The Long-Term-Care Conundrum

In 2011, long-term care was a $200 billion industry that consumed 1.4 percent of American gross domestic product. That percent is set to double by 2050. It’s a gold mine, but a mostly federally funded one. With national debt default in and out of the headlines, how will the long-term-care sector serve 88.5 million people and remain solvent?

Some experts say a tsunami of health-care patients and costs are headed toward the long-term-care (LTC) industry. But perhaps an aging population and increasingly expensive health-care system is better characterized as a rising sea, a gradual but monumental and lasting build of demand on caregiving facilities. The baby boom generation begins to reach age 70 in 2015. Their milestone is a costly burden that will force companies in care delivery to revise and reinvent—without violating the mandates required of providers.

This “age wave”—to borrow the titular term from Ken Dychtwald’s 1990 book, which outlined how all of this would unfold—might seem like a good investment opportunity, too. There are billions of dollars to be made in managing the health care of this population.

But it is a realm of risk in which shifting laws and regulations make it possible for some industry segments to thrive while others may not survive. Add to that the complexity of financial challenges and difficult decisions that patients and families must make when entering long-term, in-patient care. Evolution for industry players is key to remaining financially viable while honoring the fundamental nature of patient care and comfort.

David Beck is chief legal officer and executive vice president for Golden Living, a provider of long-term-care services in 42 states. Beck outlines how firms in health care, and, in particular, senior health, can remain solvent and provide care as needed.

To say that Medicare and Medicaid are important to the function of an LTC company, such as Golden Living, which operates nearly 300 skilled-nursing facilities, is akin to saying food and water are important to staying alive. Those two federally funded programs are responsible for more than 75 percent of the revenue stream to this firm, as well as every other organization serving long-term-care patients.

A small number of patients pay for their own care out of pocket, at least initially. Some patients have long-term-care insurance, which covers a portion of costs. But the majority of aging Americans have little to no savings or insurance that can cover their needs as they become infirm. And, given the demographics, this challenge will only grow. The US population aged 65 or older will double by the year 2050 to 88.5 million people. Further, the Federal Interagency Forum on Aging Related Statistics reported in 2010 that people over the age of 85 will triple to 19 million within 35 years.

The Patient Protection and Affordable Care Act—also known as the ACA or Obamacare—laid the groundwork for bundling and other changes for long-term care, but for now, Medicare remains unchanged with regard to it. Medicare covers a portion of up to 100 days of this type of care, after which patients are responsible for payment until their money runs out. Then, they can rely on Medicaid.

Because his career in health-care law goes back several decades, Beck is familiar with how reimbursement programs have unfolded since the 1980s.

An original part of Obamacare that was dropped was payment to physicians for end-of-life counseling, which could have helped patients and families grapple with important options but was unpopular with voters. Opponents of the bill misrepresented this provision as “death panels.” Beck says proponents might have had greater success selling this as a benefit for patients; if you make an advance end-of-life plan, for example, you receive a lower Medicare deductible. Beck sees this as an omission that could have substantially improved care and reduced costs.

One way in which the industry is bending the cost curve, however, is in a shift to at-home or assisted-living facilities, away from skilled-nursing facilities. While this may appear to be a threat to the Golden Living business model, Beck doesn’t indicate as much. The wave of patients entering the care-needing life phase is simply overwhelming.

Home care is right for many patients. Roughly one-third of people receiving services from Golden Living are able to save the system money by getting therapy or personal care, including hospice, outside of a facility. But assisted-living and skilled-nursing facilities simply deliver more. “One of our facilities has a zero-gravity treadmill,” Beck provides as an example. “It helps patients to get their walking muscles working without the risk of falling. It costs about $35,000 and is too big for most homes.”

What the ACA does encourage is a bundling of services to help drive down costs and improve care. Companies like Golden Living can help improve outcomes and lower costs by working with hospitals to provide a continuum of services to patients. For example, paying for surgery and recovery by moving the patient to the right level of care at the right time, with reimbursement covering the whole package instead of item-by-item. The net reimbursement is less, saving the system, encouraging efficiencies from providers, and, theoretically, improving overall patient care and outcomes. Beck explains that because skilled-nursing facilities provide elder care at a relatively lower cost and succeed in getting patients home, bundling with them is the best way to reduce costs.

So what does this all mean to the legal department? “Legal allows our people to focus on excellence,” Beck says. The American Health Care Association has recognized this and awarded the company multiple Gold Quality Awards. “We take worry off [our employees’] plates while we speak truth to power,” he adds. “To succeed as a business, we want our leaders to use legal as a resource. One of legal’s biggest roles is cost avoidance, which starts with getting internal business leaders attuned to risk management and dealing with regulations.”

The health-care industry, and perhaps the long-term-care segment more than others, is among the most heavily regulated in the country, and with reason. Just to participate in Medicare and Medicaid, Beck says, caregivers must meet state licensure and other laws, like any business. Skilled-nursing facilities also have to comply with hundreds of pages of federal rules and pass detailed on-site inspections at least every 15 months to participate in the federal programs. Beck is clear that licensure and certification rightly prioritizes everything from patient rights and quality of care to safety, cleanliness, activities programs, and serving palatable food. Attorneys in the industry know that accomplishing all of this requires careful stewardship of resources, and that means working with the largest source of revenue: the government.

It also means listening to public leaders to learn about creative approaches to service delivery. In an environment of shifting regulations and increased financial pressures, innovation is essential. “We study new ideas to see if anything violates state or federal laws,” Beck says. “We know the company goals, so if there is a problem, we try to find the creative solution.” He adds that while the compliance office is a separate group, legal works very closely with it. Also, several company executives are clinicians, which Beck says is an advantage in process improvement.

Aside from the need to evolve, long-term care faces some formidable headwinds, not the least of which includes the complex False Claims Act, otherwise known as the whistle-blower laws. The ACA added amendments to this law, which dates back to the American Civil War, providing that individuals can more easily call out fraud in government contracts. Whistle-blowers are financially rewarded when they achieve a successful ruling.

The intent of including a whistle-blower element in the ACA is beneficial as part of the high-profile effort to get rid of waste, fraud, and abuse that cost taxpayers billions every year. Beck acknowledges that there are bad players in health care who need to be called out. But a large system like Golden Living makes an easy target for what are often invalid accusations from disgruntled parties. “Sadly, both the tort cases and the false claims cases we face are often more about the incentives for the lawyers on the other side than anything else,” observes Beck.

Aside from Beck’s department’s strong defensive strategies, they also work to prevent false claims and medical malpractice cases from being brought in the first place. “This is why strict compliance is so important,” he says. On the tort side, Beck says that employee education is an essential part of proactive risk management. “That includes being responsive to concerns of family members and patients. And with new team leaders, we make sure they know what legal resources are available to them.”

When Beck describes the values that keep 42,000 employees rowing in the same direction, he speaks of patient comfort, vitality, and dignity. These still boil down to quality care, the vast majority of which is delivered by nurses, certified nursing assistants, and therapists. “Many are saints,” Beck says. They have the most direct contact with patients and families.” Against the ever-swelling tide of an aging population, the human elements of long-term care are what make it all work. Just ask a lawyer.

Client Connection
Dechert LLP: “David is always on top of every legal issue. His sophistication on complex litigation matters, from motions to trials, is matched by deep regulatory knowledge and experience. David is not just a client, he is a partner in solving problems.” –H. Joseph Escher, III, Partner