What Hospitals Want: How SNFs Can Break into New Payment Partnerships

Skilled nursing facility operators frequently hear about how forging hospital partnerships is essential to their success under new payment models, but the intricacies of those interactions can often be difficult to navigate.

Speaking at the National Investment Center for Seniors Housing & Care (NIC) spring conference in San Diego last week, the leader of one hospital system’s accountable care organization (ACO) revealed some of the factors he looks for when contracting with skilled nursing partners.

“We’ve seen success with a combination of process measures and outcomes measures,” Michael Reiche, executive director of the Medicare ACO business at Steward Health Care Network, which operates 36 hospitals and other care sites across 11 states.


ACOs work by forging partnerships among acute care providers, physicians, and post-acute operators, with a goal of potentially saving the Medicare program money through collaboration. If all goes well, and the ACO demonstrates savings, providers in the organization can share in some of the extra cash.

SNF providers have expressed some concern with the ACO model, as the acute care providers typically sit in the driver’s seat, dictating the terms without necessarily providing significant financial benefits. But as the Centers for Medicare & Medicaid Services (CMS) works to move to a more value-based model of care, SNFs increasingly must ingratiate themselves in ACOs, preferred provider networks, and other new collaborations in order to keep referrals flowing.

In Reiche’s experience, hospitals have two potential options for holding SNFs accountable for outcomes. In the first, SNFs and other post-acute partners can pledge to improve certain benchmarks — for instance, readmission rates — over a certain historical average. In the second, the skilled nursing operator can work to reduce those levels below a defined regional average, effectively pledging that they’ll be among the best in their given market.


Process measures, meanwhile, include promises to conduct routine check-ins and perform cause analyses of readmissions and other negative events.

“They ultimately should correlate with outcomes, but they definitely communicate willingness to work closely together,” Reiche said of process measures.

ACOs as expansion tools

Steward’s participation in ACO models has been a “driving force” in its expansion from a local hospital player with locations clustered in Massachusetts to a nationwide operator, Reiche said.

“We very quickly understood that a very large percentage of our spend is in the post-acute space,” he said. “I think the two big cost drivers for a Medicare beneficiary are one, inpatient admissions, and two, post-acute utilization.”

Whenever Steward enters a new market, Reiche’s team first looks for strong data, seeking out electronic health record (EHR) vendors that can provide them “windows through the wall” between acute and post-acute providers. Steward in particular focuses on technologies that allow them to receive a notification any time one of its patients is admitted at a hospital or skilled nursing facility.

“[They’re] not perfect, and not as fully detailed as we’d like them to be, but they’re definitely a very huge step forward from the very complete data opaqueness that was happening before,” he said.

But Reiche called on skilled nursing providers to lead the way in that regard, noting that he’s never seen an example of a post-acute provider approaching Steward to tout their technological capabilities in the marketplace.

“I would probably say we’re all a little technology-challenged, and I think this is an area that definitely sees a lot if investment, and should continue seeing some investment,” he said.

I-SNP superiority

Though the theme of the conversation focused on innovative partnerships outside of Institutional Special Needs Plans (I-SNPs), or special Medicare Advantage plans that operators can form to cover their own long-term residents, the options still loomed large in conversation.

“I still haven’t found its equal in the health care space,” Shawn Schaefer, vice president of network at insurer Optum, said.

Optum’s I-SNP currently boasts about 60,000 enrollees at about 1,600 skilled nursing facilities around the country. The company, a subsidiary of insurance giant UnitedHealthcare, has also developed the model to include a robust medical program in which nurse practitioners visit residents to prevent readmissions and potentially serious medical problems.

But while I-SNPs can insulate providers from some of the financial pressures on the skilled nursing industry, Schaefer also emphasized that the model allows more freedom for providers, with the reimbursement structure more closely linked to resident needs and outcomes than traditional fee-for-service Medicare. That in turn passes down to the resident, who can benefit from interventions that he or she may not have received under the traditional model.

“We can pass the value of the savings on to the skilled nursing facility,” Schaefer said, giving the example of performing a lab test on a resident with a potential infection. “But we still want to pay for that transaction because it has to happen. We don’t want to have any incentive for that not to happen.”

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