‘Under Siege’ for Years, SNFs Face Uphill Battle for Respect Under New Payment Models

Though skilled nursing facilities have experienced significant pain under the structures of alternative payment models such as accountable care organizations (ACOs), they still have the opportunity to show value.

But it’s something of an uphill road, according to Harvard Medical School professor and Medicare Payment Advisory Commission (MedPAC) member David Grabowski.

“I absolutely think that the sector has been under siege over the last few years through alternative payment models, growth of Medicare Advantage and … PDPM and PDGM,” he said at the Senior Care 360 conference in National Harbor, Md. earlier this month. “I think there’s opportunity, but there’s also a lot of potential for increased risk-sharing, and potentially further cuts in terms of payments.”


The ‘first rule of an alternative payment model’

Post-acute care is where alternative payment models such as bundled payments and ACOs tend to realize savings — primarily in the form of cutting post-acute utilization.

In the bundled payment model, the Centers for Medicare & Medicaid Services (CMS) provides one reimbursement for an entire episode of care to the providers serving each patient. Under the ACO system, groups of providers can share in the savings they generate for Medicare, if they hit certain benchmarks.

The problem is that in such models, post-acute providers rarely are the ones accountable, Grabowski said.


“The first rule of Fight Club is you don’t talk about Fight Club,” he said. “And the first rule of alternative payment models: If you have a choice between pushing down on your own revenue or somebody else’s revenue, push down on somebody else’s revenue.”

SNFs have experienced quite a bit of pain under the ACO model when it comes to being pushed on revenue; one study published in Health Services Research in 2018 found that ACOs were particularly strict about enforcing short patient lengths of stay, and this year an anonymous operator described them as “a disaster for SNFs.”

Bundled payments have come under less fire, but under the Bundled Payments for Care Improvement Advanced (BPCI-Advanced), SNFs can’t serve as episode initiators, and United Hospital Fund researcher Gregory Burke sounded a warning about the model for SNFs earlier this year.

“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 told Skilled Nursing News in May. “People ought to be looking very seriously at their hips and knees and cardiac and other things that are being pushed to bundles.”

And acute care’s control of the bundles poses a major threat to SNFs, Phil Fogg, president and CEO of the Milwaukie, Ore.-based Marquis Companies, argued at a conference earlier this year.

“If the hospital owns the bundles, I really do think it’s one of the biggest threats to our profession,” he said at the LTC 100 conference in Naples, Fla., in May.

Potential waste in post-acute care

Another reason SNFs serve as a savings target is the overall perception that the entire medical system is rife with waste, Grabowski said — with post-acute care as a potential area of cleanup. He specifically cited a report from the Institute of Medicine that found widespread variation in spending across hospital referral regions, with post-acute care driving fluctuations in Medicare costs across local areas.

“The reason we might attribute this to waste is: It’s hard to suggest those high-spending areas have much better outcomes than low-spending areas,” Grabowski said. “We’re not seeing big variations in outcomes, suggesting that maybe post-acute care isn’t always adding value.”

But as Grabowski and other researchers wrote in a New England Journal of Medicine perspective story, there are unintended consequences of cutting post-acute use wholesale. One is the potential strain on family members as patients are moved from the SNF to home health care. Another is forcing SNFs to rely ever more on Medicaid patients, when the reimbursement is not enough to cover costs in many states.

Given how much Medicare has been subsidizing Medicaid long-term patients, the financial strain for SNFs will become even greater if they’re forced to rely on more Medicaid patients — and the strain on Medicaid programs will also go up, Grabowski said.

Post-acute can only take so many revenue cuts, and hospitals, physicians and others under the Medicare system are being paid on a fee-for-service system, he noted. That creates a tension of whether these providers will want fewer fee-for-service patients to potentially gain rewards payments under alternative payment models.

“I think going forward, as we continue to cut post-acute care, we run this risk from cutting low-value services to cutting those high-value services that really matter for patients,” Grabowski said.

Medicare Advantage (MA) is another major cause of the post-acute pressures; like ACOs, MA payers are known for forcing SNFs to reduce patient length of stay.

And while Grabowski was optimistic about post-acute care’s future as long as it can demonstrate value, he acknowledged that the definition of value can be murky for MA plans, which have been found to send patients to lower-quality SNFs as defined by Five-Star Quality Rating System data from CMS’ Nursing Home Compare tool.

MA plans also tend to cause difficulty on the reimbursement front for SNFs, which could stem from their place in the health care system.

“When it comes to hospitals and physicians, MA pays pretty similar to traditional Medicare. When it comes to post-acute, they don’t pay similar to traditional Medicare; they actually pay below,” Grabowski said. “That says something about the bargaining power, potentially, of this sector.”

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