Without Incentive to Share Savings, ACOs Add to SNFs’ Financial Headaches

It’s been a common refrain in the industry: To survive in a health care system increasingly moving to value-based payment models, skilled nursing facilities will have to form strong partnerships with hospitals, health systems, and accountable care organizations (ACOs).

But doing that will be difficult if acute care facilities and ACOs aren’t interested in forging such a collaboration. And that’s the problem many SNFs have encountered, according to Mary Coppage, vice president at Anne Tumlinson Innovations. Many operators have found health systems and ACOs reluctant to share the savings that result from a SNF lowering readmissions and helping bolster their success, she explained, because of the many headwinds they face.

“A lot of this goes back to the fact that SNFs are under an enormous amount of pressure,” she told Skilled Nursing News. “Their volumes are going down … they’re operating in a completely different world, and so they’re having to change the nature of these relationships. So it’s about trying to get as much volume in the market as possible.”


They have to do this in a world in which hospitals and health systems are moving to form so-called narrow networks — the referral groups to which acute care sends its patient populations. But there’s been debate about the proper size of such networks, and the lack of consensus may affect how many referrals a SNF actually ends up seeing. That can leave SNFs in the position of having done the work — and invested the money — to boost quality and reduce readmissions, while seeing no benefit.

In an ideal world, a hospital might form a narrow network by looking at the community and identifying a subset of nursing homes and post-acute providers with which they want to do business, said Steve Wermuth, partner at the consulting firm Strategic Health Care, which has offices in Washington, D.C., and Columbus, Ohio.

This might be because the SNFs are of higher quality, have good readmissions, or have certain specialty programs; whatever the reason, the SNF would see more referrals, which would then affect the bottom line, he said.


The result, in the best-case scenario, would be a system that addresses the inherent difficulties in discharge planning and keeps vulnerable patients in the most appropriate care setting, he said.

“That’s where I see the value of a preferred provider network, when it really works,” he said. “It’s not just about the dollars and cents. It’s about: What system of care are we putting together at that local level between the hospital and the nursing home?”

But sometimes hospitals will have far more SNFs and post-acute providers in their network than the adjective “preferred” would suggest. One of the issues is that even though a health system might develop a network, it can’t necessarily influence how the discharge planners work on the ground level, Anne Tumlinson, the founder and CEO of Anne Tumlinson Innovations, told SNN. In fact, this is the most common problem: Frontline staff at a hospital not adhering to the network.

But it’s the second problem that smarts even more for many providers.

“The second [issue] is that, even in situations in which there is a narrow network and the SNFs are part of the health systems’ clinically integrated network, reducing rehospitalizations — that helps the system succeed as an ACO or MA plan, or bundled payer. [But] the system doesn’t share in the savings with the SNFs,” Tumlinson said. “I’ve never heard of a hospital or health system sharing savings with a SNF, honestly.”

Part of the problem is that ACOs, which get a single pool of funds to maintain care quality while reducing overall costs, don’t have a reason to share the resulting savings with a SNF – even if a SNF is doing its part to help the ACO succeed in providing care at a lower cost, Coppage said.

“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].”

One of the concrete ways SNFs can approach ACOs and health systems include proactively having the conversation about the relationship, preferably with data, both Coppage and Wermuth told SNN. And if SNFs are ready to have the conversation, they should be thinking ahead of time about how far they may want to take the partnership, Coppage added.

“Are you prepared to take on some of the downside risk for post-acute spend?” she asked rhetorically. “Are you able to partner with some of the home health companies you discharge to to have that continuity of care? Could you operate as an ER diversion for some patients? Those things may not be necessary at the outset … but some ACOs may want you to put something on the line.”

Another wrinkle is the fact that many of the financially successful ACOs have found cost-savings by cutting out SNF care as much as possible, Coppage noted. In fact, one study in the American Journal of Accountable Care found that for every 1% a given ACO cut skilled nursing spending, the overall savings rate increased by 0.82%. And with the Centers for Medicare & Medicaid Services recently overhauling the rules for ACOs so that they have to take on risk, they will have an even stronger incentive to hunt for savings.

But ACOs and narrow networks aren’t the only drivers of these trends, Coppage added. Bundled payments and other value-based contracts are resulting in similar behavior from health systems and Medicare Advantage plans.

“It’s happening across a lot of different fronts, and so I think that’s why SNFs are starting to see it pop up more,” she said. “I think it’s speaking more to this larger trend of them being asked to improve care, improve readmission, reduce length of stay, and not seeing the improved relationship from that.”

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