Cost-Cutting Consequences: Improper Discharges Home, Financial Strain for SNFs

In a rush to find savings amid a changing payment landscape, hospitals have turned to the reduction in institutional post-acute care, especially in skilled nursing facilities.

But that determination to secure savings could have unintended consequences for patients, their families, and SNFs, according to a perspective article published Wednesday in the New England Journal of Medicine by three researchers based out of Harvard University in Massachusetts.

Alternative payment models include accountable care organizations (ACOs) – groups of health care providers who band together to coordinate care for Medicare patients – and bundled payment programs, where providers along the continuum work together while sharing a single payment for certain episodes of care. Multiple studies have found ACOs and bundled payment models save by diverting money from SNFs, with one anonymous operator going so far as to call ACOs “a disaster for SNFs.”

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These models create incentives to achieve savings, but there are ways that they can backfire, the NEJM article explained. The first is that hospitals could be sending patients who need institutional rehabilitation home in the drive to avoid institutional post-acute care.

“Payment reforms can be a blunt instrument, and it may become difficult to distinguish low-value from high-value use of postacute care,” the article authors wrote. “There is an enormous evidence gap regarding how much and what type of postacute care is best for which patient.”

Another major gap is the lack of data related to patient function, David Grabowski, one of the authors of the perspective and a member of the Medicare Payment Advisory Commission (MedPAC), told Skilled Nursing News.

“It’s really the biggest goal of post-acute care,” he said, referring to patient function.

Another unintended consequence could be the closure of SNFs altogether. Because many SNFs rely on higher margins from treating Medicare patients to stave off the losses on Medicaid patients, a significant reduction in the volume of Medicare patients could put “enormous financial strain on postacute care facilities,” according to the article.

Indeed, while Medicare patients often give SNFs a double-digit margin, margins for other payers are often negative, Grabowski noted. And since nursing homes primarily offer two services – post-acute care for short-stay patients and long-stay Medicaid care for patients that will be in the nursing home for the rest of their lives – the fact that alternative payment models such as ACOs divert Medicare patients could be disastrous for SNFs.

“By pushing down on Medicare, are we putting greater pressure on these nursing homes to find other payer sources?” Grabowski asked. “If they can’t, they’re more dependent on Medicaid.”

Though the overhaul of Medicare payments taking effect in October could align SNF financial incentives with the incentives of hospitals under alternative payment models, the future for the reduction of post-acute spending under such models is still murky.

And health systems and policymakers considering payment reforms should pay attention to the impact on patients, families and the post-acute market, the authors wrote.

“I think a big part of the problem for post-acute is that it’s been hospitals and the physician-led models, or in the case of bundled payment, an outside convener,” Grabowski told SNN. “All of these entities have an incentive to hold down cost to get savings payment or reward payments. They don’t have an incentive, however, to push down on their own revenue.”

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