‘Bundling is Not Your Friend’: Bundled Payments Remain a Skilled Nursing Threat

Among the many skilled nursing landmines — from a new Medicare payment system to underfunded Medicaid programs to a shifting regulatory landscape — providers would be wise not to ignore the ongoing effects of bundled payment programs.

In fact, at the end of a recent discussion on his research into the cost-savings successes and failures of accountable care organizations (ACOs), United Hospital Fund researcher Gregory Burke made a point to call out bundled payments as a key area of concern.

“Bundling is not your friend,” Burke, who serves as director of innovation strategies at the New York City-based non-profit, told SNN.


Specifically, Burke called out the ways bundled payment models bypass skilled nursing facilities entirely, as rehabilitation for once-staple procedures such as joint replacements increasingly moves to the less-costly home care setting.

“The economics of a nursing home pivots off of those Medicare admissions, and if they start to dry up, that’s a really scary item,” he said. “People ought to be looking very seriously at their hips and knees and cardiac and other things that are being pushed to bundles.”

Bundling blues

Under bundled payment models, the Centers for Medicare & Medicaid Services (CMS) provides a single reimbursement for an entire episode of care — for instance, a hip or knee replacement — to the acute and post-acute providers who serve each patient. As a result, hospitals have a significant incentive to reduce usage of skilled nursing facilities for post-acute recovery, and instead encourage patients to go directly from the hospital to the home health setting.


The Centers for Medicare & Medicaid Services (CMS) provided a reprieve for SNF operators back in the fall of 2017, when it cancelled the mandatory hip fracture and cardiac bundled payment models, and scaled back the reach of the compulsory Comprehensive Care for Joint Replacement (CJR) bundled system.

“While CMS continues to believe that bundled payment models offer opportunities to improve quality and care coordination while lowering spending, we believe that focusing on developing different bundled payment models and engaging more providers is the best way to drive health system change while minimizing burden and maintaining access to care,” CMS administrator Seema Verma said in a statement at the time.

But the new bundled payment models have brought their own share of headaches. Under the Bundled Payments for Care Improvement (BPCI) Advanced model, SNFs can’t serve as episode initiators, meaning operators in the space are prohibited from actively applying to participate in the program.

Instead, their role will be limited to that of convener, in which they can agree to take on some downside risk in exchange for potential payment boosts. That could provide a path to success, as SNF operators can take advantage of hospitals’ aversion to risk.

“We’re going to take on all the risk as the convening entity,” Anne Tumlinson, founder and CEO of Anne Tumlinson Innovations, recently said as an example of a pitch to hospitals. “We have all of the capabilities. You don’t know how to manage post-acute care. We do. We’re going to set this up in a way that if it works well, you’ll have the opportunity to share in some of the savings.”

But several leaders have expressed concerns over the fact that hospitals will be the ones designing and applying the structure of the programs.

“If the hospital owns the bundles, I really do think it’s one of the biggest threats to our profession,” Marquis Companies CEO Phil Fogg said during a recent panel discussion on the future of skilled nursing. “When you get another provider in the health care continuum who’s profiting from lowering our utilization, I have a problem with that.”

No Medicaid safety net

Post-acute skilled nursing stays covered under Medicare often help operators fill in the Medicaid reimbursement gaps that have led to nursing home closures in states across the nation. If a given building loses money on its Medicaid residents, which many do, the consistently higher Medicare reimbursements can offset the losses and keep the facility afloat.

But for some operators, the rise of bundled payments completely upended that delicate equation. LindenGrove Communities of Wisconsin, for instance, recently decided to end long-term services at three of its four facilities after it could no longer weather the $5 million to $7 million annual losses associated with Medicaid residents.

While Wisconsin has seen significant Medicaid underfunding, it was actually the CJR that portended the significant reduction of LindenGrove’s long-term business, according to president and CEO Linda Joel.

“The ability to offset those losses has been pretty devastated. You can’t offset those losses anymore,” Joel told SNN earlier this month. “Then you have nothing to cover that gap.”

Burke, of the United Hospital Fund, insisted that bundled payments’ role in exacerbating Medicaid problems needs more discussion in the space — as Medicare dollars often represent the only factor keeping a property’s doors open.

“It’s astonishing to me that people are not talking about this more openly, because nursing homes are very fragile animals, and Medicaid routinely underpays,” he said.

Companies featured in this article:

, , ,