LONG-TERM CARE UPDATE Volume V, No. 1 January 1999 Spotlight: Year 2000 Crisis PPS -- Outpatient Hospital Services -- Therapy Caps Corporate Compliance Survey & Enforcement ODHS Recoupment Project Medicaid Step Up OSHA Miscellaneous RR&G News SPOTLIGHT: YEAR 2000 CRISIS Next to President Clinton and Saddam Hussein, the media's favorite whipping boy over the past year or so has been the impending "Year 2000 Crisis." This article will briefly summarize some of the primary legal issues that should be of concern to health care providers as we rapidly approach the new millennium. While space limitations prohibit a lengthy explanation of exactly what the Year 2000 ("Y2K") Crisis is (or whether it will actually even be a crisis), a short description of the primary Y2K concerns for health care providers is in order. For decades, computer programmers used only two digits to represent years, such as "95" for the year 1995. In most cases, unless these programs (including programs in computers and hard-coded programming imbedded in many electronic devices) are updated, they will likely interpret the use of the digits "00," that are intended to represent the year 2000, as 1900. This problem will impact virtually every automated system that has not already been designed or repaired to address the Y2K issue. Most health care providers rely extensively on systems that are vulnerable to the Y2K problem. These systems include (but are not limited to): patient medical records and scheduling programs; patient and third-party billing; pharmacy and pharmaceuticals management; medical equipment (from infusion pumps and CPR equipment to heart-lung bypass machines); plant management systems, including fire and security alarms; and, diagnostic testing and lab equipment. A survey released in mid-1998 revealed that almost a third of the hospitals in the United States had not yet begun to address many critical program updates that will be required for hospital operations in the post-2000 era. Cap Gemini, a large computer consulting firm, conducted a study in October, 1998, that revealed that the health care industry tied for 11th place (out of 13 categories) in preparedness for Y2K. This article will not address the solutions for these difficult problems, however, providers must be aware that ensuring a problem-free transition to the new millennium will not be easy or cheap. For example, an average hospital should have budgeted several hundred thousand dollars for the work required to test, correct, repair, and/or replace equipment and systems that are determined to be "non Y2K compliant." Independent nursing facilities, on the other hand, may be able to determine compliance through the expenditure of only a few thousand dollars. Regardless of the cost, each health care provider must be prepared for Y2K. It must also be recognized that a health care provider's examination of its Y2K preparedness can not be limited within its own walls; each supplier or goods and services must be polled to ascertain whether they, as a company, will be prepared for Y2K, as well as the whether the goods they supply will be free from Y2K glitches. Written confirmation should be required to be provided by all such suppliers, and all new contracts, purchase orders, and similar documents should include language requiring the vendor to warrant Y2K compliance. Failure to gain assurance from a supplier should lead to the development of a relationship with a replacement supplier that can guaranty no interruption in service or quality due to the Y2K issue. Further, suppliers of certain essential services, such as electric, water, and other public utilities and services will likely not guarantee uninterrupted service during the Y2K transition; health care providers should therefore have contingency plans to prepare for potential interruptions in these essential components of facility operations. Potential liabilities exist in many areas of Y2K compliance. An initial area of concern should be a thorough review of existing insurance policies to ensure that losses resulting from Y2K problems are adequately covered. While focusing on the individual elements of a Y2K compliance review, many businesses fail to recognize that should the worst-case scenario occur, it may become impossible to conduct "business as usual" until newly-discovered Y2K glitches are resolved. For health care providers, major problems with patient record, pharmacy, or lab computer systems could cripple facility operations. Thus, every health care provider must ensure that it has adequate business interruption insurance, and further, that such insurance specifically cover business losses directly and indirectly caused by Y2K problems. Despite the best of intentions in preparing for Y2K, it is possible that some item of equipment or computer system might slip by your compliance efforts, and cause an error that injures a patient or staff member. Health care providers must therefore scrupulously document all plans made and actions taken to screen for and remedy Y2K issues. It is crucial to create a paper trail to document that every reasonable effort has been made to prevent problems caused by Y2K-noncompliant systems. This paper trail will serve as your first line of defense should you find yourself entangled in a legal proceeding arising from damages caused by a non-Y2K compliant system or item of equipment. Even if such a paper trail was not created concurrently with your Y2K review and remediation program, it would be beneficial to create a written history of all of your Y2K compliance activities. To help avoid personal liability for any such occurrence(s), officers, directors, and administrators should review their D&O insurance coverage to obtain confirmation that existing policies provide coverage for Y2K-related losses. Each health care facility should review and adopt its Y2K plan at the Board level, following review by legal counsel, and should ensure that its plans to address this unavoidable occurrence are adequately recorded in the minutes or company records of the provider. Creating the paper trail described above is an ideal way for such individuals to document that fiduciary responsibilities have been fulfilled regarding preparation for Y2K, and could be a prerequisite to claiming coverage under an D&O policy. While certainly no guarantee of airtight legal protection, health care providers with well-documented Y2K compliance plans that have been implemented in all respects will provide themselves with a better ability to defend against lawsuits arising from Y2K issues than will providers that prefer to ignore these problems. While it is pretty far into the game to begin addressing Y2K issues, it is certainly not too late to undertake a comprehensive audit of your Y2K compliance. Such an audit can be useful in measuring progress towards Y2K compliance, and can provide useful guidance in focusing compliance efforts in the rapidly decreasing time before December 31, 1999. RR&G can assist you in conducting a review of your insurance policies and contractual arrangements to help ascertain whether you have taken all reasonable steps to prepare for the Y2K. Please call Ira S. Goffman or Eric M. Simon if you have any questions concerning the Y2K-related legal services offered to health care providers by our firm. PPS Outpatient Hospital Services. Under the SNF prospective payment system (PPS), nursing homes are responsible for billing certain outpatient hospital services provided to a SNF resident. In the preamble to the PPS interim final rule, HCFA indicated that it did not consider certain services to be within the purview of SNFs, but rather were the hospital's responsibility to bill: MRIs, CT scans, cardiac catheterization, ambulatory survey involving the use of an operating room, and emergency services. In a Program Memorandum (PM) released in November 1998, HCFA has also removed the following from SNF responsibility: radiation therapy, angiography, and lymphatic and venous procedures. HCFA's current interpretation of the law is that a SNF's responsibility is not determined by what appears on a particular resident's care plan or by what services the SNF offers to its residents, but rather by what may be covered by the Medicare extended care benefit. The PM states that a SNF is responsible for "essentially the entire package of care furnished during the outpatient visit," except for those items specifically excluded above. Note that HCFA has indicated that it is still considering other procedures and treatments that may be excluded from SNF responsibility based on comments it is receiving, and will notify the long-term care community of its decisions in the future. SNFs should proceed very cautiously when contracting with hospitals for the provision of outpatient hospital services. Therapy Caps. As of 1/1/99, there is a $1500 annual limit for each Medicare beneficiary's outpatient physical therapy (includes speech language pathology) services, and a separate $1500 limit for outpatient occupational therapy services. The limits do not apply to services furnished directly or under arrangement by a hospital to an outpatient, or to an inpatient who is not in a covered Part A stay. SNFs are responsible for the billing of all outpatient rehabilitation services (including under Part A and Part B) and the tracking of the incurred expenses for those services when furnished to a SNF resident not in a covered Part A stay and nonresidents receiving outpatient rehabilitation services at the SNF, regardless of whether the services are furnished by the SNF itself or by an outside therapist. The cap is facility specific, which means that a SNF is not responsible for keeping track of therapy services the patient may have received some place else. CORPORATE COMPLIANCE The Office of Inspector General (OIG) has asked for input and recommendations from interested parties for its development of corporate compliance program guidance for the nursing home industry and its suppliers and providers. The OIG's 1999 Work Plan includes the following projects: (1) checking how often States conduct surveys, how many surveyors they have, how they train them, and how long they spend at each facility; (2) studying trends in patient abuse reports to State agencies; and (3) determining whether mental health services are still being billed inappropriately. On 10/21/98, the OIG issued the "Provider Self-Disclosure Protocol," which sets forth detailed guidance for providers that choose to disclose to the OIG their noncompliance with Federal healthcare program requirements. Providers need to consider very carefully the benefits and risks of voluntary disclosure. The DOJ has released guidelines to State and Federal prosecutors with regard to sharing health care fraud investigation information with private insurers. At a recent national conference on nursing home fraud and abuse held by the DOJ, HHS, OIG and FBI, there was a strong focus on the use of the False Claims Act as an enforcement tool. This theory has been gaining momentum, and numerous qui tam actions were filed in 1998. As we have reported previously, this approach may be a significant problem for providers with quality of care citations. Those providers face not only regulatory enforcement actions, but also lawsuits with potentially enormous penalties. Speaking at the American Health Lawyers Association's annual conference, a Deputy Attorney General stated that the DOJ would prosecute nursing home operators whose staff cutbacks lead to serious neglect of residents. "Corporate plans to scale back on personnel expenses to the point of having inadequate staff, not just medical professional staff, but all levels of staff…can constitute a fraud." The OIG has proposed a rule implementing the law passed by Congress in 1996 that calls for a national "Healthcare Integrity and Protection Data Bank." According to the OIG, all actions should be reported to the data bank "that are inconsistent with accepted sound fiscal, business or medical practices, directly or indirectly, resulting in: (1) unnecessary costs to the program; (2) improper payment; (3) services that fail to meet professionally recognized standards of care or that are medically unnecessary; or (4) adverse patient outcomes, failure to provide covered or needed care in violation of contractual arrangements, or delays in diagnoses or treatment." The information in the data bank is confidential and will only be available to (1) Federal and State government agencies; (2) health plans; (3) individuals or entities requesting information about themselves; or (4) persons or entities aggregate information not identifying any particular patient, provider, supplier or practitioner. A mail order pharmacy company and a hospital sought to enter into an arrangement whereby a pharmacist would be placed on the premises of certain transplant centers where the patients receiving transplants would require lifetime immunosuppressive drugs that could be provided by the pharmacy. The OIG determined that the arrangement may constitute grounds for sanctions because the pharmacist would be providing a tangible benefit to the hospital in the form of providing services that the transplant center would otherwise have an employee/agent perform. The OIG determined that an arrangement between nursing facilities, their trade association and an electric utility was proper under the GPO exception to the fraud and abuse laws. Under the proposed arrangement, the trade association would be authorized by its nursing home members to act as a purchasing agent for electricity brokerage services. Contingent fee billing contracts where payment to the consultant increases when more aggressive billing is pursued is being targeted by the U.S. Attorney and the OIG for careful review. Entering into such contracts should be done with the utmost caution. SURVEY & ENFORCEMENT There were 65 immediate jeopardies in Ohio from January through November 1998, with falls (32) and elopement (16) making up the lion's share. A recent ALJ decision has determined that HCFA had no basis to impose a CMP against a nursing home due to alleged abuse. The facility had been cited because surveyors had discovered injuries of unknown origin, which they concluded were caused by abuse. The ALJ held that those injuries were much more likely due to accidents arising because of the restraint free operation of the facility. In light of no direct evidence of abuse, and the facility's clear policy against abuse, the ALJ found that the facility was not liable. Determining that CMPs are intended to be remedial and not punitive, an ALJ reduced the fines imposed against a new operator of a nursing facility because: (1) all of the deficiencies identified were caused by the prior operator; (2) the new operator was not responsible for the prior poor compliance history and had no relationship with that facility during the period of noncompliance; and (3) the new operator had an unblemished compliance record and had taken prompt, extraordinary measures to correct the deficiencies. The ALJ reduced the penalties from $750 a day to $50 a day because the ALJ had no authority to impose less than $50 a day where some basis existed for a remedy. HCFA was found to have improperly imposed a CMP against a SNF when a licensed psychiatric nurse administered excessive doses of insulin to two diabetic residents resulting in the death of one and the treatment at an emergency room for the other. The ALJ found that the SNF was entitled to rely upon State nursing licensure as evidence that the nurse was qualified for the position. The District Court for the District of Columbia has temporarily stopped HCFA from terminating a SNF from the Medicare and Medicaid programs due to past deficiencies. The judge was influenced by the fact that though the facility had some deficiencies on its most recent survey, none of those citations constituted immediate jeopardy. The court ordered the State agency to resurvey the facility and report back to the court whether it would still recommend termination. The judge noted that the Medicare Act only allows HCFA to terminate a nursing facility when residents are in "immediate jeopardy," but that the Secretary of DHHS had promulgated regulations that allowed HCFA to terminate a facility for not being in "substantial compliance." The judge pointed out that the majority of courts that have visited this issue have determined that the Secretary has overstepped her bounds and is acting outside of statutory authority. The judge, however, refused to resolve the issue because it was "not necessary to a resolution of this motion." Currently, a facility will be a "poor performer" if it receives a citation at the "H"(pattern/actual harm) level or higher on two consecutive surveys. ODH has indicated that it will not adopt HCFA's suggested policy of using "G" level citations or higher until directed to do so by HCFA. ODHS RECOUPMENT PROJECT At this point, ODHS is still not requesting payment from providers. Prior to submitting any requested information or payment to the Department, we suggest that providers consider taking the following steps: (1) verify the accuracy of the amounts identified as overpayments; (2) examine closely (preferably with legal counsel) the rationale that ODHS is providing as the basis for the recoupment project; and (3) review the impact that the repayment may have on your costs and corresponding rates. Thereafter, based on the facts that you gather, you may wish to engage in negotiations with ODHS rather than simply paying the amount calculated to be owed to the State. MEDICAID STEP UP Under prior law, if a provider transferred a nursing facility to another provider, no increase in the capital cost basis of the asset was allowed if the providers were related parties. If the parties were unrelated, the basis of the asset was subject to a step-up adjustment as provided in the law. A newly passed law allows a transfer to a related party to be treated, for such adjustment purposes, as a transfer to an unrelated party if certain conditions are met. Effective: March 22, 1999. OSHA In April 1999, OSHA plans to propose, in regulation rather than standard, a new comprehensive safety and health program rule. It will require employers to have a written overall safety and health program that ensures routine inspection of the workplace with employee involvement, self-identification of all hazards, information and training to workers and the implementation of hazard control measures. Publishing the program as a regulation may allow OSHA to avoid the stringent legal tests applied to the promulgation of a standard, such as, demonstrating that the new requirements would substantially reduce the risk of workplace hazards, and whether they are technologically and economically feasible for employers to implement. OSHA plans to issue national ergonomics standards this summer, which will apply to the nursing facility industry. OSHA is focusing on the nursing facility industry because it reports that nursing home employees have the third highest rate of injury among American workers, behind only meat-processing and vehicle-manufacturing employees. MISCELLANEOUS A class action lawsuit based on the quality of care provided in a nursing home was brought recently in Colorado. Vencor has agreed to pay $270,000 to settle charges that it involuntarily discharged 54 Medicaid residents in Tampa. The 7th Circuit Court of Appeals has determined that LPNs are supervisors for purposes of union organizing. RR&G NEWS We are pleased to announce the association of Geoffrey Goss with our firm. Geoff will concentrate his practice in corporate and transactional issues. Carol Rolf and Aric Martin will be teaching the legal portion of the OSU Core of Knowledge on February 18. Carol will be presenting a seminar sponsored by OHCA on survey & enforcement on April 7 in Columbus and April 8 in Toledo. We are in the process of developing comprehensive corporate compliance programs for a number of chain facilities and some individual CCRC campus facilities as well. There have been some additions to the list of "template" documents that we offer. For example, our medical staff package now includes: bylaws, rules and regulations, a resolution adopting the rules and regulations, a release, authorization and consent agreement for obtaining background information from applicants, an application for appointment, and a denial of application letter. In addition, we offer packages, policies, agreements, etc. that address the following: (1) abuse, neglect & misappropriations; (2) nursing facility admissions; (3) advance directives; (4) ancillary supplier agreements; (5) background checks; (6) compliance programs; (7) grievance protocols; (8) hospice; (9) hospital transfer agreements; (10) independent living apartment leases; (11) medical director agreements; (12) physician agreements; (13) residential care facility admissions; (14) restraints; and (15) transfer & discharge.   | Practice Areas | Attorney Profiles | Publications | | Seminars | Screen for Exclusion | Contact Info | | Directions | Home | Rolf & Goffman Co., L.P.A. 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