Legal Update: What s New For Skilled Nursing Facilities?

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1 Legal Update: What s New For Skilled Nursing Facilities? Susan A. Benz Eric C. Naegely Susan Benz is a partner and Co-Chair of our Health Care and Human Services Practice Area. Susan represents health care and human service providers with regulatory, reimbursement, compliance, enforcement and corporate matters. Her clients include skilled nursing, assisted living, and independent senior housing facilities, CCRCs, home care agencies, clinics, hospices, medical transportation providers, pharmacies, billing companies and health care professionals. She also represents not-for-profit organizations that provide services to individuals with intellectual/developmental disabilities, communication disorders, and behavioral health issues. 1

2 Eric Naegely is a partner and trial attorney in the Health Care Practice Group Eric focuses his practice on representing all types of health care providers, He has successfully tried numerous cases to verdict. He also represents health care professionals in matters with the State and Federal government agencies including the New York Department of Health, Office of Medicaid Inspector General, Medicaid Fraud Control Unit and Justice Center. Eric also assists health care providers with risk management issues including developing and implementing policies and procedures, conducting internal investigations and dealing with privacy issues. He has published many articles and given numerous lectures in the area of healthcare law such as mandated reporting, medical charting, conducting internal investigations and nursing home negligence. Overview Regulatory Highlights Compliance Update HIPAA Update Arbitration Resident Grievance Rights CMS Facility Assessment Action At the County Level Civil Lawsuits 2

3 Federal Regulatory Highlights Major Overhaul to Medicare Part A rate setting methodology? New Federal Rule provides new system known as Resident Classification System or RCS-I (eliminates RUGS IV) Released May 4, 2017; comments due June 26, 2017; will publish proposed rule Spring, 2018 Federal Regulatory Highlights Goals: Reduce or eliminate skilled therapy as primary driver of per diem rate Decrease inappropriate therapy volume Increase weight of non-therapy costs 3

4 Federal Regulatory Highlights Residents would not be assigned to case mix group based on amount of therapy provided Would be assigned based on objective patient characteristics deemed predictive of therapy costs and other service needs: 1) clinical reasons for stay; 2) functional status; and 3) cognitive impairment Federal Regulatory Highlights 5 components: PT + OT SLP Non-Therapy Services Nursing and social services Non-case mix costs (room and board, admin, capital-related costs) 4

5 Impact? Methodology more complex Part A revenue less predictable Payments change over resident s stay Payment classification based on resident s unique characteristics and needs Federal Regulatory Highlights Requirements of Participation Phase I: Nov. 28, 2016 Phase 2: Nov. 28, 2017 Phase 3: Nov. 28, 2019 No formal guidance yet Some CMS memoranda offer guidance 5

6 Federal Regulatory Highlights New definition of Substandard Quality of Care (SQC); same as old definition but more regulatory bases for citations No substantial or substantive changes to what type of deficient practices would result in SQC Effective Nov. 28, 2016 See CMS Memo NH dated 5/12/17 Federal Regulatory Highlights Phase 1: Most SQC FTags same Phase 2: New F Tag numbering system will be implemented Nov. 28, 2017 Phase 3: No SQC changes anticipated; effective Nov

7 Federal Regulatory Highlights Notice of Transfer or Discharge For resident-initiated transfers, no need to send notice of discharge to ombudsman For facility-initiated transfers and emergency transfers, notification to ombudsman required but some timeframes relaxed. See CMS Memo NH dated 5/12/17 State Regulatory Highlights Bed Hold Regulation Amendment 4/1/17 implementation delayed until emergency regulations are adopted Amendment to eliminate Medicaid reimbursement for reserved bed days but require that the bed be held in same room for hospitalized patient for 14 days in 12 month period. See DOH DAL dated May 12,

8 State Regulatory Highlights Therapeutic leave unchanged Residents continue to receive 10 days of leave per 12 month period Paid at 95% Medicaid rate State Regulatory Highlights Managed Care Plan payment Requirement to pay Medicaid benchmark rate through 2020 (state budget) DOH to attempt creation of separate rate cell for Managed Long Term Care (MLTC) as MLTC premium does not cover costs of NH care 8

9 Compliance: Federal Enforcement Post-acute providers continue to be hit with false claims act penalties: Ruchk v. CMC II: $347 million (April, 2017): Falsifying records by overstating the residents medical needs and amount of care provided to them Incomplete care plans which led to inadequate staffing and poor care Case brought by RN Ruchk who worked as MDS consultant in 2 of 53 facilities in Florida Compliance: Federal Enforcement RehabCare and Kindred: $125 million for alleged false claims related to providing medically unnecessary therapies (Jan. 2017) Whistleblower case brought by PT and OT employed by RehabCare, largest therapy provider in country LifeCare Centers: $145 million (Oct. 2016) Whistleblower case brought by former employees alleging improper ultra high rehab 9

10 Compliance: NY Enforcement Medford Multicare Center $28 million civil settlement and Independent Monitor for alleged diversion of Medicaid funds to owners and staffing and service cuts Criminal conviction against corporation (and employees) for allegedly falsifying records in connection with death of 72 year old resident and $10 million fine Other New York MFCU Cases Use of residents credit cards Failure to respond to ventilator alarms Punching, kicking and abusing residents Photos and videos of residents in undignified positions, some of which were posted on Facebook and Snapchat Tip: Note DOH standard surveys after 9/5/16 will request and review policies and procedures related to prohibiting staff from taking or using photos or recordings that would demean or humiliate a resident. See DAL NH

11 Compliance: OMIG Activity Another year of MDS Audits with findings; Documentation did not support assessments of ADLs, skin, swallowing/nutrition status, assessments, dementia add-on, necessity and frequency of skilled therapy Another year of cost report audits New Compliance ROPs New ROPs for Compliance and Ethics Programs (11/28/19) Largely track NY requirements (8 essential elements) Social Services Law 363-d; 18 NYCRR 521 Few Key Differences: Individuals must have sufficient available resources and authority to reasonably assure compliance with program standards. 42 CFR (c)(3) 11

12 New Compliance ROPs Must review its compliance program on an annual basis and revise as needed For organizations with 5+ facilities, designated compliance officer at each of the facilities in addition to central Compliance Officer Compliance Officer cannot be subordinate to general counsel, CFO or COO Mandatory annual training on program (already required by NY) 42 CFR (d) Compliance Tools Government Publications OMIG Compliance Review Guidance US DOJ Evaluation of Compliance Programs HCCA-OIG Resource Guide 12

13 1 5/25/2017 U.S. Department of Justice Criminal Division Fraud Section Evaluation of Corporate Compliance Programs Introduction The Principles of Federal Prosecution of Business Organizations in the United States Attorney s Manual describe specific factors that prosecutors should consider in conducting an investigation of a corporate entity, determining whether to bring charges, and negotiating plea or other agreements. These factors, commonly known as the Filip Factors, include the existence and effectiveness of the corporation s pre existing compliance program and the corporation s remedial efforts to implement an effective corporate compliance program or to improve an existing one. February 18,

14 SNF HIPAA Enforcement Theft of employee iphone issued by Catholic Health Services of Philadelphia, parent management and IT company for 6 affiliated nursing homes (a Business Associate) iphone not encrypted or password protected 412 individuals affected Social security numbers, diagnosis and treatment info, medical procedures, names of family members, and medications disclosed 14

15 SNF HIPAA Enforcement Catholic Health had no policies addressing: Removal of mobile devices containing PHI from its facility What to do in event of security incident No risk analysis No risk management plan SNF HIPAA Enforcement Monetary payment of $650,000 Corrective action plan Monitoring by HHS-OCR for 2 years Key factor in determining penalty: Catholic Health provides unique and much-needed services in Philly to elderly and individuals with DD and HIV/AIDS 15

16 HIPAA Audits Phase 2: (July, 2016 present) Enhanced protocols and adding business entities to the audit program OCR will review the policies and procedures of Covered Entities and their Business Associates to determine compliance with Privacy, Security, and Breach Notification Rules Between audits HIPAA Audits How are providers selected? Covered Entities and Business Associates were sent a request for contact information. Received a pre-audit questionnaire to assist OCR in creating a potential audit subject pool. Auditees selected through a random sampling process and were notified of their participation. 16

17 Most of the audits will be desk audits Provide documents electronically. Auditors will review documentation and share draft findings with the entity. After receiving the draft report, auditees have 0 business days to send comments. Final audits will be completed 30 business days after the auditee s response. A third set of audits may occur onsite, where a broader scope of HIPAA requirements will be examined. After the audit HIPAA Audits In the event of serious compliance issues, OCR may investigate further with a compliance review OCR will not post a listing of audited entities or the findings in a way that identifies the audited entity, but OCR may be required to release certain material under the Freedom of Information Act (e.g., notification letters) 17

18 Nursing Home Arbitration? In November of 2016, a portion of the new CMS regulations were scheduled to go into effect that prohibited nursing homes from entering into any and all binding arbitration agreements with a resident, or a resident s representative, until an actual dispute arose between the parties. Nursing Home Arbitration? The CMS regulation was more extensive than anticipated. It states the following: A nursing home cannot require a resident to sign a binding arbitration agreement as a condition of admission. A nursing home can ONLY ask a resident to sign a binding arbitration agreement after a dispute arises AND the agreement must be limited to the specific dispute that has already occurred. The nursing home must first fully explain the agreement to the resident and/or to the resident s designated representative. 18

19 Nursing Home Arbitration? Also The arbitration agreement must specifically provide for the selection of a neutral arbitrator who is agreed upon by both parties. A resident s continuing right to remain in the nursing home must not be contingent on the resident signing the agreement. There must be clear evidence that the resident, or their legal representative, entered into the agreement knowingly and voluntarily. Nursing Home Arbitration? The Legal Challenges to the Ban They already are taking place. Shortly before the regulation was scheduled to go into effect, the America, Health Care Association (AHCA) led a class action lawsuit against the rule in Federal District Court in Mississippi. The basis for the lawsuit is that CMS (1) overstepped its statutory authority by effectively creating legislation on the issue AND (2) violated the Federal Arbitration Act. CMS argued that it did not BAN arbitration agreements but merely provided a financial incentive to nursing homes not to use them. Seriously! Last week s WHITE HOUSE MEETING! CMS may repeal the ban. 19

20 Nursing Home Arbitration? STATUS OF THE MISSISSIPPI LAWSUIT The Judge issued a 40 page decision granting the plaintiff s request for a temporary restraining order (TRO) preventing the new rules from being implemented until a final decision is made on the lawsuit. THIS IS VERY SIGNIFICANT because a TRO is not supposed to granted unless that party seeking it establishes a likely chance of success of winning the case. CMS appealed the judge s decision this past January. There has not yet been a decision on the appeal. Nursing Home Arbitration? PREDICTION CMS will lose its appeal and the TRO will remain in effect until the conclusion of the lawsuit. Plaintiffs will ultimately win the lawsuit because CMS did overstep its authority and violated the Federal Arbitration Act. Important is that the federal government has consistently expressed its like for arbitration agreements. In fact, on May 3 rd, the Supreme Court declined to review a Pennsylvania action that enforced a different arbitration clause involving a nursing home. However, plaintiffs lawyers from all over the country are organizing to help CMS. These lawyers would LOVE for the ban to take effect. They are well funded and organized. 20

21 Nursing Home Arbitration? POLICY ARGUMENTS FOR AND AGAINST ARBITRATION AGREEMENTS FOR: The arbitration process is much less costly. The arbitration process is much faster, which is important given the advanced age and health of the residents. The arbitration process allows for the actual parties to fully participate, including negotiating the eventual resolution. AGAINST: Arbitration agreements are hidden deep within admission agreements and the resident s do not even realize they are signing them. Arbitration agreements are signed under duress during a difficult time in the resident s and family s life. Civil litigation is a good thing because it helps improve the quality of care at poor facilities.*** Nursing Home Arbitration? ***TRUTH ABOUT LAWSUITS AGAINST NURSING HOMES A 2011 study published in the New England Journal of Medicine compared nursing homes with the best ratings, as given by state regulators, to nursing home with the worst ratings. The study then compared those ratings to see how many times each facility was sued. The conclusion reached was that the best performing nursing homes were sued only marginally less than the worst performing nursing homes. In other words, there is no correlation between good care and avoiding lawsuits. 21

22 Resident Grievance Rights Another part of the new CMS regulations (Section 483.1) requires facilities to establish a detailed policy and process for residents to voice grievances without reprisal or fear of discrimination. Grievances must be promptly resolved and can include anything related to: 1. Care and treatment issues. 2. Behavior of staff and other residents. 3. Other concerns regarding their stay. Resident Grievance Rights The Grievance Policy must: Notify residents individually or via postings of the right to file a grievance orally or in writing. Identify the designated Grievance Official. Allow for grievances to be filed anonymously. Ensure a reasonable expected time frame for completing the process. Allow the resident to obtain a written decision. Provide contact information for the state agency(s) where grievances can be filed. 22

23 Resident Grievance Rights The Facility must also: Take IMMEDIATE action to prevent potential further violations. Report to the proper authorities as required by law. Maintain all evidence demonstrating the results of all grievances for no less that 3 years from issuance of the grievance decisions. Resident Grievance Rights Huge Concern! The final report/decision will provide a road map for plaintiffs attorneys and government investigators, as it will most likely not be privileged and confidential. The Final Report/Decision Must Include: 1. Date grievance received and decision was issued. 2. Steps taken to investigate, 3. Summary of pertinent findings and conclusions. 4. Statement as to whether grievance was confirmed. 5. Corrective actions taken or will be taken. 23

24 CMS Facility Assessment Are we ready for November 28th? Facilities must comply with the facility assessment requirement by CMS s Phase 2 implementation date of November 28, This is all part of CMS s Reform of Requirements for Long-Term Care Facilities final rule that was issued by on September 28, CMS Facility Assessment WHAT IS IT CMS intends the facility assessment to form the basis for long term care facility resource planning and utilization including deployment of sufficient direct care staff with appropriate competencies to meet each resident s unique needs. It is considered the cornerstone of CMS s new requirements. 24

25 CMS Facility Assessment It is intended to be used by facilities to: Determine staffing requirements. Establish a QAPI (Quality Assurance and Performance Improvement). Conduct emergency preparedness planning and training. Inform facility decisions about several new requirements like providing behavioral health services, trauma-informed care, providing culturally competent care based the facility s ethnic and religious populations, training needs, and other facility operations. CMS Facility Assessment The assessment must consider the following elements: 1. The facility s resident population. 2. The facility s resources. 3. The facility-based and community-based risk assessment approach, utilizing an all hazards approach. 25

26 CMS Facility Assessment 1. The facility s resident population includes, but is not limited to: a) Both the number of residents and the facility s resident capacity; b) The care required by the resident population considering the types of diseases, conditions, physical and cognitive disabilities, overall acuity and other pertinent facts that are present within that population; c) The staff competencies necessary to provide the level and type of care needed for the resident population; CMS Facility Assessment Continued.. d) The physical environment, equipment, services, and other physical plant considerations that are necessary to care for this population; e) Any ethnic, cultural, or religious factors that may potentially affect the care provided by the facility including, but not limited to, activities and food nutrition services. 26

27 CMS Facility Assessment 2. The facility s resources include, but is not limited to: a) All buildings and/or other physical structures and vehicles b) Equipment, both medical and non-medical; c) Services provided, such as physical therapy, pharmacy, and specific rehabilitation therapies; CMS Facility Assessment Continued d) All personnel including managers, staff (employees and contract) and volunteers, as well as their education and training and any competencies related to resident care; e) Agreements with third parties to provide services or equipment to the facility during both normal and emergency operations; and f). Health information technology resources, such as systems for electronically managing patient records and electronically sharing information with other organizations. 27

28 CMS Facility Assessment CONCERNS ALREADY IDENTIFIED The New F-Tag could be overused and abused by surveyors. - One isolated incident can easily result in two deficiencies. - F-Tags may often come with an immediate jeopardy level of severity with a corresponding fine of up to $20,628, WITHOUT an opportunity to cure. CMS Facility Assessment Continued The assessments can be a roadmap for plaintiff s attorneys. - A facility s weaknesses and shortcomings are highlighted and outlined in a single convenient document. - It can be used to prove the facility was on notice of the problem. It is unclear if the assessments will be deemed privileged and confidential pursuant to federal and/or NY law. - AHLA recommends considering having these prepared by your attorney or under their direction, so you can invoke the attorney/client privilege. 28

29 Action at the County Level Erie County recently announced it was taking action to help improve the quality of care at nursing homes. On March 24 th, the Erie County Executive announced a proposed law Ruthie s Law which requires nursing homes, located in Erie County, to notify a resident s family within one hour of determining the resident suffered injuries severe enough to require hospital care. Ruthie s Law will also require nursing homes, located in Erie County, to disclose their DOH scores to every applicant seeking placement at their facility. Ruthie s Law will also require the nursing homes, located in Erie County, to provide injury and fatality data to the Erie County Commissioner of Social Services. Action at the County Level Who was Ruthie? Ruth Murray was a nursing home resident with Alzheimer s disease who sustained serious injuries after being assaulted by another resident when she mistakenly walked into the other resident s room. She died 3 days later from her injuries. Her family alleged that they were not informed about the severity of Ruthie s injuries until several hours later by hospital physicians. There was much media coverage about the incident. The nursing home was fined $10,000 by the DOH. 29

30 Action at the County Level Ruthie s Law was announced with much fanfare, with a press conference that included many state and local politicians. The local paper covered it with a bent of how great it will be. Nursing home trade organizations were quick to act, including LeadingAge New York and the New York State Health Facilities Association, writing a letter to the County Executive citing Section 2812 of the Public Health Law which prevents counties, towns, villages and cities from enacting or enforcing regulations and standards applicable to nursing homes. Action at the County Level Additional actions taken by Erie County The County Executive also issued a new executive order that creates a website publicizing information about all nursing homes located in Erie County. The public can use the site to access rankings and scores assigned by the DOH. The site will also list past infractions of the nursing home. 30

31 Action at the County Level Additional actions taken by Erie County The County Executive is also lobbying and organizing NYS legislators to pass new laws, at the State level, increasing the amount of fines the DOH can issue to nursing homes for repeat violations and for incidents that result in a resident s serious injury and/or death. Action at the County Level PREDICTIONS Much of the County s proposed actions will be defeated in court due to Section 2812 of the Public Health Law. However, this litigation will be costly and likely result in several appeals, as the trial level judges will be swayed by public sentiment. Counties all over the State will take similar action and will organize to put pressure on at the state level to pass even more nursing home regulations and harsher penalties. 31

32 Action at the County Level WHAT DOES THIS ALL REVEAL? Nursing homes continue to lose the public relations battle to well funded interest groups often led by plaintiffs lawyers. Those of us who live in Erie County see the commercials daily from Brown Chiari, LLP, as well as the slanted media coverage. Politicians will vote for increased regulations and fines because it s the popular thing among voters. New York State will never have a cap on awards in civil lawsuits, particularly those involving nursing homes. Which takes us back to the importance of arbitration agreements!! Issue of Admissibility of Previous State Actions in a Civil Lawsuit Mazella v. Beals FACTS: The plaintiff alleged that her husband received substandard medical treatment resulting in his suicide. She specifically alleged that Dr. William Beals negligently prescribed Paxil without adequately monitoring her husband s condition for more than a decade. Interestingly, Dr. Beals acknowledged that his care was below accepted medical standards but argued his negligence in no way caused the husband s death. RESULT: The jury disagreed with Dr. Beals and found in favor of the plaintiff. Dr. Beals appealed. 32

33 Issue of Admissibility of Previous State Action in a Civil Lawsuit Mazella v. Beals RESULT: The Court of Appeals ordered a new trial for Dr. Beals after finding: (1) The consent order was not probative of the issue of whether Dr. Beals caused Mr. Mazella death; and (2) Any relevant information that was contained within the OPMC order was significantly outweighed by the prejudicial effect it had on the Jury. The Court emphasized that it is improper to try to prove a person did something wrong, on a specific occasion, by establishing he did the same thing wrong on previous but unrelated occasions. Issue of Admissibility of Previous State Action in a Civil Lawsuit Mazella v. Beals ISSUE ON APPEAL: Dr. Beal s most compelling argument on appeal was related to what he claimed was an improper admission, into evidence, of a previous consent order between himself and the OPMC. - The Consent Order stemmed from previous OPMC charges that were strikingly similar to those alleged in this case. The OPMC alleged that Dr. Beals negligently prescribed medication to 13 patients without properly evaluating and monitoring them. One of those patients was Mr. Mazella. Dr. Beals consented to the OPMC findings as to all patients EXCEPT for Mr. Mazella given the existence of the civil lawsuit brought by his wife. - The Consent order was admitted into evidence by the Trial Judge over the objections of Dr. Beals attorney. 33

34 Issue of Admissibility of Previous State Action in a Civil Lawsuit Mazella v. Beals WHY THIS IS SIGNIFICANT TO NURSING HOMES: (1) We can use this decision, in civil litigation, to argue that previous DOH findings are not relevant and, as such, should not be admitted into evidence at trial. (2) We can try to argue that such findings are not subject to discovery, such as asking about them at depositions. This is unlikely given New York s broad discovery rules. (3) The decision came from New York s highest court, the Court of Appeals. As such, it must be followed by all other New York Courts, including administrative courts. Susan Benz, Esq. (716) sbenz@barclaydamon.com Eric Naegely, Esq. (716) enaegely@barclaydamon.com 34