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EVENT | Macau Operators & LVS

Tuesday, August 30th at 11:00AM ET

Watch the replay below.

CLICK HERE to access the associated slides.

CLICK HERE to access an audio-only replay.


Court to CMS: Educate Providers/Contractors on Expanded HHA/SNF Benefit: Pos: AMED, ENSG, LHCG, KND,

Takeaway: CMS's less than enthusiastic education of providers and contractors on the abandonment of the improvement standard must be corrected

Five years have elapsed since the Medicare beneficiary group, Center for Medicare Advocacy, filed a lawsuit against CMS to end use of what was known as the “improvement standard” for approving occupational, speech and physical therapy claims. Despite a settlement three years ago, the issue remains unresolved. The Center has argued, with the help of organizations that advocate for Alzheimer’s, Multiple Sclerosis and Parkinson's patients that CMS’s settlement agreement remains on paper alone. Last week the U.S. District Court agreed and ordered CMS to develop a corrective action plan within 45 days that addresses their breach of the 2013 settlement agreement.


Full implementation of the desired alternative to the improvement standard – the maintenance standard –is a positive for post-acute providers like SNFs and HHAs and negative for Medicare Advantage Plans.


The crux of the CMA’s complaint is that CMS through its contractors, the Medicare Administrative Contractors (MACs) and Medicare Advantage Plans, have for years relied on the improvement standard for approving home health and SNF claims. Specifically, CMS policy dictated that the patient must benefit from the therapy such that their condition improves. That standard, of course, would rule out therapy for Medicare beneficiaries suffering from Alzheimer’s, Parkinson’s, Multiple Sclerosis and other chronic and debiliating diseases who, although they would benefit, are not likely to improve due to the nature of their illness.


In the settlement agreement, CMS agreed to apply a maintenance standard. A maintenance standard would permit a home health agency to provide complex physical, occupational and speech therapy to patients to maintain function or slow deterioration. To their credit, CMS does describe a maintenance standard in their provider education materials. As is so often the case, when complex government programs must be executed by people three or four steps removed from central decision making, execution has been flawed.


As required by the settlement agreement, a series of tests were run to analyze SNF and HHA claims for compliance with the maintenance standard. In the first report 95 percent of claims applied the standard appropriately. In the second report, 53 percent of claims sampled applied the standard incorrectly and had to be returned to the contractor. In a third report, the percentage of incorrect claims had dropped to 38 percent. We should note that the sample size of these claims numbered just 100.


Based on the affidavits that accompanied CMA’s complaint requesting enforcement of the settlement agreement, CMS appears to have three barriers to successful implementation of the maintenance standard:

  • Adherence by Medicare Advantage organizations
  • Training and education of MAC personnel
  • The less than vigorous efforts by CMS

Several of the affidavits were submitted by people whose Medicare coverage was through a MAO. Either the beneficiary named the MAO – Humana and Healthnet, for example - or referred to them as a Medicare Advantage Organization or Plan. We have heard fairly consistently from providers that Medicare Advantage organizations tend to be very difficult to work with from both the care delivery and reimbursement perspectives. Several providers we know refuse to join MA networks.


We have tended to attribute the MAO’s action to a general skepticism about home health care which has a reputation for fraud, waste and abuse. The CMA’s filing, however, suggests that MA plans are also not staying on top of changes to benefit policy. There is little incentive for them to do so as increased home health and SNF utilization is not in the interests of their plans. Of course, the cases represented in CMA’s filing may be isolated and not represent larger trends.


Complaints about Medicare Administrative Contractors transcend reimbursement divisions in Medicare reimbursement. From IRFs to Clinical Labs to HHAs, providers routinely express concerns that the MACs inconsistently apply Medicare benefit policy and are not sufficiently staffed. While some of that might just be the usual chafing under the yoke of government, we have found some of the MACs prepayment determinations to be a bit unbelievable - as in the case of 100 percent improper claims determinations for HLS’s IRFs a couple of years ago. More recently home health agencies have expressed concern that the MACs will be unable to handle the volume of claims subject to the new pre-claim review in certain fraud-prone states.


MACs, many of whom have held their contracts since the inception of Medicare in the 1960s, have a strong influence on HHAs who are disproportionately reliant on Medicare payments. One or two claims denials for violating the improvement standard would be enough for an HHA to refuse admission to an Alzheimer’s, or Parkinson’s patient even in the presence of a doctor’s order. Providers, under these circumstances, are best served to wait until the MAC is sufficiently aligned with CMS on Medicare Benefit Policy before admitting patients for whom payment may be denied.


For good reason, the maintenance standard has gotten hung up on contractor interpretation and understanding. The court found that CMS failed to fully explain to contractors what the maintenance standard was and how it should be applied. Contractors and especially MACs, have a difficulty relying on nuanced interpretation of policy often preferring the “check the box” approach to compliance. Absent an explicit directive, contractors will adhere to the status quo.


CMS has 45 days to submit a corrective action plan to the court. If their change in policy actually reaches implementation this time - and we think it will - it should be a positive for HHAs and SNFs due to increases utilization by heretofore ineligible beneficiaries. The change is likely a negative for Medicare Advantage organizations.


Call or email with questions.

JT TAYLOR: National Politics By Amy Walter

NATIONAL POLITICS By Amy Walter, August 24, 2016

Of Electoral Maps, Emails and Pivots


With just under three months to go in election 2016, some things, specifically the Electoral College math, look much clearer. Clinton not only has a decided lead, but she has a deeper, wider path to 270 than Trump does. Then there’s the stuff that makes the election look less stable - the constant campaign staff shuffling by Trump and the never-ending drip, drip, drip of Clinton’s emails. 

Let’s start with the more clear-cut stuff first. 

The decision this week for the Clinton campaign to announce an $80M ad buy in just seven states, eight if you include the decision to target Omaha’s 2nd CD - North Carolina, New Hampshire, Nevada, Florida, Ohio, Pennsylvania, Iowa - suggests that they see these states as the most competitive. Notably absent from this list are traditional battleground states like Virginia, Colorado, and Wisconsin. Recent polling has shown Clinton up by the high single or double digits in those three states. 

Notably the Trump campaign - despite its previous disdain and skepticism of TV advertising - has begun to run campaign ads in four of those same states - Florida, North Carolina, Ohio and Pennsylvania. 

In other words, both sides see the same states as the ones that will determine the election. So, let’s plug these assumptions into my favorite Electoral College app - 270towin.com. First, plug the seven states (and NE-02) as undecided. Then give Clinton the traditionally blue states - as well as Virginia and Colorado - and give Trump the traditionally Republican states. That scenario means Clinton starts at 249 and Trump begins at 190. 


JT TAYLOR: National Politics By Amy Walter - Map


According to the 270towin.com calculator, there are 13 different paths for Clinton to the magic 270 number. She can win or lose any of those seven toss up states and still hit the threshold. Trump, meanwhile, has only 4 paths to 270. And, all require winning BOTH Florida and Pennsylvania. The current Real Clear Politics Average of polls has Clinton up by nine points in Pennsylvania and 4.5 points in Florida. Unless and until Trump can turn those numbers around, there is no way he can win the election. 

Now the murky - which is actually less murky than you think. 

At this point in a “normal” campaign, there is talk about the dreaded “October Surprise” which is an event or series of events that can change the contours and direction of the campaign. Or maybe it’s a new piece of information about the candidate that alters the perception of that candidate or pulls them off their carefully crafted message. 

What’s unique about this campaign, however, is that the stuff (specifically bad stuff) that is most likely to come out between now and Election Day won’t be “surprising,” but will instead reaffirm existing perceptions about these candidates. More suspect emails from Clinton and more bad behavior from Trump won’t be a “surprise” to voters who already view both Clinton and Trump more negatively than positively. 

Moreover, the biggest problems for both candidates are the ones they have brought onto themselves. A surprise is something that is unexpected. Like the economy falling-out between now and November, or Obama’s approval rating suddenly dropping by 20 points. That’s not likely, but would be surprising. Instead, it’s Clinton’s sloppy handling of the email server and the porous firewalls between the State Department and the Clinton Foundation that are going to dog her through November. And, beyond. Those problems are totally self-inflicted. And, while there is no evidence of a quid pro quo or anything explicitly illegal, it not only smells bad - it looks woefully out of touch. At a time when voters are more frustrated and disillusioned than ever by “politics as usual” and the symbiosis between the powerful and the rich, the State Department/Clinton Foundation nexus looks at best outdated and at worst a proof point that she will continue to support the discredited and disliked status quo. The expectations of transparency and accountability have changed. She - and those around her - have not. 

Moreover, there is concern among some Democrats that a lack of enthusiasm among younger voters as well as African-American voters could blunt not only Clinton’s margin of victory, but also prevent a wave from washing out down-ballot GOPers. One smart Democratic strategist I spoke with recently was surprised at the cynicism and apathy he saw among African-American voters in recent focus groups. They don’t like Trump, but they also weren’t committed to showing up to vote. Among younger voters, Johnson and Stein are getting a significant percent of the vote that has traditionally gone to Democrats. 

Trump, of course, has problems of his own making. His inability to control himself, his message or his itchy Twitter finger are the biggest single impediments to his ability to win this contest. As I’ve written many times before, there is never going to be a Trump “pivot.” What you see is what you get. And, for a majority of Americans, they don’t like what they see. The latest pollster.com chart shows Trump’s favorable/unfavorable rating at 35%/ 63% or -28. Clinton is at 42%/56% or -14. 

Even if Trump were able to show a more restrained side, it’s not clear that voters would believe it. We are getting to point now where opinions of these candidates are getting baked in and are tougher to change. At a focus group of swing female voters I attended the other week there was a lot of frustration expressed about the not-ideal choices in front of them. Yet, while they didn’t trust Hillary Clinton, they were far more worried about Trump’s lack of self-control. As one woman in the Phoenix group remarked, “I don’t trust Hillary Clinton on fighting terrorism, but Trump would get us into World War III.” 

Preeminent pollster Peter Hart has followed one voter in particular for the last year and sees her as a solid gauge of this race. Jen Howard lives in suburban Colorado. She is a “conservative, middle-class Republican in her mid-forties who works in accounting. She has voted for the past four GOP presidential nominees.” In early 2016 she told Hart that “Bernie Sanders was her new favorite. Donald Trump, who had been in the race for about six months at that point, appealed to her because of his position on immigration. Throughout this election cycle, immigration has been her driving concern.” And yet, today she says won’t vote for Trump. She tells Hart that she thinks that Trump “is acting like an idiot; he is crazy.” Her advice: “Shut up; be quiet.” Moreover, while she agrees with Trump on immigration, she has “many reservations about his position and considers ‘the wall’ a ridiculous approach.” While she doesn’t like Clinton: “I don’t trust her; she is not approachable,” she sees Clinton “as competent and someone who will keep U.S. relationships with other countries stable.” It’s not just Jen who Trump lost, but he lost her husband too. While he was an early supporter of the businessman, he “does not plan to vote for the Republican nominee, whom he considers a bully.” 

If voters, especially those that are predisposed to like you, describe you as an “idiot” and a “bully” this close to the election, those views are not likely to change. Moreover, Trump’s decision to double, triple and quadruple down on a strategy of appealing almost exclusively to white voters, has already made his pathway to the presidency narrow. And, any softening of his deportation policies isn’t going to be enough to make up for his previous statements about Mexican “rapists” and his continued focus on building a wall. The wall itself, for many minority voters, is as problematic as a deportation policy. It says, pretty clearly, we don’t want you here. 

At the end of the day, we have two candidates with well-defined weaknesses who are going to be battling those weaknesses for the foreseeable future. Clinton has less control over how her bad stuff gets out. The State Department and Judicial Watch, not her campaign will be releasing the latest trove of previously unknown emails. But, she’s aided by the fact that Trump has proven unable - or unwilling - to stay focused on making her weaknesses the centerpiece of his strategy. Just when it seems he’s honed in on a message, he veers off into another tweet storm or speech that distracts from her and puts the spotlight back on him. Moreover, with a huge fundraising advantage, Clinton and her allies will be able to keep more of Trump’s bad stuff in front of voters - regardless of what is happening in the news cycle.


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REPLAY! This Week On HedgeyeTV

Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro ShowReal-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.


Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)





1. McCullough: How I Built My Wealth Without Huge Drawdowns (8/26/2016)



In this candid excerpt from The Macro Show, Hedgeye CEO Keith McCullough walks through his own process and history of how he approaches risk managing volatile global markets. “I’m not trying to wax philosophically,” says McCullough. “I’m just telling you there’s a huge difference in volatility adjusted returns, and building your wealth without huge drawdowns.” He’s joined by Senior Macro Analyst Darius Dale who offers additional perspective on the subject. 


2. Taylor: Heat Rising In ‘Historic’ Trump vs. Clinton Slugfest (8/26/2016)



Hedgeye Chief Political Strategist JT Taylor walks through some of the key factors and developments in the fiery 2016 Election battle between Hillary Clinton and Donald Trump.


3. The Big Joke: Animated Cartoon Nails Squirrely Fed (8/25/2016)



In this excerpt from The Macro Show, Hedgeye CEO Keith McCullough explains why Fed policy is a joke (with a little help from our incomparable cartoonist Bob Rich). 


4. McCullough: Here's What Happens If The Fed Raises Rates (8/25/2016)



In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough explains what will happen to bond, stock and commodity markets if the Fed raises interest rates. 


5. McCullough: ‘Don’t Short Balls Underwater’ (8/24/2016)



In this brief excerpt from The Macro Show today, Hedgeye CEO Keith McCullough shares some practical investing advice he learned early in his career.


6. REPLAY: About Everything | Q&A with Neil Howe - Credit Cards Lose Their Charge (8/24/2016)



In this complimentary edition of About Everything, Hedgeye Demography Sector Head Neil Howe discusses the future of the credit card industry. Howe breaks down the key takeaways and explains the broader implications for investors.


Click here to access the associated About Everything slides.

Click here to read Howe’s associated About Everything piece.


7. McMonigle: Sell the OPEC Oil Production Freeze Nonsense (8/24/16) 



Does the OPEC rumormongering have you confused? Hedgeye Energy Policy analyst Joe McMonigle sifts through the rumors and speculation on The Macro Show today. He provides clarity on what's really going on and what likely lies ahead for oil prices.


8. McCullough: The Yield Spread Doesn't Lie - People Do (8/23/2016)



In this excerpt from the Macro Show earlier today, Hedgeye CEO Keith McCullough explains why the coming quarter will be "the best time to short the Financials." 


9. Does Stock Market Volume Still Matter? (8/22/2016)



In this brief excerpt from The Macro Show today, Hedgeye CEO Keith McCullough responds to a subscriber's question about whether trading volume is still relevant. 


Click here to subscribe for free to our YouTube channel.

Investing Ideas - Levels

Takeaway: Please see below Hedgeye CEO Keith McCullough's refreshed levels for our high-conviction Investing Ideas.

Have a great weekend.


Investing Ideas - Levels - levels 8 27


Trade :: Trend :: Tail Process - These are three durations over which we analyze investment ideas and themes. Hedgeye has created a process as a way of characterizing our investment ideas and their risk profiles, to fit the investing strategies and preferences of our subscribers.

  • "Trade" is a duration of 3 weeks or less
  • "Trend" is a duration of 3 months or more
  • "Tail" is a duration of 3 years or less

McCullough: How I Built My Wealth Without Huge Drawdowns

In this candid excerpt from The Macro Show, Hedgeye CEO Keith McCullough walks through his own process and history of how he approaches risk managing volatile global markets. “I’m not trying to wax philosophically,” says McCullough. “I’m just telling you there’s a huge difference in volatility adjusted returns, and building your wealth without huge drawdowns.” He’s joined by Senior Macro Analyst Darius Dale who offers additional perspective on the subject. 



Subscribe to The Macro Show today for access to this and all other episodes. 


Subscribe to Hedgeye on YouTube for all of our free video content.