Focusing on Patient Care: The Final Rule

For the approximately 16,000 nursing home operators across the country, increased scrutiny and constant realignment have become a way of life. And if trying to prepare for a new administration that is likely to enact significant regulatory and reimbursement changes in the near future wasn’t enough, long-term care providers also end 2016 with a new 700-page rule from the Centers for Medicare & Medicaid Services (CMS).

The new rule, commonly referred to as either “The Final Rule” or the “Rules of Participation,” is a series of guidelines and requirements for long-term care facilities that receive Medicare or Medicaid funding. The guidelines will be implemented in three phases. The first phase was initiated on Nov. 28, 2016, phase two will be implemented by Nov. 28, 2017, and phase three will be implemented by Nov. 28, 2019 (Figure 1). The goal of the new regulations is to continue the advancement of service delivery and safety that has occurred over the past several years, as well as put in place a series of mechanisms designed to achieve improvements in quality of care while simultaneously attempting to reduce burdens on providers.

The new regulations represent the most comprehensive update in decades. The first time Medicare and Medicaid requirements were published by CMS was in 1989, and although there have been periodic revisions since then, this is the most thorough overhaul since 1991. Clearly, the health care industry has experienced substantial changes in care delivery in the past decades, so the Final Rule’s arrival has been long overdue.

The Final Rule, along with the recently implemented five-star system for skilled nursing facilities (SNFs), is part of CMS’s ongoing attempts to move from a fee-for-service system to one that is quality-based. Using decades of evidence-based research, CMS put together the Final Rule as an attempt to implement a comprehensive update to both the structure and content of nursing home regulations.

Perhaps the most talked-about regulation is the one that bans pre-dispute arbitration agreements. The American Health Care Association (AHCA) has been a staunch opponent of this rule, arguing it will lead to an increase in meritless lawsuits and other penalties that would negatively affect SNFs. The AHCA requested an injunction on the arbitration ban and was successful, as a U.S. District Court judge ruled that Congress would have to pass such a ban, and that the CMS overstepped its authority as a federal agency by doing so. As such, the ban is currently on hold with no clarity as to whether the ban will ever be implemented.

Person-Centered Care

One of the themes in the new regulations is “person-centered care,” as evident by several of the provisions regarding residents’ rights. Ownership will now be more responsible for proving the residents’ participation and choice in care planning. Other rules aimed at strengthening residents’ rights include:

  • More emphasis will be placed on accommodating resident groups, including making sure private space is available and designating a staff person responsible for responding to requests from a group.
  • Residents may refuse to transfer to another room if the reason is “solely for convenience of staff.”
  • Providers must inform residents of all rules regarding resident conduct and responsibilities.
  • Grievance policies will have a higher standard, as they will be required to ensure prompt resolutions and provide more thorough documentation.
  • When providing copies of personal and medical records, facilities will only be able to charge the equivalent to the cost of labor of copying the files and postage.

There are also several sections of the new guidelines designed to bolster residents’ rights in regard to abuse. The rule contains updated explanations for how providers must define the terms abuse, neglect, exploitation, mistreatment, willful, and sexual abuse. Further, facilities will face stricter oversight regarding reporting any possible crimes against residents, as well as more closely monitoring employee behavior and must notify state authorities of any employees with “court actions.”

Admission, transfer and discharge procedures will also be more robust and resident-oriented under the new guidance. Providers will no longer be able to discharge a resident while a discharge appeal is pending and must take more steps to ensure a safe and orderly discharge process. In addition, providers will no longer be able to discharge a resident based solely for behavior reasons.

Training and Survey Enforcement

Another one of the major changes providers will deal with is a more stringent process for survey enforcement. Providers will have to prove to surveyors during a site visit that staff has been adequately trained, which was not the case previously. Beginning with phase two in November of 2017, facilities must be trained to provide care as defined by the facility assessment, which focuses on such areas as vision, skin care, mobility, ostomy care, pain, respiratory care, prostheses and dialysis. By phase three in 2019, staff must also be trained to provide care for residents with mental or psychosocial disorders, as well as trauma or post-traumatic stress disorders.

Quality Assessment and Assurance

All facilities must develop a quality assurance and performance improvement (QAPI) plan and present it to a state agency by phase two. The QAPI plan must feature detailed policies for monitoring, performance improvement and program activities. When developing the plans, providers are encouraged to use data analytics to identify trends. In addition, the facilities’ quality assessment committee is now required to involve the highest levels of administration, such as a medical director, a change from previous regulations.

Since the 1990s, patient care in nursing homes has evolved significantly. This is due in part to changes in technology (medical and computerization), value-based reimbursement models, heightened patient expectations and, of course, increased regulations. Significant regulatory changes are always difficult for any industry to deal with, especially ones heavily dependent on federal reimbursement programs such as long-term care, but the underlying goal of improving patient care is always worth pursuing.

About The Authors

Bradley Granger
Vice President

Bradley Granger

Vice President

Bradley Granger is a vice president, operational and clinical underwriting with Lancaster Pollard, a financial services firm based in Columbus, Ohio, that specializes in providing capital funding to the senior living and health care sectors. In addition to underwriting tax-exempt and taxable bond offerings, Lancaster Pollard provides organizations a complete range of funding options through its Fannie Mae/FHA/GNMA/ USDA-approved mortgage lender subsidiary. It can also provide bridge-to-agency lending, private equity, balance sheet lending and investing, and M&A services.

The Clinical Risk Group significantly enhances Lancaster Pollard’s ability to analyze and assess risk factors in senior care facilities and to pass that knowledge on to our clients. Brad also assists clients in developing business opportunities relating to improving managed care relationships, hospital referral patterns and reimbursement enhancement.

The expertise and perspective of the Clinical Risk Group enables Lancaster Pollard to create best-in-class credit narratives and offering memoranda which demonstrate and convey the most thorough understanding of seniors housing and care in the industry. Our clients benefit from more efficient review processes that lead to better outcomes, whether the objective is closing a loan or preparing to acquire or divest an asset.

Post-closing, the Clinical Risk Group works collaboratively with our clients who have obtained debt to proactively address operational benchmarks identified as key success factors. The group continuously monitors various operational characteristics of the facilities in our portfolio, developing benchmarks that identify opportunities for improvement.

Prior to joining Lancaster Pollard, Mr. Granger worked for Ultra Risk Advisors as a vice president and underwriting manager for the long-term care professional liability program. His past experience also includes American Safety Insurance, PointRight Analytics, Inc., Trilogy Health Services and HCR Manor Care, where he was a regional director of operations for nine facilities.

Mr. Granger is a licensed nursing home administrator and licensed property and casualty (P&C) insurance broker. He holds a BSBA in finance from The Ohio State University and an MBA from Franklin University.


Subscribe to The Capital Issue Newsletter
Receive regular email issues with timely insights on financing hospitals, senior living and housing as well as nonprofit investment consulting and financial governance.