In the course of business planning, everyone wants to know what will happen in coming times. Prophets and seers have been long sought after to unlock the mysteries of the future. But as followers and skeptics of the notorious sixteenth-century French prophet, Nostradamus, have discovered, mysterious stanzas and quirky quatrains alone aren’t always enough to achieve predictive accuracy. However, with a solid view of demographic trends, regulatory developments, and business imperatives facing skilled nursing facilities today, we have an advantage over Nostradamus. Let us don our souped-up Nostradamus goggles and peer into the coming months and years and gaze upon the legal forces and market events that will dramatically shape the future for SNFs.
First, the major trend that will affect all of healthcare in the coming years is the continued impact of the baby boomer generation.
Over the next 11 years, three million boomers annually will reach Medicare eligibility, which equates to roughly 10,000 per day or nearly 1 every 10 seconds.
On the positive side, demand for skilled nursing facility placement and services will certainly surge. Conversely, this demand will undoubtedly stress the healthcare reimbursement system, forcing payors to stretch limited dollars. The shift to value-based purchasing and quality as the fundamental determinant of reimbursement will surely accelerate, requiring providers to quickly develop their ability to adapt to the changing financial and regulatory environment and operate in a new and different way.
“The gleaming white fortress offers many safe abode; but in the days of famine and drought, beware those who charge its gates uninvited and unannounced.”
Given the cost pressures inherent in the surge of baby boomers, the major issue that will challenge all healthcare providers in 2019 and beyond, including SNFs, will be preventable hospital readmissions. Providers whose care is found to exacerbate or permit such unnecessary and high-cost occurrences will be penalized to a greater degree going forward, and access to certain payors, programs, and patients will likely depend on a provider’s ability to maintain sound clinical and operational controls that forestall and prevent high-cost hospitalizations.
Consequently, the trend toward joint ventures, network relationships, and other collaborations among provider groups will necessarily intensify. Accountable Care Organizations and similar programs that create shared savings will transition into new risk sharing-arrangements that further increase returns. However, the corresponding downside to these arrangements — notably lost revenue or contractual penalties where the cost curve is not sufficiently bent — can be offset by providing higher quality care and improving preventative care within the facility to avoid costly rehospitalizations and ER visits.
“The steward. the hand, and the attendants of the manor shall scatter forth like dandelions dancing in the spring mistrals.”
The massive increase in demand for SNFs and for higher quality of care required to afford their care will further strain an already tight labor market. It has been estimated that health care will require an additional 5.6 million jobs over the next five years just to keep pace with demand. Skilled nursing facilities must be prepared to compete for top talent and to differentiate themselves as employers of choice as never before. Facilities with the most engaged and skillful staff will be the ones that thrive in the coming years.
Note the words “engaged” and “skillful” in the previous sentence. SNFs simply cannot retain questionable employees or accept poor performance just to avoid a staffing shortage. The warm body syndrome that so often afflicts providers in tight labor markets will actually hurt quality of care, increase costs, and drive even good providers out of business. In light of recent, high-profile incidents involving physical and sexual abuse of residents with diminished mental and physical conditions, regulators can be expected to pay more attention to issues such as staff supervision, access to compromised residents, access by male staff to female residents (and vice versa), and monitoring of treatment.
Additionally, as technology such as “granny cams” becomes more widely available, facilities will also need to develop policies and procedures to comply with emerging privacy laws or face a range of repercussions involving quality of care, compliance, state surveys, litigation, and public relations issues, among others.
I have one final prediction that is certain to occur this year, summed up in the following ominous, prophetic warning:
“I’m from the government, and I’m here to help.”
Buried in Section 6401 of the Affordable Care Act is a requirement that all healthcare providers implement effective compliance and ethics programs. Skilled nursing facilities also have a separate, specific mandate under Section 6102 of the ACA for implementing their own such programs, which requirements go into effect on November 28, 2019. By this deadline, SNFs must:
- Develop and distribute written standards of conduct, as well as written policies and procedures addressing anti-fraud compliance;
- Assign high-level personnel to oversee their compliance program;
- Communicate the written compliance standards, policies, and procedures to staff, contractors, and volunteers;
- Enforce the standards, policies, and procedures through consistent disciplinary mechanisms; and
- Perform an annual program review in order to update the compliance program as necessary.
In addition, SNF operators with five or more facilities are also required to:
- Conduct a mandatory compliance and ethics training program annually;
- Designate a compliance officer for whom the compliance program is a “major responsibility”;
- Designate a compliance liaison at each facility.
While implementation costs may vary depending on the size and existing compliance infrastructure of the facility, HHS estimates that the cost of this new compliance program requirement will be approximately $10,000 per facility annually. To maximize the benefits of enacting a compliance program and ensure that the various technical requirements of the new regulations are satisfactorily met, a best practice would be to utilize experienced counsel to assist with the drafting and implementation of the compliance program.
As these various prophecies demonstrate, the landscape in healthcare is certain to change over the coming years. These changes present both significant opportunities and serious challenges to SNFs, but provided facilities undertake careful planning and disciplined execution, SNFs can and will flourish.
Jeffrey D. Jeter is special counsel in the Corporate Practice Group at Jones Walker LLP.