ACOs Cost Government Money, But Skilled Nursing Opportunity Remains Large

Accountable care organizations (ACOs) don’t always meet their intended goals of saving the government money, and while a new study shows that the model has led to losses in New York, its author asserts that the programs remain ripe for skilled nursing opportunities.

Five years into the Medicare Shared Savings Program (MSSP), ACOs in the Empire State generated a net loss of $70 million in 2017, according to a report released last week from the United Hospital Fund — or $75 per beneficiary.

That runs counter to the Centers for Medicare & Medicaid Services’ (CMS) ACO aims: By encouraging providers up and down the care continuum to work together at improving quality and reducing costs, the thinking goes, Medicare beneficiaries can receive better care while cutting overall government spending.


But the math frequently doesn’t work that way. Between 2013 and 2016, ACOs ended up increasing federal spending by $384 million, according to a 2018 study from consulting firm Avalere Health, largely from models that only rewarded high-achieving performers with bonus payments — without the threat of penalties for failing to meet certain cost and quality benchmarks.

CMS has responded by eliminating no-risk tracks in its new Pathways to Success ACO model, set to take effect July 1; organizations will now have only two years to figure out their operating models before facing potential penalties, a move that CMS. administrator Seema Verma predicted would lead to $2.9 billion in savings over the coming decade.

But while the overall effectiveness of ACOs seems mixed, individual case studies show a potential path forward. Some organizations in New York State, for instance, saved the government up to $25 million in 2017, the United Hospital Fund found, with the top two beating their benchmark spending target by $56 million.


Experience frequently ranks at the top of reasons why ACOs succeed, with study author Gregory Burke noting that hospitals, physicians, and post-acute partners simply require time to build the relationships and infrastructure required to improve care and create efficiencies. But there are other intangible factors at play, Burke wrote.

“Discussions with ACO leaders and industry experts suggested that some less quantifiable characteristics were at least as important as the structural issues: strong and legitimate leadership; substantial investment to build a strong infrastructure to support population health improvement; and, perhaps most important, a shared sense of common purpose among a heterogeneous mix of providers historically accustomed to going their own way,” he wrote.

Burke, director of innovation strategies at the New York City-based United Hospital Fund, told SNN that skilled nursing facility participation appeared to be minimal in his research — a fact that he found surprising given the opportunities that the programs present.

In particular, Burke pointed to the fact that ACOs can waive the three-day stay requirement for Medicare SNF coverage; unlike in fee-for-service arrangements, where beneficiaries must spend three qualifying nights in a hospital before receiving Medicare coverage, ACOs can bypass the rule entirely.

“There’s a growth industry and business opportunity there — you can have patients admitted to the nursing home who might not otherwise have ended up there,” Burke said.

Given the pressure facing ACOs to reduce costly hospitalizations, they could take advantage of the waiver by sending patients that require certain specialized care to a SNF instead of a hospital. That logic could even extend to residents on the long-term care side of the nursing home: Should a custodial Medicaid resident require IV antibiotics or other more intensive services, a SNF participating in an ACO could use the waiver to simply transfer the patient into the post-acute/rehab side of the business. The resident would avoid the stress of going to a hospital, the ACO wouldn’t be on the hook for a rehospitalization event, and the nursing home would secure vital Medicare dollars, Burke noted.

“If they’re in an ACO, and they’ve got the 72-hour waiver, why would a community-based patient getting admitted to the nursing home be different from a patient who was in the long-stay section of the nursing home?” Burke said. “Why would they be treated differently from a hospital patient?”

Such a system would help nursing homes boost Medicare funding at a time when Medicaid pressures are forcing many out of business. In general, properties use the higher-reimbursing Medicare residents to offset losses they may incur caring for long-term Medicaid patients, who bring in substantially lower per-day payments.

But that has become difficult as bundled-payment models for common post-acute, Medicare-reimbursed conditions such as knee and joint replacements increasingly cut SNFs out of the equation. Just last week, a four-building senior living chain in Wisconsin was forced to suspend its long-term care services at three of its properties; executives cited $7 million in annual Medicaid losses, coupled with reduced Medicare revenue associated with bundled payments, as a key reason for the move.

“Bundling is not your friend,” Burke said.

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