With termination notices ramping up for nursing homes on the Special Focus Facilities (SFF) list, operators and legal counsel close to the matter say the time is ripe for an overhaul of the program.

For starters, the independent dispute resolution (IDR) process needs to be revised, and a more timely appeals process should be essential. Additionally, changes made to deficiency criteria during the Biden administration need to be reversed since these are making it more difficult for facilities on the SFF list to graduate and for others to be added to the list. And finally, incentives should also be offered for star operators to turn around facilities on the SFF list.

Bill Miller, CEO for Washington-based Vertical Health Services, said that currently state surveyors – the same individuals giving out citation tags – are the ones reviewing IDRs. An independent body needs to head up the IDR process to eliminate bias.

“It has to be independent from the regulators, and it has to be final,” Miller said of the IDR process. “What good is an IDR process if the recommendation can be from the people who wrote the tag? Then they say well, we disagree with you [on the IDR].”

The appeal process post-closure notice often takes up to a year to resolve, and by that time residents have already been displaced, and operators have absorbed catastrophic financial losses.

This situation happened to Liberty Health and Wellness in Missouri, which was operated by Vertical prior to its closure in March.

Vertical took on the distressed Liberty property a year-and-a-half ago and was in the process of turning it around, eventually resorting to litigation to keep their Medicare and Medicaid reimbursement flowing, and the doors open, following a termination notice.

The Department of Health and Human Services (HHS) immediately made Liberty submit a closure plan despite efforts to correct, and only gave them 30 days of funding once the termination notice was sent.

Steve LaForte, director of corporate affairs and general counsel with Idaho-based Cascadia Healthcare, has been working with state associations and the American Health Care Association to revamp the SFF list to better capture the root causes and what lands a facility at rock bottom, and identify the best practices for operators to dig themselves out of the SFF list.

One way to get rid of the SFF status would be if a new operator takes over the SFF facility and turns it around. And in order to facilitate this, policy makers need to offer better incentives. A pause in surveys, for example, would help a new operator get the right people and practices in place and start improving quality measures.

“New operators need to get a break when they come in so that a month after, surveyors don’t come in and give a tsunami [of citations] based on what the past operator left behind,” said LaForte. “There needs to be some sort of survey holiday … for an operator that has [a reputation for] good quality, taking up a special focus building in order to ensure that it survives.”

The appeals process and arbitrary criteria

Any closure timeline offered to a SFF facility should make space for the appeals process, Miller said. Otherwise, needless closures arise and give way to unnecessary transfers of residents while the operator is fighting to stay open.

“Shutting down a nursing home should be the last resort. They should force a receivership … there’s a lot of things that could be done before you make a bunch of residents move from their home,” said Miller.

Instead, state survey agencies should work with operators and the Centers for Medicare and Medicaid Services (CMS) to create some dispensation and incentivization to get model operators to turn around these facilities, LaForte said.

“Otherwise we’re going to lose facilities. They’re going to shut and you’re going to lose access, and we’re already in a place where demographics are dictating the demand is outweighing supply,” said LaForte. The situation will only get more dire within the next decade or so, with baby boomers cycling through the care system, he said.

Cascadia took on an SFF property in January 2017 set for closure, and saved it for the community, LaForte said. Another building the operator turned around had the only ventilator building in 300 miles for patients, when the state wanted to close it; Cascadia graduated the building in 18 months.

But the process of turning distressed facilities is not without perils, and not all turnarounds are successful even when the new operator has the best intentions.

“Ironically, two years later we couldn’t safely create a care plan for a resident [at the ventilator building], and we were going to have to move that resident, and the next closest building that had the specialty that this resident needed was 300 miles away,” said LaForte. “The state said to us, if you move this resident 300 miles, you will be creating psychological harm, and we will give you a G-tag.”

One more recommended change to the SFF program, Miller said, has to do with the graduation criteria from the program, which was updated by the Biden administration in 2022. A facility can graduate from the SFF list once it has two consecutive standard health surveys with 12 or fewer deficiencies cited as a scope and severity of “E” or less.

The number of tags are arbitrary, Miller said, and these block some nursing homes from showing significant improvement and in turn graduate from the program.

Moreover, buildings that have had remarkable improvements are still on the list, while other buildings with much worse outcomes are unable to get help offered through the SFF program. It’s not a sustainable criteria, he said, and considers it to be the biggest threat to the program.

Access issues and shifting operator priorities

If changes aren’t made to the SFF list, Miller expects that there will continue to be access issues for residents across the country, and operators will be increasingly less likely to take on higher acuity patients for fear of high scope and severity tags.

That goes for patients with behavioral health issues too, a riskier prospect for operators without a program like the SFF list to help with quality improvement.

“Improvements are never linear, right? It takes time and working processes and investment,”” he said. “You’re going to have a lot more people fail, or you’re going to have artificial improvement, fake improvement, and then that’s not what anybody wants,” said Miller.

Arbitrary criteria, and the potential for more sudden termination notices, will drive operators away from turning around distressed properties in an already challenging industry, especially when the decision to take on such properties is already associated with higher costs and a heavy amount of resources, Miller said.

“We’re pretty proud of our story, even if we got this unprecedented action out of the blue,” said Miller. “I’ve spent a lot of money trying to just find an agreement with CMS on it, and that’s fine, but my main goal is to try to preserve the reputation of the people who work there. They work their tails off every day to try to take good care of people in an imperfect system.”