Why Skilled Nursing Providers Could Embrace Shorter Lengths of Stay

As Medicare Advantage plans continue to pressure skilled nursing operators, one prominent leader in the space predicts that innovative providers can survive by leaning into the changes.

By transforming their facilities into standalone medical-surgical facilities that can replace similar units in hospitals, SNFs can evolve into purely short-stay health care providers that thrive in the growing Medicare Advantage landscape, according to National Investment Center for Seniors Housing and Care (NIC) founder and strategic advisor Robert Kramer.

“There’ll be every effort, as there already has been, through home- and community-based services to empty out of nursing homes individuals that are only there because there’s no other option for them,” Kramer said on a Tuesday webinar hosted by Aging Media Network, the parent company of SNN. “But having said that, there are going to be complex care individuals for whom it is going to be less expensive to care for them in a well-staffed, well-run nursing home than to bring the care into their home.”

In that scenario, which Kramer tabbed as “the greatest opportunity” for skilled nursing operators, Medicare Advantage plans would partner with SNFs to develop the kinds of services that normally occur in hospitals — with the end goal of cutting the emergency room out of the equation entirely. That transformation would mean robust staffs of highly trained individuals, according to Kramer, that can manage the occasional acute needs of patients with chronic conditions such as diabetes, COPD, and congestive heart failure.

While Kramer emphasized that the market for long-term custodial care will never fully go away, he still predicted a future where SNF stays of 10 to 12 days — now considered relatively short — will seem comparatively lengthy.

“I think there’ll always be a long-stay population. I think for the short stay, it’ll be even shorter lengths of stay than we’re seeing today,” Kramer said, pegging the average number at three to five days.

If you can’t beat ’em

In essence, Kramer’s skilled nursing future is a macro-level application of an old adage: “If you can’t beat ’em, join ’em.”

Medicare Advantage plans, public-private partnerships that use federal Medicare dollars allocated by private insurance companies, have depressed lengths of stay across the SNF industry, with many operators pointing to shorter stints — along with the associated lower reimbursements — as a key challenge. In the third quarter of 2018, SNFs received an average of $515 per patient day from Medicare, compared to just $427 per day from managed Medicare plans, according to the most recent set of data from NIC.

Those pressures will only increase in the years to come: Anne Tumlinson, founder and CEO of consulting firm Anne Tumlinson Innovations, presented projections estimating that nationwide MA enrollment will jump 12% in 2019, bringing the overall total to just under 23 million people.

And while penetration varies by market — ranging from more than half in Minnesota under 10% in three states, according to Kaiser Family Foundation data for 2018 — the benefits to consumers mean that uptake will likely only increase over time.

“Medicare Advantage plans offer a better deal over traditional fee-for-service in terms of the out-of-pocket exposure, cost exposure, and the opportunity to get supplemental benefits that are not otherwise covered by Medicare,” Tumlinson said on the webinar.

But the data also reveals an opportunity for skilled nursing providers. Though one might expect private insurance plans to attract generally wealthier enrollees with fewer structural impairments to good health, Tumlinson noted that there was very little difference between the complex care needs of patients in MA plans as compared to traditional Medicare beneficiaries.

So if SNFs can prove to insurance partners that they can provide high-quality care to people with multiple complex conditions, they can position themselves for success.

“This offers an opportunity to senior care providers, because these are your people,” Tumlinson said. “You’re already on the ground, serving the growing number of Medicare beneficiaries who are enrolling in private insurance plans, and are costing a lot.”

Overnight irrelevance

Of course, courting Medicare Advantage plans isn’t always even as simple as furnishing solid data about outcomes to acute care hospitals and insurance companies, a common refrain on the conference circuit. Kramer urged providers to identify their MA partners’ key pain points, acknowledging that post-acute providers sit “at the bottom of the food chain.”

“The reality is that even though these entities may be saving dollars in terms of total health system dollars, and in terms of saving dollars for the MA plan, they’re not voluntarily willing to gain-share,” Kramer said, referring to bonuses offered to SNFs for hitting certain savings benchmarks. “That’s why you see many providers now, post-acute care providers, long-term care providers … banding together in consortiums or coalitions, basically to have more leverage.”

Kramer’s comments echoed an SNN story from earlier this week, in which Anne Tumlinson Innovations vice president Mary Coppage noted that accountable care organizations (ACOs) — another kind of shared risk and savings model — are frequently reluctant to spread the wealth.

“There aren’t really incentives for them to share with SNFs, and there’s nothing telling them they have to,” she said. “I think they also know SNFs are in a relatively vulnerable position and need those strong relationships with the ACOs to maintain their volumes [of patients].”

Coppage suggested that providers consider taking on downside risk when negotiating with ACOs, as well as marketing themselves as an “ER diversion” to help keep episodic spending low.

No matter what form it takes, these moves have become imperative even for providers in areas with relatively low Medicare Advantage uptake. With mega-mergers between health plans and other providers — such as the combination of pharmacy giant CVS and health insurance behemoth Aetna — the payer landscape in any given market can change rapidly, Kramer said. As a result, providers need to know their strengths and their partners’ weaknesses, constantly monitoring the market to stay essential in a shifting world.

“The danger here is that you could become irrelevant and lose your customers if suddenly overnight … you’re not part of their referral network,” he said. “That’s a real risk.”