Long Term Care

As our population ages, increasing numbers of individuals will require long term health care services. Services provided by home health agencies allow elderly individuals to receive medical and supportive assistance while remaining at home. Assisted living facilities serve those who cannot live on their own, i.e. , they require assistance with bathing, dressing, ambulating and the other activities of daily living. For those who require more complex or round-the-clock health services, nursing homes may be the best alternative.

This summary highlights basic legal considerations for each type of provider.

I. Nursing Homes

Licensure of Nursing Homes

Licensure requirements for nursing homes vary from state to state. Some licensing authorities take an aggressive role; health planning considerations are given much importance, detailed requirements are imposed and applications undergo strict review. Other states have no formal review program, but providers may be required to register equipment purchases and construction projects. The usual review criteria in states with review requirements include need for beds (Certificate of Need), adequacy of character and competence of operator(s), and the financial feasibility of the project. If new construction or renovation is involved, review of the proposed design is also required. State approval may also be required for adding or deleting beds/services and for change of ownership.

Federal/State Monitoring of Quality of Care

Federal law requires that long term care facilities participating in the federal Medicare program "provide services and activities to attain or maintain the highest practicable physical, mental and psychosocial well-being of each resident in accordance with a written plan of care [that] describes the medical, nursing, and psychosocial needs of the resident and how such needs will be met."

Requirements for participation in the Medicare program are set forth in federal regulations. Categories cover:

  • Residents rights.
  • Admission, transfer and discharge rights.
  • Resident behavior and facility practices.
  • Quality of life.
  • Resident assessment.
  • Quality of care.
  • Nursing services.
  • Dietary services.
  • Physician services.
  • Specialized rehabilitative services.
  • Dental services.
  • Pharmacy services.
  • Infection control.
  • Physical environment.
  • Administration.

Federal/State Survey, Certification and Enforcement Process

Each state maintains its own quality assurance standards. However, the federal requirements for participation in the Medicare program are the minimum standards allowed. If the federal government determines that a facility is out of compliance, its determination is binding over the state’s determination of compliance. If the state has determined that the facility is out of compliance, but the federal agency finds compliance, the state’s determination controls.

Surveys of nursing homes are performed to certify that new facilities are in compliance with applicable standards, to ensure that existing facilities maintain compliance with quality standards through routine periodic surveys, and to respond to complaint allegations.

"Outcomes," rather than mere compliance with paper requirements, are key. Surveyors are required to focus on the impact of the treatment on the residents’ health and safety rather than simply reviewing the facility’s policies and procedures for rendering care. Resident interviews are part of the survey process.

When determining whether a remedy should be imposed, surveyors consider the seriousness of the deficiency or deficiencies by analyzing the scope and severity and applying a formula based on a scope and severity grid. One or more of several remedies may be imposed for failure to maintain substantial compliance.

An appeal of survey findings may challenge only the following:

  • A finding of noncompliance that results in the imposition of a remedy;
  • The amount of a civil money penalty imposed (not the decision to impose a civil money penalty);
  • A finding of immediate jeopardy that led to a civil money penalty of between $3,050 and $10,000 per day;
  • Termination of a facility’s nurse aide training program.

A pending appeal does stay the imposition of enforcement remedies except where civil money penalties are imposed.

How Nursing Homes Get Paid

Medicare Part A
Only skilled nursing rehabilitation or services are covered under Medicare Part A. Skilled services must be provided on a daily basis and a physician must certify that the individual requires skilled nursing care. The care needed must, as a practical matter, be available only in a skilled nursing facility on an inpatient basis. Part A covers semi-private room, meals, nursing services, physical, occupational and speech therapy, medical social services, supplies, equipment and medication. Only post-hospital admissions to nursing facility are covered and the hospital stay must be at least three days. A maximum of 100 days per spell of illness are covered (full coverage for the first 100 days; Medicare pays all except for daily coinsurance amount for days 20-100).

Historically, nursing homes have been reimbursed under a methodology based on the facility’s costs of providing covered care. Pursuant to requirements of the Balanced Budget Act of 1997, the methodology has changed to a prospective payment system, referred to as "PPS."

Medicare Part B
Medicare Part B is intended to fill some of the gaps in medical insurance coverage left under Part A. Covered services include physicians’ services, physical/speech/occupational therapy (when not billed under Part A), x-rays, laboratory tests, durable medical equipment, and prosthetic devices. Medicare Part B pays 80 percent of the payment rate approved by Medicare. The patient is responsible for the remaining 20 percent.
Medicaid
Medicaid provides coverage to qualifying poor individuals for unlimited duration. Coverage is based on income and asset tests; the threshold generally is very low. Each state’s Medicaid program has its own rules, subject to certain federal requirements.
"Private" payment
Payment also can be made through long term care insurance, managed care coverage, or out-of-pocket payment.

Liability Concerns for Nursing Homes

Patient abuse and neglect
Many states require facilities to report instances of abuse or neglect. What constitutes abuse/neglect can be an issue. The increased focus of patient advocates, elder law/personal injury attorneys and the media on alleged abuses in nursing homes creates a difficult climate for nursing homes.
Violation of fraud and abuse laws
The primary laws that apply to nursing homes are the Health Care Anti-kickback Law and Civil False Claims Act. Fraud and abuse issues targeted by the government include kickbacks received in exchange for referrals, medical necessity of services and supplies, overlapping Medicare and Medicaid payments for hospice care to nursing home residents, and "gang visits" by one or more medical professionals where large numbers of residents are seen in a single day.
Credentialing of medical staff
Facilities should formally verify and document the ability of its medical staff members to provide appropriate care and services to the facility’s residents. Under the theory of corporate negligence, a facility may be held liable for the failure to properly credential its medical staff.
Confidentiality of medical records
State laws concerning confidentiality of medical records must be observed.
Treatment decisions
A resident’s treatment decisions, including the withholding of treatment, must be observed in accordance with the Patient Self-Determination Act and any applicable state statutes.
Discrimination
Anti-discrimination laws applicable to employment settings and places of public accommodation apply to nursing homes. In addition, some states have laws that prohibit discrimination against nursing home residents based on the source of payment for their care.
Negligent hiring/negligent retention of unfit employees
Under the doctrine of respondeat superior , an employer may be held liable to third parties for the actions or omissions of his employee. The doctrine may be extended to impose liability for injuries caused by intentional torts if committed within the scope of the individual’s employment. Conduct such as violent acts are not likely to fall within the scope of employment. However, if the conduct can be traced to the employer’s negligence, it may not be possible to avoid liability.
Admission Agreements
Federal statute and regulations do not specifically require that a nursing home have a written agreement with its residents. However, regulations require that residents be given notification of certain rights. An admission agreement that includes the rights and responsibilities of the parties, and the expectations of the parties, is an appropriate mechanism for providing residents with required notices, as well as for setting forth the rights and responsibilities of each party.

II. Assisted Living Facilities

Currently, the assisted living industry is not subject to the same level of regulation as nursing homes and home care agencies. Many, but not all, states regulate the provision of assisted living services. While there are no federal laws specifically governing assisted living, there are several more general federal rules that apply to these services.

Anti-kickback Law Issues

The federal Health Care Anti-kickback Law prohibits giving, receiving, offering or soliciting any remuneration, direct or indirect, to induce referrals for services or items reimbursed by Medicare, Medicaid or other federal health care programs. Violations may result in criminal prosecution. States frequently have similar anti-kickback laws, many of which relate to services or items reimbursed by any payor, not just government programs.

Home Health Agency Services

A 1995 OIG Special Fraud Alert on "Home Health Fraud" is noteworthy for the assisted living industry because it highlights two practices by home health agencies that may constitute a violation of the Anti-kickback Law and put both the assisted living community and the home health agency at risk:
  1. Providing free services, such as 24 hour nursing coverage, to a retirement home or adult congregate living facility in return for home health referrals.
  2. Subcontracting with a retirement home or adult congregate living facility for the provision of home health services, to induce the facility to make referrals to the agency.

In addition, home health agency services that duplicate those furnished by the assisted living facility when the facility is required to provide the care under state licensure requirements or the resident’s contract with the facility may raise kickback concerns if aide services for which the facility is responsible are being provided to the facility at no charge.

Free or Reduced Rate Items or Services

In addition to home health agencies, other ancillary service providers may find assisted living facilities attractive as a potential source of business for their products. Examples are rehabilitation services, physician services, and durable medical equipment suppliers. Provision of free or reduced price services or items to assisted living programs may constitute illegal kickback arrangements if they are intended as inducements to generate referrals.

Leasing of Space

The leasing of space within an assisted living community is another common practice that raises potential kickback issues if an incentive for referrals is built into the lease arrangement, e.g. , the rent paid by the home health agency is in excess of fair market value.

Marketing for HMOs

Marketing on behalf of Medicare HMOs also may raise significant anti-kickback concerns. Payments tied to the number of persons enrolled are strictly forbidden.

Safe Harbor Regulations

Despite the breadth of the Anti-kickback Law, federal "safe harbor" regulations set forth criteria that, if met, may insulate certain specific types of arrangements from a finding of a violation of the law.

Discrimination on the Basis of Disability or Handicap

Assisted living facilities generally are subject to the anti-discrimination provisions of the Fair Housing Amendments Act of 1988, the Americans with Disabilities Act, and Section 504 of the Rehabilitation Act of 1973. All of these laws prohibit discrimination on the basis of "disability" or "handicap." These terms are broadly defined so that most assisted living residents will be considered to be disabled or handicapped.

Providing Care Beyond the Scope of the Facility’s License

Most states limit the admission or retention of residents and/or the scope of services that can be provided in assisted living according to a wide variety of criteria, such as whether the resident is bed-ridden, medically unstable, non-ambulatory, incontinent or requires assistance with several activities of daily living. Most states do not permit the provision of 24-hour skilled nursing care in an assisted living facility.

Freedom of Choice

Many assisted living facilities have preferred provider arrangements with ancillary service providers. Denying or restricting a resident’s right to choose his/her own provider of ancillary services may violate state licensure or consumer protection laws, as well as Medicare or Medicaid conditions of participation, if applicable.

III. Home Health Care

Home Health Agencies are regulated under federal and state law, depending on the category of agency. Medicare certified agencies (CHHAs) are authorized under the Social Security Act, and operate under a complex set of rules and regulations promulgated by the Health Care Financing Administration (HCFA) and implemented by Medicare Fiscal Intermediaries. Non-Medicare agencies are usually licensed under state law and regulations.

On both the federal and state levels, regulations governing home health agencies generally seek to protect patient rights, set minimum quality standards, and prevent fraud and abuse. The typical home health patient is an elderly, frail individual who requires nursing, rehabilitation or home health aide services in order to live safely in the community. Younger individuals with short term rehabilitation needs, and chronically ill individuals make up the remaining census of most agencies.

Under pressure from DRGs and managed care to limit acute care hospitalization, home health patients tend to be sicker and require complex treatments and highly skilled monitoring. With the increased complexity of care, the burden of staffing and coordinating home care services has risen, as has the potential for professional malpractice liability.

Federal Certification and Licensure

Medicare certified agencies must meet the Medicare Conditions of Participation under 42 C.F.R. § 484. Requirements include appointment of a governing body, a qualified administrator, and sufficient, credentialed staff to provide certain baseline services, including skilled nursing, rehabilitation, medical social work services, and provision of medical equipment. Under new requirements, agencies are mandated to establish a continuous quality improvement program that is data-based and outcome oriented. That is, patient outcomes must be systematically measured, and the effectiveness of services must be demonstrated in terms of patient improvement and patient satisfaction. Agencies must collect outcome data using an instrument, the Outcomes and Assessment Information Set (OASIS). OASIS is expected to allow for comparisons among agencies in terms of their performance. Eventually, Medicare eligibility rules and payment for home health services will be linked to outcome data collected through the OASIS system.

Non-Medicare certified agencies are usually licensed under state law and regulations. These agencies are typically organized to provide nursing, rehabilitation, home health aide, or infusion therapy services. Non-certified agencies serve "private" pay patients covered by commercial insurance or who pay out of pocket. They also contract with Medicare certified agencies as vendors to provide services to Medicare and Medicaid patients.

Governmental Monitoring of Quality Issues

HCFA contracts with State Departments of Health to perform the survey and certification process under which agencies must demonstrate conformance with the Conditions of Participation. The states are responsible for monitoring quality issues under the Federal Conditions of Participation and state licensure requirements, and for responding to complaints. In addition to state enforcement activities, Medicare Fiscal Intermediaries perform audits to verify that patients are getting the services for which Medicare pays.

Each state maintains its own quality assurance standards, but for Medicaid patients, the federal Conditions of Participation are the minimum standards allowed.

How Home Health Agencies Get Paid

Medicare Part A
To be eligible for the Medicare home health benefit, a beneficiary must on an ongoing basis:
  • be homebound;
  • be in need of skilled services;
  • be under the care of a physician who establishes the plan of care; and
  • receive services from or under arrangements with a Medicare certified home health agency.

Services must be medically necessary, and the patient's care must be manageable with part-time or intermittent services. An individual requiring full-time care, or requiring mainly custodial care, does not qualify for home care under Medicare. All services must be documented and physicians' orders signed before an agency submits a bill to Medicare.

Payment rates were historically set on a cost basis. In an effort to encourage efficiency, however, the Balanced Budget Act of 1997 changed the method of home health reimbursement to a prospective payment system (PPS). The prospective payment system, which is still under development, is expected to be linked to the management of episodes of illness as measured by OASIS data. Meanwhile, home health agencies are being paid under an Interim Payment System (IPS). Many agencies have lost money under IPS, where payments must be the lower of the actual reasonable allowable costs, per-visit limitations in the aggregate; or a per-beneficiary limitation in the aggregate. Agencies that do not organize themselves to achieve desired patient outcomes in an efficient manner will be financially penalized under the prospective payment system.

Medicaid
Medicaid eligibility requirements are determined by income. Services that Medicaid will cover vary from state to state. Some states will cover personal services and "custodial" care, which are not covered under Medicare.
"Private" payment
"Private" payment may include long term care insurance, indemnity health coverage, managed care coverage, and out-of-pocket payment. Managed care contracts in particular often strictly limit the services that may be provided by a contracting home health agency.

Liability Concerns

Patient abuse and neglect
Home health personnel work in a relatively unsupervised setting, making monitoring difficult. Criminal background checks are often performed for home health aides whether or not they are required under state law. As is true of any health care provider, home health agencies may be subject to liability for negligent hiring, credentialing, and supervision of staff.
Violation of fraud and abuse laws
Home health agencies are subject to liability under federal and state anti-kickback and self-referral laws. Accordingly, payment for referrals in cash or in kind are subject to criminal penalties. Relationships between physicians who act as medical directors or otherwise provide personal services to home health agencies must be carefully structured so that compensation is set at fair market value, and in no way tied to the volume or value of referrals. Home health is a designated health service under the Stark II regulations. Thus, in the absence of a personal services contract or other exception, a physician may not refer Medicare or Medicaid patients to a home health agency in which he or she has an ownership interest.

There is a potential for False Claim Act violations when agencies do not carefully monitor their billing and documentation practices. The following are some common sources of liability:

  • billing for services not furnished or supplies that were not provided;
  • submitting duplicate bills for the same service;
  • describing a non-covered service in a misleading way that makes it appear as if a covered service was actually furnished;
  • certifying medical necessity for patients who do not require care or meet the eligibility requirements;
  • providing medically unnecessary services or services that do not meet professionally recognized standards;
  • billing for services of a professional when services were actually provided by non-licensed personnel;
  • altering claim forms and/or receipts in order to receive a higher payment amount;
  • billing for person who has Medicare coverage for services provided to another person not eligible for Medicare coverage;
  • repeatedly violating the participation agreement, assignment agreement, the maximum allowable actual charge limits or limitation amount;
  • conspiring to submit or manipulate bills by a provider and a beneficiary, two or more providers and suppliers, or a provider and a carrier that results in higher costs or charges to the program;
  • billing procedures over a period of days when all treatment occurred during one visit (e.g ., split billing schemes);
  • submitting bills to Medicare that are the responsibility of other insurers under the medicare secondary regulations; and
  • billing Medicare based on a higher fee schedule than for non-Medicare patients.
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