The siphoning of residents from skilled nursing facilities into the home health space remains a troubling trend for institutional operators, and an executive at one of the nation’s largest health systems sees nothing but acceleration ahead.
“There’s almost nothing that won’t eventually move to the home,” Scott Powder, chief strategy officer of Advocate Aurora Health, said during a Tuesday presentation at the Health Care Innovation and Investment Conference (HI2) in Chicago.
While he allowed that conducting complex procedures such as surgeries may not be viable in the home within the next five years, Powder — whose Chicagoland-based employer covers about 2.7 million patients and ranks as the tenth-largest non-profit health system in the country — was confident that the home setting will attract higher-acuity residents in the near term.
“More and more recovery will be done there,” Powder said. “If you’ve got a five- to seven-year outlook in terms of investment, that’s a good place to be putting your money right now.”
The shift to home has taken a direct toll on institutional nursing home operators, which have consistently lost business to home health agencies as both the federal government and private payers attempt to reduce overall health care spending.
The Comprehensive Care for Joint Replacement (CJR) model, for instance, has led to demonstrable declines in SNF usage. Under this mandatory structure, hospitals in certain markets across the country are on the hook for the entire episodic cost of hip and knee replacements — long the bread-and-butter resident type for skilled nursing operators with a Medicare focus.
But because SNFs represent a more expensive choice for joint replacement recovery, the CJR model has encouraged hospitals to increasingly cut out physical nursing homes from the care plan.
In New Jersey, that has led to a sharp reduction in hospital discharges to SNFs in a three-year span, from 45% in 2015 to 26% in 2018. In Wisconsin, the drop-off in rehab residents after CJR’s implementation in 2016 forced at least one operator to drastically scale back its long-term Medicaid operation, as the Medicare joint-rehab business was no longer helping to keep the lower-revenue Medicaid business afloat.
Nationwide, the CJR saved the government $1,084 per episode between 2016 and 2017, a team from Harvard determined in a study released this past winter — almost completely on the backs of nursing homes.
“Decreased Medicare spending on hip- and knee-replacement episodes at hospitals in the CJR program was nearly exclusively related to reductions in the use of post–acute care services in skilled nursing facilities and inpatient rehabilitation facilities,” the team wrote in their study. “This is not surprising, because post–acute care services are a large and highly variable fraction of spending in hip- or knee- replacement episodes, and hospitals have strong financial incentives to reduce the frequency of post–acute care services.”
Gregory Burke, who serves as director of innovation strategies at the New York City-based United Hospital Fund, described the problem more succinctly in an interview with SNN last month: “Bundling is not your friend.”
But one operator’s enemy is another provider’s friend, and for hospitals and investors, the home remains a red-hot area for growth.
“We think we’re still in the early innings of opportunities there,” Paul Diaz, partner at the health care-focused private equity firm Cressey & Co., said during the HI2 event in Chicago.
Diaz pointed to Cressey & Co.’s investments in wound care and meal delivery businesses as early successes in the home-care space. And while the overall push to home has come from the top down, Diaz and other speakers on Tuesday emphasized that consumer preference for staying home will continue to drive interest in home health services from the greater financial and health care industries.
“We’re sort of at the beginning of that, and some of the historic biases against doing that are really starting to break down,” Diaz said.
The skilled nursing industry, however, is staking its future on the idea that there’s a certain subset of residents who cannot safely receive care in any other setting. George Hager, CEO of nationwide skilled nursing giant Genesis HealthCare (NYSE: GEN), in March declared that efforts to shift post-acute and long-term residents from SNFs to the home have “run their course.”
“I think those things have reached a point of equilibrium, and that we’re beginning to see some marginal growth in total census,” Hager said at the Barclays Global Healthcare Conference in Miami. “I’m less concerned about migration out of our setting or diversion away from our setting.”
The Genesis CEO expanded on those thoughts at the Skilled Nursing News Summit in Chicago earlier this month.
“If you walk around, I would argue, any of our skilled centers, I would like you to point out which patient you think can go home less expensively,” Hager said.
In Hager’s view, the government and private payers have already shifted as many low-acuity, custodial-care patients as possible out of nursing homes and into their homes, with SNFs offering the only viable option for those with more complex medical needs.
“The break-even point is maybe two hours of nursing care,” Hager said in Chicago. “If you go past two hours of nursing care in a home setting, you’re already through the break-even point, and I think that train, on the long-term care side, left the station a while ago. I don’t see that as a risk or a real issue.”
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