“This is a time of amazing disruption. . .”
Today we kicked off the seventh annual Health Dimensions Group (HDG) National Summit, one of the nation’s most comprehensive post-acute healthcare conferences.
It is great to see so many of the nation’s top healthcare leaders together at the Rancho Bernardo Inn in San Diego, California.
There is little doubt that 2017 will be a tumultuous year for long-term care providers, as well as the healthcare system overall. Over the course of this three-day event, we will tackle some of the most pressing industry challenges – which is no small task.
For real-time updates or to share your insights, please follow the #HDGSummit hashtag on Twitter.
The Summit officially kicked off with remarks and a keynote presentation by Nicholas J. Webb. His talk, titled Disruptive Innovation and the Future of Post-Acute Care, shared how each of us can break down the complex healthcare landscape into actionable, strategic growth. Webb highlighted the complex and sometimes scary future of healthcare, which he acknowledged can sow confusion among even the most seasoned executives.
In his talk, Nicholas Webb also emphasized the importance of future-focused technologies and business practices that prepare healthcare organizations for disruptive changes to the healthcare industry. A few of those challenges include factors such as: digital ubiquity, hyper-connectivity, consumerized patients and new economic landscapes. As he said, “We are going to go from diagnosis and treatment to anticipation and prevention . . .to get patients better, we have to be more thoughtful about what the human experience is like.”
Webb’s presentation was followed by a spirited panel discussion. Daniel K. Zismer, PhD (Managing Director and Co-Founder, Castling Partners), Preston Gee (Vice President, Strategic Planning, CHRISTUS Health), Tom Coble (President and CEO, Elmbrook Management Company), Willis Chandler (Vice President, Health System Alliances, CVS Health) and Troy Reiff (VP of Operations, Mainstreet Health) offered their perspectives and real-life experiences of how existing healthcare models are being disrupted.
As Coble pointed out, “Skilled nursing facilities are the most regulated industry in the country after the nuclear industry,” adding that innovative approaches are needed. Troy Reiff offered the perspective that “transparency through data is where we need to go” – just one of many observations that elicited agreement and audience follow up questions.
We capped off the day with a welcome reception that offered ample opportunity for networking and reconnecting. It was a great day in San Diego and we can’t wait to see what the next two days will bring!
Post-Acute Consolidation in Value-Based Health Care
In the shift from volume- to value-based care delivery models, many are asking the question: What will the consolidation of post-acute providers look like over the next five to ten years, and how will this consolidation drive value to the consumer—if at all? Given the current trend of enhanced utilization of community- versus facility-based care options, such as in-home and outpatient service providers, the role of the skilled nursing facility (SNF) has changed drastically. For most SNF providers, gone are the days of waiting lists and low-acuity patients. Instead, providers are required to transition and retool with an intense focus around investing in technology and enhancing the competencies of staff to handle a much sicker population while simultaneously driving down post-hospital lengths of stay. Under payment reform, survival of post-acute providers will hinge more than ever on hospital system preferred network inclusion. The good news for skilled nursing providers is that most hospital systems are seeking partnership arrangements and typically not employing an acquisition strategy to fill that component of the care delivery continuum. This environment will bode well and remain opportunity rich for organizations willing to venture into what may be unfamiliar waters.
Health Systems Create Continuum of Care Through Post-Acute Care Relationships
Health systems will enhance efforts to create a continuum of care through strategically establishing formal functional relationships with select post-acute providers to secure high-quality, cost-competitive services. A mix of buy, build, joint venture, and contract approaches will be commonly employed based on market dynamics, access to capital, and individual health system assets and competencies. The continued pressure of value-based payment arrangements, increasing presence of Medicare Advantage, and the rise of two-sided risk accountable care organizations (ACOs) are among the drivers. To succeed, execution of an effective post-acute strategy will demand that health systems not only ensure access to high-quality services with competitive cost profiles, but also effectively manage the patient across the continuum. This will give rise to further investment in risk stratification, non-acute care management, and redesign of care delivery outside of the acute setting—areas often not strengths of health systems.
Momentum for Value-Based Payment Transformation Continues
The shift from rewarding volume-to-value through Alternative Payment Models (APMs), such as bundling and accountable care organizations (ACOs), is likely to become more pronounced as payment models grow and evolve. In 2015, the Medicare program established a goal that 50 percent of the fee-for-service payments be made through APMs by the end of 2018 and, so far, it has been on track to easily meet this goal. While the election has created some uncertainty about health care policy, ongoing budget pressures and the need for “advanced” alternative payment options under newly–implemented physician payment system, will create continued impetus to move forward with APMs. Those providers diving in to the deep end of the risk-taking pool, through directly taking risk under bundled payments or seeking gainsharing opportunities with other at-risk entities, will learn the quickest how to implement effective care redesign and survive in these swirling currents.
Select Post-acute Providers Emerge as Care Aggregators in At-Risk Marketplace
To secure a higher value position in an increasingly at-risk marketplace, select post-acute providers with favorable market dynamics, scale, capabilities, and capital will emerge as “aggregators” to create non-acute networks that provide, arrange for the provision of, and coordinate post-acute and community-based services. As key partners to health systems and ACOs that need access to a true continuum of care, but lack the assets, ability, or interest to create and manage it, these aggregators will have the capability to accept and manage risk. These efforts will position the aggregators to thrive in an at-risk environment: capturing a portion of the value created and distinguishing themselves from their more traditional post-acute brethren who will be viewed as contracted, low-margin, commodity services.
Community-Based Primary Care Is Key to Providing Value-Based Health Care
The role of primary care providers has never been more in the forefront of reshaping health care delivery to the most frail and medically complex patients. High-quality, high-touch care provided in the community or post-acute setting by house call or SNFist practices can be key to meeting value-based payment criteria for acute care, skilled nursing, and home health providers. Enhanced payment opportunities for advanced care planning, chronic care, and transitional care management supports the role these providers can play in population health management and risk mitigation. Additionally, these programs create significant value for at-risk and managed care players, positioning providers to participate in the value created. The expansion of efficient, effective, and compliant community-based practices addresses the quadruple aim: improved patient experience, better outcomes, lower costs, and greater provider satisfaction. Clinically integrated community-based medicine will enhance delivery of care to those at greatest risk of fragmented care and high costs.
Medicare and Medicaid Managed Care for Elderly & Disabled Populations Continues to Grow
As baby boomers age into Medicare eligibility, there appears to be less resistance to managed care. Accordingly, the penetration of Medicare Advantage has grown by over 30 percent since 2010, with five states that now average greater than 40 percent penetration. In addition, plans in some areas are more aggressively courting influential doctors by raising fees and moving towards shared savings payment models. At the same time, state Medicaid programs are increasingly turning to Managed Long Term Supports & Services (MLTSS), whereby long-term care populations are either voluntarily and mandatorily enrolled in managed care plans, in some cases integrated with a Medicare managed care product as well. In response to these trends, providers will need to up their game on managed care contracting, including strategies to achieve enough scale to attract plans’ attention in order to implement value-based payments. This will include post-acute providers forming “Independent Provider Associations (IPAs),” once the exclusive province of doctors and hospitals, as a strategy to achieve scale. This strategy is not for the faint of heart, however, as these otherwise competing providers will need to agree to self-imposed quality standards and meaningful strategies for clinically integrated care and sharing risk in order to be effective and pass legal muster.
Health Care Consumers’ Involvement in Their Care Continues to Grow
While the impact of a new administration on changes on delivery of and payment for health care is unknown, one thing is known—the trend of patient involvement in their care will continue to grow. Health care consumers have become more educated, more financially involved, more empowered, and more outspoken in their health care spending and decision-making. Supporting this change in health care consumer behavior is increasingly core to providers’ success. Providers must respond to this trend by offering the services that consumers need and want—at the price and convenience they are looking for. When health care consumers can go to a local retailer for in-and-out diagnosis, what keeps them engaged and loyal to a provider organization? The answer may vary by market but most answers will be consumer focused, such as wellness programming, health information access, continuum of services, and convenience and affordability of options.
Continued Focus on Readmissions
In 2016, CMS announced that significant progress has been made in reducing readmissions in the Medicare program over the last five years, noting that 11 states had a 10 percent reduction in 30-day readmission rates. At the same time, CMS announced that the readmission penalties imposed on hospitals rose by one-fifth, penalizing hospitals to the tune of $500 million this coming year. Now SNFs will get into the act. Effective October 1, 2018, SNFs will get penalized (and possibly rewarded, though that is not clear yet) for their achievement or improvement (whichever is better) in their 30-day readmissions rate for patients admitted to SNFs. Although October 2018 sounds far away, the performance period for the adjustment actually already started on January 1, 2017, so SNFs should be reducing readmissions now to mitigate the consequence of readmission penalties later next year.
Community-Based Organizations Partner with Health Systems, ACOs, and Payors
Due to increasing recognition of the clear association between addressing the social determinants of care and providing sustainable value, community-based organizations (CBOs) offering and coordinating social support services will build more structured relationships with health systems, ACOs, and payors. A recent national study of ACO executives noted that 84 percent felt such relationships were key to achieving meaningful improvements in population health outcomes. While referrals to CBOs have long been common, formally integrating them into the care plan and managing across the continuum has not. These partnerships will face several challenges. Among them are cultural and language barriers; a still limited appreciation for the value from the traditional provider community; high variability in the quality, capability, and infrastructure of CBOs; and the continued lack of functional outcomes measures and reimbursement mechanisms.
Palliative Care Achieves Widespread Recognition
Palliative care will achieve more widespread recognition for improving quality and delivering value, leading to greater acceptance and penetration, particularly in community-based services. As health care and community-based providers feel continued pressure to create value by improving care while reducing costs, palliative care is emerging as an underutilized tool in the care delivery toolbox. Patients that receive consultative or integrated palliative care at varied points throughout their lifespan to address complex health needs experience greater satisfaction with overall care, as well as less depression and anxiety; palliative care also reduces hospitalization, emergency department, and overall health care costs. Integrating palliative care strategies across the care continuum will support patient, provider, and payor goals in achieving quality, while managing risk and enhancing population management acumen.
PACE Continues to Grow Through Traditional and Non-Traditional Sponsors
Long considered the gold standard in person-centered care delivery for community-dwelling, but nursing home qualified dual eligible seniors, Programs of All-inclusive Care for the Elderly (PACE) are poised to continue the significant growth of recent years. New opportunities for regulatory and enrollment flexibility through updated proposed regulations released in July of 2016 and in the PACE Innovation Act of 2015 (PIA); faster time to market with a more efficient application process; and the new opportunity for previously discouraged for-profit program sponsorship has created much deserved interest in PACE. These developments, among others, indicate the Centers for Medicare and Medicaid Services (CMS) believes in the financial and clinical outcomes of PACE and is encouraging faster growth and expansion. As recently as December 2016, CMS released a request for information seeking public input on potential adaptions to the PACE model of care and expansion to serve additional populations, such as individuals with physical disabilities, those who are under 55, or those who have not yet reached nursing home eligibility. When viewed as a key population health management tool for select segments of medically complex individuals, ACOs, health systems, managed care organizations, and senior living communities are increasingly recognizing the symbiotic relationships possible with PACE. In 2017, PACE will continue to grow, attracting interest and investment from traditional and non-traditional sponsors.
Workforce Shortage Drives Employee Engagement Programs and Wage Increases
Workforce issues are confronting providers at all locations and levels. Large markets are seeing fierce competition for the same employees, and small markets are seeing critical shortages of caregivers. Shortages include primary care practitioners and direct caregivers. Population forecasts suggest an ongoing trend of decreasing numbers of workers to care for the rapidly growing segment of those aging, many with advanced and chronic illness, and providers are responding. Workforce challenges have hastened the focus on employee retention and engagement; driven the development of employee education programs; and increased wages in many markets. As providers endeavor to respond to these changes, they must work with local educators, communities, and other providers to ensure a strong and steady workforce to care for a rapidly aging America, while seeking to achieve lower cost of care goals.
Brian Ellsworth, MA, Director, Payment Transformation
Health Dimensions Group
In a year where we have witnessed many twists and turns in health policy and politics writ large, we should no longer be surprised by anything. To that end, on December 20, 2016, the Centers for Medicare and Medicaid Services (CMS) finalized the Advancing Care Coordination through Episode Payment Models rule that was first proposed in July 2016, as well as finalized a new payment track for Medicare ACOs. Hospitals in the designated regions would be required to participate in 90-day episodic payment models for cardiac and orthopedic bundles. Unless delayed or repealed by the incoming Administration, the mandatory episode payment models would go into effect in a few short months (July 1, 2017) as originally proposed.
There is some controversy about mandatory episodic payment models. In September 2016, 179 Members of Congress, including incoming Secretary of Health and Human Services designee Dr. Tom Price, wrote to CMS expressing their concerns about implementing large scale, mandatory alternative payment models (APMs) without Congressional input, possibly affecting care to patients and commandeering clinical decision-making. In addition, the incoming Trump administration has made no secret of its disdain for last-minute rulemaking that imposes significant new mandates on regulated entities.
That said, CMS makes several compelling arguments in the final rule for moving forward in response to those and other concerns:
- Large scale, mandatory demonstrations are necessary to truly ascertain how these new payment models work across a broad swath of providers and localities.
- Changes to these payment models are necessary for them to qualify as “Advanced” APMs under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), also known as the physician payment fix bill. This is critical because without access to a large array of Advanced APMs, physicians will have a hard time qualifying for the 5 percent Medicare payment bonus envisioned under MACRA because that law requires that a significant portion of physician revenues come from Advanced APMs in order to qualify for the bonus. Of note, shortly after the announcement of the final rule by CMS, the American Medical Association (AMA) expressed its support for making more payment models qualify as Advanced APMs under MACRA, sending an important signal to the new Administration.
- Regarding hospital readiness, CMS has pushed back the required assumption of downside risk in the mandatory episode payment models. There is also an option to assume downside risk quicker if the hospital wishes to seek Advanced APM status.
- In response to comments about ensuring quality, CMS noted the strong linkage of payment to quality metrics and the beneficiary protections in the final rule.
Exactly how all of these dynamics are going to play out after Inauguration Day remains as yet unknown. Given the few short months until implementation as the final rule currently reads, it is not too soon to prepare for significant value-based transformation, especially in markets where there will be multiple mandatory and voluntary alternative payment models in play.
Here are some of the key things that hospitals, physicians, and post-acute providers need to know about the final rule:
- Mandatory cardiac care bundles: Two new mandatory episodic payment models will require participation of 1,120 hospitals in 98 randomly selected regions across the country in 90-day episodic bundles for patients who receive treatment for heart attacks and heart surgery to bypass blocked coronary arteries (to be referred to as “AMI Bundles” and “CABG Bundles,” respectively. In addition, incentives are being provided in 90 regions (45 regions overlapping with cardiac bundles and 45 different regions) affecting over 1,300 hospitals for cardiac rehabilitation following a heart attack or heart surgery over a 90-day episode of care following hospitalization for one of those conditions. This will be referred to as the Cardiac Rehabilitation (CR) Incentive Payment Model.
- Addition of hip fractures to mandatory joint replacement bundles: Over 860 hospitals already required to be participating in the Comprehensive Care for Joint Replacement Model (CJR) in 67 markets, will now also be required to participate in mandatory bundling for a 90-day period for patients who receive surgery after a hip fracture. This will be referred to as the Surgical Hip and Femur Fracture Treatment (SHFFT) Model. In addition, CMS is finalizing updates to CJR, which began in April 2016, to include allowing the model to qualify as an Advanced APM, as well as tweaks to align the model’s policies with other episode payment models. The addition of hip fractures to joint replacement means that every hospital in a mandatory CJR region will now be bundling for 30–50 percent more orthopedic episodes, necessitating robust care redesign and effective post-acute management strategies.
- New Payment Track for Accountable Care Organizations: The new Medicare ACO Track 1+ Model will have more limited downside risk than Tracks 2 or 3 of the Medicare Shared Savings Program (MSSP) in order to encourage more practices, especially small practices, to advance to performance-based risk. The overwhelming majority of MSSP ACOs have been in Track 1 (upside-only risk) and, thus, were not able to qualify as an Advanced APM (which requires an assumption of downside risk). With this change, more Medicare ACOs will have the option to qualify, allowing their participant doctors a better opportunity to qualify for bonuses under the MACRA physician bonus structures.
Many of the features of the episodic payment models, such as waivers of payment and coverage rules (e.g., three-day prior stay rule for Medicare SNF coverage) and beneficiary notification requirements are similar to, or the same as, originally proposed.
Of particular note are the emerging rules on how all of these payment models will overlap. For instance:
- There are 17 regions where both mandatory orthopedic and cardiac bundling will occur. Those regions are more likely to reach a tipping point on care redesign and post-acute management as hospitals in those regions become at risk for an increasingly significant portion of their Medicare fee-for-service revenues. A list of regions for each of the mandatory bundles, as well as which ones overlap, can be found here: Cardiac and CJR Mandatory Regions FR FINAL 12.22.16.pdf
- The interaction between bundling and ACOs is also important. Beneficiaries included in a mandatory episode payment model may also be assigned or aligned to an ACO if both programs are applicable, in which case the bundler accrues all the savings and the ACO does not, unless they agree to gainsharing. Additionally, episodes initiated by beneficiaries who are prospectively assigned to certain programs such as the Next Generation ACO Model, the Comprehensive ESRD Care Model, and MSSP ACOs in Track 3, will be excluded from the mandatory episodic model. In those cases, the ACO will accrue the savings unless it shares with providers.
These emerging complexities must be mastered on a market-by-market basis by providers seeking to position themselves for success in a value-based world. In coming weeks, HDG will summarize important details and provide a webinar on January 19, 2017. Also, these and other issues will be discussed in the Intensive Session: Owning the Risk-A Journey into Value-Based Transformation at our National Summit in San Diego, California, on Tuesday, February 28, 2017, from 2:00 p.m. to 4:30 p.m.
In the meantime, the Advancing Care Coordination through Episode Payment Models final rule can be viewed at https://www.federalregister.gov/public-inspection/current starting December 21, 2016. For more information about the individual cardiac and orthopedic bundled payment models finalized through this rule, visit the CMS Innovation Center website at https://innovation.cms.gov/initiatives/epm.