As Lengths of Stay Decline, Drug Costs Loom Larger in Skilled Nursing

Escalating drug costs have made headlines in the health care sector at large in recent months, and as patient length of stay (LOS) declines, skilled nursing facilities are particularly feeling the pinch due to their unique supply requirements.

For Transitional Care Management, which has two skilled nursing locations in Illinois, the average cost of medications was about $40 per patient day in 2017. In 2018, the average cost is about $48 a day.

That translates to about $18,000 to $20,000 extra costs per month for Transitional Care, chief operations officer Mike Filippo told SNN.

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“It really does come back to one phenomenon that has happened in the industry, and it’s not a secret, of course — hospitals are sending more people to home health than they ever have in the past,” he said. “Twenty percent of the safest — let’s say less complex — referrals that we would get in the past are all going home now. So that gives us a new baseline, and our referrals are getting more and more complex. We’re getting surviving cancer patients, organ transplant patients, that have more expensive medications and more complex medical systems, that we have to put in place.”

Ecumen, a non-profit senior housing and care organization with a presence in eight states, spends about $10,000 per month on inhalers alone for Medicare Part A patients in the five SNFs it owns and the four it manages. The problem the organization faces is that management typically must purchase a month’s supply, when residents only stay for an average of 19 days, Shelley Matthes, senior director of resource optimization for Ecumen, told Skilled Nursing News.

With accountable care organizations (ACOs) and managed care plans putting pressure on SNFs to keep patient length-of-stay short, the importance of managing medication supply and cost is only likely to increase.

“It’s a huge piece of our world that probably doesn’t always get the attention it deserves,” Monica Schreck, vice president of clinical operations at Symphony Post Acute Network, said to SNN.

Complexity and expense

Though a recent data set found that hospital discharges to SNFs remained steady, home health has seen an increase in admissions. That change has resulted in a very different population inside the SNF — a population that requires facilities to pay extremely close attention to pharmacy supply. As the patients arrive with more complex needs and more comorbidities, they have medication needs that are more intensive than those of SNF patients in prior decades. This is particularly true at Transitional Care, which focuses entirely on patients discharged from the hospital.

“Sometimes it’s IVs, and sometimes it’s oral meds, but in the end there are patients that we’ll take that have $250, $300 cost a day just based on medication,” Filippo said.

Matthes has seen a similar trend to complex patients at Ecumen’s facilities, calling the situation one that the organization is “going to really have to take a look at.” The crux of the issue, she explained, is the practice of consolidated billing, under which the facilities submit bills to Medicare for a rate based on the Resource Utilization Group (RUG) from the patient’s Minimum Data Set.

But there are some specific items that are excluded from consolidated billing. They are separately payable, but the costs the SNF faces to provide them are steep; Matthes noted one example where a patient in need of expensive chemotherapy medications cost the SNF about $30,000 because the total reimbursement was less than the cost of one of the medications. Chemotherapy drugs were typically on the consolidated billing exclusion list, among other services that a patient with more medical complexities might require.

“We spend, across our organization, about $2 million a year on medication, and that’s over nine facilities,” Matthes said. “We want to pay our share — that’s part of the deal — but it’s gotten kind of prohibitive in many cases. And when you’re looking at adding more complex patients, it gets really costly.”

Some of the steps Transitional Care has taken to try to mitigate those costs include ordering the smallest possible supply of drugs such as insulin, and making what might seem like counterintuitive choices in terms of medication strength.

“If you have someone on a more expensive antibiotic for a shorter period of time, because it’s more expensive, it’s actually cheaper in the long run than having them on a less expensive antibiotic for a longer period of time,” Transitional Care chief clinical officer Michelle Stuercke explained to SNN.

Managing medications

Medication supply is another factor to consider. At Symphony, the majority of medication orders consist of 30-day supplies, Schreck said.

On the other hand, Transitional Care — where management places an emphasis on moving residents to the next level of care as soon as possible — functions on seven-day supplies, Stuercke explained. When residents overstay that one-week timeframe, Transitional sends the patient home with the balance of the medication.

It’s all part of the goal of curbing hospital readmissions, and an inability to access the necessary medication remains a  common reason why they return to the acute setting, she noted.

“Those medications that we send people home with, once they’re discharged from our facility, the pharmacy bills those medications to the patients’ Part B plan, or whatever it is that pays for their medications,” Stuercke said. “If they don’t have a payer source, we still send them home and we absorb those costs, because if it allows for a safe discharge, it’s worth it in the end.”

Symphony takes a similar approach, as Schreck explained via e-mailed answers provided with the help of a pharmacy consultant. The pharmacy — CVS Health (NYSE: CVS) company Omnicare, in Symphony’s case — limits the doses dispensed for patients that have Medicare Part A or managed care coverage to mitigate the issue of patient length-of-stay.

“These shorter-stay residents typically have less waste,” Schreck said in the e-mail. “If there are medications left over from a facility billed stay, we have the option with our pharmacy to split-bill the remaining quantity and bill the patient’s insurance plan or Part D plan for the remaining quantity. This is a good option because it allows us to provide some medications to the resident to hold them over until they can either see their own physician or until they can get to the community pharmacy and have their prescriptions filled.”

When it comes to drug choices generally, Transitional Care has relied on its pharmacy and medical directors — along with the input of executives including Stuercke and Filippo — to come up with a list of medications with the pharmacy and then have a physician sign off on it, Filippo said.

This might include automatically switching out expensive medications to medically similar ones with a more moderate cost, which provides savings of “a decent amount of money each month,” he told SNN.

But this strategy has to be tied into patient care. Stuercke stressed the need to incorporate those best practices into the care of the resident so that he or she receives the proper drugs, but not for a time period so long that it becomes excessively costly.

There is another advantage to that approach. As Transitional Care keeps track of its medications, the data it gathers has proved useful at the negotiating table with payors, chief strategy officer Charles Ross noted.

“Any information we gather, it’s good information for us,” he explained. “We can go back and say: Look, expenses have gone up. And perhaps that gives us a bit of leverage for a better rate going forward.”

Written by Maggie Flynn

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