therapy services the government paid at the highest RUG rates because Extendicare engaged in a range of fraudulent conduct, including the following:
- “Clustering” therapy sessions ordered for three times a week around weekends. Such clustering inaccurately implied that residents were receiving treatment five times a week, which the government reimburses at a higher rate.
- “Ramping up” therapy minutes during assessment periods to meet higher RUG levels, without intending to sustain those therapy minutes after assessment periods. Lovvorn alleged that Extendicare then knowingly “ramped down” therapy minutes between assessment periods resulting in a “suspension bridge” pattern of some residents’ therapy minutes over time. The Lovvorn Complaint quoted from Extendicare business records encouraging “ramping up” and “ramping down.” The records also described examples of residents who received increased therapy minutes, allegedly to meet higher RUG levels, but who poorly tolerated the therapy.
Another relator—a former Extendicare resident, Donald E. Gallick—along with his son filed a second Complaint against Extendicare in the U.S. District Court for the Southern District of Ohio in February 2013. They limited their FCA allegations to only the relator’s own care, which Gallick contended included therapy services he did not need as well as prolonged placement at a rehabilitation facility when he was capable of living independently.
In resolving both relators’ allegations and federal prosecutors’ investigation of Extendicare, Extendicare agreed to pay $38 million to settle those allegations and end the investigation, and also agreed to enter a five-year, company-wide Corporate Integrity Agreement.
The government’s leverage under the FCA arises in part from its remedy provisions: civil penalties ranging from $5,500 to $11,000 for each proven act violating the FCA and treble damages that the government proves that it has sustained. Those damages are calculated as the difference in the amount the government paid because of the fraud and the amount the government proves it would have paid in the absence of fraud—times three. As a result, SNFs have significant incentives to reduce FCA liability.
Federal regulations set forth both Medicare conditions of participation and conditions of payment, which should guide SNFs’ operations. The Extendicare and LCCA cases, however, illustrate the government’s view of proper SNF conduct. Although LCCA is contesting the government’s claims and Extendicare admitted no wrongdoing, given prosecutors’ apparent expectations expressed in both cases, it is recommended that SNFs take the following steps:
Structure SNF operational policies and procedures to ensure that care conforms to clinically appropriate decision-making.
It is critical that an operator’s corporate culture (as well as its written communications and medical documentation) reflect that patient care is a priority, and that the operator’s job is to deliver quality, compliant care consistent with clinicians’ judgment. SNF operators can advance toward this goal by ensuring that they broadcast and promote effective Codes of Conduct; that executive, manager and staff evaluations account for performance in delivering quality, compliant care and positive resident outcomes; and that the ongoing training and management of therapy staff accounts for patient prognoses, implementation of valid care plans and tolerance for therapy as much as efficiency.
Invest in self-assessment.
Most SNFs already have compliance programs. It is advisable to revisit compliance programs regularly to ensure that they foster a compliant culture and include mechanisms for auditing and monitoring relevant issues. Continued self-imposed discipline in this area will benefit SNFs in the long run.
Conduct tailored audits concerning therapy services, specifically.
The OIG’s recent guidance emphasizes that it will analyze “trends”—namely, statistics concerning SNFs’ populations of high RUG residents, the number of minutes provided over both assessment and non-assessment periods, the relation of therapy minutes between those two periods and the effectiveness of such therapy in improving patient outcomes.
This guidance provides a potential blueprint for self-assessment that the OIG and prosecutors may expect to see SNFs adopt, and could inform enforcement decisions. Regardless, conducting such assessments also could enable SNFs to understand whether they are adequately responding to potential instances of concern, and whether they are adequately documenting therapy utilization goals correlating to (for example) a high-acuity resident population, and documenting valid clinical reasons for material deviations in residents’ therapy minutes over time.
Conduct multifactorial audits.
Regulators and law enforcement are increasingly focusing on therapy services. Yet federal investigations of SNFs often require the production and analysis of resident charts, which reflect all SNF services. This fact only highlights the need for SNF operators to be vigilant concerning the entire scope of their operations and compliance with all federal regulations.
For instance, the Lovvorn and Gallick Complaints focused almost exclusively on FCA allegations concerning therapy services. Yet in the Extendicare settlement agreement, the government’s first allegation was not about therapy services. Instead, the government alleged that Extendicare had provided “materially substandard and/or worthless skilled nursing services” at 33 of its facilities. The therapy issues received second billing in the settlement agreement.
The Extendicare settlement expressly noted that it comprised “disputed claims,” and the defendants thus admitted no wrongdoing. The settlement agreement nevertheless included statements in which the government contended that Extendicare employed insufficient nursing staff, deviated from applicable protocols concerning pressure ulcers and falls, and erroneously administered resident medications. In addition, the settlement described the larger ($28 million) part of Extendicare’s total settlement payment ($38 million) as corresponding to these issues. The remaining $10 million corresponded to the therapy services allegations that the Lovvorn Complaint described.
Given the financial scope and potential reputational harms of so-called worthless services claims, SNFs should monitor all aspects of their operations, not merely the therapy services that may initiate regulators’ interest in a SNF’s operations.