CHAPTER 10 LONG TERM CARE FACILITIES INDUSTRY OVERVIEW

Transcription

1 CHAPTER 10 LONG TERM CARE FACILITIES INDUSTRY OVERVIEW

2 NURSING HOME I. WHAT IS A LONG TERM CARE FACILITIES? A. THE CENTER FOR MEDICARE & MEDICAID SERVICES DEFINITION INCLUDES: 1. Nursing Homes 2. ICF-DD s 3. Inpatient Psychiatric Facilities (NOTE: A.L.F. s are not considered long term care facilities at CMS) B. THE D.E.A. DEFINITION OF A LONG TERM CARE FACILITY: The term Long Term Care Facility (LTCF) means a nursing home, retirement care, mental care or other facility or institution which provides extended health care to resident patients. ( NOTE: The DEA definition is much broader than CMS) Skilled nursing facility is defined as an institution (or a distinct part of an institution) which is primarily engaged in providing skilled nursing care and related services for residents who require medical or nursing care, or rehabilitation services for the rehabilitation of injured, disabled, or sick persons, and is not primarily for the care and treatment of mental diseases; has in effect a transfer agreement (meeting the requirements of 1861(1)) with one or more hospitals having agreements in effect under 1866; and meets the requirements for a SNF described in subsections (b), (c), and (d) of this section. Nursing facility is defined as an institution (or a distinct part of an institution) which is primarily engaged in providing skilled nursing care and related services for residents who require medical or nursing care, rehabilitation services for the rehabilitation of injured, disabled, or sick persons, or on a regular basis, health-related care and services to individuals who because of their mental or physical condition require care and services (above the level of room and board) which can be made available to them only through institutional facilities, and is not primarily for the care and treatment of mental diseases; has in effect a transfer agreement (meeting the requirements of 1861(1)) with one or more hospitals having agreements in effect under 1866; and meets the requirements for a NF described in subsections (b), (c), and (d) of this section. If a provider does not meet one of these definitions, it cannot be certified for participation in the Medicare and/or Medicaid programs. II. NUMBER OF BEDS NATIONALLY ,123 Million nursing home beds (82, 621 beds in Florida) Million ALF beds (78, 348 beds in Florida) ,000 ICF-DD beds (3, 433 beds in Florida) 4.?? Psychiatric Inpatient beds III. CHARACTERISTICS OF NURSING HOMES NATIONALLY 1. 15, 681 nursing homes in the U.S ,500 are certified for Medicare or Medicaid admissions 3. 36,000 A.L.F. s in the US 4. 2/3 (67.7%) of all Nursing Homes in the country are For Profit facilities

3 IV. PAYOR MIX IN THE NURSING HOME 1. Medicaid 68% 2. Medicare A 12% (this payor class represents 1/3 of all new admissions) (Must have stayed in a hospital for 3 days and can receive up to 100 days of Medicare coverage) 3. Private 17-18% 4. Managed Care 2-3% 5. Dual Eligibles (covered by Medicare and Medicaid) (1) 18% of all Medicare patients (2) 25% of all dual eligibles are in nursing homes (3) the great majority of Medicaid patients in LTC are dual eligible V. FACILITY CHARGES BY PAYOR TYPE 1. Medicaid determined by state reimbursement, facility responsible for OTC drugs used by these residents. (These patients drug costs moved to Medicare Part D on 1/1/ Medicare determined by a Federal coding system (RUG s score) Facility is responsible for drug costs 3. Private facility determines rate patient or responsible party pays for drugs 4. Managed Care facility negotiates rates with managed care organization. Drugs may be the responsibility of the facility or the managed care organization depending on the M.C.O. VI. MEDICARE ADMISSION DATA MEDICARE ADMISSION DATA COMPARISON FROM 1997 TO 2008 Year Average Stay (in days) Average Per Diem RUG's Reimbursement $ $ Average Drug Per Diem $13.28 $33.41 Routine Meds Per Month Drug Cost as a % of the Facility's RUG reimbursement 5.03% 9.65% VII. STAFFING CONSIDERATIONS IN THE NURSING HOME Annual RN s and LPN s turnover is 49% 35.5% 6. Annual CNA s turnover is 71% 42 % 7. Staff turnover has a major impact on training requirements and patient care 8. Non-profit homes spent 11% more on staffing than the for profit homes in 1999 (21% more LPN hours and 18% more CNA hours per day) McKnight Online 8/11/05

4 VIII. FINANCIAL CONSIDERATIONS * 9. Occupancy Rates = 86.8% 10. Medicare Rates average $266/day or $97,000/year (2002 data) 11. Average drug cost per day = $26.50 (medicare) 12. Average Medicare profit per day = $ Average annual cost for private care = $55,000/year 14. Average profit per Medicaid Day = - $13.15 (2007 national average) (the worst = IL -$30.21, N.J. -$28.64 and Wisc -$27.29) 15. Average patient drug bill = $650/month 16. Average cash on hand = 30 days 17. Average accounts receivable = 43.4 days (the reason they pay slow) Average net operating revenue growth = 1.4% per year VI. FACILITY CHALLENGES 1. Staff training of new CNA s averages $250,000/year 2. Reimbursement rates constantly changing trending downward 3. Increased State and Federal quality initiatives are draining resources 4. Increased Liability costs 5. Medicare Part D program * Taken from BDO Seidman LLC (

5 NURSING HOME NURSING HOME RESIDENTS' RIGHTS (STATUTES) Disclaimer: This is part of the year 2002 version of Florida Statutes and it is offered for general information purposes. Any changes made for 2003 (the Florida Legislature is currently still in session) will be unavailable until approximately May to July of The statutes on this site should not be relied on without reviewing your legal situation with an experienced medical malpractice lawyer and making sure you are using the appropriate version of the statute for your case. The provisions applicable to your potential claim may or may not be the version that was in effect at the time of the incident because some changes to statutes are retroactive and some changes are not. Other statutes and other case law interpreting or applying these statutes may also apply to your case Residents' rights.-- (The information on this site applies to Florida only) (1) All licensees of nursing home facilities shall adopt and make public a statement of the rights and responsibilities of the residents of such facilities and shall treat such residents in accordance with the provisions of that statement. The statement shall assure each resident the following: (a) The right to civil and religious liberties, including knowledge of available choices and the right to independent personal decision, which will not be infringed upon, and the right to encouragement and assistance from the staff of the facility in the fullest possible exercise of these rights. (b) The right to private and uncensored communication, including, but not limited to, receiving and sending unopened correspondence, access to a telephone, visiting with any person of the resident's choice during visiting hours, and overnight visitation outside the facility with family and friends in accordance with facility policies, physician orders, and Title XVIII (Medicare) and Title XIX (Medicaid) of the Social Security Act regulations, without the resident's losing his or her bed. Facility visiting hours shall be flexible, taking into consideration special circumstances such as, but not limited to, out-of-town visitors and working relatives or friends. Unless otherwise indicated in the resident care plan, the licensee shall, with the consent of the resident and in accordance with policies approved by the agency, permit recognized volunteer groups, representatives of community-based legal, social, mental health, and leisure programs, and members of the clergy access to the facility during visiting hours for the purpose of visiting with and providing services to any resident. (c) Any entity or individual that provides health, social, legal, or other services to a resident has the right to have reasonable access to the resident. The resident has the right to deny or withdraw consent to access at any time by any entity or individual. Notwithstanding the visiting policy of the facility, the following individuals must be permitted immediate access to the resident: 1. Any representative of the federal or state government, including, but not limited to, representatives of the Department of Children and Family Services, the Department of Health, the Agency for Health Care Administration, the Office of the Attorney General, and the Department of

6 Elderly Affairs; any law enforcement officer; members of the state or local ombudsman council; and the resident's individual physician. 2. Subject to the resident's right to deny or withdraw consent, immediate family or other relatives of the resident. The facility must allow representatives of the State Long-Term Care Ombudsman Council to examine a resident's clinical records with the permission of the resident or the resident's legal representative and consistent with state law. (d) The right to present grievances on behalf of himself or herself or others to the staff or administrator of the facility, to governmental officials, or to any other person; to recommend changes in policies and services to facility personnel; and to join with other residents or individuals within or outside the facility to work for improvements in resident care, free from restraint, interference, coercion, discrimination, or reprisal. This right includes access to ombudsmen and advocates and the right to be a member of, to be active in, and to associate with advocacy or special interest groups. The right also includes the right to prompt efforts by the facility to resolve resident grievances, including grievances with respect to the behavior of other residents. (e) The right to organize and participate in resident groups in the facility and the right to have the resident's family meet in the facility with the families of other residents. (f) The right to participate in social, religious, and community activities that do not interfere with the rights of other residents. (g) The right to examine, upon reasonable request, the results of the most recent inspection of the facility conducted by a federal or state agency and any plan of correction in effect with respect to the facility. (h) The right to manage his or her own financial affairs or to delegate such responsibility to the licensee, but only to the extent of the funds held in trust by the licensee for the resident. A quarterly accounting of any transactions made on behalf of the resident shall be furnished to the resident or the person responsible for the resident. The facility may not require a resident to deposit personal funds with the facility. However, upon written authorization of a resident, the facility must hold, safeguard, manage, and account for the personal funds of the resident deposited with the facility as follows: 1. The facility must establish and maintain a system that ensures a full, complete, and separate accounting, according to generally accepted accounting principles, of each resident's personal funds entrusted to the facility on the resident's behalf. 2. The accounting system established and maintained by the facility must preclude any commingling of resident funds with facility funds or with the funds of any person other than another resident. 3. A quarterly accounting of any transaction made on behalf of the resident shall be furnished to the resident or the person responsible for the resident. 4. Upon the death of a resident with personal funds deposited with the facility, the facility must convey within 30 days the resident's funds, including interest, and a final accounting of those funds, to the individual or probate jurisdiction administering the resident's estate, or, if a personal representative has not been appointed within 30 days, to the resident's spouse or adult next of kin named in the beneficiary designation form provided for in s (6). 5. The facility may not impose a charge against the personal funds of a resident for any item or service for which payment is made under Title XVIII or Title XIX of the Social Security Act.

7 (i) The right to be fully informed, in writing and orally, prior to or at the time of admission and during his or her stay, of services available in the facility and of related charges for such services, including any charges for services not covered under Title XVIII or Title XIX of the Social Security Act or not covered by the basic per diem rates and of bed reservation and refund policies of the facility. (j) The right to be adequately informed of his or her medical condition and proposed treatment, unless the resident is determined to be unable to provide informed consent under Florida law, or the right to be fully informed in advance of any nonemergency changes in care or treatment that may affect the resident's well-being; and, except with respect to a resident adjudged incompetent, the right to participate in the planning of all medical treatment, including the right to refuse medication and treatment, unless otherwise indicated by the resident's physician; and to know the consequences of such actions. (k) The right to refuse medication or treatment and to be informed of the consequences of such decisions, unless determined unable to provide informed consent under state law. When the resident refuses medication or treatment, the nursing home facility must notify the resident or the resident's legal representative of the consequences of such decision and must document the resident's decision in his or her medical record. The nursing home facility must continue to provide other services the resident agrees to in accordance with the resident's care plan. (l) The right to receive adequate and appropriate health care and protective and support services, including social services; mental health services, if available; planned recreational activities; and therapeutic and rehabilitative services consistent with the resident care plan, with established and recognized practice standards within the community, and with rules as adopted by the agency. (m) The right to have privacy in treatment and in caring for personal needs; to close room doors and to have facility personnel knock before entering the room, except in the case of an emergency or unless medically contraindicated; and to security in storing and using personal possessions. Privacy of the resident's body shall be maintained during, but not limited to, toileting, bathing, and other activities of personal hygiene, except as needed for resident safety or assistance. Residents' personal and medical records shall be confidential and exempt from the provisions of s (1). (n) The right to be treated courteously, fairly, and with the fullest measure of dignity and to receive a written statement and an oral explanation of the services provided by the licensee, including those required to be offered on an as-needed basis. (o) The right to be free from mental and physical abuse, corporal punishment, extended involuntary seclusion, and from physical and chemical restraints, except those restraints authorized in writing by a physician for a specified and limited period of time or as are necessitated by an emergency. In case of an emergency, restraint may be applied only by a qualified licensed nurse who shall set forth in writing the circumstances requiring the use of restraint, and, in the case of use of a chemical restraint, a physician shall be consulted immediately thereafter. Restraints may not be used in lieu of staff supervision or merely for staff convenience, for punishment, or for reasons other than resident protection or safety. (p) The right to be transferred or discharged only for medical reasons or for the welfare of other residents, and the right to be given reasonable advance notice of no less than 30 days of any involuntary transfer or discharge, except in the case of an emergency as determined by a licensed professional on the staff of the nursing home, or in the case of conflicting rules and regulations which govern Title XVIII or Title XIX of the Social Security Act. For nonpayment of a bill for care received, the resident shall be given 30 days' advance notice. A licensee certified to provide services under Title XIX of the Social Security Act may not transfer or discharge a resident solely because the source of payment for care changes. Admission to a nursing home facility operated by a licensee certified to provide services under Title XIX of the Social Security Act may not be conditioned upon a waiver of such right, and any document or provision in a

8 document which purports to waive or preclude such right is void and unenforceable. Any licensee certified to provide services under Title XIX of the Social Security Act that obtains or attempts to obtain such a waiver from a resident or potential resident shall be construed to have violated the resident's rights as established herein and is subject to disciplinary action as provided in subsection (3). The resident and the family or representative of the resident shall be consulted in choosing another facility. (q) The right to freedom of choice in selecting a personal physician; to obtain pharmaceutical supplies and services from a pharmacy of the resident's choice, at the resident's own expense or through Title XIX of the Social Security Act; and to obtain information about, and to participate in, community-based activities programs, unless medically contraindicated as documented by a physician in the resident's medical record. If a resident chooses to use a community pharmacy and the facility in which the resident resides uses a unit-dose system, the pharmacy selected by the resident shall be one that provides a compatible unit-dose system, provides service delivery, and stocks the drugs normally used by long-term care residents. If a resident chooses to use a community pharmacy and the facility in which the resident resides does not use a unit-dose system, the pharmacy selected by the resident shall be one that provides service delivery and stocks the drugs normally used by long-term care residents. (r) The right to retain and use personal clothing and possessions as space permits, unless to do so would infringe upon the rights of other residents or unless medically contraindicated as documented in the resident's medical record by a physician. If clothing is provided to the resident by the licensee, it shall be of reasonable fit. (s) The right to have copies of the rules and regulations of the facility and an explanation of the responsibility of the resident to obey all reasonable rules and regulations of the facility and to respect the personal rights and private property of the other residents. (t) The right to receive notice before the room of the resident in the facility is changed. (u) The right to be informed of the bed reservation policy for a hospitalization. The nursing home shall inform a private-pay resident and his or her responsible party that his or her bed will be reserved for any single hospitalization for a period up to 30 days provided the nursing home receives reimbursement. Any resident who is a recipient of assistance under Title XIX of the Social Security Act, or the resident's designee or legal representative, shall be informed by the licensee that his or her bed will be reserved for any single hospitalization for the length of time for which Title XIX reimbursement is available, up to 15 days; but that the bed will not be reserved if it is medically determined by the agency that the resident will not need it or will not be able to return to the nursing home, or if the agency determines that the nursing home's occupancy rate ensures the availability of a bed for the resident. Notice shall be provided within 24 hours of the hospitalization. (v) For residents of Medicaid or Medicare certified facilities, the right to challenge a decision by the facility to discharge or transfer the resident, as required under Title 42 C.F.R. part (2) The licensee for each nursing home shall orally inform the resident of the resident's rights and provide a copy of the statement required by subsection (1) to each resident or the resident's legal representative at or before the resident's admission to a facility. The licensee shall provide a copy of the resident's rights to each staff member of the facility. Each such licensee shall prepare a written plan and provide appropriate staff training to implement the provisions of this section. The written statement of rights must include a statement that a resident may file a complaint with the agency or local ombudsman council. The statement must be in boldfaced type and shall include the name, address, and telephone numbers of the local ombudsman council and central abuse hotline where complaints may be lodged. (3) Any violation of the resident's rights set forth in this section shall constitute grounds for action by the agency under the provisions of s In order to determine whether the licensee is adequately protecting residents' rights, the annual inspection of the facility shall include private

9 informal conversations with a sample of residents to discuss residents' experiences within the facility with respect to rights specified in this section and general compliance with standards, and consultation with the ombudsman council in the local planning and service area of the Department of Elderly Affairs in which the nursing home is located. (4) Any person who submits or reports a complaint concerning a suspected violation of the resident's rights or concerning services or conditions in a facility or who testifies in any administrative or judicial proceeding arising from such complaint shall have immunity from any criminal or civil liability therefore, unless that person has acted in bad faith, with malicious purpose, or if the court finds that there was a complete absence of a justiciable issue of either law or fact raised by the losing party. History.--s. 8, ch ; s. 1, ch ; ss. 1, 9, ch ; ss. 2, 18, ch ; s. 2, ch ; ss. 11, 19, ch ; ss. 5, 79, 83, ch ; s. 1, ch ; s. 15, ch ; s. 30, ch ; ss. 3, 49, ch ; s. 764, ch ; s. 226, ch ; s. 118, ch. 99-8; s. 5, ch ; ss. 70, 137, ch ; s. 57, ch ; s. 33, ch

10 FEDERAL REGULATORY GROUPS FOR NURSING HOMES TAG NUMBER F150 F151 F152 F153 F154 F155 F156 F157 F158 F159 F160 F161 F162 F163 F164 F165 F166 F167 F168 F169 F170 F171 F172 F173 F174 F175 F176 F177 SUBJECT RESIDENT RIGHTS Definition of SNF & NF Exercise Rights/ Free of Coercion Rights Exercised by Surrogate Access/Ability to Purchase Records Informed of Health Status/ Med Condition Right to Refurse Treatment/Research Inform of Services/Charges/Legal Rights etc Inform of Accidents/Sig Changes/ Transfers etc Resident Manage Own Financial Affairs Facility Management of Resident Funds Conveyance Upon Death Surety Bond or Other Assurance Limitation on Charges to Personal Funds Free Choice of Personal Physician Privacy and Confidentiality of Records Voice Grievances without Reprisal Facility Resolves Resident Grievances Survey Results Readily Accessible Receipt of Info/ Contact Client Advocates Right to Work/ Refuse to work for Facility Send or Receive Unopened Mail Access to Stationery, Etc Access and Visitation Ombundsman Access to Examine Records Access to Telephone with Privacy Right to Share a room Self-Administration of Drugs Refusal of Certain Transfers F201 F202 F203 F204 F205 F206 F207 F208 F221 F222 F223 F224 F225 F226 ADMISSION, TRANSFER AND DISCHARGE RIGHTS Reasons for Transfer/Discharge Documentation for Transfer/Discharge Proper Notice Before Transfer or Discharge Orientation for Transfer/Discharge Notice of Bed-hold Policy Upon Transfer Return of Resident After Bed-hold Days Expire Facility Establishes Equal Access Policies Admission Policies Right to be Free from Physical Restraints Right to be Free from Chemical Restraints Right to be Free from Abuse Facility Policies Prohibit Abuse, Neglect Not Employ Persons Guilty of Abuse Staff Treatment of Residents

11 F240 F241 F242 F243 F244 F245 F246 F247 F248 F249 F250 F251 F252 F253 F254 F255 F256 F257 F258 F309 F310 F311 F312 F313 F314 F315 F317 F318 F319 F320 F321 F322 F323 F324 F325 F326 F327 F328 F329 F332 F333 F334 F271 F272 F273 F274 QUALITY OF LIFE Facility Promotes/Enhances Quality of Life Dignity Self determination - Resident Makes Choices Resident Participation in Risident/Family Groups Facility Listens/Responds to Resident/Family Groups Resident Participation in Activities Accomodation of Needs & Preferences Notice Before Room/Roommate Change Activity Program Meets Individual Needs Qualifications of Activity Director Medically Related Social Services Qualifications of Social Worker Safe/Clean/Comfortable/Homelike Env Housekeeping & Maintenance Services Clean Linens in Good Condition Private Closet Space in Each Room Adequate & Comfortable Lighting Levels Comfortable & Safe Temperature Levels Comfortable Sound Levels QUALITY OF CARE Necessary Care for Highest Practical Well Being ADLs Do Not Decline Unless Unavoidable Resident Treatment to Improve or Maintain ADL's ADL Care of Dependent Residents Resident Treatment to Maintain Hearing & Vision Treatment to Prevent/Heal Pressure Sores Resident Not Catheterized Unless Avoidable No Reduction in ROM Unless Unavoidable Range of Motion Treatment & Services Treatment for Mental/Psychological No Development of Mental Problems No Nasogastric Tube Unless Unavoidable Proper Care & Services - Nasogastric Tube Facility Free of Accident Hazards Supervision/Devices to Prevent Accidents Maintain Nutritional Status Receives Therapeutic Diet When Required Facility Provides Sufficient Fluid Intake Treatment/Care for Special Care Needs Free from Unnecessary Drugs Medication Error Rates of 5% or More Resident Free From Sig Medication Errors Influenza and Pneumoccocal Immunizations RESIDENT ASSESSMENT Physician Orders at Addmission Comprehensive Assessments Assessment Frequency - no later than 14 days Assessment After Sig Change

12 F275 F276 F278 F279 F280 F281 F282 F283 F284 F285 F286 F287 F353 F354 F355 F356 F360 F361 F362 F363 F364 F365 F366 F367 F368 F369 F370 F371 F372 F385 F386 F387 F388 F389 F390 F406 F407 F411 F412 Assessment Every 12 Months Quarterly Review of Assessments Accuracy of Assess/Coordination with Professionals Develop Comprehensive Care Plans Develop/Prep/Review of Comp Care Plan Services Provided Meet Professional Standards Qualified Services in Accordance w Care Plan Discharge Summary Request for Post-discharge Plan of Care PASRR Requirements for MI & MR 15 Months Assessments on Medical Record Encoding Data NURSING SERVICES Sufficient Nursing Staff on 24 hour Basis Use of Charge Nurse & Registeres Nurse Nursing Waivers Nurse Staffing DIETARY SERVICES Facility provides Resident with Appropriate Diet Employment of Qualified Dietician Sufficient Support Personnel Menus Meet Needs & Followed Food Properly Prepared, Palatable Etc Food Prepared to Meet Individual Needs Substitutes of Similar Nutritive Value Therapeutic Diets Prescribed by Physician Frequency if Intervals Between Meals Special Eating Equipment/Utensils Food Procured From Approved Sources Sanitary Food Preparation/Distribution/Storage Dispose Garbage & Refuse Properly PHYSICIAN SERVICES Resident's Care Supervised by Physician Physician Responsibilities During Visits Frequency/Timliness of Physician Visits Visits by Physician/Physician Assistant Etc Emergency Physician Services 24 Hr/Day Physician Delegation of Tasks in SNF/NF SPECIALIZED REHAB SERVICES Facility Provides Specialized Rehab Services Qualifications For Providing Rehab Services DENTAL SERVICES Dental Services in SNF's Dental Services in NFS

13 F425 F428 F431 F441 F442 F443 F444 F445 F454 F455 F456 F457 F458 F459 F460 F461 F462 F463 F464 F465 F466 F467 F468 F469 PHARMACY SERVICES Facility Provides Drugs & Biologicals Drug Regimen Reviewed Monthly Proper Labeling of Drugs & Biologicals INFECTION CONTROL Facility Establishes Infection Control Program Facility Isolates Resident When Appropriate Employee with Communicable Diseas - No resident Contact Wash Hands When Indicated Handle Linens to Prevent Infection Spread PHYSICAL ENVIRONMENT Facility Designed To Protect Health & Safety Facility Has Emergency Electrical Power Essential Equipment in Safe Operation & Condition Rooms No More than Four Residents Rooms at Least 80 S.F. per Resident Rooms have Direct Access to Exit Cooridor Rooms Designed to Assure Visual Privacy Rooms Have at Least One Window to Outside Rooms Equiped w Near Toilet & Bath Facilities Resident Call System Requirements for Dining & Activities Environment is Safe/Functional/Sanitary Comfort Procedures to Ensure Water Availability Facility Has Adequate Outside Ventilation Corridors Have Firmly Secured Handrails Mainatins Effective Pest Control Program

14 F490 F491 F492 F493 F494 F495 F496 F497 F498 F499 F500 F501 F502 F503 F504 F505 F506 F507 F508 F509 F510 F511 F512 F513 F514 F515 F516 F517 F518 F519 F520 F522 ADMINISTRATION Facility Administered Effectively Licensure Under State/Local Laws Fed/State/Local Laws/Professional Standards Gov. Body Appoints Admin/Mgs Facility Nurse Aide Training/Competency Comp Nurse Aides Worked <4 Months Nurse Aide Registry Verification Regular Perf Rev/Inservice Education Proficiency of Nurse Aides Facility Employees Qualified Professional Staff Use of Outside Professional Resources Responsibilities of Medical Director Facility Obtains & Provides Lab Services Laboratory Services Provided by Facility Laboratory Services Only When Needed Physician Promptly Notified of Lab Results Facility Assists Resident in Transport To Lab Lab Reports Filed in Clinical Record Facility Provides/Obtains Radiology Services Radiology Services Meet Requirements Radiology/Diag Svcs When Ordered Promptly Notify Physician of Radiology/Other Findings Assist Resident in Transport for Radiology Reports of Xrays/Diag Services Filed in Record Clinical Records Meet Professional Standards Req for Maintaining Clinical Records Facility Safeguards Clinical Records Plans to Meet Emergencies/Disasters Train Employees, Emergency Proc/Drills Transfer Agreement with Hospital Facility Maintains QA Committee Disclosure of Ownership Requirements

15 [We redact certain identifying information and certain potentially privileged, confidential, or proprietary information associated with the individual or entity, unless otherwise approved by the requestor.] Issued: November 30, 2012 Posted: December 7, 2012 [Name and address redacted] Ladies and Gentlemen: Re: OIG Advisory Opinion No We are writing in response to your request for an advisory opinion regarding four proposed arrangements involving a pharmacy company s provision of items and services to community homes in which its customers reside. The first and second proposed arrangements ( Proposed Arrangement A and Proposed Arrangement B, respectively) would primarily involve the pharmacy company providing pre-populated medication administration records ( MARs ), physician order forms, and treatment sheets to community homes for free either in paper format or via a web-based software program. Under the third and fourth proposed arrangements ( Proposed Arrangement C and

16 Proposed Arrangement D, respectively) the pharmacy company would provide a sublicense for a different web-based software program to community homes that would allow the community homes to perform certain administrative functions and to maintain electronic medication administration records ( emars ). We refer to Proposed Arrangement A, Proposed Arrangement B, Proposed Arrangement C, and Proposed Arrangement D collectively as the Proposed Arrangements. Specifically, you have inquired whether the Proposed Arrangements would constitute grounds for the imposition of sanctions under the exclusion authority at section 1128(b)(7) of the Social Security Act (the Act ), or the civil monetary penalty provision at section 1128A(a)(7) of the Act, as those sections relate to the commission of acts described in section 1128B(b) of the Act, the Federal anti-kickback statute.

17 Page 2 OIG Advisory Opinion No You have certified that all of the information provided in your request, including all supplemental submissions, is true and correct and constitutes a complete description of the relevant facts and agreements among the parties. In issuing this opinion, we have relied solely on the facts and information presented to us. We have not undertaken an independent investigation of such information. This opinion is limited to the facts presented. If material facts have not been disclosed or have been misrepresented, this opinion is without force and effect. Based on the facts certified in your request for an advisory opinion and supplemental submissions, we conclude that, although Proposed Arrangement A, Proposed Arrangement B, and Proposed Arrangement C could potentially generate prohibited remuneration under the anti-kickback statute if the requisite intent to induce or reward referrals of Federal health care program business were present, the Office of Inspector General ( OIG ) would not impose administrative sanctions on [name redacted] under sections 1128(b)(7) or 1128A(a)(7) of the Act (as those sections relate to the commission of acts described in section 1128B(b) of the Act) in connection with Proposed Arrangement A, Proposed Arrangement B, or Proposed Arrangement C. However, we conclude that Proposed Arrangement D could potentially generate prohibited remuneration under the anti-kickback statute and that the OIG could potentially impose administrative sanctions on [name redacted] under sections 1128(b)(7) or 1128A(a)(7) of the Act (as those sections relate to the commission of acts described in section 1128B(b) of the Act) in connection with Proposed Arrangement D. Any definitive conclusion regarding the existence of an anti-kickback violation requires a determination of the parties intent, which determination is beyond the scope of the advisory opinion process. This opinion is limited to the Proposed Arrangements and, therefore, we express no opinion about any ancillary agreements or arrangements disclosed or referenced in your request for an advisory opinion or supplemental submissions. This opinion may not be relied on by any persons other than [name redacted], the requestor of this opinion, and is further qualified as set out in Part IV below and in 42 C.F.R. Part I. FACTUAL BACKGROUND A. Background [Name redacted] (the Requestor ) provides pharmacy services to more than 3400 individuals with intellectual and developmental disabilities who reside in community homes ( Community Homes ) located in [state name redacted] and [state name redacted] (the States ). The Requestor enters into agreements with certain Community Homes to

18 Page 3 OIG Advisory Opinion No supply prescription medications to their residents. The Requestor certified that nothing in the Proposed Arrangements would require those agreements to be exclusive. The Requestor provides its services through its pharmacies. According to the Requestor, the Community Homes have the ability to select, or influence the selection of, the pharmacy serving their residents, some of whom are Federal health care program beneficiaries. The Requestor also certified that, although the residents (or the residents families) may choose an alternate pharmacy, and the Community Homes are obligated to respect their residents (and their families ) choice, that choice is not frequently exercised. The Requestor certified that the Community Homes can neither prescribe, nor influence or control the prescription of, medications and that the Community Homes neither control nor influence the decisions of prescribing physicians. 1 The Requestor further certified that the Community Homes do not set formularies or otherwise limit or influence prescribing physicians selection of prescription medications. Both States in which the Community Homes served by the Requestor operate require that the Community Homes maintain a MAR documenting certain information about the medications provided to their residents. According to the Requestor, the Community Homes are required to maintain the MARs as a condition of licensure in both States, and licensure is a condition of participation in Medicaid. B. Proposed Arrangements The Requestor proposes to enter into the Proposed Arrangements with various Community Homes located in the States. One of the Proposed Arrangements would be available to all Community Homes in the two States in which the Requestor does business, while the others would be available only to those Community Homes that have residents who obtain prescription medications from the Requestor. The Requestor certified that, except for the limitation referenced in the preceding sentence, each Proposed Arrangement would be available regardless of the volume or value of prescription medications a particular Community Home s residents obtain from the Requestor. The Requestor further certified that no other remuneration would be offered or provided to any of the Community Homes in connection with the Proposed Arrangements. 1 According to the Requestor, residents and their families have the right to choose their own physicians. While some Community Homes employ or otherwise obtain the services of medical directors, we have not been asked to opine on, and we offer no opinion concerning, those relationships.

19 Page 4 OIG Advisory Opinion No Proposed Arrangement A The Requestor would make Proposed Arrangement A available to Community Homes that have residents who obtain prescription medications from the Requestor. Under Proposed Arrangement A, the Requestor would provide these Community Homes with free computer-generated paper copies of pre-populated MARs 2 for each resident who receives his or her prescription medications from the Requestor. The Community Homes would still be required to document the actual administration of each dose of medication, including the date, time, and the person administering the medication. The Requestor would also provide free paper copies of a physician order form (the Physician Order Form ) and a treatment sheet ( Treatment Sheet ). According to the Requestor, the Physician Order Form contains all of the information that the Requestor collects about an individual as part of its process for filling prescriptions, including allergies, medications, and diagnoses. The Community Homes may then present the Physician Order Forms to the prescribing physicians who review and sign the Physician Order Forms to reauthorize prescriptions. That reauthorization, in turn, permits the Requestor to dispense the medications. The Requestor certified that the Community Homes are required by state law to retain a copy of the signed Physician Order Forms for their records in order for their staffs to administer medications. According to the Requestor, the Treatment Sheets are a form of MAR that include medication administration information related to topical prescription medications. The States require that Community Homes maintain this medication administration information. 3 As with the MARs, the Community Homes would still need to document the actual administration of each dose of topical prescription medication on the Treatment Sheets. The Requestor 2 The pre-populated information would include the resident s name, address, and date of birth, the prescribing physician s name, the name of the medication, the date the medication was started, the diagnosis/condition for which the medication was prescribed, the medication strength, dosage form, dose, route of administration, frequency of administration, prescribed administration times, duration of the prescription, and any special precautions. The Requestor obtains this information from prescribing physicians and other sources as part of its process for filling prescriptions. 3 While some Community Homes do not use Treatment Sheets, and instead maintain all required medication administration information in one MAR document, other Community Homes choose to separately maintain administration information regarding topical medications on a separate document, a Treatment Sheet, because topical prescription medications may be stored and handled differently than oral medications and may be administered by different staff members.

20 Page 5 OIG Advisory Opinion No would deliver the paper copies of the pre-populated MARs, Physician Order Forms, and Treatment Sheets once a month. The Requestor acknowledges that, absent the Proposed Arrangements, the Community Homes would be required to prepare MARs, Physician Order Forms, and Treatment Sheets in order to meet their obligations under state law. According to the Requestor, the cost of providing the pre-populated materials would be nominal because the Requestor must gather the information contained in the materials to fill a prescription. Further, the Requestor states that providing the pre-populated materials could reduce medication errors resulting from the Community Homes staff manually transcribing prescription information from pill bottles or other prescription medication packaging on to blank forms. 2. Proposed Arrangement B The Requestor would make Proposed Arrangement B available to Community Homes that have residents who obtain prescription medications from the Requestor. Under Proposed Arrangement B, the Requestor would offer these Community Homes free, limited access to [name redacted] ( Software Y ) in connection with each resident who receives his or her prescription medications from the Requestor. Software Y is a secure, web-based software program that allows users to re-order medications, print medical records, and communicate directly with the Requestor s pharmacists. The Community Homes access to Software Y would be limited to the following functions: printing prepopulated MARs, Physician Order Forms, and Treatment Sheets; composing messages to, and reading messages from, the Requestor; reviewing the resident profile that is maintained by the Requestor; reordering and refilling prescriptions; checking on the status of the ordered prescriptions; and changing the user s password. If the end-user is a nurse, then the following additional functions would also be available: changing resident demographics, adding and removing resident drug allergy information, and adding and removing resident medical condition information. The Requestor certified that it requires this updated information to ensure that it is safely dispensing the prescription medications. The Community Homes would have access to these limited Software Y functions 24 hours a day, 7 days a week. Thus, if information on one of the prepopulated materials changed in the middle of a month, the Community Homes staff would be able to access and print the updated materials. In the absence of this ability to access and print updated materials, the Community Homes staff would have to manually update the existing materials to reflect any changes.

21 Page 6 OIG Advisory Opinion No The licensor of Software Y charges a one-time fee based on the number of pharmacies using the software. For the Requestor, that one-time fee totaled [amount redacted] for all of its pharmacies. The Requestor would incur no additional costs to add users or to give the Community Homes access. Software Y is only available for purchase by pharmacies. The Requestor certified that Software Y is not interoperable within the meaning of 42 C.F.R (y). 3. Proposed Arrangement C The Requestor has entered into a licensing agreement with [name redacted] (the Developer ) that grants the Requestor the exclusive right to sell sublicenses for [name redacted] ( Software Z ) to Community Homes in certain territories, including the States. 4 Software Z is a web-based software program that offers a number of functions, including bundled products that facilitate scheduling and administration of medications, and provides an emar that complies with state regulatory requirements. Specifically, Software Z integrates pharmacies information and order fulfillment processes with software end-users medication administration work responsibilities (e.g., documenting medication administration, tracking vital signs, and storing medical observations). Software Z also offers a real-time prompting system that automatically transfers prescription information from a pharmacy to an end-user and prompts end-user staff to administer scheduled medications. That same function could be used by the end-user to schedule, and prompt staff to engage in, other tasks and events like providing patients and residents with other treatments or exercise, taking vital signs, and other calendar-based events. End-user nurses and management could be alerted when medication administration or other tasks and events are omitted or performed early or late. The Requestor certified that Software Z is not interoperable within the meaning of 42 C.F.R (y). According to the Requestor, the data that an end-user would create and maintain in Software Z would not be readily transferable to another system, and losing access to Software Z would result in losing electronic access to the MAR documentation and other data stored in Software Z. The Requestor would make Proposed Arrangement C available to any Community Home, regardless of whether its residents obtain prescription medications from the Requestor or another pharmacy. Under Proposed Arrangement C, these Community Homes would be able to purchase a sublicense for Software Z from the Requestor. The Requestor would 4 The Requestor is the exclusive sublicensor of Software Z to Community Homes in both States. We have not been asked to opine on, and we express no opinion regarding, the arrangement between the Requestor and the Developer.

22 Page 7 OIG Advisory Opinion No offer sublicenses to all Community Home at the same price and under the same purchase terms. The Requestor would charge a one-time [amount redacted] setup fee 5 in addition to a monthly per-resident fee. The Requestor certified that the fees it would charge Community Homes for Software Z access would be fair market value and would not vary based on whether the Community Homes residents receive prescription medications from the Requestor or another pharmacy, or the volume or value of resident prescriptions, if any. The monthly per-resident fee charged by the Requestor would be lower than the monthly per-resident fee the Developer normally charges Community Homes for Software Z, but would not be below the cost to the Requestor. 4. Proposed Arrangement D The Requestor would make Proposed Arrangement D available to Community Homes that have residents who obtain prescription medications from the Requestor. Under Proposed Arrangement D, the Requestor would offer these Community Homes a free sublicense for Software Z for their own use in connection with each such resident. The Requestor certified that its cost to provide the free sublicenses would be significant and exceed its nominal cost of providing the pre-populated materials described in connection with Proposed Arrangement A. II. LEGAL ANALYSIS A. Law The anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. See section 1128B(b) of the Act. Where remuneration is paid purposefully to induce or reward referrals of items or services payable by a Federal health care program, the anti-kickback statute is violated. By its terms, the statute ascribes criminal liability to parties on both sides of an impermissible kickback transaction. For purposes of the anti-kickback statute, remuneration includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind. The statute has been interpreted to cover any arrangement where one purpose of the remuneration was to obtain money for the referral of services or to induce further referrals. See, e.g., United States v. Borrasi, 639 F.3d 774 (7th Cir. 2011); United States 5 The setup fee would be charged per agency that operates the Community Homes, rather than per Community Home. According to the Requestor, a single agency may operate multiple Community Homes.

23 Page 8 OIG Advisory Opinion No v. McClatchey, 217 F.3d 823 (10th Cir. 2000); United States v. Davis, 132 F.3d 1092 (5th Cir. 1998); United States v. Kats, 871 F.2d 105 (9th Cir. 1989); United States v. Greber, 760 F.2d 68 (3d Cir. 1985), cert. denied, 474 U.S. 988 (1985). Violation of the statute constitutes a felony punishable by a maximum fine of $25,000, imprisonment up to five years, or both. Conviction will also lead to automatic exclusion from Federal health care programs, including Medicare and Medicaid. Where a party commits an act described in section 1128B(b) of the Act, the OIG may initiate administrative proceedings to impose civil monetary penalties on such party under section 1128A(a)(7) of the Act. The OIG may also initiate administrative proceedings to exclude such party from the Federal health care programs under section 1128(b)(7) of the Act. The Department of Health and Human Services has promulgated safe harbor regulations that define practices that are not subject to the anti-kickback statute because such practices would be unlikely to result in fraud or abuse. See 42 C.F.R The safe harbors set forth specific conditions that, if met, assure entities involved of not being prosecuted or sanctioned for the arrangement qualifying for the safe harbor. However, safe harbor protection is afforded only to those arrangements that precisely meet all of the conditions set forth in the safe harbor. The safe harbor related to electronic health records, 42 C.F.R (y), is potentially applicable to Proposed Arrangement B, Proposed Arrangement C, and Proposed Arrangement D. B. Analysis The Proposed Arrangements implicate the anti-kickback statute because, under each of the Proposed Arrangements and as explained more fully below, the Requestor potentially would provide remuneration to Community Homes that have the ability to select, or influence the selection of, the pharmacy serving their residents, some of whom are Federal health care program beneficiaries. Although the electronic health records safe harbor potentially applies to Proposed Arrangement B, Proposed Arrangement C, and Proposed Arrangement D, each fails to meet the conditions of the safe harbor because, among other reasons, neither Software Y nor Software Z is interoperable within the meaning of the safe harbor regulation. However, the absence of safe harbor protection is not fatal. Instead, these Proposed Arrangements must be subject to case-by-case evaluation. As a preliminary matter, we note that our position on the provision of free or belowmarket items or services to actual or potential referral sources is longstanding and clear: such arrangements are suspect and may violate the anti-kickback statute, depending on the circumstances. It is in this context that we consider each of the Proposed Arrangements in turn.