Protecting LTC providers from unearned deficiencies

A certified letter arrives. The Centers for Medicare and Medicaid Services (CMS) notifies you that, effective immediately, based on a survey of a certain date, you are facing denial of payments for all Medicare/Medicaid individuals and you will suffer civil money penalties of a certain amount per day. The reasons given connect to alleged deficiencies identified as F-level or higher but do not rise to the level of immediate jeopardy.

As you digest the notification and begin the process of seeking to determine what caused such dramatic action by the government, you learn that some of your contracted service providers failed to follow through with certain responsibilities. You review your contracts only to find there were no legal violations where indemnification language could engage; however, their failure to do the right thing caused you to face what could be catastrophic problems. What do you do?

This situation may seem farfetched; yet, it can happen because it did in our agency. As a result and after matters were resolved with CMS, we defined a new plan for working with all contracted service providers.

The first step was to determine if and where culpability lay with affected providers. Research showed, beyond reasonable doubt, that errors made by service providers resulted in deficiencies. In addition, something interesting was learned. Although service providers had some knowledge of the CMS review process and regulations our agency had to meet, they really did not understand the connection with the state review agency, CMS and assessment factors identified on the “Scope and Severity” scale. Initial steps involved educating them on the process, the review and its meaning.

The following language was developed: In the event the Centers for Medicare and Medicaid Services (CMS) take action against (insert the agency’s name) for failure of (insert the contracted provider’s name) to be in adherence with appropriate federal regulations defined under the Social Security Act, (insert the contracted provider’s name) will indemnify (insert the agency’s name) to the extent of the civil money penalty imposed on (insert the agency’s name) due solely to proven acts or admissions of (insert the contracted provider’s name).

With the aforementioned language on paper, the next step was to have conversations with contracted service providers to make sure there was “buy-in” for the need to include the wording in contracts. I would be remiss if I led you to believe this process was easy. In fact, in some instances, it was time consuming and took several attempts before an understanding was reached and the documents modified. Some service providers suggested that indemnification language was already in the contracts. Those providers had to be shown that what they were referring to was related to legal and not regulatory matters. As this concept was understood, service providers began to comprehend what was being done and why it was necessary.

As the process progressed, one of two plans for adding language was used. Where possible, contracts with an annual renewal were adjusted with the language added as a new paragraph. With agreements that were more long term, addendums were used. I am sure there could be additional approaches, but these two worked best to put contracted providers on notice that they had a responsibility to assist in meeting government standards through practices within our agency. If they failed, creating civil money penalties for the agency, they had a duty to indemnify for the financial loss.

Going forward, I am convinced the agency will be better protected and its residents better served because all parties with a contribution to make in resident care will do their best in implementing care plans.

I hope that by sharing our experiences and the approach used by our organization to be proactive in caring for potential problems other organizations that have had similar experiences will have ideas they can use to protect themselves and ultimately their residents.

Daniel W. Farley, PhD, CNHA is the President/CEO of GlenWood Park Retirement Village, Princeton, W. Va., and President of the GWP Foundation, Inc., and is an ordained deacon in full connection with the West Virginia Conference of the United Methodist Church. Contact him at

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