As previously discussed, the U.S. Department of Veterans Affairs (the “VA”) issued a proposed rule in February providing long-awaited guidance regarding an exemption to the Service Contract Act (“SCA”) for certain providers of extended care programs entering into agreements with the VA under the Veterans Health Care, Capital Asset and Business Improvement Act. The SCA imposes prevailing wage rate and fringe benefit standards, as well as various reporting requirements, on certain contractors and subcontractors.

We recently interviewed the Director of the Purchased Long-Term Care Group at the VA regarding implications of the proposed rule and steps providers can take to begin preparing for the changes. Highlights of our interview appear below:

  • What are the implications of the new rule? Providers will be exempt from the SCA’s reporting and wage payment requirements, effectively removing the ability of the Department of Labor to audit them for SCA compliance. Providers therefore have discretion to determine their own wages. The removal of these reporting requirements will likely result in increased veteran care by small providers of extended care services. Such providers were previously unable or unwilling to admit VA patients, concluding that reimbursement from VA for caring for one or two veterans was not worth the cost of compiling and reporting the data required by general federal contract law.
  • What is the status of the final rule? The final rule should be issued within three months, and the new provider agreement released shortly thereafter. The Director’s office is developing the agreement, which will not be reviewed by the Office of Management and Budget prior to issuance.
  • What are the anticipated changes to the final rule based on the public comments? The final rule will respond to certain significant public comments which were raised prior to the conclusion of the comment period on March 15, 2013. First, the adult day healthcare community commented that the rule’s reimbursement procedures, whereby either the higher of Medicare or Medicaid rates would be reimbursed to providers by the VA, would not sufficiently cover costs. Second, the hospice community requested clarity regarding whether all four levels of hospice care would be covered by the rule’s procedures (routine home care, in-patient care, respite care and continuous nursing care). Third, the Aging and Disability Network commented that the proposed rule focuses too narrowly on Medicare and Medicaid agencies and requested explicit mention of its work with the VA in the rule, which will likely affect private agencies. The final rule will likely also address several other significant comments.
  • What will provider agreements look like?The VA intends to create simple, streamlined agreements. There should not be any surprises, as most of what is currently in the agreements is taken directly from the statute, which has now been around for ten years. The agreements likely will contain the following provisions and/or changes:
    • The proposed rule expressly states that even though the SCA requirements would not apply, providers are still expected to comply with applicable federal laws concerning employment and hiring practices. To avoid redundancy, the agreements themselves likely will not reiterate this exact statement.
    • The Form 10-1170 Application for Furnishing Long-Term Care Services to Beneficiaries of Veterans Affairs has fallen out of favor, and will be replaced by a cover page stating simply: “A provider agreement exists between [agency] and the VA of [location] for the purpose of [services] effective [date.] See attachment for details,” and signature blocks for the hospital director or designee and for the agency.
    • The agreement will not contain an end date.
    • The new agreement will likely contain a more substantial provision regarding reimbursement, billing and invoicing, including the VA’s new electronic billing scheme which promises payment within five days. Providers are advised to pay close attention to this provision.
    • The agreement will set forth points of contact and attach a rate sheet. If Medicare rates apply, the rates initially will use the low utilization payment rates (LUPA) which operate as a cap on payments made, until the VA’s prospective payment is up and running.
    • The VA will likely not request copies of liability insurance from providers. If the provider is working with the state, the VA may request a copy of a state and/or business license to confirm the provider is in good standing.
    • The new agreement will still contain standard provisions concerning referrals, termination, oversight function, etc. It will likely have modified quality standards for skilled nurses working in the home health care community. The VA is considering removing the standards regarding an agency’s performance on Medicare Home Health Compare and will likely include satisfaction scores as a quality standard.
    • The termination provision will likely not change substantially. The VA will follow the regulation unless there is a specific reason not to do so, particularly for home healthcare. Providers may voluntarily terminate agreements provided they give the VA at least 15 days advance notice. The VA is also required to give providers at least 15 days advance notice, unless the health of a veteran is in immediate jeopardy, in which case two days advance notice is sufficient. However, according to the Director, if the agency is not satisfied with a provider, for simplicity’s sake it will likely discontinue using that provider without actually terminating the agreement. Agreements may also be terminated by mutual consent. Additionally, if a veteran expresses a preference for a particular provider, the local VA medical center will take this into consideration and try to honor that preference. Providers may appeal the VA’s decision to terminate an agreement.
  • What will be the process for approving and authorizing services under a provider agreement? The local VA medical centers will determine whether there is a need for provider agreements in particular areas, and if so, how many agreements are needed. The Director believes there is a pressing need for such agreements in the home health care community in particular. The local center will send written notification to providers identifying the proposed agreement, and will request written acceptance from the provider. The Director noted the VA is concerned about the over-medicalization of home health aide services and is considering whether it should provide more opportunities to non-Medicare personal care services providers. Providers may appeal the VA’s decision not to enter into a provider agreement.
  • What should providers do in the interim? Providers should await the final rule and pay particular attention to the VA’s forthcoming guidance regarding the new electronic billing scheme. Once the medical centers determine the need for provider agreements, smarter medical centers will likely have open houses soliciting interested providers, and providers should take steps to get themselves noticed. The Director encourages eligible providers to write directly to the head of geriatrics and extended care, the head of social work and/or the head of community health at their local VA hospital, emphasizing how the provider is uniquely positioned to serve the needs of the VA and how the provider’s mission supports veteran care.