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 Measure First, Then Manage

The transition into the new health care environment born of value-based purchasing and managed care  may be stormy, but proactive providers that can produce data proving their quality will emerge leaner and more efficient.

 

​Health care is in transition.
 
Providers, patients, and payers are all pushing for higher-quality, better clinical outcomes and the data to prove it. Managed care organizations, among other stakeholders, are demanding lower costs.
 
Occupancy rates in long term care facilities are dropping, and managed care rates are falling, even as the number of managed care residents is growing in skilled nursing care centers. Federal reimbursement programs are moving away from fee-for-service to value-based payments. Regulations, codified to improve safety or other aspects of quality, are typically expensive for long term care providers to implement, and come at a time when providers are continuing to be forced to cut costs.
 
“What people are doing is they’re trying to improve quality, but if the census is down, they have to decrease cost at the same time,” says Fred Benjamin, vice president and chief operating officer of Medicalodges, Coffeyville, Kan.
“Also [payers are] trying to put people in the appropriate environment, which means out of the hospital quicker and sicker into skilled care, and trying to get people out of skilled care sooner, or skipping skilled care and going home,” he says.
 
“I’m not saying it’s inappropriate,” Benjamin emphasizes, “I’m just saying it’s the whole system tightening up.”

Managed Care Rates, Lengths Of Stay Dropping

Even without considering the new trends in reimbursement, the long term care profession is grappling with some less than ideal operational trends. For example, from 2011 through 2015, skilled nursing occupancy fell by 180 basis points, according to a recent report from the National Investment Center for Seniors Housing & Care (NIC). NIC attributes that decline to high turnover from the falling averages in lengths of stay.

“The main reason they’re not staying as long is really because of the trend within the health care industry, especially with managed care,” says Bill Kauffman, NIC senior principal, research and analytics. “Managed care is expanding. Managed care enrollees have grown since 2010 over 8 percent annually.”

During the same time period, reimbursement rates in Medicare managed care plans have decreased by more than 10 percent, according to the NIC report.

“If you’re getting more managed care patients,” says Kauffman, “you’re going to have managed care pressing down saying we’re only going to pay for a certain number of days. The main takeaway and the highlight of that report is the decrease of managed care rates per day,” Kauffman says.

“So, not only are you seeing decreased lengths of stay, but also decreased rates per day, so it adds up to a challenging environment.”

Still, Kauffman’s not pessimistic about the future of long term care. “There’s certainly a challenge here, but if you’re the operator willing to adapt and become the top operator in your market, you have some opportunity,” he says.

Doing More With Less

“The main theme of the baby boomers—10,000 reach age 65 every day, and there aren’t enough people to support them, to pay for their medical care—inspires a very high level of concern at the federal government and throughout the entire economy,” says Benjamin. “How do we pay for all of this, from primary care to skilled care?”

The federal government is trying several approaches.

“Medicare is doing a lot of things,” says Benjamin, “experimenting with many different approaches to see what works.”

Fred BenjaminIn Medicare, 25 percent of hospital reimbursement is now tied to quality or value, says Benjamin—hospital spending per beneficiary, hospital-acquired conditions, rehospitalizations—altogether, 7.5 percent of hospitals’ Medicare payments are at risk under value-based purchasing programs. The Centers for Medicare & Medicaid Services (CMS) estimates that by 2018, 90 percent of Medicare claims will be tied to quality or value; 50 percent of those claims through alternative payment methods.

As a result, “hospitals have a great deal of say where their patients go after a hospitalization,” Benjamin says. They are paying close attention to how well skilled nursing centers, for example, perform in the areas that can bring a penalty down on the hospital.

Accountable care organizations (ACOs), which take on risk transferred from the Medicare program, are playing an ever larger role. For a per-member-per-month (PMPM) reimbursement amount, an ACO is required to pay for all expenses, giving them a strong incentive to be more efficient.

The CJR (Comprehensive Care for Joint Replacement) program was created because identified variations in cost were found to be correlated to post-surgical recovery, particularly skilled nursing centers. In cases where there was a readmission, the cost was twice as high. In this program, the hospital accepts the risk.

The Move To Value-Based Care

Whatever else it’s doing, the move to value-based payment is creating dramatic change in the health care world.
“In my mind, the transition to value-based payments and payments for outcomes instead of service is creating tremendous change—an upheaval in the skilled nursing space,” says Jim Seymour, senior managing director and leader of Capital One’s health care real estate business.

And the rate of change is only likely to ramp higher, says NIC’s Kauffman.

“The minority of hospital systems are engaging in a strategy right now in terms of value-based payments,” Kauffman says. “So most are only thinking about a strategy. So what that can mean is there’s going to be an acceleration of more hospital systems engaging in a strategy of value-based payments. The risk is that overnight you can be shut out of a network,” whether that be a hospital system or a managed care network, Kauffman says. “That’s one of the threats out there.”

But while change can often be difficult and complicated, Seymour isn’t all that worried, not when he looks down the road.

“Most probably there will be a period of transition over the next several years where that will get sorted out,” says Seymour. “There will be business models that will thrive in the new environment—those that have excellent provider networks, technology to demonstrate outcomes, the ability to manage costs,” he says.

And companies with proactive strategies will up their chances of navigating the new environment more successfully.
“I think it is a major change for many providers,” says Jason Feuerman, senior vice president of strategic development and managed care for Genesis HealthCare Corp. “Genesis sees the world changing, moving from a fee-for-service world to a value-based world. This is already happening in the marketplace, so we’re taking proactive steps to adapt to the environment and respond accordingly.”
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Survival Strategy No. 1: Intense Focus On Quality

The key to keeping afloat in the coming health care environment, says Benjamin, is an intense focus on quality. “If you don’t have quality, you’re not going to survive,” he says.

“In CJR, the mandatory lower-joint bundle initiative, the hospitals will only refer to nursing centers with a three-star [rating] or higher,” notes Kauffman, “so one of the things you want to do right now, as a nursing facility, is make sure that you are getting to at least a three-star or higher,” he says.

“And what that requires you to do as a nursing facility operator is concentrate on the metrics in CMS’ Five-Star Quality Rating System and optimize those metrics, the health inspection, and everything else, because hospitals and the ones running the bundled payments are certainly utilizing that to include you in the network.”

One key quality measure, says Benjamin, is a facility’s rehospitalization rate.

“The first thing that anyone’s paying attention to is really bearing down on quality, measured in a variety of different parameters,” says Benjamin, such as the Five-Star rating system and referring hospitals’ quality measures, “and making sure their rehospitalization rate is under 15 percent—really under 10 percent.”

Benjamin says the American Health Care Association (AHCA) quality program has been indispensable in Medicalodges’ quality efforts.

One of its priorities has been “making sure our systems work—and we’ve done that right out of AHCA quality program in terms of process management,” Benjamin says. “We’re participating in the AHCA quality program, we are devoted to the AHCA quality program, obsessed with it, because the strategies applied in it are the strategies that we need to survive.”

And quality isn’t something that can be achieved, marked on a permanent scoreboard, and set aside. “The quality not only has to be good now; we have to be on a journey of continuous improvement,” says Benjamin. “The ultimate survival strategy is to be on a journey of continuous improvement.”

But a center can’t just say its quality is high—it has to be able to prove it, Benjamin says. “There’s another critical piece here, and that’s data. If you don’t measure it, you can’t manage it. That means that we measure everything. We have many, many quality and operational parameters that we measure on a daily and monthly basis, and the key to that is what I call ‘moving the dials.’ If your number of falls in a facility is too high, what are you going to do about it?

“What we do is put teams in place to improve the score, and try to find out what best practice is compared with other facilities or anyone else in the country.”

In fact, finding out about best practices is absolutely essential, he says.

“Understanding what best practice is and what strategies others have used to achieve best practice is critical, as is data,” Benjamin says.

Survival Strategy No. 2: Outstanding Communications

Know the networks in the market, and go prove to them what exceptional quality the nursing center offers, advises Kauffman.

“Make sure in your area you know your managed care representative, and you’re going to them and actually proving your value and what you can do for that managed care organization,” Kauffman says. “Prove the quality outcomes of your patients, and build your partnerships with managed care and hospitals. You really have to be proactive and go into this like you haven’t historically and show your value. You have to have the systems in place, the data and analytics, and technology to actually do that.”

 “It’s not only meeting the patients’ needs, but also the hospitals’ expectations,” Feuerman says. “That’s really the world we live in; it’s become very transparent over the past two years. We in the post-acute world have got to make sure we are doing everything we can to reduce unnecessary hospital readmissions” and the other key quality points.
“And we as providers have got to acknowledge that to the extent that we do, we’re going to continue to work arm in arm with our health system partners, who are our distribution channel for patients,” he says.

Thirty-two Genesis facilities are voluntarily participating in the Bundled Payment for Care Improvement (BPCI) Model 3 program. Under this program, Genesis is managing approximately $130 million worth of program costs, says Feuerman. With BPCI, Genesis enters the new health care environment side-by-side with hospitals and other health care organizations, an arrangement that has made them comrades in arms with the very groups that were also Genesis’ referral sources.

Sharing Risk

“That was the first way for us to adapt to the new world order,” says Feuerman. “The second thing that we’ve done is we placed Genesis Physician Services in the Medicare Shared Saving Program (MSSP), so we’ve got our own ACO with approximately 16,000 Medicare beneficiaries attributed to us in 2016 and managing more than $800 million in Medicare spending.” It’s the only ACO in the United States focused on the long term care population, Feuerman says.
So, Genesis has put itself in a new kind of relationship with its referral sources. “It’s all packaged together, what we are doing and how we are communicating and aligning our interests with our referral sources,” he says.

“The fact that we’re out there assuming risk and managing cost is very consistent with the way health systems are being held accountable today and the way health plans operate,” Feuerman says.

“So, we’ve adapted our dialog to the same as [that of] our referral sources, and I think that’s given our referral sources a level of comfort, confidence, and trust that’s very effective. Instead of hiding away, we’re out there being aggressive and attacking many of these programs, and to that extent we’re out ahead of the curve that is helping us navigate differently within the health care community.”

From where Feuerman stands, he can see an exciting new world emerging.

“As we look forward, I can see the MSSP expanding nationally as we head into 2017,” Feuerman says. “I can see it really create an environment where for the first time, really, in post-acute history, you’ll have physician and facility providers rowing in the same direction to improve quality outcomes and create health care efficiencies. I’m extremely excited and bullish about it,” he says.
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Survival Strategy No. 3: Managing Cost

Meanwhile, with all of this, regulations are making everything more expensive for long term care providers.

“Regulations are increasing expense in a very significant way,” says Benjamin. “Changes in conditions of participation of the Medicare program—that has been in the process for about a year now. They have not yet announced the final rules—they expect to by the end of the year—but some of the things that are being considered are requiring nursing facilities to have a full-time infection control and prevention officer, a $50,000-a-year position.

“They’re also talking about having us have a compliance officer in each facility,” Benjamin says, although he isn’t certain if it would be a full-time position. “Between these two positions could be $75,000-100,000 per year added expense [per facility] very easily,” he says.

Clifton Porter IIAnother expense created by regulations is Payroll Based Journal.

“On the cost side, we’ve got the Payroll Based Journal issue moving,” says AHCA Senior Vice President of Government Relations Clifton Porter II. “July 1 of this year is when we’ll start having to be accountable for electronically reporting our staffing levels. It’s a cost issue; providers will have to get and implement software, and then there are the staff hours to gather information,” he says. Many vendors are in the process of developing solutions, he says.

“We have to report our clinical hours of care to the federal government using their system,” says Benjamin, “and that is expensive because it means having an entirely new computer software system created.”

The system was to be in place July 1, and skilled nursing centers must begin reporting data in November. If they don’t, they will be sanctioned, says Benjamin, a scary word that, despite talk about “soft enforcement” is still disturbing because the sanction has not yet been specified.

And life-safety regulations are also weighing in.

“There are continuing new changes to the life safety code,” says Benjamin. “Although they’re well intended, some are just resulting in increased expense with marginal benefit.”  In addition, there is a lack of clarity from one jurisdiction to the next in terms of code enforcement. The lack of clear definition, for example, of where a generator’s automatic shut-off mechanism should be placed is a current source of frustration.

“Remember 70 percent of our expenses on a day-to-day basis is labor,” says Benjamin. “So we’ve had to bear down on managing our labor expense. We’ve done that at Medicalodges without touching people who ‘touch’ patients. Our numbers show that our average Five-Star score across the entire company puts us in the top 15 percent in the country.”

In Chaos Is Opportunity

The years ahead may be especially difficult for rural and small-town providers, say several health care experts. But Seymour, for one, thinks the care they provide is far too important to those communities for the providers to be allowed to disappear on a large scale.

“The government will periodically adjust reimbursement to the most cost-efficient model, but they won’t go to the point where care can’t be provided—it’s an essential care setting,” Seymour says. “We may wind up with systems that are different, but I can’t imagine they’re just going to eliminate the care.

“Long term care, with well over a million patients, provides an essential piece of the care structure,” says Seymour. “There will be fewer nursing homes five years from now, but they will still have a significant place in the industry.”
Benjamin also sees a silver lining to what appear to be dark clouds approaching.

“At a time when revenue is tight, states don’t have enough money to fully fund important programs, and the federal government is experimenting with all of these purchasing strategies, resulting in decreased revenue and/or increased expenses,” he says, adding that long term care facilities will likely find stormy seas ahead.

“But in chaos there is opportunity,” he says. “The opportunity is to go into a cocoon, engage in a strategic planning process, and emerge as a butterfly—as a lean, efficient, more focused company. We expect that by focusing on quality, we’ll be one of the survivors—because we will have survivors, not winners.”
 
Kathleen Lourde is a freelance writer based in Dacoma, Okla.
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