I-SNPs vs. ACOs: Balancing the Skilled Nursing Risks, Rewards of Two Hot Payment Models

As the skilled nursing industry struggles to adapt to a new Medicare payment landscape, in-house Medicare Advantage plans have emerged as one of the hottest topics among leaders — while the space’s publicly traded behemoth has thrown its full support behind the separate accountable care organization (ACO) model.

There may not be one set answer for an operator mulling the decision between launching an Institutional Special Needs Plan (I-SNP) and joining on with an ACO, but a pair of experts from both sides of the equation argued that it’s important to just ask the question, or risk getting left behind.

“The world is moving to value-based care,” René Lerer, CEO of I-SNP insurer Longevity Health Plan, said last week during a presentation at the eCap health care conference in Doral, Fla., just outside of Miami. “We may like it, we may not like it, but the world is going to move to value-based care and CMS is going to mandate it more and more.”

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Lerer was joined onstage by Jason Feuerman, president of Genesis HealthCare’s (NYSE: GEN) LTC ACO, the skilled nursing giant’s entrant into the Medicare Shared Savings Program. The Kennett Square, Pa.-based Genesis has recently launched a full-court press to expand the LTC ACO, specifically by targeting operators from outside of its own footprint.

This year alone, Genesis and LTC ACO have announced partnerships with Senior Living Properties and SavaSeniorCare, with the plan covering about 6,000 long-term care residents nationwide.

Though their perspectives on the pros and cons of each model differed, Lerer and Feuerman tried to frame the choice as one between two similar paths toward achieving the same goals.

“These really are two complementary programs,” Feuerman said.

By forming an I-SNP, a skilled nursing operator is essentially becoming both an insurer and a health care provider, directly covering residents who choose to enroll in the plan. An ACO, meanwhile, is made up of traditional fee-for-service Medicare enrollees, with providers along the continuum incentivized to reduce the cost of each covered resident’s care.

Each model comes with its own unique set of startup challenges. I-SNP companies must meet certain capital requirements, which can vary by state, to prove that they can cover the cost of their residents’ care. Speaking on SNN’s “Rethink” podcast last year, Lerer declined to put a specific price tag on launching an I-SNP plan, but estimated that it could range from $8 million to $12 million; though estimates of target population size also vary, 500 covered lives tends to be the minimum figure.

“It’s much harder for us than an ACO to expand,” Lerer said at eCap.

Feuerman agreed.

“It made me remember why I didn’t want to be an I-SNP,” Feuerman said after Lerer listed the challenges his company has faced along the road to Longevity’s current presence in five states with 2,000 beneficiaries.

The ACO model hasn’t exactly been met with open arms in the skilled nursing community, with some operators blaming the groups for causing shorter lengths of stay and SNF utilization in general; after all, the home health setting represents a significantly cheaper post-acute care option. But as he has in the past, Feuerman touted the advantages of being a SNF-backed version of the ACO.

“We know who the residents are,” he said. “Unlike a typical Medicare Advantage plan, or quite frankly a typical ACO, you’re able to control the care.”

While Genesis’s strategy comes with fewer regulatory headaches, ACO growth isn’t necessarily easy either. Feuerman specifically pointed to the need for striking productive partnerships with physician groups and other clinicians — specifically those that understand the importance of trying to treat residents in place.

But that latter factor, both Feuerman and Lerer noted, illustrates how and where the two programs overlap. I-SNPs and ACOs succeed when they reduce hospitalizations, both financially — by reducing insurance payouts for the former and Centers for Medicare & Medicaid Services (CMS) penalties for the latter — and clinically.

“Incentives are based on total medical cost — in an I-SNP world, or an ACO world, it’s all the same,” Lerer said, adding that the simple act of transporting a 90-year-old skilled nursing resident to the hospital, with all the potential for infections and other complications, can be “a death sentence.”

In fact, the programs can also coexist. Genesis is the largest nationwide client for I-SNP provider Optum, with 4,000 enrollees alongside the operator’s 6,000 LTC ACO participants, Feuerman said.

“I think in this new value-based world, we’re creating value up and down the distribution stream and it can get monetized,” he said. “Both programs create a new financing mechanism for the industry.”

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