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Column | Legal and Regulatory Compliance

Proposed nursing home regulations send an important message to all providers

Column | Legal and Regulatory Compliance

Proposed nursing home regulations send an important message to all providers


In a Feb. 28 statement, the Biden administration proposed major reforms for the nation’s 15,500 nursing homes “to crack down on bad actors.” The proposal has important implications not only for nursing homes but also for healthcare organizations of all types.

The White House statement was accompanied by a fact sheet stating that the proposed changes aim to “.… improve the safety and quality of nursing home care, hold nursing homes accountable for the care they provide, and make the quality of care and facility ownership more transparent so that potential residents and their loved ones can make informed decisions about care.”a

Among the policy reforms are:

  • Minimum staffing requirements
  • Expanded access to single-occupancy rooms to reduce overcrowding and community contagion
  • Measures to limit unnecessary treatments and medications, including antipsychotics
  • Promotion of vaccine boosters and primary series shots
  • Increased infection prevention staffing

The statement also includes a specific focus on the role of private equity, noting, “Too often, the private equity model has put profits before people — a particularly dangerous model when it comes to the health and safety of vulnerable seniors and people with disabilities.”

The timing of the administration’s attention to nursing homes is understandable given the sector’s significance in the pandemic. As of May 9, of almost 1 million who had died from the pandemic since March 2020, more than 150,000 were nursing home residents.b Moreover, almost 2,400 nursing home staff had succumbed to the virus. Understandably, the sector drew oversized attention during the pandemic as the vulnerabilities of patients and staff were exposed.

A challenging sector

As a sector, nursing homes are rarely in the spotlight — until there’s an issue, like the pandemic. More than 1.4 million reside in about 15,500 Medicare- and Medicaid-certified nursing homes, the White House fact sheet reported. They are elderly and disabled, and most are poor. The sector represents almost 5% of total health spending, increasing 13% from 2019 to 2020 (from $174.2 billion to $198.8 billion) and forecast to reach $273 billion by 2030.c Most facilities depend entirely on funding from Medicare and Medicaid; a handful cater to well-heeled seniors. Thus, the dynamics that impact the solvency and sustainability for nursing home operators are unusually challenging. Two are particularly instructive for healthcare finance professionals.

1 The complexity of senior health. The senior (65+) population is large (surpassing 54 million as of 2019) and growing (projected to reach 95 million by 2060). Seniors also are an influential group, as voters and healthcare consumers, despite many having limited resources.d

As entrepreneurs explore ways to reach this population, they’re finding senior health to be a diverse and complex landscape with vast variability in needs and wants. The have found attractive opportunities in digital technologies, alternative care and customized products, but they also are confronting inadequate funding and ageism bias in modernizing services.

Nursing homes are a petri dish for testing approaches to senior health. The Biden proposal targets an evidence-based approach to senior care in nursing homes that holds organizations to account for clinical and financial results. It calls out three dimensions of clinical operations that impact patient outcomes and costs directly: staffing levels, infection controls and medication management.

Here's the bigger picture: State Medicaid and Medicare funds are thinning. These programs are seeking better ways to manage the nursing home resident population so they can invest their resources elsewhere. And the lessons they learn in modernizing senior health will invariably be extended to all of healthcare.

2 The influence of PE investments. The administration’s fact sheet contends, “Too often, the private equity (PE) model has put profits before people — a particularly dangerous model when it comes to the health and safety of vulnerable seniors and people with disabilities.”

The Medicare Payment Advisory Commission reported in June 2021 that 11% of nursing homes are owned by PE funds. A 2020 cross-sectional study found PE-owned nursing homes performed comparably on staffing levels, resident cases and resident mortality rates vis-a-vis nursing homes with other types of ownership.e Yet regulators have seized on the presumption that PE ownership means lower quality care for residents.

In the past six months, PE investing in nursing homes has slowed; publicly traded companies that operate multiple facilities have seen their share prices plummet. For PE operators, the compound impact of the pandemic, hourly caregiver work-force shortages and potential liability from patient/family complaints has forced aggressive cost-cutting, and 400 have suspended operations altogether. For most, CARES Act relief funds were a temporary reprieve, and their long-term viability remains in question.

The administration’s negative predisposition toward PE ownership of nursing homes is a sequel to its policies requiring heightened price transparency by hospitals and insurers and limits on the influence of business partners in shared risk arrangements with Medicare. It’s a popular focus for healthcare regulators that extends beyond nursing homes.

Implications of the proposal

Nursing home advocates cried foul when the White House released its policy proposal. But akin to similar tough love targeted to other sectors in healthcare by reformist regulators, it’s likely to be enacted.

For finance professionals in nursing homes, the proposal means every function in financial operations will change and every outside business relationship with private capital sources will be subject to added scrutiny. And for finance professionals across the health continuum, the way this proposal is enacted may well be a sign of what’s in store for their organizations.  

Footnote

a. The White House, “Fact sheet: Protecting seniors by improving safety and quality of care in the nation’s nursing homes,” Feb. 28, 2022.

b. CMS.gov, “COVID-19 nursing home data,” page accessed May 9, 2022.

c. Stulick, A., “National nursing home spending could reach $273B by 2030,” Skilled Nursing News, March 29, 2022.

d. The Administration for Community Living, 2020 profile of older Americans, May 2021; and Mather, M., Scommegna, P., and Kilduff, L., “Fact sheet: Aging in the United States,” Population Reference Bureau, July 15, 2019.

e. America Health Care Association and the National Center for Assisted Living, “Myths vs. facts: Private equity and nursing homes,” March 11, 2022.

About the Author

Paul H. Keckley, PhD,

is managing editor, The Keckley Report, Washington, D.C.

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