Confessions of a Skilled Nursing Operator: ‘ACOs Have Been a Disaster for SNFs’

With the U.S. health care system lumbering toward value-based care and grappling with how to match payments with outcomes, accountable care organizations (ACOs) have come under the spotlight.

But despite conflicting reports about their capacity to produce savings and improve care, one operator tells Skilled Nursing News that there is no doubt about one thing: For skilled nursing facilities, the arrival of ACOs has been a catastrophe.

Under the ACO model, hospitals, physicians, and other health care providers band together to provide care to Medicare fee-for-service beneficiaries. The theory is that coordinated care will reduce medical errors and duplication of services, leading to better outcomes for patients — all for hopefully less money spent.

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The reality has been more complicated. Reports have offered contradictory conclusions on whether ACOs have actually saved money for the Medicare program or increased spending. In addition, the Centers for Medicare & Medicaid Services (CMS) is pushing ACOs to take on more downside risk by eliminating the program’s no-risk tracks, even as the organizations themselves argue that doing so would lead to many ACOs leaving the program altogether.

Then there’s been the effect on SNFs. Multiple studies have found that regardless of the net savings to the government, most ACOs generate savings by reducing skilled nursing lengths-of-stay or cutting SNFs out of the picture altogether.

For the newest installment of our Confessions series, SNN spoke with a SNF operator on what working with ACOs has done to the business — and on what doesn’t get said by consultants and experts who recommend partnering with the organizations. To allow this operator to speak without fear of retribution, he or she has been kept anonymous.

A common refrain that SNFs hear is the need to partner with their referral sources, show them metrics, and work with them. Does that advice sound feasible when dealing with ACOs?

At the beginning of ACOs, that was great advice: Partner with ACOs, get in on the inside, work collaboratively to drive improved outcomes at better costs — and at the same time, maintain the referral relationships so that volume flows would be at least even, and at best, improved. That was the fundamental mantra: Get in the game, keep your volumes where they were or better, develop collaborative relationships.

And in large part, that didn’t come to fruition. The underlying or the stated premise of ACOs was to improve outcomes, improve value, and drive costs out of the system. Outcomes have not improved. Period, end of debate.

The goal from the SNF perspective was to keep referral volumes at least as good as they were before ACOs, and hopefully gain market share by improving the relationships. But ACOs have turned out to be from the perspective of the SNF provider a complete, utter failure. Patient outcomes have not improved. There is absolutely zero evidence that patient outcomes are any better or any worse. Rehospitalization rates have actually gone up, and the reason they’ve gone up is that lengths of stay have gone down.

The ACOs have turned out to simply be a vehicle for whoever the convener of the ACO is to reduce post-acute volume in the SNF setting. It’s an easy target for ACOs with a weak partner. SNFs don’t have a strong seat at the table, because SNFs have always been the poor sister in the discussion.

ACOs have simply taken advantage of the SNFs, and our organization realized it very early on, when the first couple of ACOs we did business with immediately started with the idea of skipping the SNF. So it’s the double-whammy of: Skip the SNF, and for the SNF stays we do have, we’ll reduce the lengths of stay.

All those things were designed to create surpluses, and the surpluses never came to fruition, because the money got spent somewhere else, or the money went out the door in rehospitalization penalties.

The ugly truth is that ACOs have been a disaster for SNFs.

I’ve heard about SNFs being able to have conversations with ACOs about a reasonable length of stay if they make clinical care more efficient. Does that kind of collaboration with an ACO sound likely?

In the early stages of a relationship, it’s likely. But what has happened is that ACOs have been sold [data] products that had the hypothesis that lengths of stay in SNFs were too high. As a result, the hypothesis then became the truism, and then the truism played out in real time.

Metrics like expected lengths of stay for particular diagnoses were imposed in many ACOs, and they weren’t risk-adjusted, so as a result the length-of-stay goal became the requirement, managing to a number on length of stay, as opposed to managing to a patient-specific situation. And it ended up being a disaster for lengths of stay in the SNFs, but on the back end, it also created a disaster for patients. And it created a problem for rehospitalization rates, because the data is beginning to show that as length of stay is reduced, rehospitalizations go up. There’s a direct relationship to that.

Several years ago, when ACOs actually were started, rehospitalization rates were high, and it was because of that that a huge effort went into collaboratively reducing rehospitalization rates — but that was done through clinical collaboration, and not through the ACOs. Things started to get really hot on hospitalization rates around 2014 and 2015, a lot of work went in in 2015 and 2016, and rehospitalization rates started to come down. And now they’re going back up as ACOs have gotten into the game, because they’ve driven length of stay too low.

In some cases, ACOs — depending on who the convener is — have done it to their financial benefit, because they may have a home care company that they own, so they’d rather drive the volume out of the SNF that they don’t own to the home care company that they do own. And they can make more money on the home care than they’re going to incur in penalties on the rehospitalization rates, so they don’t really care.

And the patients get bounced around. There’s very limited engagement by the patient community, so they end up getting ping-ponged around the system.

We have had a number of situations of patients that have been discharged prematurely. We knew they would bounce back to either a SNF or a hospital, and the ACO case managers have said to us, “That’s okay, we’ll cover them with our own home care.”

And the patient experience has been pretty significantly reduced. One of the great patient experience elements of a SNF stay is the engagement of the social worker, who helps coordinate the discharge home. The social worker would, in many great SNF situations, would go to the patient’s house to figure out what accommodations they need for a safe discharge home.

But what happened in ACOs — and this is not anecdotal, this is real — a patient gets discharged home without any sense of what the home requirements were. In many cases, the ACO solution is: “Get them home in 11 days, not 15 or 20 days. Doesn’t matter if you have to set up a hospital bed in the dining room, or the patient can’t go up a flight of stairs; that’s okay. At least they’re home, and we’ve reduced the length of stay.”

It doesn’t sound like there’s a lot of communication, for lack of a better word.

There’s plenty of communication. It’s just that communication is a one-way street. The ACOs tell the SNFs what to do.

That doesn’t sound much like a partnership, the way it would work ideally.

No. It’s not a partnership at all; it’s a fraudulent partnership. There’s a lot of head-nodding and bobble-head agreement, but at the end of the day, if the SNF reduces the length of stay, don’t worry about the rehospitalization, because the financial gains from reducing the length of stay or by skipping the SNF dwarf by many times the rehospitalization penalty. So it doesn’t matter if the rehospitalization rates go up. To the patient, it sure as heck matters, because they don’t want to get bounced around.

Listen, it sounded great at the beginning. But it has not played out in practice. And by the way, at the end of the day, most ACOs, on top of all of this, are still losing money. And why is that? Because there’s a whole new, giant administrative oversight layer of costs put into the system that wasn’t there before. SNFs, case managers, social workers did all of the work around this. Now there’s a whole layer of bureaucratic engagement at the ACO level added into the system. The ACOs in most of the markets that I know are not financially viable.

What will CMS pushing ACOs to take on risk do to how ACOs relate to SNFs? Will anything change in a system where ACOs are required to take the downside risk?

ACOs are not going to make it if they’re going to have to eat the downside. They’ll close up and go out of business. The early data on ACOs were: “It’s not working, but we’re going to declare victory anyways and keep plugging ahead.”

There’s no data to suggest yet that they work.* But CMS continues to plug ahead. Now I don’t know why they’re doing it, but that’s what’s going on. SNFs continue to be a spectacular low-cost alternative for post-acute care patient outcomes, and care management across the continuum, and we continue to be ignored as the poor sister.

I’ve spoken to one ACO that mentioned wanting SNFs to have skin in the game, and to be partners. Is that something ACOs want to explore, in your experience?

It’s a one-way risk. They only want us to take the downside risk. They’re not offering enough upside benefit.

They never offer to share savings?

Not enough to make it worthwhile. And frankly the ACOs don’t really care all that much about quality because they’re willing to say to a SNF: “Listen, if you don’t want to play ball with us, we’ll just go down the street.”

And the truth of the matter is most SNFs do a really good job at care. So forget about what the Five Star [Rating System] says, most SNFs are pretty good. The ACOs are right. They don’t want to do business with me; they can go down the street and go do business with the next guy.

That sounds like it makes it tough to stand out.

Right. It’s playing with the devil.

Have you ever felt like you had a choice in whether or not to do that?

I don’t feel I have a choice. “Please, sir, I want some more.” You’re going in to be whipped, and: “Please, sir, I’ll have another one.” The truth is, it’s all about volume, and particularly in states where Medicaid funding gaps continue to grow, the only way to cover those gaps is to chase post- acute volume. And at the end of the day, post-acute volume is better than long-term care Medicaid volume. So it really is, in my opinion, a race to the bottom. And the ones that are getting hurt the most are the patients.

What’s the biggest misconception that you’ve heard in the industry — whether in a trade publication like ours or at a conference — about working with ACOs?

The biggest misconception is that ACOs want to be your partner. They don’t want to be a partner. They want SNFs — we’re the weak partner at the table, and ACOs are leveraging us at every possible turn.

Why do SNFs have such a lack of leverage, especially if they’re doing a good job?

Most SNFs are desperate for post-acute volume, which is required to offset large state-funded Medicaid losses. And as the whole length-of-stay reduction movement comes in, we need even more volume just to stay even. If length of stay goes down by 10%, your admissions have to go up by 10%. Those are big numbers. It’s easier, or there’s more elasticity, on the reduction in the length-of-stay than there is in increasing admissions. There just aren’t enough admissions to offset a 10% reduction in length of stay.

How is this going to play out? Is anything going to change in the relationship between SNFs and ACOs?

At some point a smart ACO is going to realize that the SNF setting can be a very viable alternate setting to acute care. For things that I call ambulatory case-sensitive health care — pneumonia, urinary tract infections — that care can be delivered in the post-acute SNF setting for 30% of the cost in an acute care setting. If an ACO is really serious about delivering quality care at the least-cost alternative, they’re going to start to look at smart SNFs that can deliver that quality care.

But a lot of times these ACOs are run by hospital systems, where there’s an inherent bias to the acute-care hospital as the place of choice for institutional care. So any hospital system, any major metropolitan hospital system that owns hospitals that has an ACO, they can’t afford to vacate those hospital beds because they just built the new hospital at a cost of million dollars a bed — and without the volume in that hospital, they can’t service the debt.

It doesn’t matter that it’s going to cost more money to care for that patient in the hospital; at least they cover their capital costs.

Is this system that you’ve described beyond saving? Or could a smart ACO turn around the paradigm that exists right now?

There’s a lot of pre-exisitng bias in the ACO system and it’s really stacked against the SNF, so is it too late? Maybe, but I’m going to remain optimistic that somebody is going to get it, and figure out that SNFs are the high-quality, low-cost link in the health care chain, and think about SNFs as health care centers, as opposed to nursing homes.

But different parts of the country are on different parts of the maturity curve for ACOs, so the post-acute providers that think they’re making money in ACOs — just wait a few minutes or a few years. The worst is yet to come.

*Editor’s Note: Several studies have illustrated varying levels of ACO success. The Medicare Payment Advisory Committee (MedPAC) last week estimated that the ACO program resulted in a 1- to 2-percentage-point drop in overall Medicare spending, while a separate study — commissioned by a national trade group representing ACOs — pegged the savings at $2.7 billion. Other studies have claimed the the program actually increased spending by hundreds of millions of dollars.

This interview has been condensed and edited.