Skilled Nursing Can Do It Cheaper, But Reputation and Partner Risks Remain

Skilled nursing facilities often bear the brunt of negative press surrounding long-term care, and their place in the future of the continuum could rest on changing that reputation in the minds of the public and lawmakers.

“We need to get that reputation back, because we are part of the solution,” Celtic Consulting president Maureen McCarthy told an audience at the American College of Health Care Administrators (ACHCA) Convocation in Orlando, Fla. on Monday.

In the coming value-based landscape, the Centers for Medicare & Medicaid Services (CMS) will be increasingly focused on achieving the best outcomes for the least amount of money, regardless of the setting.


That new horizon for long-term care providers has caused consternation in the skilled nursing industry, as insurers and health networks ostensibly have an incentive to shift potential patients into the home health setting — typically the cheapest along the continuum.

But McCarthy, a registered nurse who founded the Torrington, Conn.-based Celtic Consulting in 2001, reframed the question by looking a little farther up the spectrum. An inpatient rehabilitation facility (IRF) might receive $900 to care for a patient with a specific condition, while a long-term acute care hospital (LTAC) might bring in $750. A SNF, meanwhile, might only get $500.

If those numbers remain the same while the quality of care at skilled nursing facilities increases, McCarthy said, one or more of those settings won’t exist into the future.


“If we can do it cheaper, we can win,” she said.

McCarthy’s comments echoed those of Formation Capital founder and chairman Arnold Whitman, who exhorted the skilled nursing industry to leave the “kids’ table” and achieve parity with the rest of the health care system at an event hosted by the National Investment Center for Seniors Housing & Care (NIC) last month.

Whitman and Sabra Health Care REIT (Nasdaq: SBRA) CEO Rick Matros repeatedly emphasized that the future of SNFs involves taking care of higher-acuity residents in a setting that’s cheaper than any other alternative, pulling market share away from the IRFs and LTACs that remain in the ecosystem.

“The skilled nursing facility isn’t a a nursing home,” Matros said at that event, held in Dallas. “It’s more of a step-down unit from an acute care hospital.”

Part of the problem, however, is the overall unfavorable reputation that nursing homes have in the public imagination. Even the term itself tends to be conflated with assisted living, independent living, and other care settings, McCarthy noted, making SNFs pay the price for any wrongdoing in senior care settings.

“We need to empower ourselves to get over this bad reputation that we have in nursing homes,” she said. “When you see something happen on the news, and it’s negative, it’s always nursing homes.”

In fact, a requirement instituted under the IMPACT Act of 2014 reveals just how SNFs can provide value. Skilled nursing providers are now responsible for downstream Medicare spending during the so-called “associated services period,” which lasts from 30 days after discharge.

In many cases, the home health agencies involved in the post-discharge process end up racking up more Medicare dollars than the inpatient portion of the episode, McCarthy said, including in states such as New York. That’s why it’s crucially important for SNF providers to closely vet their home health partners; if one of five agencies in a facility’s roster has a rehospitalization rate of 35%, she said, it might be time to reevaluate that relationship.

“You’re getting dinged for that every time that patient goes back to the hospital,” McCarthy said.

Written by Alex Spanko

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