Inside the Market That Puts Nursing Homes in the Managed Medicaid Driver’s Seat

At most skilled nursing facilities, the patient and resident population is primarily covered by the state’s Medicaid program — and in many states, the reimbursement for such care doesn’t approach the cost of providing it. As a result, providers across the country have common cause in lamenting the state of payment from their largest payer.

That makes Alabama Nursing Home Association (ANHA) CEO and president Brandon Farmer’s assessment of his state’s Medicaid program — “somewhat well-funded and steady” — unique. But Alabama took a unique path with its managed care program by putting providers in the driver’s seat. The result, according to Farmer, has been improvement on cost and better assessment of the needs of Medicaid beneficiaries.

Skilled Nursing News caught up with Farmer, who was officially announced as ANHA president and CEO late in February, to talk about his policy and legislative work both for the association and for the SNF operator NHS Management — the largest in the state — as well as his priorities for SNFs, and why Alabama is keeping an eye on the Medicaid Fiscal Accountability Regulation (MFAR).

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Going to back to your time at NHS Management, what were some of the top issues you worked on, from a legislative strategy standpoint? And what changes going from a multi-state operator to a state-focused association?

NHS Management is the largest skilled nursing operator in Alabama, and then also has operations in Missouri, Arkansas, and Florida. And I represented that organization for many years on the state level with public affairs — anything with the intersection of politics would have a public component as well — and then also represented them in Washington with the American Health Care Association and several other active companies that participate on a heavy level, both in shaping policy for the benefit of skilled nursing residents and the employees and owners and operators, and also participating politically with them.

There was an opportunity to build a skill set around the national policy that’s being shaped, and then helping see that NHS was positioned — and also here in Alabama, the association as a whole positioned — to take advantage and be aware of what’s going on on a national level and the trends and directions.

What have you seen in terms of changes to federal and state approaches to skilled nursing over time, and what are some of the different policies that stood out? Where do you see federal and state policies related to nursing homes going?

Obviously, on the federal level, any significant payment change is going to have an impact on how a facility goes about its daily operations and how they would move forward. So the change last October was a significant shift in how Medicare is reimbursing the facilities, and the transition on an operating level was a challenge, and one that I think they’re probably a quarter and a half, maybe two quarters almost now into. We’re seeing how that is been a benefit to the beneficiaries that we serve and the residents we serve, as well as the the operators and the individual facilities.

On the state level, obviously that has an impact — you also see where the Medicaid programs that vary state by state and make up the prominent level of funding for SNFs. So it is always a challenge, from NHS’s perspective, and the individual states where it operated, seeing that that program is well-funded, and that the members of the state legislature see the importance of that funding in Alabama specifically.

Shifting into this new role, I’ve been very fortunate that its Medicaid program has remained somewhat well-funded and steady, and there’s been a stable environment surrounding that. We will hopefully work to continue that, and help present opportunities to the Medicaid commissioner and to the state on how to better serve the residents that take part in that program.

Just before I started covering skilled nursing full-time, Alabama had actually rejected a plan to move its Medicaid program to managed care. Have there been any other moves to go to managed care in Alabama, or is that off the table for now?

Actually, what the state of Alabama elected to do is to move in the direction of what called an integrated care network, referred to as the ICN. That is a provider-driven managed care effort that is made up of the providers here in the state, [which] came together and created an entity that was designed — in coordination with Medicaid and with members of the legislature — to bend the cost curve so that it’s the best utilization of the dollar set forth by the state. … It’s attempting to bend that cost curve in a direction that is a benefit both to the residents, but also to the state’s fiscal environment.

So that’s been up and running for a couple of years now, and it seems to have been very positive and seeing good results and shifting the dynamics as it relates to how the Medicaid system is operated — specifically with the goal of bending that cost curve in the direction of the legislature. So it is not a commercial, out-of-state-driven Medicaid managed care, it is an in-state, provider-driven Medicaid managed care effort.

When you’re a SNF dealing with this network, how is that different from dealing with a network that’s run by commercial insurance?

As an individual, as a beneficiary enters into the Medicaid program or requires skilled nursing care, a determination is made at that level of: Does this individual need to go into the SNF, or could they also remain served in a home site, through a home- and community-based services (HCBS)-type measure? Then seeing that there’s coordination between those two, versus competition between those two, which may have existed in other states or in the past.

I think that measure helps control the costs, and thereby helps bend the cost curve overall, to see that the right person is being served in the right setting at the right time. At the time an individual in the home- and community-based setting needs to shift into the skilled setting or the institutional setting, then that is made available. But there’s a team that sees and determines what works best for that individual and what setting works best. If the home setting is available, we work to see that that is provided, and if that is not available or the acuity level is such that it’s necessary to be in a SNF, we see that that is provided as well.

So from an operational standpoint, on the caregiving level at the skilled nursing facility, they don’t so much see any difference. They’re still caring for the resident that they normally would. It’s at a top level that we’re trying to see that each beneficiary is in the most appropriate place for their acuity level and their need. In doing so, that works with the state on a fiscal level, to see that that cost curve has been moving.

When that network came into place, did that do anything to occupancy numbers in the state? Specifically, did occupancy rates in SNFs change with implementation of the ICN?

In Alabama, the facilities and the operators have done a very good job in working with Medicaid and working with the [Area Agencies on Aging] and other agencies to see that there are very few, if any, individuals in a SNF at the time of implementation of the ICN — or now — that could be served elsewhere. So there wasn’t a change in occupancy level as it relates to individuals being taken out of facilities that could be served elsewhere. We’re fairly confident, as was the state, that that wasn’t the case.

What we’ve done is identify as they enter into eligibility for skilled nursing care, that we had worked with the Area for Aging and Department of Senior Services to see: Can this individual be served in a HCBS waiver slot? Are there slots available? And if so, what can we do to position them there? Then, as their acuity level changes, or there are other individuals entering the program that may not meet the criteria necessary for that, they can then be served in the SNF setting.

That coordination has worked well, and we’ve also worked with Medicaid to see that there may be a slot increase, to see that availability is there for the home setting when appropriate.

I think what you’ll actually see impacting occupancy trends, and this speaks to Alabama as well as other states, has been more what you see being done through [the Center for Medicare and Medicaid Innovation] and some other programs on the federal level at CMS. Bundling and [accountable care organizations] and things of that nature are having much greater impact on occupancy and patient stays and length of stays and rehospitalizations and things of that nature, than probably the ICN or commercial Medicaid managed care would on a state level.

In Alabama, the growth is fairly stagnant, at least in the elderly population on Medicaid. So we’ve been able to manage that growth appropriately and help and work with Medicaid to see that that growth is managed appropriately.

For the facilities, their challenge has been more in managing the bundled payment and the ACOs, and the significant increase in penetration of Medicare Advantage. That has an impact on SNF occupancy, I know here in Alabama, and throughout the country as well.

Has MA enrollment in Alabama been particularly increasing? I know it can vary depending on where you are in the U.S.

Right, it does. It even varies somewhat within markets within the state, but Alabama has a fairly high MA penetration — and specific markets can have an unusually high MA penetration. Skilled nursing operators and individual facilities work to create relationships with those programs and work to become preferred providers, and work with them to see that length of stays and the short-stays are appropriate, and that the readmissions are decreasing as a result of receiving the rehab in this settings.

For this coming year at the state level, what are some of the top regulatory priorities or changes that you’ll focus on? And are there any top priorities at the federal level?

On the federal level, obviously there is the [Medicaid Fiscal Accountability Regulation], the rule proposed by CMS that deals with supplemental payments. That is obviously a regulatory issue that we’re monitoring, that I know all states are monitoring. Alabama is impacted by that; the SNFs here are probably less impacted, because we are in compliance with how the rule is written currently. But there are still changes, possibly on the hospital side, and with [intergovermental transfers] and things of that nature that we should work together on — and with them on — to see that they do have a safe landing there with the implementation of the rule.

I’m not sure exactly how CMS decided what they’re going to do with that; Alabama doesn’t have some of the problems that other states do, which I think were maybe the targets of that rule. But that would be a federal issue that is obviously important.

I’m sure you’re aware that the health care sector in general and specifically SNFs are experiencing a workforce shortage. Here in Alabama, a lot of what we’re working on currently is to see how we can help the rural communities and the rural skilled nursing facilities. Alabama is unique in that we have at least one SNF in all counties, and in many cases, we’re the only health care provider in that county. So we are the foundation or the fabric of the health care delivery continuum in many areas. We want to see how best we can help with the workforce development; we’re experiencing a shortage of [licensed practical nurses] and we’re trying to address that with the legislature — and with the two-year college systems and other individuals — and are finding cooperation across the board to do that.

And you always want to see that your Medicaid budget is funded appropriately, and we’ll monitor that moving forward as well.

This interview has been condensed and edited.

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