From volume to value: A roadmap for skilled nursing providers to transform relationships with acute care hospitals
|Without question, the new face of American medicine has begun to take shape and will continue to transform relationships among healthcare providers across the continuum. Those that will thrive in this new environment will have proactively forged new, meaningful relationships based on delivering value, defined as better patient outcomes on lower overall costs.
Implementation of the Affordable Care Act (ACA) is in full swing, along with a multitude of concurrent initiatives to support the CMS Triple Aim goals: improve care, reduce overall costs and better manage a population of patients. While different providers and markets are experiencing varying levels of intensity of change, all hospitals are facing growing incentives to better coordinate care with all post-acute providers, and in particular, skilled nursing facilities (SNFs).
SNFs have the highest rates of hospital readmissions across all post-acute care provider types. Not surprisingly, the attention of hospitals is focused on partnering with SNFs to improve care transitions and reduce unnecessary readmissions. However, other key provisions impacting hospitals in 2013, including the onset of hundreds of accountable care organizations (ACOs) and bundled payment arrangements throughout the country, have expanded the focus to creating closer partnerships with post-acute providers in order for hospitals to achieve the Triple Aim goals (improving health, improving healthcare and lowering costs by transforming the finance and delivery of healthcare) and navigate into a risk-bearing future successfully. This provides a unique opportunity for SNFs to proactively reposition themselves from a vendor and referral destination for hospitals to a partner and value-driven solution to address some of the challenges being faced by hospitals.
Determining Which Hospital Would Be a Good Partner
To successfully reposition the relationship with hospitals to one that is based on value, as a skilled nursing provider, you must have a well-defined strategic roadmap that creates and maintains a compelling value proposition clearly linked to the needs of hospitals in your market. The first step in creating this roadmap is determining which hospital(s) in your market would be a good partner. To do this, you should seek to identify the following:
- Is the hospital part of a health system or affiliated network that includes other hospitals?
- Does the hospital or health system operate and/or have ownership interest in its own post-acute components (home health, skilled nursing facility, etc.)?
- Does the health system have, or is it contemplating, shared risk payment arrangements for private insurance or Medicare fee-for-service such as bundling or ACOs?
The answer to these questions will tell you the reliance of your potential hospital partner on unaffiliated post-acute entities and the degree of risk they are facing as they move from fee-for-service toward population-based models of care. For example, if a potential hospital partner is considering the development of an ACO, then their interest in aligning with SNFs is even greater.
To further narrow your focus to a target hospital or hospitals, you should understand their unique needs and where your organization can directly align your value proposition and strategic roadmap to address those needs. This will involve conducting research and data analysis from publicly available and no-cost sources such as Hospital Compare, as well as pursuing other data sources to obtain hospital discharge data such as average lengths of stay and volumes in key diagnosis-related groups (DRGs). Hospital discharge data is available and can be requested in some states from the state healthcare agency responsible for data collection, or if not available in your state, can be purchased from third-party vendors.
From the data, ask these questions:
- Are the readmissions rates for CHF, COPD, and AMI for hospitals in my market at, below or above the state and national averages? Can I help with reducing readmissions?
- Can I help with creating care pathways for common conditions discharged to SNFs which would decrease the DRG average length of stay?
- Are there conditions being admitted to the hospital which I could help avoid or reduce by caring for those patients in a SNF setting?
- Can I be a solution for any other problems or challenges these hospitals are facing?
In our work, we have found that some hospitals continue to be challenged by long average lengths of stay for clinical conditions where SNFs can offer a solution by creating smoother patient transitions and defined clinical care pathways with the hospital. Packaging a defined program around these clinical conditions to approach the hospital has clear and tangible value to them. From the review thus far, you should narrow the potential hospital partners in your market based on their fit with you as a partner and begin to formulate your partnership strategy. This strategy should be focused on those areas where you’ve identified a need or challenge and where you can directly provide a clearly tangible solution to the hospital.
Developing a Value-Based Partnership Strategy
In formulating your strategy, it’s now time to engage key leaders within your organization in a series of strategy development sessions. Review the research and data analysis you’ve completed and validate the hospital target(s) and their unique needs and challenges.
For the target hospital(s), based on this research and knowledge about a hospital’s interest in risk-based payment, ask these questions:
- What gaps can we alone fill for the hospital or health system and how can we help them be successful?
- Can we create a better value proposition by creating an alliance with other aging services providers and then approaching the hospital or health system as a provider network?
- What data and information about our patients can we share with the hospital to build a common knowledge base around what occurs with a patient after discharge from the hospital to begin to gain alignment in strategies to improve care and reduce costs?
- What two steps can we take in the next month toward a value-based partnership with one or more of our targeted hospitals or health systems?
For example, we are seeing hospitals increasingly need more medically complex care to be delivered in SNFs which can be met with highly specialized clinical program development around the specific needs of a particular clinical condition. The ability to care for these medically complex patients with the clinical skills to prevent readmissions, achieve good quality and functional outcomes and ultimately discharge patients to home will differentiate those SNF providers that are best in class from those that are not.
Once you determine where your facility can meet specific hospital needs, take a proactive approach to reaching out to the target hospital and request a meeting with key leaders. But before initiating this meeting, prepare by putting together a presentation that clearly articulates who your organization is and what programs and services you offer, shares data on your patients (volume by diagnosis group, 30-day readmissions rates, quality outcomes, average length of stay, etc.), and defines your current areas of focus and future priorities. Finally, relate all of this back to the information you gathered and interpreted about the hospital and ask them to validate what you have learned and clarify outstanding questions you have.
The meeting goals should partially be about educating hospital leaders and articulating your value as a healthcare provider in your market as well as launching the beginning of an ongoing dialogue with the hospital about their needs and challenges and where you directly can partner together to develop solutions.
The Future Is Now
Hospitals have awoken to the reality that the siloed walls must come down and that cross-continuum relationships with post-acute providers are key to achieving the Triple Aim, especially in vulnerable populations. Throughout the country, hospitals are moving rapidly to form narrow or “preferred provider” networks.
These networks create referral pathways for the hospital’s patients and are chosen based on providers’ ability to demonstrate quality outcomes, manage complex patient populations through evidence-based protocols, and manage overall costs of care.
It is likely that if you are not being invited to network formation meetings, then you are at risk for being left out. SNF providers should act now to develop your value to hospital partners and proactively seek a preferred provider relationship that can become the basis for a longer term, more meaningful partnership in the future.
Brian Fuller has extensive experience as a senior executive for an integrated post-acute healthcare organization and was responsible for positioning the system for future healthcare delivery environments. He has been actively involved in the Center for Medicare and Medicaid Innovation’s Bundled Payments for Care Improvement (BPCI) initiative, both authoring applications and serving as an expert panel reviewer for CMMI to review round one BPCI applications. He is currently senior consultant for Health Dimensions Group.
A tried-and-true program serves hospitals as a learning laboratory for new kinds of care delivery.
Achieving the Triple Aim—improved experience of care, improved health of a population, and reduced costs—has become the mantra of healthcare reform, particularly among organizations that are focused on serving the so-called “dual eligibles,” people who qualify for both Medicare and Medicaid. Our healthcare delivery system has failed to PACE: Community-Based Model Still Leads the Way for Dual EligiblesA tried-and-true program serves hospitals as a learning laboratory for new kinds of care delivery(Continued on next page)meet the complex and costly needs of this population, in particular the overwhelming consumer preference for community-based alternatives to institutional long-term care.
On the journey to value-based healthcare, providers of all types are embracing new Medicare models of care, including accountable care organizations and patientcentered medical homes. In addition, 25 states are moving towards implementing new managed care or financial alignment models specifically for dual eligibles, with the hope of stemming the rise in costs while improving outcomes of care.
However, long before the Affordable Care Act (ACA) spawned such intense interest in these population-based models of care, Programs of All-inclusive Care for the Elderly (PACE) were delivering the full spectrum of care in the community to frail seniors clinically assessed at the nursing facility level of care, 90 percent of them dual eligibles. PACE is recognized as the gold standard of care for this complex population precisely because it achieves the Triple Aim.
The PACE Model of Care
Beginning as a Medicare demonstration in 1983 and becoming a permanent program in 1997, PACE provides and manages all services needed by enrollees, including preventive, primary, acute, and long-term support services (LTSS), regardless of type or location—and without regard for what services Medicare and Medicaid will reimburse.
Three key features of PACE have led to its success:
- Capitated Financing: PACE programs receive fixed, combined, monthly payments from Medicare and Medicaid for individuals enrolled in the program, regardless of payer or services utilized. As a result, they have the flexibility to offer the care that is needed, no more and no less.
- Comprehensive and Coordinated Care: At the core of each program is a PACE center, where primary care clinic services are provided, and an interdisciplinary team of physicians, nurses, therapists, social workers, pharmacists, van drivers, and others. PACE programs are responsible for meeting participant needs 24/7/365 in all settings in which the participant resides and in which care is delivered.
- Accountability: PACE programs are fully accountable for the quality and cost of the complete continuum of care provided both directly and through contracted providers. As such, they have the financial incentives to prevent prolonged hospital stays, unnecessary emergency room visits, and premature nursing facility placements.
The Case for PACE in a Health System
All PACE programs must be nonprofit organizations and, while there are a wide variety of PACE sponsors—including long-term care providers and community organizations—hospitals have always been the predominant sponsors. Two examples demonstrate why.
Inova Health System, Fairfax, VA
With five hospitals and more than 1,700 beds, Inova Health System is northern Virginia’s leading not-for-profit provider, serving 2 million residents across northern Virginia and the Washington, DC, metro area. Inova sought and received state and Centers for Medicare and Medicaid (CMS) approval to operate InovaCares for Seniors, which opened in May 2012 with one center in Northern Virginia. Future plans call for expansion throughout the northern Virginia service area with multiple PACE centers and/or alternative care sites.
- PACE targeted a population that accounted for more than its share of heavy service use and readmissions, which Inova knew it could manage better.
- Developing a PACE program provided Inova’s first foray into risk-based payment and care management of a population.How does PACE fit into the system’sbroader strategy?
- Inova is moving towards a risk-based, population-based health management approach across the system and new models of care for Medicare, Medicaid, and private payers.
- It has entered into partnership with Aetna to serve Medicare-covered lives through an entity called Innovation Health.
- It is applying to Medicaid to become a dual eligible plan in the state of Virginia.
- Taking what it learns from PACE and other dual eligible programs, Inova intends to infuse care management throughout its non-PACE products, possibly by placing centers throughout the service area to serve seniors.
Cheyenne Regional Medical Center, Cheyenne, WY
Cheyenne Regional Medical Center (CRMC) is a regional healthcare system serving Cheyenne and southeastern Wyoming, western Nebraska, and northern Colorado. CRMC received state and CMS approval to open a PACE center on January 1, 2013.
- The CEO sees the program as the ideal model for nursing facility eligible populations, as well as other high-risk populations, and saw PACE as an opportunity to learn more about population-based health.How does PACE fit into the system’sbroader strategy?
- The PACE program is housed in a newly created Wyoming Institute for Population Health.
- The Institute is implementing a $14 million grant from the Center for Medicare and Medicaid Innovation to transform primary care across Wyoming through care redesign, care coordination, increased access to primary care, improved care transitions, and enhanced community-based, health-related social service delivery for the comprehensive care of vulnerable populations.
- Once the first PACE center is established, the system will explore expansion into rural areas through satellites or other alternatives.
Many hospitals, health systems, and not-for-profit providers along the continuum of care are embracing PACE as an effective, population-based model of care for nursing facility level dual eligibles—and as a learning laboratory for population-based models in general. The ability of healthcare organizations to serve as the integrator in caring for this population is well-established. But there is an opportunity and a need to do more, and healthcare providers and PACE are helping each other adapt to an increasingly complex marketplace.
Vice President of Strategic Initiatives
Health Dimensions Group
Manager, PACE Advisory Services
Health Dimensions Group
Jade Gong, Senior Vice President, Strategic Initiatives
Brian Fuller, Senior Consultant
Last week, the Centers for Medicare and Medicaid Services (CMS) announced the awardees for the Bundled Payments for Care Improvement (BPCI) initiative. Bundled payment is a model where providers receive a lump sum payment for an episode of care. Previously, bundled payment approaches have focused on hospitals and physicians. However, this initiative provided unprecedented opportunity and flexibility for post-acute providers to test bundled payment within their organizations via two different models:
- Model 2, which included the inpatient hospitalization, physician services, and all care, including post-acute care and readmissions following discharge
- Model 3, which included all services following discharge from an inpatient hospitalization, including all post-acute care, physician services, and readmissions
These new awardees provide insights on how post-acute providers can successfully engage in bundled payment models in round two, as well as bundled payment arrangements with other health care providers and payors.
Understanding the Bundling Initiative
CMS initially offered applicants the opportunity to pursue four different models of participation in bundled payment, including two models that included post-acute providers. All four models are summarized in Table 1. Two of these models were limited to the acute care hospital stay and associated physician services (Models 1 and 4) while the other two models included post-discharge services within post-acute care settings (Models 2 and 3). Applicants received extensive cost and utilization data from CMS to develop concrete, targeted care redesign interventions with specific pricing that became the basis of their proposals.
CMS announced this week that over 460 health care providers will participate in the four models of round one of the BPCIinitiative. Not surprisingly, Models 2 and 3, the models that included postacute care, represented three-fourths of the announced awards, illustrating strong acknowledgment by the participants of the potential to improve care and lower costs within post-acute care settings.The number of awards in each model are:
- Model 1: Acute hospital stay only 32
- Model 2: Acute hospital stay and post-acute care 193
- Model 3: Post-acute care only 166
- Model 4: Acute hospital stay and readmissions 76
Deep Dive into the Bundling Models for Post-Acute Care
CMS utilized an intentionally broad and open-ended application process to encourage new ideas and design concepts; however, in the end,refined the program design for providers participating in either Model 2 or Model 3 with certain specific requirements for participation, as shown in Table 2.
Table 2: Requirements for Participation in the BPCI Initiative
For Model 3, there were common aspects of the more than 166 awards representing 27 states across the U.S. Many on the list included multiple awards for different markets under the same parent company organization; however, more than one-third were local or regional providers, many of which are nonprofit organizations. This included providers who predominantly offer one post-acute setting in multiple geographic markets as well as those providers who offer multiple post-acute settings within a defined market. In almost all cases and regardless of the breadth of services offered, Model 3 organizations engaged additional health care providers to build their bundled payment network.
Remarkably, participants were bullish on the cost savings potential for multiple clinical conditions as more than half of the Model 3 initiatives will bear risk for all 48 clinical conditions offered by CMS and almost 90 percent took on three or more conditions. The most popular clinical episodes included orthopedic conditions, particularly joint replacements, followed by cardiac conditions such as congestive heart failure.
Why Become an Early Adopter of Bundled Payment
Based upon our experience working with clients in developing bundled payment applications and in reviewing round one applications for CMS, we have identified the main reasons for organizations to accept the risk and opportunity of entering round one of bundled payment:
- Opportunity to access data and costs in order to intelligently redesign care across settings and develop a concrete, value-based strategy.
- Ability to develop risk mitigation strategies for bundling approaches by understanding the source of costs across settings and identifying the risks.
- Leverage to create meaningful partnerships with other providers built upon solid analysis and commitment to a model of care designed to achieve higher quality and lower costs.
- Participation in a bundled payment is a stepping stone to clinical integration and accountable care, preparing the organization’s culture and strategy for payment reform regardless of the ultimate form it takes.
- Bundled payment participation creates a catalyst within organizations that devotes the focus, planning, and resources necessary to begin moving towards value-based payment mechanisms.
The Next Wave
If successful, bundled payment is intended to achieve the goals to better coordinate care, reduce overall costs, and better manage a population of patients across a defined episode of care—the three defining goals of CMS’ Triple Aim. The momentum is building for bundled payment approaches and, in particular, those that involve post-acute care, as evidenced by this announcement as well as the launch of private payor bundling arrangements occurring throughout the country.
In the near future, providers should expect the start of the mandated National Pilot Program on Payment Bundling in the Affordable Care Act (ACA) along with the release of a second round of CMS bundled payment applications with new models to include chronic conditions. Interested providers should begin moving down the path of assessing their organizational readiness and using the results to develop a strategic action plan.
In the upcoming months, Health Dimensions Group (HDG) will release a series of papers exploring the details of bundled payment in greater depth. The HDG team has experience working with clients on bundled payment and is available to assist your staff and organization to pursue this new opportunity. Please contact our team for additional guidance on how your organization can create competitive advantage by positioning as a high-quality, low-cost provider with the ability to leverage the bundled payment opportunities in your market.