Adult day care centers (also known as adult day service centers) are a growing business throughout the United States. Adult day care centers generally are facilities that operate during normal business hours to provide a variety of services to adults who have difficulty caring for themselves, suffer from mental or behavioral impairments or who otherwise require support to maintain independence in the community. Such services include transportation, meals, social activities, rehabilitation and other health-related services. Currently, adult day service centers are required to comply with a number of legal requirements largely under state and local law. Passage of the proposed Medicare Adult Day Care Services Act of 2009, which would provide Medicare reimbursement for adult day care services, would add an overlay of regulatory scrutiny at the federal level and would require many providers to take into account a host of new legal considerations.
Growth. There is rapid growth in the adult day service industry today, which may best be explained in terms of demographics. As baby boomers begin to experience some of the inevitable negative physical and mental impairments that accompany aging, their friends and family members providing support will increasingly look for outside assistance as caregiving obligations place unsustainable demands on their time and resources. Some estimates state that an average intensive caregiver will lose almost $660,000 in wages, pension and Social Security benefits over the course of his or her lifetime due to caregiving obligations, and that every year the cost to employers for employing those who also have intensive caregiving obligations is over $33 billion dollars. According to advocates of the proposed Medicare Adult Day Care Services Act, such statistics highlight the need for extra caregiving funding and assistance for impaired adults.
Current Funding. At this time, Medicare does not reimburse the costs associated with adult day service centers. However, as is the case in many other states, in Minnesota there are a number of other sources of public funding for such programs. People who are sixty-five or older and Medicaid-eligible may have their adult day services covered through the state-funded Elderly Waiver program and low-income people who are sixty five or older yet ineligible for Medicaid may qualify for coverage through the state’s Alternative Care program. In addition, the Veterans Administration covers services provided by those adult day programs that contract with it.
Current Legal Framework. Today, adult day service centers must navigate a number of legal issues. These include applying for and maintaining a license, properly billing for services (and, when Medicaid funding is involved, compliance with laws related to billing federal health care programs such as the anti-kickback statute and the false claims act) and compliance with state and federal privacy and security laws.
Adult day service centers located in Minnesota are regulated and licensed by the Minnesota Department of Human Services (MDHS). Currently, there are 125 licensed centers in operation statewide; these have the capacity to provide services to over 3,800 adults. Individuals or entities seeking or maintaining an adult day service center license must comply with a number of statutory and regulatory requirements. These include, among other things, establishing policies on a range of topics such as patient payment plans and employee training; maintaining proper staffing ratios; drafting grievance procedures; properly maintaining patient records; and holding employees accountable for complying with MDHS’s participant’s bill of rights. Providing adult day care services without a license is a misdemeanor offense, which may result in a fine of up to $1,000 or imprisonment of up to ninety days. In addition, in Minnesota the commissioner of human services may ask the attorney general or the appropriate county attorney to seek a court order to discontinue the operations of any unlicensed adult day service center. These penalties highlight the need for facilities to remain in good standing with licensing authorities.
Adult day service centers must also navigate the legal requirements associated with billing for services. Regulators are increasingly scrutinizing providers in an effort to identify and penalize entities that are paying for referrals in violation of anti-kickback laws or engaging in fraudulent billing practices such as billing for services not rendered, services that lack medical necessity, or services provided by unqualified personnel. Providers engaging in such practices are subject to significant civil and criminal penalties.
State and federal patient privacy laws including the Health Insurance Portability and Accountability Act (HIPAA) may apply to an adult day service center. Whether or not HIPAA is applicable depends on the types of services that the facility provides and whether it transmits information in an electronic form in connection with certain standard transactions as defined by HIPAA. If a center is considered to be a covered entity under HIPAA, the center will need to comply with a number of privacy and security requirements, including drafting and maintaining a number of privacy and security policies and procedures, maintaining administrative, physical and technical safeguards, appointing a privacy officer, putting into place business associate agreements and conducting certain employee trainings.
To ensure compliance with licensing requirements, avoid payer and regulator scrutiny and comply with privacy and security laws, adult day service centers, in conjunction with legal counsel, should develop a compliance program led by a designated compliance officer. This person would be tasked with developing policies and procedures aimed at preventing illegal activity, uncovering such activity and responding to problems when they do occur. For example, many states including Minnesota require adult day service centers to document certain safety incidents, including the center’s response to such incidents. Generally speaking, the existence of a compliance program and officer signifies to regulators and payers that the center has taken steps to prevent and eliminate illegal activity.
Potential Additional Regulation. In June, 2009, California Representative Linda Sanchez introduced H.R. 3043, The Medicare Adult Day Care Services Act of 2009. The bill has been awaiting debate by the House Ways & Means Committee since its introduction, but continues to gain sponsors (with sponsor number 97 signing on in late September 2010), and advocacy groups are pushing for enactment of the bill by the end of 2010. The bill would expand the definition of Medicare-covered “home health services” in the Social Security Act (found at 42 U.S.C. 1395x(m)) to include certain services provided by licensed adult day care facilities, including transportation, meals, supervised activities designed to enhance physical and mental health, and medication management. The legislation would pay for adult day care services through Medicare reimbursement by way of the home health prospective payment system.
Medicare reimbursement as contemplated by the proposed legislation would likely enable a large number of new participants to take advantage of adult day care services. For states that do not currently provide Medicaid funding for adult day care services, passage of H.R. 3043 would introduce a new source of reimbursement, but also additional government oversight. In states like Minnesota where the government does currently pay for adult day care services through some Medicaid programs, the adoption of H.R. 3043 would expand reimbursement opportunities. With these increased reimbursement opportunities, however, would come increased regulatory scrutiny. Medicare reimbursement would bring with it federal scrutiny and a host of new federal regulations related to participating in Medicare, as well as laws that currently apply to providers of Medicare but not Medicaid services, such as physician anti-referral laws (aka Stark). Finally, Medicare participants must comply with detailed conditions in order to participate in the Medicare program. Examples of conditions of participation include establishing a governing body that performs certain tasks, developing an individual plan of care for each patient that includes particular elements and is reviewed by certain people at certain intervals, and ensuring that staff possess certain qualifications. If this bill becomes law, it will be critically important for adult day care service centers, through their compliance officers and outside counsel, to stay current with such regulations.
Conclusion. The increase in demand for adult day care services means greater reimbursement opportunities for facilities providing such services. However, as is currently the case and even more so should Medicare reimbursement become available with the passage of H.R. 3043, adult day care centers should devote substantial resources to ensuring compliance with applicable statutes and regulations.