Why Biden’s Calls for $1M Fines, CMS Survey Funding Boost Could Put Some Nursing Homes In Peril

The nursing home industry has long been governed under a carrot and stick system, but some worry the Biden administration may be too focused on the latter in its recently unveiled reform proposals.

While the reform’s staffing standards have been called “out of touch” and its emphasis on policing private equity is seen by some as “misguided,” calling on Congress to raise the dollar limit on per-instance financial penalties levied on poor-performing nursing homes has operators feeling more targeted than ever coming out of Covid.

Specifically, the Biden administration proposed raising the dollar limit on per-instance penalties from $21,000 to $1 million.

Biden has also called on Congress to provide almost $500 million to the Centers for Medicare & Medicaid Services (CMS), a nearly 25% increase, to support nursing home health and safety inspections – an effort he seems to have doubled down on in his Fiscal Year 2023 budget released on Monday.

Establishing more consistency when it comes to how and when nursing homes are surveyed, inspected and cited has long been called for by both leaders and advocates in the sector, but more surveys and higher fines was not the solution operators had in mind.

Out of 15,295 nursing homes nationally, 10,913, or 71%, have gone at least 16 months without a standard survey as of May 2021, according to a report filed by the U.S. Department of Health and Human Services Office of Inspector General.

Meanwhile, the average civil monetary penalty saw a steady increase from $8,000 in January 2016 to over $16,000 in July 2019, according to data published by the National Investment Center for Seniors Housing & Care (NIC).

The pandemic temporarily slowed average CMS penalties to just under $12,000 by October 2020, but that dollar figure was rising again to $15,000 by April 2021.

“I just don’t think more surveys are the answer,” Health Dimensions Group Principal and CEO Erin Shvetzoff Hennessey told Skilled Nursing News.

Minneapolis-based Health Dimensions Group (HDG) provides management and oversight for its 30 health care properties in seven states, according to its website, and has extensive experience with day-to-day operations of SNFs, continuing care retirement communities, assisted and independent living communities, and home health care.

Hennessey said facility staff can find surveys distracting, especially if it becomes too punitive or too frequent.

For Angela Schnepf, LeadingAge Illinois executive vice president, the government has often zeroed its focus on trying to find ways to “punish” operators instead of developing solutions to improve care for those in nursing homes, and Biden’s reform does little to change that.

“It’s almost like a gotcha … we’re not going to provide you the money, we’re not going to provide you the education or support, but we’ll provide you the fines when you do something that we think is wrong,” Schnepf told SNN. “That does not help the residents, it doesn’t help the nursing home improve, it doesn’t help anyone except for the entity that’s collecting those fines.”

The Biden administration also wants to overhaul CMS’s Special Focus Facility (SFF) program, which identifies the poorest-performing nursing homes in the country for further scrutiny as a way to improve the care they deliver.

The program currently requires more frequent compliance surveys for program participants, which must pass two consecutive inspections to move past the program.

While little detail was provided in the White House’s fact sheet on how the SFF program would be revamped, the administration said it would urge CMS to make changes that allow facilities to move through the program more quickly.

The fact sheet also noted that facilities that failed to improve would face “larger enforcement actions” such as termination from the Medicare and Medicaid programs.

This is not the first time the federal government has asked for changes to the SFF program.

U.S. Sens. Bob Casey and Pat Toomey last March introduced the Nursing Home Reform Modernization Act of 2021, which, in part, would expand the program so all facilities nominated for the program would receive additional oversight and enforcement, as well as technical assistance and educational programming, according to a 2021 news release announcing the bill. That bill has not gained any traction since it was introduced.

“I understand why people want a SFF program … the problem with how the program is run is it relies heavily on on-site survey activity, which is a distraction from quality improvement,” Hennessey said.

Sticker shock at increasing fine limit by nearly 50x

At a time when projected nursing home operating margins are expected to stay in the negative for at least the next year, some see the administration’s plan to increase the dollar limit on per-instance financial penalties as potentially dangerous for the industry as a whole.

Brian McGovern, health care lawyer and partner at Crowell & Moring’s New York office, admitted feeling some “sticker shock” over Biden’s call to raise the dollar limit on per-instance fines at a time when the industry is still reeling from a global pandemic.

“For the size of those fines and given the subjectivity of certain surveyors, you could just put people out of business,” Sabra Health Care REIT (Nasdaq: SBRA) CEO Rick Matros told SNN. “I don’t think that’s the right way to approach it. I just think that decades of taking punitive approaches is detrimental for everybody.”

Matros called the increase to a $1 million limit for fines as well as Biden’s call on Congress to provide almost $500 million to the Centers for Medicare & Medicaid Services, a nearly 25% increase, to better support and adequately fund health and safety inspections at nursing homes as “outsized.”

Hennessey agreed, especially after some states saw multiple nursing home closures in 2021.

“I think for a lot of communities I would not call that a penalty, I would call it a forced closure,” she said. “I know that is strong language but I would say a number of communities, especially rural communities or communities that serve a high Medicaid population, if they received a million dollar fine it would be a closure.”

She added that she understands tying punishment to dollars, but she encourages the administration to better understand the numbers they are working with relative to the industry.

Schnepf said the government has repeatedly failed to improve nursing homes through surveys in the past.

“They’re moving all the money to get more surveyors, which is fine, but I think that the government has struggled for the entire time that nursing homes have existed using research on what improves behavior and what improves performance,” Schnepf said.

The White House’s fact sheet points to evidence that from 2013 to 2017, 82% of all inspected nursing homes had an infection prevention and control deficiency, however, an American Health Care Association report indicated that 72% of the more than 110,000 infection control focused inspections of nursing homes conducted from 2020 to 2022 were deemed “deficiency free.”

While Matros admitted some concerns over Biden’s budget increases and calls to raise the dollar limit on per-instance financial penalties, he thinks it’s a long way from becoming law as funding increases for both surveys and fines will likely require congressional approval.

American Health Care Association President and CEO Mark Parkinson has already called this year’s congressional briefing in Washington, D.C. in June the most important in nursing home history, and has rallied the entire industry to fight against the “offensive” nursing home package laid out by the administration.

While the per-instance penalty increase wasn’t mentioned in Parkinson’s address specifically, he did say that lawmakers were pointing the finger and blaming nursing homes for the severity of the pandemic even though study after study shows that community spread is what caused the virus to spread to nursing homes.

While Biden is calling on Congress for funding increases, industry officials like Parkinson are similarly calling on operators to get ahead of some of these proposals before they are put in front of Congress.

Hennessey expects Congress will hear from plenty of their constituents and lobbying groups that this proposal is not reasonable.

In fact, since the reform package was released she’s heard CMS make several requests for more “stakeholder feedback,” which she thinks could be operators’ time to respond.

“I think that will be our opportunity to agree with some of these things in theory, but in reality we want to share the impact these proposals will have on day-to-day operations in the sustainability of access to care,” she said.

State surveys differ widely

Prior to Covid, efforts were made to create greater consistency with nursing home surveys with varying degrees of success.

In fact, Seema Verma, the leader of the Centers for Medicare & Medicaid Services (CMS) at the time, pushed for nursing home oversight by creating greater consistency among state survey agencies, prior to the onset of the pandemic.

In some states – such as Michigan – reports have shown little correlation between the number of citations that nursing homes receive and quality. Michigan State Rep. Bronna Kahle introduced a bill last year (House Bill 5609) to establish more clear and consistent standards for health care surveyors that operate in the state.

“In Michigan, we’ve been cited at more than four times the national average for staffing ratios,” she told SNN. “The fact is we are well above comparable national staffing ratios.”

Kahle felt Michigan had become a leader in reducing the use of psychotropic medication in SNFs,and yet 21.8% of facilities in the state had been cited for this, while the national average is 17.8%.

“What we saw in the beginning was the suspension of annual surveys and the increase of infection control surveys, and those vary by state. So in some states, they were extremely punitive,” Hennessey explained. “In others they came with more supportive guidance because we were all learning.”

The Centers for Disease Control and Prevention came into one of Health Dimensions Group’s facilities and Hennessey described the experience as extremely “helpful” and “collaborative.”

“Then a week later, we had a state survey and that was a very different experience,” she said. “We have also seen the return of annual surveys, which have seen surveyors be a bit more aggressive.”

The other trend she’s seen with is ‘complaint visits’, where surveyors will come in and ‘clean up’ older complaints, which can be a huge distraction for a week for her operators.

“It can be rather inconsistent,” Hennessey added. “When surveyors are in the building the staff is nervous because they are being watched and anytime any of us are being watched closely we don’t perform as well as we normally would.”

She thinks that the survey process makes it an even tougher environment for staff and at a time when the industry is at a “low point” with census down and persistent staffing issues, she thinks what the industry needs now is “support, not blame.”