2016 Was a Busy Year: Developments in Nursing Facility Arbitration Law

Nursing home arbitration agreements get a bad rap. But as most practitioners in the field know, nursing facility arbitration agreements seem here to stay, at least (possibly) until recently.  Arbitration is thought by many to offer significant flexibility and efficiency vis-à-vis litigation, and proponents in the skilled nursing industry cite arbitration as an important tool to reduce litigation costs – including, of course, the costs associated with “runaway jury” punitive and noneconomic damages verdicts, which can be crippling to industry participants.

The enforceability of nursing facility arbitration agreements has long been a hotly contested issue.  It probably is fair to say that, in general, courts broadly view these agreements as enforceable in a vacuum, but they will approach any particular instance with a healthy degree of skepticism.  Occasionally, state courts have tried to go one step further than analyzing and rejecting nursing facility arbitration agreements on an ad hoc basis and have announced a per se rule against enforceability of such agreements.  That typically does not end well for those courts.

The relatively recent Marmet decision is a good example of this latter scenario.  There, the West Virginia Supreme Court issued a decision in a consolidated group of cases holding that pre-dispute nursing facility arbitration agreements were void as against public policy under state law  The decision was appealed to the U.S. Supreme Court, which granted certiorari and promptly slapped down the state court.  In a (relatively) scathing per curiam opinion, the Court emphasized:  “As this Court reaffirmed last Term, ‘[w]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward:  The conflicting rule is displaced by the FAA.’  … That rule resolves these cases.  Since that decision, state courts seem to be somewhat more receptive to honoring and enforcing nursing facility arbitration agreements.

In 2016, however, federal regulators attempted to throw a curveball to the skilled nursing industry.  On September 28, 2016, the Centers for Medicare and Medicaid Systems (“CMS”) announced a new rule ostensibly intended “to make major changes to improve the care and safety of the nearly 1.5 million residents in the more than 15,000 long-term care facilities that participate in the Medicare and Medicaid programs.”  As part of this new rule, which would go into effect on November 28, 2016, CMS banned the use of pre-dispute arbitration agreements by nursing homes on a going-forward basis.  It noted that the rule did not apply to existing arbitration agreements (thus avoiding running afoul of the Federal Arbitration Act), and it specifically allowed nursing facilities and plaintiff-residents to agree to arbitrate after a dispute has arisen.  But the sort of prospective arbitration agreement that is presented to residents and potential residents at the time of admission would be prohibited from now on.  Although the rule technically only applied to nursing homes that accepted Medicare and Medicaid funds, as a practical matter, that included virtually all such facilities.

Needless to say, this was a controversial measure.  And the industry did not take it lying down.  On October 17, 2016, a group of trade organizations and nursing facility operators filed a lawsuit in the U.S. District Court for the Northern District of Mississippi challenged the pre-dispute arbitration rule.  On November 7, 2016, the court ultimately agreed with the challengers and entered an order preliminarily enjoining it.  It held in relevant part that a federal agency regulation effectively banning a certain type of arbitration agreement, even on a prospective-only basis, would be flatly inconsistent with the overarching pro-arbitration policy and purpose embodied by the FAA.  On December 9, 2016, CMS capitulated and sent a memorandum to Medicaid state survey administrators announcing that the rule should not be enforced unless and until the litigation was resolved and the injunction was lifted.  Especially in light of the change in administrations, the ultimate status of the pre-dispute arbitration rule is uncertain at best, and it is currently not being enforced.

So where does that leave nursing facility arbitration agreements?  Are facilities free to include them in admissions packets without fear that they will be unenforceable?  The answer to those questions necessarily is a qualified one.  Pre-dispute nursing home arbitration agreements still are not unenforceable per se, but at the same time, they will be looked upon with varying degrees of skepticism by courts.  As noted above, many post-Marmet state courts seem to have gotten the message that animus towards nursing home arbitration agreements will not be tolerated by the federal judiciary.  But “many” does not mean “all” (or even, necessarily, “most”), and there are still a number of states and jurisdictions in which courts appear likely to continue to go out of their way to find reasons as to why any particular arbitration agreement should not be enforced.

As such, it is crucial that any nursing facility or operator of facilities that wants to institute (or continue to use) an arbitration program go to great lengths to dot every “i” and cross every “t” when offering residents the opportunity to enter into an arbitration agreement.  This includes proactively reviewing the form arbitration agreement currently in use to ensure it complies with state contract law requirements, and training admissions staff so that the avoid typical pitfalls when presenting arbitration agreements to residents or prospective residents to sign (e.g., making sure that the resident has capacity to sign or that there is sufficient documentation for a representative to sign on behalf of that individual, making sure that the agreement is properly witnessed and countersigned, etc.).

Litigation over the arbitrability of a nursing facility dispute can itself be so costly and time-consuming that it removes many of the efficiencies and related advantages of arbitration. As is usually the case, it is best to try to address that potential issue on the front end of things.


Colorado Voters Approves “End of Life Options” Measure

On November 9, 2016, Colorado voters approved Proposition 106, the “End of Life Options” measure. Modeled after Oregon’s “Dignity in Death” law, it allows a Colorado resident who is terminally ill to seek a prescription for a lethal dose of medication if two doctors certify that the resident is mentally competent and has less than six months to live. The detailed act consists of 23 separate statutes, and it addresses a number of issues that may raise important questions for health care providers. For example, under Section 118 of the law, health care facilities (specifically including long term care facilities) are expressly permitted to bar employed or contracted physicians from writing a prescription for the terminal medication; obviously, health care facilities will need to decide whether – and how – their physicians will be allowed to participate in the right-to-die process. Look for updates from Gordon & Rees on key factors that health care providers must consider in upcoming weeks. The law is scheduled to become effective in the next month.

To read Proposition 106, the “End of Life Options” measure, please click here.

Well, This Changes Things: King v. Burwell and the New(?) Chevron Doctrine

I first flagged this all the way back in 2013. As everyone reading this probably knows, the Supreme Court had its final say on the matter earlier today. Long story short: The administration won. Insurance exchange subsidies under the Affordable Care Act are available on state and federal exchanges.

My colleague Knicole Emanuel has a piece up about the decision here. I’m a little less skeptical of the majority opinion in general. I think it’s pretty clear that the subsidies were intended by Congress to be available on the federal exchange, and while we should be wary about reading unambiguous laws as we think they were intended to function, and not as their wording indicates they should function, I think Chief Justice Roberts has a fair-enough point that the seemingly unambiguous language in question isn’t so clear cut when one reads it in the context of the law as a whole.

But that’s not the most interesting part to me. The most interesting part is what this decision may well do to the Chevron doctrine. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., for those who don’t know, is perhaps the most cited Supreme Court case in history (hat tip to my former admin law professor, Cass Sunstein). The Chevron opinion basically says that when a federal agency is confronted with a potentially ambiguous statute, and that agency promulgates formal rules or regulations interpreting the statute, the agency’s interpretation will be upheld provided that (1) the intent of Congress on the issue in question is not clear (i.e., the statute is silent or ambiguous), and (2) the agency’s interpretation is “permissible.”

Law professors and courts have debated what this means and how it should be applied literally for decades. (For example, what does “permissible” even mean?) But those days may be over due to King. From the outset of the case – or, at least, the certiorari grant – there was a good deal of speculation that the Supreme Court would endorse the administration’s interpretation of the subsidy issue on Chevron grounds. This would be important because it would mean that the next Republican administration could reverse that interpretation just as easily. (That’s the whole point of Chevron!)

Uh, not so fast. In his King majority opinion, Chief Justice Roberts expressly decided not to go this route. He explained:

When analyzing an agency’s interpretation of a statute, we often apply the two-step framework announced in Chevron, 467 U. S. 837. Under that framework, we ask whether the statute is ambiguous and, if so, whether the agency’s interpretation is reasonable. Id., at 842–843. This approach “is premised on the theory that a statute’s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps.” FDA v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 159 (2000). “In extraordinary cases, however, there may be reason to hesitate before concluding that Congress has intended such an implicit delegation.” Ibid.

This is one of those cases. The tax credits are among the Act’s key reforms, involving billions of dollars in spending each year and affecting the price of health insurance for millions of people. Whether those credits are available on Federal Exchanges is thus a question of deep “economic and political significance” that is central to this statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so expressly. Utility Air Regulatory Group v. EPA, 573 U. S. ___, ___ (2014) (slip op., at 19) (quoting Brown & Williamson, 529 U. S., at 160). It is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort. See Gonzales v. Oregon, 546 U.S. 243, 266–267 (2006). This is not a case for the IRS.

In other words, Chief Justice Roberts just added some teeth to the previously vague – and essentially inapplicable – language from Brown & Williamson. Now, Chevron will not apply to an agency’s interpretation of “question[s] of deep ‘economic and political significance.’” And what’s more, King seems to have given us some indication of what this might mean – if the issue in question is “central” to the legislation at issue, then Chevron appears to be inapplicable.

On the one hand, this may seem somewhat limited at first blush. After all, how many questions put in front of an agency involve those sorts of deeply significant issues? On the other hand, that kind of misses the point. A litigant can always argue that the agency interpretation at issue involves such a question. And a court inclined to disagree with a particular agency interpretation now has an out – it can always classify the statutory language being interpreted as involving a question of deep economic and/or political significance.

All of this is deeply problematic for one simple reason – under an expansive reading of King, the state of the Chevron doctrine is now up in the air. Heck, it’s unclear to me that the question at issue in Chevron itself – the definition of a “pollution source” under the Clean Air Act – would have been sufficiently unimportant or insignificant to invoke Chevron deference. In other words, it’s not settled to me that under the exception announced in King that the Chevron doctrine would have been appropriate to apply in the Chevron case itself. At the very least, this is going to spark a lot of litigation.

Dealing with Medicaid/Medi-Cal Temporary Suspensions in California – Tips Based on Our Firm’s Experience

I have written a good deal about Medicaid temporary suspensions in the past. Well, my new colleague at Gordon & Rees, Knicole Emanuel (whose blog I have followed for years), recently pointed out that a recent federal OIG audit of California pediatric dentists participating in the state’s “Denti-Cal” (i.e., Medicaid for dentists) program found that 335 of those dentists – or about 8% of the pediatric dentists providing Medicaid services – were engaging in “questionable” billing practices. The formal OIG report is located here. The California state Medicaid agency – the Department of Health Care Services (DHCS) – has vowed to step up monitoring and take action “if needed.”

Uh-oh. We’ve been down this road before with DHCS. For those who don’t click through, in the summer of 2013, a joint investigation by CNN and the Center for Investigative Reporting “uncovered” a widespread pattern of suspicious Drug Medi-Cal (DMC) billing activity in the substance abuse treatment industry in Los Angeles County. The response by DHCS and its investigators and auditors – whether warranted or not – was draconian. I’ve heard estimates that a third of the DMC providers in LA County that were investigated were “temporarily” suspended by fall 2014. As is often the case with temporary suspensions, most of these providers essentially were forced to shut down. In my experience, the DMC providers with a sufficient source of DMC revenue to wait out the temporary suspensions survived; the ones without non-DMC revenue did not.

Knicole has a number of good tips and suggestions concerning the Medicaid audit and investigation process generally (and she should! She has a ton of experience doing this sort of work). I thought I’d chime in as well. In the past few years, our firm represented a number of California providers that were the target of a temporary suspension by DHCS.  All were in the context of the DMC crackdown alluded to above. Based on that experience, I have several California- and DHCS-specific tips to offer.

  • Under California Welfare & Institutions Code Section 14043.36(a), in addition to payment suspensions, providers will be temporarily suspended from participating in the Medi-Cal program altogether, and their NPI numbers will be deactivated, while they are under investigation. This is automatic. It doesn’t matter how much (or little) evidence of fraud there is, or what that evidence is – if the matter is referred to the California Department of Justice, the referred provider’s NPI is suspended, and its ability to treat Medi-Cal patients is stopped until the investigation is resolved. Oh, and these investigations can last a long time, especially in cases involving industry-wide crackdowns, where dozens (or more) of providers are being investigated simultaneously.
  • The audits are oftentimes hectic and incomplete. It’s not uncommon for auditors to be there for less than two hours. That 90 minute visit then becomes the entirety of the basis for a finding of credible evidence of fraud. Any evidence of compliance – or at least non-fraudulent activity – produced later is typically considered suspect.
  • In this regard, audited providers should always have staff members accompany and assist the auditors. Never let the auditors pull documents for themselves. Staff should repeatedly ask if the auditors have found everything they need, and offer assistance in finding any “missing” documents. I have seen more than one instance in which the auditors left to their own devices with a provider’s files couldn’t find documents, refused to ask for help in locating them, and then concluded that the documents didn’t exist – which, of course, became Exhibit 1 in support of the finding of credible evidence of fraud. Even if the provider finds and produces the “missing” documents after-the-fact, DHCS often will view them as fabricated.
  • Staff members of an audited provider should do whatever they can to identify and copy the documents reviewed by auditors immediately after (or even during) the audit. In my experience, half of the battle in defending a temporary suspension is trying to recreate what the auditors looked at.
  • Doublecheck the copies made by auditors. Again, I can’t stress this enough. If auditors overlook a document (say the back side of a two-sided document), and then subsequently can’t find it when they go back through their copies, they’re going to assume that the document didn’t exist. Don’t give them that opportunity.
  • Audits will almost always be unannounced. That means it is crucial now to go through your files and make sure they are as squeaky clean as possible. Providers will not have notice and lead time to do so before the auditors arrive. Providers should consult their attorneys if they are worried in this regard – many attorneys provide billing compliance self-audit services, and spending that money now may well save a provider many times the cost in future legal fees if a temporary suspension can be avoided.
  • Providers should prepare their staff in advance if they think they might be audited. I’ve heard of instances of DHCS investigators pounding on the door and demanding to be admitted in a fairly confrontational manner. I’ve even heard rumors of some investigators being armed, though I have to stress that this is all second- or third-hand, so I cannot confirm whether it actually happened.  In any event, the process can feel like a stressful police ambush. That can be scary for office staff – and scared staff members oftentimes look like they’re trying to hide something, plus they can be distracted and confused.
  • If a provider does receive notice that payments and NPIs are being suspended (usually with fifteen days notice), the absolute best chance to resolve the matter quickly and efficiently will come up front at the meet-and-confer stage. This is a meeting with DHCS auditors, program people, and the staff who are ultimately responsible for the decision to suspend. It will occur quickly, often within a month or two of the suspension. This is the provider’s first and best opportunity to plead its side of the case. It is crucial to consult with your lawyer and – ideally – be represented in the meeting. Providers can come across defiant and defensive if they try to go it alone – which isn’t surprising, of course, because they have been accused of fraud and even had their livelihoods threatened! That isn’t what DHCS wants to hear. DHCS wants to hear the provider acknowledge any mistakes, and it wants to hear how the provider is going to fix them.
  • If the matter is not resolved at the meet-and-confer stage, it’s going to go to administrative briefing. Pursuant to California Welfare and Institutions Code Section 14043.65, there is no in person hearing – the entire appeal is decided on the papers. It is crucial for a provider to put the most persuasive and polished brief on record – not only because it gives you a better chance to win at the administrative stage, but also because if you lose there, it is going to be the record of your defense on judicial appeal or even in further informal settlement discussions.

I know that some of this might be frightening. My first thought after putting pen to paper on this post was to that scene in Empire Strikes Back, when Luke tells Yoda he isn’t afraid, and Yoda tells him ominously “you will be.” But there is a reason for my sturm und drang. As Knicole says, state Medicaid agencies have a good bit of leverage in these overpayment and fraud and abuse investigations, and in my opinion, DHCS falls towards the very top end of that list. This isn’t a time for providers to put their heads in the sand and figure that they’ll deal with any problems with DHCS later down the line if and when something happens. By that point, it very well might be too late – or at the very least, the providers will have missed the best chance (or even the second best chance) to prevent or resolve any problems cheaply and quickly.

A Lot of Home Health Business? That’s a Lot of Home Health Claims for Medicare and Medicaid to Suspend

I’ve been thinking a good bit about home health care lately.  A lot of that is the concerted effort in the Affordable Care Act to promote home health in lieu of placement in a skilled nursing facility.  It seems like every other long term care provider out there – including most of the big ones – is trying to expand its home health presence as quickly as possible.  Some of that may be my recent experience with my grandmother’s end-of-life care over the past six or seven months, which was spent in a skilled nursing facility (first), an assisted living facility (second), and at her home receiving home-based hospice care (last).  Her last few weeks at home left me with a positive impression of home health care.

Anyway, I hate to be a stick in the mud, but one thing does concern me.  As this blog shows, I write a lot about Medicaid fraud-based temporary suspensions.  The same remedy (technically suspension, effectively termination) exists under Medicare.  As that regulation and Medicaid counterpart show, it’s a broad power.  The applicable federal or state agency need only show a “credible allegation of fraud,” at which point it can withhold all payments owed to the provider – including those that have nothing to do with the alleged fraud, and even when the provider can show that the vast majority of claims are legitimate.  Indeed, after the ACA, federal and state regulators are now told that they must have good cause to release any of the owed claims, and they can only do so under a limited set of circumstances.  As one colleague recently put it to me, “temporary suspension” is really code for “lazy man’s termination.”

So what does that have to do with home health care?  Regulators have long recognized that home health care carries an increased risk of fraud.  It makes sense, of course.  There is no direct supervision when a home health caregiver provides care in the home of a recipient.  Usually, the only way to know what the caregiver did, and for how long, is the say so of the caregiver and the recipient.  The opportunity for collusion is more-or-less unchecked.  Add in lower level managers responsible for scheduling and supervising the caregiver (inasmuch as supervision is possible), and it becomes very difficult to police fraud.  And indeed, from 2010 to 2014, OIG has identified over one billion dollars associated with fraudulent home health claims – and that’s without looking.  The real amount likely is a multiple of that.

That should cast the rapid expansion of the home health care industry in an ominous light.  The sorts of institutional providers looking to increase their home health presence quickly undoubtedly will be able to garner a large share of the market quickly.  And that’s a good thing for the most part.  But a lot of business means a lot of opportunities for fraud.  It’s a lot of caregivers, a lot of lower level managers, and a lot of recipients – which means a lot of risk that some small number of them might (for example) collude to record care for services not provided, and then split the proceeds.

And remember from above, if federal or state regulators believe that they have any credible allegation of fraud, they can suspend all payments owed to the company, not just those associated with the fraud.  Ouch.  Now, is it realistic that regulators would step in and turn the revenue spigot off entirely for a company providing home health services to thousands or even tens of thousands of recipients?  Probably not – at least not without a back-up provider lined up to step in.  But it’s certainly a lot of leverage on the part of Medicare and Medicaid, and there’s a strong likelihood that regulators might use that leverage to pressure institutional providers into favorable settlements (both financially and in terms of a going-forward corrective action plan).

So how should companies aspiring to a big share of the home health market protect themselves in such a perilous area?  That’s something I intend to address in the next few posts.

Getting Your LTC Arbitration Dispute into Federal Court

Last week, I noted that it often can be crucial – if you want to arbitrate a long term care (LTC) tort claim – to keep that claim out of state court.  But, as I also noted, this can be easier said than done.  Plaintiff’s lawyers often will sue employees of the LTC facilities (most often nursing home administrators) as co-defendants, and while the facility itself may be a foreign corporation, the employees normally are Colorado residents, thus spoiling diversity jurisdiction.  So does that mean the LTC facility is stuck in a potentially hostile state court venue if it wants to try to compel arbitration?

Not so fast.  Normally, plaintiffs do not bring the arbitration claim in the first instance – and why would they, given that they never want to arbitrate?  So the arbitration claim will not become a part of the state tort claim unless the defendant wants it to.

And while the defendant will want to raise the arbitration issue at some point, there’s no reason that it has to be in the case and the court in which it was sued.  It’s normally perfectly acceptable to bring a new, affirmative lawsuit attempting to compel arbitration.  But why include the resident employee?  The saying is that a plaintiff is the master of his claim, and if a LTC facility doesn’t want to include the employee, it doesn’t have to.  Voila!  Now you have diversity jurisdiction.

It may seem unfair to let a state court defendant manufacture diversity jurisdiction to take the arbitrability question into federal court despite a pending tort case.  Maybe it is and maybe it isn’t, but the point is, courts let defendants do that sort of thing all the time.  This is not to say that federal courts automatically will hear a complaint seeking to compel arbitration; it is possible that the resident defendant might be held to be an indispensable party under Rule 19 of the Federal Rules of Civil Procedure, and if that’s the case, dismissal will be warranted.  But nursing home administrators seem not to fall in that category too often.

Arbitration is not a panacea, of course.  Many LTC facilities are (understandably) wary of participating in a alternative dispute resolution process with little formal standards or appeal rights.  In most cases, it may be preferable to stay in state court.  But most is not all.  There are certain jurisdictions where a LTC defendant will want to get out of the forum at all costs.  In those places, it might be helpful to get to federal court, even if it’s just on the arbitration issue.  (It’s also important to note that even if the federal trial court is skeptical of the arbitration petition, the LTC facility will have appeal rights pursuant to Section 16 of the Federal Arbitration Act, so there is even a safeguard against an unfriendly district court judge.)

Dotting Your “I”s and Crossing Your “T”s Is Really Important if You Want to Arbitrate Your Long Term Care Tort Claim, at Least in Oklahoma

This is going to be the first in probably a couple of posts on arbitration agreements in the long term care (LTC) context.  This decision from the Oklahoma Supreme Court was handed down last week.  It involves the death of an LTC resident at a Chickasha, Oklahoma facility.  The deceased resident’s daughter brought a wrongful death claim.

The facility moved to dismiss the litigation and compel arbitration, citing an arbitration provision in the admission agreement, which was signed by the daughter (and not the resident herself) under a General Power of Attorney.  The plaintiff responded by arguing that the Power of Attorney did not authorize the daughter/plaintiff to bind the resident to the arbitration agreement because it was superseded by a later-in-time Health Care Power of Attorney, which specified that the daughter could only make “health care decisions” on behalf of the resident if she was certified by a physician to be unable to make her own health care decisions (which was not the case upon admission.  The plaintiff further argued that because the arbitration agreement was a condition precedent to admission, it made signing it a “health care decision” – i.e., a decision that the plaintiff/daughter was unable to make.

The trial court agreed with the plaintiff.  The facility appealed, and on November 25, 2014, the Oklahoma Supreme Court handed down its decision.  The crux of the opinion concerned the issue of whether signing the arbitration agreement was, in fact, a “health care decision.”  The high court agreed, endorsing the plaintiff’s argument that when signing it is a requirement for admission to a LTC facility, it becomes such a decision.  It primarily cited and relied upon a 2010 Maryland high court decision reaching the same result.  The court also noted that the facts and circumstances surrounding the signing of the general and health care POAs indicated an intent to carefully delineate between the two duties.  (As an aside, this appears to be part of a recent trend in Oklahoma to disfavor LTC arbitration agreements.)

So what is the takeaway from this?  Well, in Oklahoma at least, it’s simple.  LTC facilities admitting new residents need to look at POAs before they accept the new resident’s representative’s signature on an arbitration agreement.  If there’s any question at all, try to have both the representative and the resident (if possible) sign.

Outside of Oklahoma, and even outside of the POA context, cases like these really emphasize the importance of making sure you have an ironclad arbitration agreement – and a similarly ironclad process for making sure that they are properly signed.  Oklahoma court are not the only state courts that really do not like arbitration agreements.  If there is any way for a state court to reject an arbitration provision, in many states, the court will bend over backward to do so.  There’s no foolproof method to eliminate that risk, but LTC facilities should do what they can to mitigate it.

This all raises an issue that I plan on covering in a future blog post – maybe a major goal should be to keep arbitration disputes out of the state courts in the first place.  But how do you do that?  Even if there is diversity jurisdiction based on the out-of-state citizenship and domicile of the facility, plaintiff’s counsel often includes the nursing home administrator or executive director as a co-defendant, which usually defeats diversity.  I’ll address this in my next post.

VA, We Have a Problem – Yes, Another Problem

It’s no secret that the U.S. Department of Veterans Affairs (the VA) has had its share of problems in recent years.  In some areas, revelations of the scope of these problems have led to improved care.  (I can vouch for this – my brother-in-law is a veteran, and in recent months, the quality and responsiveness of his care has improved dramatically.)  That’s unquestionably good news.

But it’s not rosy on all fronts.  There is a little-known VA program, called Aid & Attendance and Housebound, that is designed to help pay for the care of disabled vets (and their spouses) who cannot take care of themselves.  This includes skilled nursing and assisted living care. The eligibility formula takes into account the vets’ income and health care costs, and pays up to $2,054 a month (for a vet) or $1,114 a month (for a surviving spouse).  That’s not nothing.  Indeed, an eligible vet who spends his last five years in assisted living and then skilled nursing care would be entitled to nearly $125,000 to pay toward that care.  And that’s not all – the benefit is retroactive, meaning that an eligible vet (or his or her spouse) will get a lump sum representing all of the months that have elapsed while processing the application.

Then what’s the problem?  Well, as this excellent article points out, the waiting times to be declared eligible are enormous.  And as this great first-person account notes, the application process itself is Byzantine at best.  Applicants must submit dozens of documents, and once they do, they can expect their applications to take six to nine months – if everything goes right.  What if everything doesn’t go right?  Gulp.  You’re looking at potentially years before the appeal works its way through the process.  Oh, and if the eligible vet (or his or her spouse) dies before the application is ultimately approved, it’s unlikely that the vet’s children will be able to collect anything more than the costs associated with the last illness and funeral.  Sure, it might be the case that the last illness was the one that put the vet in the skilled nursing or long-term care facility in the first place, but it might not.  If not, the children (or the facility) won’t be reimbursed whatever they paid out-of-pocket for that institutional care.

This is not a trivial concern.  It’s notoriously hard to find statistics on life expectancy compression upon admittance to a skilled nursing facility, but some studies indicate it may be more than 50 percent by the end of the first year.  That is tens of thousands of dollars per resident that could be used for care but instead is left on the table.  And if the facility is the one providing the care with the expectation of reimbursement from the Aid & Attendance program?  Multiply the tens of thousands of dollars by the number of patients it’s doing that for, and you get a big number pretty fast.  And it’s not just the family or the facility that may be out that money – insofar as state Medicaid is paying for the care, it’s out the money, too.

So what to do?  Publicity lit a fire under the VA with respect to disability benefits.  Maybe it will have the same effect for vets eligible for the Aid & Attendance program.  On the other hand, these vets generally aren’t the ones getting a bum deal – whoever is paying for their care is, and children seeking to collect tens of thousands of dollars to reimburse themselves (or a long-term care facility doing the same) aren’t as sympathetic as a wounded or disabled vet trying to get care.  If public shaming won’t work, what’s left?

The answer – potentially – is litigation.  The first obvious objection for the lawyers out there is that the applicants must be required to exhaust that same Byzantine appeal process before going to court.  Right?  Not necessarily.  One prominent exception to the exhaustion requirement is futility – a plaintiff need not exhaust administrative remedies if doing so will be futile.  What could be more futile than a likelihood that the applicant will be dead (with most benefits lapsing) before the appeal is resolved?  I may have more on this later.

Balancing the Tension Between Treating an Ebola Patient and Protecting Staff and Other Patients

Well, the Ebola scare is all everyone is talking about.  A colleague brought up an interesting question earlier in the week: What sort of potential liability do health care facilities face from it?

There are lawsuits anticipated from the family of the first victim as well as at least one of the infected health care workers who treated him.  With respect to the first of those, from what I read, the potential lawsuit seems doomed.  With respect to the health care workers, if the treatment protocols were as inconsistent and ineffective as claimed, then they likely will have a better chance of success under OSHA or workers’ comp laws.

HC BLOG_ebolaI’m more interested in what might happen if other patients become sick.  Hospital-acquired infection cases are not novel; they’ve been tried for decades.  The general consensus of plaintiffs’ lawyers is that they are difficult but not impossible to win.  That difficulty only increases with the publication of comprehensive Ebola treatment guidelines by the Centers for Disease Control and Prevention (assuming hospitals follow them, of course).

But “difficult” is not “impossible.”  And, even setting aside liability concerns, hospitals and other health care facilities understandably may be reluctant to expose their health care workers to Ebola patients.  One way to address this concern is to systematically transfer patients to specialized care facilities designed to contain Ebola and similar viruses – and indeed, it appears that the federal government already is going down that road.  But if the crisis grows, there is no guarantee that beds will be available in those bio-containment units, and in any event, a transfer takes time, and it is likely that an Ebola patient will require on-site treatment for hours or days before the patient can be transferred.

That’s the important point to note.  Treatment will be required.  Hospitals cannot just isolate patients and wait – without treating them – until they can be transferred, or they die (if no transfer is available).  If nothing else, as the victim’s family’s potential lawsuit shows, hospitals are at risk of being sued for malpractice if they fail to provide adequate care.  So a facility is going to have to balance the competing obligations of minimizing contact between the Ebola patient and health care workers and providing a sufficient level of care.

What is the proper balance on that score?  I’m afraid I don’t have a good answer, probably because there isn’t one.  A lot of it will have to do with how many new patients present with Ebola, and what their acuity levels are.  But health care facilities need to recognize that it’s a “damned if you do, and damned if you don’t” situation.  If nothing else, it’s probably advisable for hospitals to start thinking now about how they will respond to that unenviable dilemma.

Image courtesy of Flickr by CDC Global

Medicare Advantage Risk-Adjustment Fraud – Where’s the False Claim? (Part I)

I recently saw this article discussing a False Claims Act (FCA) case pending in federal district court in Florida.  The theory is an interesting one involving the Medicare Advantage program.  The full story is available here and here, but I’ll provide a brief synopsis.

In 2003, Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act (MMA), which required the Centers for Medicare and Medicaid Services (CMS) to initiate the formal implementation of a fully risk-adjusted capitation reimbursement model for Medicare Advantage.  Essentially, a risk-adjusted model recognizes that many Medicare Advantage beneficiaries experience health conditions that can be very costly, to the point where a single hospitalization can wipe out the entire amount of premiums the Medicare Advantage managed care organization received over the course of the year.  Therefore, it pays higher premiums for those beneficiaries who have been diagnosed with conditions that make them more likely to use significant health care resources over the course of the year (e.g., diabetics, people suffering renal failure, etc.).

You can see the potential for fraud and abuse.  If Medicare Advantage plans get paid more for covering high-risk beneficiaries, then they’ll have an incentive to exaggerate the poor health of their beneficiaries.  Doctors will err on the side of diagnosing their patients with the more serious conditions in borderline (and perhaps not-so-borderline) cases.  That’s what the plaintiff alleges the provider did in the case linked above (I won’t name the company, but you can click through).  In related news, CMS recently announced that it intends to scrutinize Medicare Advantage risk-adjustment data submitted by plans to ensure its accuracy, primarily in an attempt to deter this potential practice.

But there’s a problem from the government’s point of view.  Where’s the claim?  The FCA only covers false claims submitted to the government for payment, or false records or statements material to false claims.  It is not a general HC BLOG_HHSfraud statute.  And it is at least debatable whether a trumped up diagnosis submitted for risk-adjustment purposes falls within the “false claim” category.  Now, it’s probably inarguable that if a Medicare Advantage plan knowingly included false or exaggerated diagnosis data when it submitted its capitated reimbursement request, that conduct would be a false claim.  But that’s unlikely to happen.  Instead, the plans normally will just aggregate the data they receive from their doctors without investigating its accuracy (which would be impossible on any large scale).  And in the absence of any direct connection between the receipt of false data and the submission of the reimbursement request, it’s hard to cite any specific false claim.

Now, it’s important to note that the Department of Health and Human Services (HHS) rejects this analysis.  It takes the position that the FCA encompasses risk-adjustment fraud (see note 12 for FCA actions brought by HHS).  But all of the matters involving this theory have settled before a court can opine on the issue, so we have no judicial pronouncement on whether HHS’s interpretation is a viable one.

And there’s one more thing.  The Medicare Advantage program seems to be growing, despite cuts made in the Affordable Care Act (ACA).  (It is only used by 30 percent of the population eligible for Medicare, tallying about 15.7 million beneficiaries.)  But it is not the only federal health care program that uses a risk-adjustment model.  In fact, the ACA contains a virtually identical concept to help offset insurance plans that cover high-risk individuals through the state and federal insurance exchanges.  These plans theoretically will have the same incentive as the Medicare Advantage plans to exaggerate – or even lie about – their enrollees’ health conditions.  There is an important difference between the two risk-adjustment approaches though – how Congress has decided to treat them for FCA purposes.  That difference may be crucial to the question of whether and how false or exaggerated risk-adjustment data is covered by the ACA.  More on that in my next post.