The COVID-19 pandemic paused most post-acute providers’ long-term planning efforts beyond making it through the next week or month, but now that the peak of the crisis has passed, it’s high time both operators and policymakers confront the new world ahead.
That world will almost certainly bring a smaller crop of potential residents of skilled nursing facilities as a direct result of the pandemic — but the years ahead will also see longer-simmering trends, such as increasing enrollment in Medicare Advantage plans, continue to shape the landscape.
“If your organization does not have a Medicare Advantage strategy that goes beyond just arguing over contracts, you need one,” Anne Tumlinson, founder of health care consulting firm ATI Advisory, said during a Tuesday presentation at the virtual 2021 Navigator Leadership Summit.
Tumlinson acknowledged the historically negative reaction that skilled nursing operators have displayed toward public-private Medicare Advantage insurance plans, which generally pay out lower per-day rates than traditional fee-for-service Medicare. As of January 2021, the average national daily managed Medicare rate for SNFs came in at $458 per patient, according to the most recent monthly analysis from the National Investment Center for Seniors Housing & Care (NIC), as compared to $552 for regular Medicare.
“If you are part of a skilled nursing facility organization, and I say Medicare Advantage to you, you are now feeling hostile and mad, because Medicare Advantage is a really tough customer — no matter which carrier it is,” Tumlinson said.
But operators likely won’t have a choice when it comes to deciding to work with those tough customers. Even before COVID-19, analysts had predicted the rapid onset of 50% enrollment in Medicare Advantage among Medicare-eligible seniors, essentially turning the government benefit into a primarily private enterprise.
The pandemic didn’t slow down that trend: Tumlinson specifically pointed to data from consulting firm Avalere Health showing that MA enrollment threshold clearing 51% by 2025, and continuing up to 64% by the end of 2028.
The growth of MA as a driving payment force for post-acute providers won’t just come from the expanding legions of Medicare-eligible seniors tempted by prescription coverage, lower out-of-pocket costs, and other perks that managed Medicare plans offer; physician groups and nurse practitioner organizations, often backed by venture capital and private equity dollars, are increasingly seeing the benefits of striking risk-bearing deals with MA plans, Tumlinson said.
“A very high percentage of the people who are going to be living in your buildings in the future are going to have their health insurance paid for by a third-party insurance company,” she said. “And those insurance companies are going to have a lot of interest in how well you are — or are not — contributing to the management of those health care costs for that population.”
At the same time, SNFs will likely find themselves competing for a smaller and smaller group of people who elect for rehab or long-term stays in the institutional setting. While it remains to be seen how long a coronavirus-era shift to home health will last without further efforts to expand coverage of the services, the Biden administration and state lawmakers around the country have become increasingly aware of seniors’ desire to stay at home as long as possible during the carnage of the pandemic — and are moving to meet that demand, such as through the White House’s $400 billion home health plan.
Tumlinson, like others in the post-acute space, warned that home health isn’t a cure-all, pointing to the ancillary services that residents of senior housing and care facilities receive — from meals to laundry to around-the-clock assistance with using the bathroom and other activities of daily living — that may not be as easy to supply at home.
“I think there’s a limit to what can be done in a home setting, and I worry about caregivers who are not really prepared to bring somebody home,” she said. “Whatever this model is, it’d better be robust.”
So where does that leave skilled nursing operators? Not that far away from where they were before the pandemic began: They’ll still have to find ways to meet the changing needs of referral partners and residents, and they’ll still have to continue to justify their role as part of the overall health care system.
“Your organization needs to face this head-on,” she said. “Institutional settings have an important role to play going forward, but it will be a smaller role. And so how are you going to compete if the pie is much smaller? And/or: How are you going to diversify? And/or: How are you going to interact with and engage with some of these risk-based arrangements?”
If there’s any strategic silver lining in the post-COVID world for SNFs, it’s that they aren’t alone in the historic changes sweeping health care. In other words, the best operators have an opportunity to truly change the way care is provided in the wake of the disaster — if only they’re willing to think differently.
“If you had a market leader, they might not be a market leader anymore. If your home health agencies haven’t been able to respond, that’s a big deal in your market,” Tumlinson said. “There’s an enormous number of dynamics at work today that are very, very different than they were a year ago. And you can identify those and take advantage of them.”