Dorsey Health Law

On August 1, 2021, an overhaul of the licensing requirements for Minnesota assisted living facilities (codified at Minn. Stat. 144G.08-9999) went into effect. Under the new law, which was also discussed in a previous Dorsey Health Law Blog post, Minnesota assisted living facilities are now required to obtain either an assisted living facility license or, for those that also provide dementia care services to any residents, an assisted living facility with dementia care license. The licensure scheme ushers in many new requirements aimed at protecting consumers, and the Minnesota Department of Health (“Department of Health” or “Department”) surveys facilities to ensure compliance. On August 15, 2021, the Department of Health began surveying the state’s 1,973 licensed assisted living facilities and on October 11, 2021, the Department released a report on the primary violations of the new requirements discovered in the first 17 facilities surveyed. The primary violations fall into three main categories: (1) failure to provide required disclosures, (2) failure to comply with fire safety requirements, and (3) failure to comply with internal systems requirements. Required disclosures A facility must display its license at the main public entrance of each building on its campus. A facility must provide all residents with the Assisted Living Bill of Rights (available on the Department of Health’s website) in addition to the facility’s Uniform Disclosure of Assisted Living Services & Amenities (UDALSA), which was completed by facilities as a component of the license application. The UDALSA must be provided to prospective residents prior to signing any contract and an updated UDALSA must be provided to residents and the Department of Health when services and amenities offered at the facility change. Facilities should also ensure they are in compliance with other miscellaneous notice requirements set forth in Minn. Stat. 144G.90. Fire safety Facilities must have an interconnected smoke alarm system with one alarm in each sleeping room and outside each separate sleeping room. If a facility is not fully outfitted with sprinklers, there must be smoke alarms on each story of a dwelling, including basements. A facility must have enough portable fire extinguishers such that the nearest one is within a 75 foot distance. Internal systems requirements Facilities must have in place certain required policies, including but not limited to those set forth in Minn. Stat. 144G.41. Facilities must comply with the contract requirements set forth in Minn. Stat. 144G.50. Facilities must comply with the statutory scheme’s electronic charting requirements. A facility’s clinical nurse supervisor must develop the facility’s staffing plan and the facility must post a daily staffing schedule. Finally, facilities must have an emergency plan in place that complies with Minn. Stat. 144G.42 and Rule 4659.0100. The Department of Health has publicly posted all of the forms it uses to survey assisted living facilities, and providers should take advantage of these resources to conduct a self-audit. Providers should ensure compliance in order to have a successful survey and avoid fines or other penalties, as described in Minn. Stat. 144G.31. If you have further questions about this new law, please contact the authors or your regular Dorsey attorney.

“Granny cams” or family-placed electronic monitoring in a nursing facility have become more commonplace.  Cameras are easier to obtain and set up and can easily be linked to one or more family member’s cell phones.  With COVID visiting restrictions making it more difficult for families to visit their loved ones in person, more and more people will be considering their options for keeping an eye on their family member living in a long term care facility. Some states have passed legislation to establish certain regulations or parameters around the use of granny cams in the long term care setting.  Others, including Iowa, are considering such legislation. Most states, however, do not have any statutory or regulatory requirements and thus, long term care facilities must determine how to deal with use of such cameras. The first question a long term care facility must ask is whether it is advisable to have a written policy.  If you are in a state with a statute or regulation on granny cams, you likely should have – and may be required to have – a written policy to comply with those requirements.  If you are in a state without any statutory or regulatory provisions on electronic monitoring in long term care, your initial reaction may be that having a policy provided to residents and family members will only encourage them to obtain cameras.  However, a resident or family member who wants a camera will likely place one anyway, and you may be better off to at least have a set of ground rules for everyone to follow with respect to such cameras. There are numerous considerations for handling the use of family-placed electronic monitoring in your facility: Is the resident competent to decide if he or she wants a camera in the room? If not, who can make the decision for the resident as to whether a camera can be placed in the room?  Financial and medical power of attorneys do not expressly cover the ability to consent to being videotaped, but such consent arguably falls under some of the broad powers generally given to a medical power of attorney.  The decision-maker question gets messier if there is no designated medical power of attorney or if there are joint medical power of attorneys who do not agree. Does the resident have a roommate? If so, the roommate has privacy rights that must be considered and protected.  A policy can provide restrictions on the direction the camera is pointing and also require that a roommate must give consent.  The policy can also address the resident’s options when a roommate does not consent to having the camera in the shared room. Should you require that the family disclose the existence of the camera to you? Any policy should require such disclosure so that proper signage could be placed on the doors to the room alerting people that they may be videotaped while in the room. This disclosure and signage will help reduce or eliminate liability to you (and the family) for possible illegal, covert recordings that may violate state or federal wiretapping and/or communication interception laws. Will the recording be video only or will it include audio? The inclusion of audio increases the complications and issues involved, because it may “pick up” discussions that are confidential or private in nature regarding the resident’s roommate or other discussions that may occur in the hallway or near the room. This issue should be assessed in light of federal and state-specific laws regarding the recording of verbal conversations. Who is responsible for the camera set up and operation and the resulting video? A policy should clarify that the family is responsible for the camera, its operation and the videos that are created by it.  If the facility were to take possession of the recordings, it unleashes a whole host of regulatory issues including HIPAA protections and possible self-reporting or disclosure requirements. The policy should place certain restrictions upon the camera, such as requiring a proper electrical connection (i.e., not using an extension cord or draping a cord across a room), where and how it can be mounted or placed and/or generally requiring that the camera be placed in a safe manner that will not cause safety or fire hazards.  A facility may also consider whether the use of its private Wi-Fi (and any associated cost) versus public Wi-Fi would be allowed for cameras requiring an internet connection.  The policy should also address what happens when the camera malfunctions.  For example, if it goes off (like a fire alarm) due to low battery or other complications, can it simply be turned off?  Does the family need to be notified when such issues occur?  The best bet is to have the facility take little to no responsibility for the actual operation of the camera or its resulting video and rather simply provide parameters around its placement and safe use. What are the evidentiary rules and issues with the camera footage? While this question is not likely something that you can fully address or avoid with a policy, you should consider the possible uses of the video and inform your staff to be aware of these possibilities.  Videos could be submitted to the state survey agency and used to confirm or dispute that certain cares were provided, they could be used in criminal actions, and they could be used in civil actions for malpractice.  While every state’s evidentiary rules and case law may differ and the facts of how the video was captured and maintained will impact its admissibility, everyone should be aware that their actions may be recorded.  Hopefully, this awareness will encourage everyone to do better and at the end of the day, improve the cares that are provided to your residents. If you are operating an assisted living facility, the considerations are slightly different in that the space in which the camera is situated is usually considered more like a personal home and is typically subject to landlord tenant laws.  However, some of the same considerations – especially those involving whether the camera is capturing video and audio, ensuring that use of the camera is compliant with federal and state wiretapping and communication interception laws and avoiding fire and other safety hazards with the camera – will need to be addressed. While these are difficult issues that can vary from state to state, facilities should not avoid this discussion.  Granny cameras will likely only increase in use, especially as technology improves and as families tend to live further away from their parents or grandparents who are now living in your facility.  A clear policy and transparent communications with families on this issue can actually result in a positive relationship. Families will realize that a facility who is willing to allow them to place a camera must feel confident about the good care that will be provided to their loved ones, and everyone will understand the “rules of the game” when using such cameras.

Current economic conditions have put additional strain on organizations across the health care spectrum in unprecedented ways. However, along with new challenges, both market conditions and new guidance from the Internal Revenue Service (IRS) bring fresh opportunities for tax-exempt senior services and other elder care organizations to consider new efficiencies, maximize revenues, and even expand operations. In particular, organizations in acquisitive periods and large health care systems looking to expand their spectrum of elder care services may find significant opportunities in the current market. Evaluating related versus unrelated revenue streams and associated expenses. Under Sections 511 through 514 of the Internal Revenue Code of 1986, as amended (IRC), tax-exempt organizations are required to pay unrelated business income tax (UBIT) on income from activities that are unrelated to their charitable, educational, scientific, religious or other exempt (or “related”) purposes. The unrelated business income (UBI) rules are complex, and such complexity can deter tax-exempt organizations from taking a comprehensive analysis relating to revenue sources and expense allocations for UBI calculation purposes. Changes to methodology for categorizing related versus unrelated revenue and expenses have implications across an organization’s financial reporting, to include tax returns and other compliance filings in both future and prior years. In May 2020, the IRS issued proposed regulations to give guidance for tax-exempt organizations calculating UBTI on separate unrelated trades or businesses (commonly referred to “siloing” such revenue and expenses) under IRC Section 512(a)(6), which was added by the 2017 Tax Cuts and Jobs Act (TCJA). The proposed regulations provide organizations guidance on how to identify and calculate UBTI from separate trades or businesses for purposes of IRC Section 512(a)(6), which generally requires organizations operating more than one unrelated trade or business to compute UBTI separately for each siloed trade or business. Once the businesses are broken into separate silos, an organization must determine how to allocate expenses that may apply to more than one activity to each silo. The preamble to the Section 512(a)(6) proposed regulations indicates that the IRS intends to publish a separate notice of proposed rulemaking to provide further guidance on expense allocation in calculating UBTI. In the interim, tax-exempt organizations may allocate such expenses using any reasonable method. Shifting models of care and new payment models across the health care spectrum provide not only cost efficiencies but also opportunities to analyze whether a tax-exempt organization’s activities (and associated revenues and expenses) are actually patient revenue related to such organization’s exempt purposes. And, if any activities are deemed unrelated to a tax-exempt organization’s exempt purposes, the new Section 512(a)(6) guidance provides a new benchmark to analyze such revenues and make good faith determinations relating to expense allocations. Acquiring assets out of bankruptcy proceedings. Economic downturns are painful, but for organizations with an acquisitive mindset, such market events can provide opportunities to expand existing and add activities through purchasing assets or businesses out of bankruptcy proceedings. If a tax-exempt organization is merely purchasing assets out of bankruptcy, the tax status of the former owner is typically not relevant. However, if the tax-exempt organization is purchasing the shares or equivalent ownership units of a taxable entity, it may still be a good fit for the acquiring tax-exempt organization but such transactions will require proper planning to protect the acquirer’s tax-exempt status.                                                                                                                                                                                 _____________________________________   Acquiring for-profit entities or operations. Whether acquired through bankruptcy proceedings or by a straight equity purchase, acquiring existing operations or ownership of a for-profit organization may present beneficial opportunities to tax-exempt organizations to enhance or expand their elder care service spectrum. While many senior housing organizations operate as for-profit enterprises, converting to a tax-exempt organization as a stand-alone organization or by acquisition by a tax-exempt organization may be a win-win for both organizations with proper planning. Additional considerations include the applicability of IRC Section 337(d), which requires certain corporations that transfer all or substantially all of their assets to a tax-exempt entity or convert from a taxable corporation to an exempt entity to recognize gain or loss as if it had sold the assets at fair market value. Also, the IRS has recently stated that organizations formerly operated as for-profit entities prior to their conversion to Section 501(c)(3) entities are one of the issues included on the annual compliance strategy list, and therefore may have a higher chance of future examination. However, if the converted organization files a new application for tax-exempt status by filing a Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, that is approved by the IRS the examination would seem fairly straightforward so long as the Form 1023 is an accurate representation of the entity’s activities. Despite the additional due diligence and planning required, the last several years have shown several high-profile mergers and acquisitions of both tax-exempt and taxable skilled nursing facilities by tax-exempt organizations. Tax-exempt organizations, especially those looking to expand operations geographically or to encompass a more comprehensive spectrum of care should not discount opportunities to acquire an existing enterprise based solely on its taxable status. If you want to review your organization’s current senior services activities and/or evaluate expansion of elder care, please contact the authors or your regular Dorsey attorney.

Any casual reader of healthcare news in recent years has taken note of the upheaval and financial uncertainty facing healthcare providers. Take for example a recent Bloomberg story detailing the closure of Hahnemann University Hospital in Philadelphia – “Philadelphia Hospital Collapse Highlights Healthcare ‘Anarchy’”. Anarchy or not, closures, consolidations, and financial restructuring are all too common for healthcare providers across the care continuum. To get a better sense of how financial restructuring is impacting healthcare providers and what options a provider facing a restructuring may have, Kristen Barlow, a Dorsey Health Strategies consultant, recently spoke to Annette Jarvis, a Partner with Dorsey’s Finance & Restructuring Group. Annette is a national expert in insolvency and one of the nation’s leading bankruptcy and restructuring lawyers. Kristen: Annette, are there particular segments of the healthcare industry that you think are especially vulnerable to financial restructuring – and if so, why? Annette: While all healthcare providers face financial challenges, some providers face particular challenges. For example, hospitals in rural areas have lower profit margins and may serve more uninsured patients than their urban counterparts. These rural hospitals are more at risk for closure – the Government Accountability Office recently reported that in the five years through 2017, 64 rural hospitals closed compared to 49 hospitals located in urban areas. Another segment of the healthcare industry particularly vulnerable to financial restructuring is post-acute and long-term care providers. Recent years have seen the bankruptcies of a number of large skilled nursing facility providers and many long-term acute care hospitals. Expensive overhead, reductions in Medicare reimbursement rates, and pressure to invest in care quality improvements all help create an environment that puts post-acute and long-term care providers at particular risk for financial restructuring. Annette: Kristen, from your perspective, how have you seen providers change and adapt their strategic plans to respond to these financial pressures? Kristen: Annette, providers are absolutely trying to change and adapt their strategic plans to succeed in a more financially constrained environment. One strategic response providers may pursue is to find financial security through increased scale. The rise of M&A activity for healthcare providers is well documented – a recent Commonwealth Fund report found that the vast majority of provider markets (~90%) are either highly concentrated or super concentrated. Providers may find that consolidation permits them to gain negotiating leverage with insurers and realize efficiencies through economies of scale – all considerations that make consolidation an attractive strategy in the face of a financially worrisome outlook. Kristen: Annette, consolidation is just one strategic response providers may have to financial pressures – what other strategies have you seen providers pursue? Annette: Other strategies I have seen implemented include the reduction of services in rural hospitals or the roll up of certain services into larger hospital systems.  This can occur through distressed acquisitions in or out of receiverships or bankruptcies or through less traditional combinations allowing sharing of services and patient care. Kristen: Annette, how would you advise a company that may be worried about their financial outlook to think about their options? Annette: Providers may want to remember that hospitals and other facilities are, by their nature, capital intensive. Often, by deferring capital investments (and unless their loan documents have covenants that are tripped by early substandard performance), the company can put off facing financial problems by deferring capital investments until a cash crisis hits.  Then the options for saving the business are more limited.  Facing financial problems early and getting professional help are essential for restructuring. Kristen: Annette, are there common mistakes that companies facing a financial restructuring should avoid? Annette: Facing financial problems early means providers must often come to terms with a scary and uncertain future. The most common mistake I see is avoiding facing problems, including changes that are necessary for long term financial viability, as soon as they arise. Early intervention is important for maximizing all potential solutions. By working with counsel and financial advisors experienced in restructuring, the company may be able to take care of a number of problematic issues outside of bankruptcy. The company will quite frankly be better off for approaching financial issues early with a proactive mindset and the appropriate legal and financial advice.   If you would like additional information on how Dorsey can assist healthcare organizations facing financial restructuring, please contact the authors directly at jarvis.annette@dorsey.com or barlow.kristen@dorsey.com or your regular attorney at Dorsey & Whitney.  

On May 22, 2019, Minnesota Governor Tim Walz signed a significant new assisted living licensure bill into law. Previously in Minnesota, assisted living facilities were required to register with the Minnesota Department of Health (the “Department”) but were not subject to facility licensure. The new law requires assisted living facilities to be licensed, with special licensing requirements for assisted living facilities with dementia care. The new law also provides broader consumer protections to the residents of assisted living facilities. The licensing requirements go into effect on August 1, 2021. Some of the consumer protections go into effect on August 1, 2019 and others go into effect on January 1, 2020. Below is a highlight of some of the requirements from the new law. I.    Licensing Requirements       A.   Assisted Living Facilities Under the new law, assisted living facilities must be licensed by August 1, 2021 and must pay a licensing fee of $2000 plus $75 per resident for initial license application and each annual renewal, subject to potential adjustments of up to 10% based on the proportion of residents receiving certain home and community-based waiver services in the prior year. In addition to providing information regarding the operations of the facility, in order to be granted a license, managerial officials and owners of assisted living facilities must successfully undergo a background study. New applicants must first apply for a provisional license that lasts one year. During that time, the Department will complete a survey of the facility. If the facility is in substantial compliance with the survey requirements, then the Department will issue a license to the facility. The license must be renewed every year. In addition to the requirements under the old law to be registered as an assisted living facility, the new minimum requirements for assisted living facilities include: Distributing to residents the assisted living bill of rights Using person-centered planning and service delivery Giving residents the ability to furnish and decorate their unit Permitting residents access to food at any time, with meals and snacks meeting certain minimum nutritional requirements Giving residents the right to choose their visitors and the times of visits Giving residents the right to choose their roommate if sharing a unit Giving residents the right to have and use a lockable door to the resident’s unit Some of these and other requirements may be restricted in certain circumstances if appropriate for the particular resident and documented in their service plan. Assisted living facilities must at least have a temporary service plan for each resident in place prior to a resident moving in, must assess and implement a service plan within fourteen days of beginning to provide services to a resident, and must regularly reassess and revise the service plan thereafter. Assisted living facilities must also have assisted living contracts in place with residents that meet certain requirements, must retain records for each resident who is receiving services, and must provide orientation and training to all staff on the licensing requirements and regulations. Both licensed and unlicensed staff are required to meet certain minimum requirements, and the assisted living facilities must ensure that minimum supervision and availability requirements are met. If an assisted living facility is offering medication management services or treatment and therapy management services, additional requirements apply. These are just highlights of some of the requirements, of which there are many specified in the new law.       B.   Assisted Living Facilities with Dementia Care All assisted living facilities with dementia care must be licensed by August 1, 2021. The licensing fee for an assisted living facility with dementia care is $3000 plus $100 per resident for initial license application and each annual renewal, subject to potential adjustments of up to 10% based on the proportion of residents receiving certain home and community-based waiver services in the prior year. Assisted living facilities with dementia care must comply with the previously mentioned requirements of assisted living facilities in addition to other requirements. Each facility must demonstrate that it has the ability to provide services to residents with dementia either by showing the facility has experience managing residents with dementia or showing its compliance history in operating a care facility that is licensed or registered under federal or state law. If the facility does not have the necessary experience, they must employ a consultant with expertise in providing care for residents with dementia for the first six months of operation. The director of an assisted living facility with dementia care must complete at least ten hours of continuing education per year related to the care of individuals with dementia. Additionally, special requirements related to staffing, training, policies, and resident services must all be met for assisted living facilities with dementia care. II.   Consumer Protections The new assisted living law in Minnesota offers broad consumer protections to the residents of assisted living facilities. Beginning on August 1, 2021, all residents must receive a copy of the assisted living bill of rights. These rights include a right to: Appropriate care and services Refuse care and services Participate in care and service planning Courteous treatment Freedom from maltreatment Individual autonomy Confidentiality of records Furnish and decorate Choose roommate Access food Access counsel and advocacy services The new law allows residents or their representatives to place an electronic monitoring device in a resident’s unit. Residents must notify the facility and receive the consent of their roommate (if they have one) before placing an electronic monitoring device. However, a resident may place an electronic monitoring device without notifying the facility for up to fourteen days. This provision goes into effect on January 1, 2020.   Additionally, the new law prohibits assisted living facilities from retaliating against a resident or an employee for filing a complaint, making an inquiry, or asserting a right. The retaliation provision goes into effect on August 1, 2019. The new assisted living facility law marks a new era of regulation for assisted living facilities in Minnesota, bound to have significant effects on entities and individuals operating assisted living facilities as well as residents living in them. If you have further questions about his new law, please contact the authors or your regular Dorsey attorney. The text of the new assisted living licensure law can be found on the website of the Minnesota Office of the Revisor of Statutes here.   Summer Associate Laura Kvasnicka provided substantial assistance researching and drafting this blog post.  

On April 22, 2019, the Centers for Medicare and Medicaid Services (CMS) announced two sweeping new payment innovation models under the Primary Cares Initiatives. The models will seek to incentivize primary care and other providers to take on greater responsibility and risk for the lives of covered beneficiaries. Both new models are scheduled to be effective for a first performance year of 2020. Read on for key details of the models, projected impact on the Medicare patient population, and our key takeaways for providers. Primary Care First Model provides simplified payments with performance-based adjustments The first model is Primary Care First (PCF), and include two options: PCF – General. Participating practices will assume financial risk for aligned beneficiaries and, in exchange, the practices will have reduced administrative burdens and will be eligible for performance-based payments or downside risk. PCF - High Needs Populations. Participating practices will assume financial responsibility for high-need, seriously ill beneficiaries who lack a primary care provider or effective care coordination, and, in exchange, the practices will have higher payment amounts as well as eligibility for performance-based payments or downside risk. PCF – General will provide payment to practices through a simplified payment structure that will provide a population-based payment along with a flat primary care visit fee and a performance-based adjustment providing an upside of up to 50% of revenue as well as a small downside (10% of revenue) incentive to reduce costs and improve quality. The performance-based adjustment will be assessed and paid on a quarterly basis. PCF – High Needs Population will set higher payment amounts to reflect the high-need, high-risk nature of the population as well as a yet-to-be-specified increase or decrease in payment based on quality measures. PCF is open to a range of eligible applicants, including primary care practitioners certified in internal medicine, general medicine, geriatric medicine, family medicine, and hospice and palliative care medicine. Applications for both PCF options will open soon- in Spring 2019, and the model will launch in 26 regions in the U.S. beginning in 2020 and will continue for five years. Direct Contracting Model permits providers to take on greater shared savings/shared losses up to full risk The second model is Direct Contracting (DC), and includes three options: DC – Professional. Providers will bear risk for 50% of shared savings/shared losses on the total cost of care (all Part A and B services) for aligned beneficiaries. Participants will receive Primary Care Capitation, a capitated, risk-adjusted monthly payment for enhanced primary care services equal to seven percent of the total cost of care for enhanced primary care services. DC – Global. Participating entities will bear risk for 100% of shared savings/shared losses on the total cost of care (all Part A and B services) for aligned beneficiaries. Participants may receive Primary Care Capitation as described above or may choose to receive Total Care Capitation, a capitated, risk-adjusted monthly payment for all services provided by participants and preferred providers with whom the participant has an agreement. DC – Geographic. Participating entities will bear risk for 100% of shared savings/shared losses on the total cost of care (all Part A and B services) for aligned beneficiaries in a target region. Participants will be selected as part of a competitive application process and commit to providing CMS a specified discount amount off of the total cost of care for the defined target region. This option will offer a Total Care Capitation payment as well, where CMS will continue to pay claims for services furnished by providers outside of the participants, including outside the target regions. Alternatively, participants can assume full financial risk while having CMS continue to make fee-for-service claims payments to all providers in the target region. The DC model is open to a broad range of entities, including health plans, health care technology companies, ACOs, and others operating under a common governance structure. The DC model will start in January 2020 with an initial alignment year for organizations that want to align beneficiaries to meet the minimum beneficiary requirements. Performance periods will begin in 2021 and continue for five years. CMS has issued a request for information (RFI seeking public comment on the DC-Geographic model, but nonetheless plans to launch the model in 2021. CMS anticipates shifting a quarter of beneficiaries out of fee-for-service (FFS) under the new models CMS anticipates that together, PCF and DC will: Shift over 25% of all Medicare FFS beneficiaries out of FFS and into value-based care arrangements; Offer new participation and payment options and opportunities for 25% of primary care practitioners and other providers; and Create new coordinated care opportunities for a large portion of the 11-12 million dual eligible beneficiaries in the U.S., specifically those in Medicaid managed care and Medicare FFS. Key Takeaways As we wait for additional details from CMS about the structure and payment mechanisms under both PCF and DC models, the following are a few key takeaways to keep in mind: CMS is committed to voluntary risk-based payment models. After experimenting with mandatory risk-based payment under the Comprehensive Care for Joint Replacement (CJR) bundled payment model and the proposed, but ultimately cancelled, Episode Payment Models (EPMs) for cardiac and orthopedic bundles, CMS has moved away (for now) from mandatory risk for providers. However, it appears that voluntary risk-based programs are here to stay. As these voluntary payment models are introduced, participants have opportunities to receive substantial gains (the full risk models of DC – Global and DC-Geographic, for example) if they have the appetite to bear the concurrent substantial downside risk. CMS’s pace indicates more reform likely to come. The Primary Cares Initiative announcement comes on the heels of the Pathways to Success model, an overhaul of the ACO program which was finalized in December 2018, and the BPCI Advanced bundled payment program, which launched in October 2018. In short, CMS is evaluating its existing models, creating new models, and the pace of change is faster than it has been since the slate of mandatory bundled payment programs were announced in 2016 through 2017. Going forward, the industry should expect this pace of new and revised payment models to continue, not lessen. In fact, Adam Boehler, the director of Centers for Medicare and Medicaid Innovation (CMMI), the part of Medicare that develops and administers payment reform programs, gave a speech in early April 2019 that raised the prospect of a new bundled payment program focused on post-acute care providers, which would be a first of its kind and one that those in the post-acute industry are anxiously awaiting. Physicians are increasingly the “owners” of the transition to value. For many, there’s long been a debate about who should “own” the transition away from fee-for-service toward value-based care. While CMS certainly has targeted acute-care providers for this ownership under ACOs and bundled payment models, physicians have of course been a crucial participant in those programs. Notably, the Primary Care Initiatives place the physician front and center of owning responsibility for the cost and quality of their patients’ care – an acknowledgement from CMS that primary care providers and close patient interaction are linchpins for sustained success in transitioning toward better outcomes for the health of a population. The focus on chronic and serious illness highlights a persistent problem for Medicare in controlling spending. As the population ages, success in controlling spending overall may ultimately come down to targeted efforts to better support and manage the chronically and seriously ill patient populations. While just 17% of Medicare patients live with six or more chronic conditions, they account for half of all spending on Medicare beneficiaries with chronic disease. Moreover, a full quarter of all Medicare spending is spent on Medicare beneficiaries in their last year of life. Including hospice and palliative care physicians in the PCF model, and having an entire model option dedicated to the seriously ill patient population, are clear signs from Medicare that they want to focus on programs and models that may move the dial on this patient population whose health care is notoriously difficult to manage. To learn more about this model, or to discuss how it may impact your organization, please contact the authors directly at barlow.kristen@dorsey.com or smith.alissa@dorsey.com or your regular attorney at Dorsey &Whitney.

On June 16th, 2017, The Department of Justice (“DOJ”) announced a $53.6 million dollar settlement with Genesis Healthcare Inc. (“Genesis”) over six federal whistleblower lawsuits alleging that subsidiaries of the rehabilitation and transitional care provider violated the False Claims Act (“FCA”). The original qui tam plaintiffs, former employees of companies acquired by Genesis, will receive a combined $9.67 million dollars in recovery. The settlement resolved allegations involving Genesis subsidiaries; Skilled Healthcare Group Inc. (“SKG”) and its subsidiaries, Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc., and SunDance Rehabilitation Corp. The settlement resolved the allegations that SKG and its subsidiaries knowingly submitted false claims for Medicare services by “billing for hospice services for patients who were not terminally ill” and “billing inappropriately for physician evaluation management services.” The complaint does not elaborate on the nature of the management services billing violations. Further, SKG and its subsidiaries allegedly submitted false claims to Medicare, TRICARE, and Medicaid by providing therapy to patients longer than medically needed, as well as billing for more therapy than patients actually received. The settlement also resolved allegations that Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc., and SunDance Rehabilitation Corp. knowingly submitted false claims to Medicare by billing for therapy services in the state of Georgia that were either medically unnecessary or unskilled in nature. Finally, the settlement resolved allegations that Skilled LLC, a subsidiary of SKG, violated the FCA by submitting false claims to the Medicare and Medi-Cal programs for “services that were grossly substandard or worthless and therefore ineligible for payment.” Specifically, the allegations pointed to Skilled LLC failing to meet the requirements for nurse staffing in order to be eligible for government healthcare program reimbursements. The case matter was handled by the DOJ Civil Division’s Commercial Litigation Branch, the Office of the Inspector General, and the U.S. Attorney’s Offices for the Northern District of California, the Northern District of Georgia, the Western District of Missouri, and the District of Nevada. Acting U.S. Attorney Steven W. Myhre for the District of Nevada noted, “Today’s settlement is an example of the U.S. Attorney’s Office’s commitment to holding medical providers accountable…We are committed to protecting federal health care programs, including Medicare, TRICARE, and Medicaid, which are funded by taxpayer dollars.” The recent settlement falls in line with the DOJ’s increased commitment to combating health care fraud. The DOJ budget request for 2017 included a $70.8 million dollar increase ($320.2 million in total) of funding for health care fraud prevention. Summer Associate Justin Taylor provided substantial assistance with the drafting of this blog post/article.