SNFs Must Find Their Place in New Payment Models to Last

It’s no secret that the skilled nursing industry has been on the rocks in recent years. Large operators have sold off their SNF offerings, while mom-and-pop facilities struggle to stay afloat.

Still, SNFs offer a vital service that is not largely found elsewhere — long-term and post-acute care, particularly for those that rely on Medicaid to fund their needs. If SNFs are here to stay, what will the ones that thrive look like in the next 10 to 20 years?

“At the end of the day, skilled nursing facilities are going to have to play a role by proving that they can provide value within the health care system, and right now that means partnering up with hospitals, payors and even physician groups,” said Bill Kauffman, senior principal at the National Investment Center for Seniors Housing & Care (NIC).


The SNFs that are able to provide quality care, achieve good patient outcomes and avoid rehospitalization are the ones that will be successful in the current and future health care landscape, according to Kauffman.

Responding to Shifting Payment Models

The challenges that SNFs currently face are largely a result of occupancy declines and the implementation of different payment models from the Centers for Medicare and Medicaid Services (CMS).


Operators that will be able to succeed in the future need to figure out how to gain Medicare market share, according to Kauffman. Plus, these SNFs will need to take care of more complex cases and be able to provide value for the health care system by avoiding rehospitalizations.

“It’s definitely not going to be an easy game as far as getting referrals like they used to from hospitals and payors,” Kauffman said. “Skilled nursing facilities are going to have to have data, to prove that they can avoid rehospitalization, achieve positive outcomes, and provide value to the healthcare system.”

The recently implemented Hospital Value-Based Purchasing (VBP) Program from the Centers for Medicare & Medicaid Services (CMS) incentivizes quality of care, as opposed to fee-for-service payments that are based on volume. This shift in priority has changed everything, according to Zeke Turner, CEO of Mainstreet, the nation’s largest developer of skilled nursing and transitional care properties, and the operator of 15 planned Rapid Recovery Centers in three states.

Those facilities, launched earlier this year, are the first properties operated by Mainstreet itself, and are designed to fill a market gap for post-acute care facilities that can deliver high-quality outcomes — something hospital systems want in order to avoid financial penalties for high readmission rates.

“No longer will the straightforward, ‘short term’ rehab and therapy patients make up all the profitability,” said Turner. “This profitability model has been appropriately squeezed. SNFs have to either move to a much higher acuity model on a very short-term basis, or focus solely on long-term medical care as a business model. Mixing these two modes together is no longer a functional business strategy.”

Knowing the Market

With mid-sized SNF operators — those averaging 15 to 30 properties — faring best in the current economic and regulatory landscape, analysts have speculated on whether larger and smaller SNF operators have a place in the future health care system.

“The question is how big is too big, and how small is too small,” said Kauffman. “I think the skilled nursing sector is really in the process of figuring that out. Ultimately, it will depend on what’s happening in local markets and what the needs are in that market.”

It’s unlikely that there will be a hard-and-fast rule about the ideal size of a SNF. But what’s more important, Kauffman said, is that a SNF understands the market it occupies. Research and data are vital to know and meet the needs of the market, along with having an experienced management team to oversee operations, Kauffman said.

“Health care is local and the delivery will continue to be local,” said Turner. “Companies who are connected to the health systems and insurers in local environments have the best opportunity to be successful, no matter if small or large.”

Talent Retention

High turnover rates and a declining workforce pool are yet another drain on skilled nursing businesses. Broadening that pool through education and investing in technology that will maximize staff resources are essential, Turner asserts.

“We have to find ways to get a larger volume of potential employees,” Turner said. “Just competitively bidding more and more for an increasingly shallow pool of talent is madness. We have to begin recruiting earlier, getting access to younger talent. Operators or the industry needs to invest in the education and training fields to promote more interest in health care. For example, the post-acute industry should have its own nursing school.”

With the senior population outpacing the available workforce, recruitment initiatives alone may not solve the problem, Turner suggests.

“We have to create and invest in technology solutions that make our existing talent stretch further,” Turner said. “For example, we need remote monitoring and data technology that increases the quality of monitoring while simultaneously reducing the necessary staffing.”

Written by Elizabeth Jakaitis

Companies featured in this article: