As VP of integrated services and managed care for national nonprofit aging services provider association LeadingAge, Nicole Fallon is at the helm of policy-making and advocacy efforts related to the health care payment landscape.
Having worked previously for both insurance and consulting organizations, Fallon brings a wealth of knowledge to her role in exploring emerging payment models including managed care, accountable care organizations, bundled payment plans and more.
In this Payment Perspectives interview, Fallon shares her take on what she’s seeing on the payment policy front, what needs to change for skilled nursing operators as they approach new payment models, and why without appropriate “guardrails,” adjusting to value-based care is going to continue being a challenge for providers.
Skilled Nursing News: To start, can you talk a little bit about how public policy is shaping the evolution of skilled nursing payments?
Nicole Fallon: There’s a lot of activity in the public policy space right now in the area of payment reform that’s impacting both payments and nursing home viability. Outside of workforce shortages, I would say managed care definitely bubbles to the top of the list of concerns.
One of the big strategies of CMS and CMMI is that they’re driving toward that goal of all Medicare beneficiaries being in what they’re calling an “accountable care relationship” by 2030. Now this is easy in one sense because it mainly translates into a focus on accountable care organizations — we’ve got ACOs and then we have Medicare Advantage and then there are some primary care models and other things. In our view, that’s all managed care at the end of the day.
What’s interesting is though they want individuals in those accountable relationships, what’s lacking from the post-acute world is that it doesn’t say a lot about the providers underneath these models and if they will be rewarded for that value. It’s a really important thing to consider. We spend a lot of time looking at the patient-driven payment model, PDPM. The reality is Medicare fee-for-service is a shrinking portion of the pie. Most MA plans today pay based on some percentage of that. From what we’ve seen, that percentage is about 60% to 80% of what Medicare fee-for-service pays.
Some folks are doing better under managed care. It depends on your size, it depends on whether you’re part of a provider network that contracts with plans as a bigger entity. For the most part, folks are really struggling in the Medicare Advantage space, and at the same time, that’s a growing space. This is a case we’ve made to CMS and CMMI that they need to think about these programs and take a step back. What happens in Medicare fee-for-service to some degree impacts Medicare Advantage. The CMMI models in conjunction with Medicare Advantage create an overall managed environment.
One of the things that they’ve been doing in the ACO space through ACO REACH, is allowing some managed care entities to be the ACO entity. Then you start thinking about that and you’re like, wait a minute, OK, one managed care organization now controls a bigger chunk of the market through these two models. At some point, do we risk a monopoly? It really doesn’t create a good environment for providers to negotiate terms.
CMS has floated a proposal taking some steps to ensure that fewer patients are diverted from skilled nursing into home health or some other setting by a managed care entity if they really qualify for facility-based care. Can you speak to that?
I’m going to call it the policy and technical rule for Medicare Advantage.
CMS put the proposed rule out in December [2022] and finalized it in April 2023. It’s pretty typical once a year that they put out a policy and technical change rule describing how plans are going to operation…One of the components of the rule says if the discharging physician says this person needs skilled nursing facility (SNF) care, then that person should go to a SNF, respecting the physician’s order.
I suspect the plans aren’t going to be really happy about that because they like the ability and the flexibility to substitute care because if they can substitute for a lower cost setting, they can save money and obviously, the plan does better that way. We would like to see people get care where it’s most appropriate for them. We have home health agency members as well. I don’t think one setting is per se better than the other, but it’s about the right place at the right time. We think if the physician has made a determination that that’s the appropriate place, then we support that language.
What’s something you think health care providers, and specifically skilled nursing providers, need to do differently from what they did in the past, relative to how payment frameworks are changing?
This is such a tough area of transition because when you think about it, care delivery can evolve more easily where payers are aligned. We have a lot of payers at play right now and depending on your market, you may have a lot of Medicare Advantage, or you may have a lot of ACOs. The Minnesota market is a great example because there’s tons of ACO activity, and there’s high penetration of Medicare Advantage. You have very few folks in fee-for-service, which is interesting as CMS is always pushing the value-based payment piece of that.
Value-Based Payment in Medicare FFS doesn’t influence a lot of the behavior anymore because FFS is a dwindling payment source. If we get paid a per diem, then every day that they cut, the managed care entity saves money. That does not benefit us.
That just means that there’s going to be fewer days. We have to start looking at our costs by payer type. I have one member that has looked at it in Kentucky and he’s concluded because the MA plans are suggesting such a low payment offering, he can actually do better when he looks at his costs under Medicaid. Everybody knows that we’re underfunded in Medicaid. That was quite a statement. I wouldn’t say that this approach will work across the board, but he’s taking a different strategy. Providers need to really understand their costs by payer type and really make some determinations of how they’re going to fill those beds.
I think they need to aggressively start pushing back on some of their contracts that aren’t going to be adequate. Right now MedPAC will say payments are adequate because providers are signing these contracts with MA plans. What they fail to acknowledge is that if you’re in a marketplace with 50, 60, 70% penetration of Medicare Advantage, if you don’t sign that contract, you’re out of business because you can’t make up the volume in fee-for-service.
SNFs and home health providers are basically signing their own death spiral financially by doing this because at some point it’s going to catch up. If your costs are up here and your payment is down here, eventually you’re not going to be able to make up the difference. We’ve had some members that have started pushing back and saying “I need this rate or I won’t sign.” Now some of those plans in some of those markets are starting to come back around, but it takes a while.
Pushing back or turning down inadequate contracts is easier to say and do if you’re a larger organization, but if you’re a 40- or 50-bed nursing home, that’s going to be tough. The reality is a lot of those MA plans aren’t signing contracts with 40- and 50-bed nursing homes because they’re too small. They’ll tell them it’s more work than it’s worth to sign a contract with them. A lot of those smaller entities are even being excluded from networks. As providers think about their rates with those plans, I think they need to ask for rate increases, whether the plan’s going to allow it or not.
They need to ask for carve-outs for certain things and we really believe that because we get paid on a per diem these days we need to push for more value-based arrangements. We’ve talked to CMS and CMMI about that, suggesting that it would be helpful, both from the plan perspective and also as ACOs, if CMS could provide some outline of how to contract with post-acute providers in a value-based arrangement.
There are few value-based arrangements in the post-acute space. There are some, but we’re not seeing it much from national plans. Like I said, if we continue to get paid on a per diem basis, we can’t be successful going forward. The last thing I’m going to say is providers really need to talk to their policy makers about what’s happening in MA because Congress is only getting one side of the perspective right now and until we have that full picture in front of Congress, we’re not going to see any change and it really has a potential impact on the whole system.
If we don’t make it financially over here and can’t survive, it becomes an access issue for beneficiaries ultimately.
When you say there need to be more value-based arrangements rather than per diem, does that just mean by value-based arrangements, such as when post-acute providers are being paid for delivering on some quality metrics and are getting a share of the cost savings?
Yes. it includes paying for performance on quality measures but can go further, all the way to captitated payments. We really don’t have a seat at the table for these discussions, whether it’s an ACO or a Medicare Advantage plan. We’re not in a strong position in negotiating those arrangements, but we’ve had some members who’ve created their own programs. We have even one up in Michigan that is a shared savings arrangement with the Blues plan up there to provide care to a set of high-cost Medicare Advantage beneficiaries. It’s possible.
We also have folks that some of our states have provider-based networks and they’ve been able to negotiate pay for performance bonuses and things, but I think it can be a range of things.
Some providers are in a better position, and are able to take on risk, while others will need to phase into greater risk over time. We believe that our members are doing a good job on the quality front and we’re working hard to deliver those outcomes, but the MA plans expect more pay less and it’s just not working right now.
Do you think that that situation with the MA plans is motivating more providers to start their own I-SNPs or get involved in terms of owning the plan themselves?
It has motivated, certainly some of our members to go that direction, but you need to have available capital to pursue this option. You have to keep in mind that the main reason we’re moving towards is I-SNPs or we have members that have MA plans and D-SNPs and C-SNPs but they’re larger organizations, so they’re more able to make that happen and they’re doing it through a variety of arrangements. Sometimes they own the plan, sometimes there is an existing plan that is offloading the clinical risk to them in an I-SNP arrangement. They’re doing this because there is no other CMMI model that post-acute providers can lead currently. We have members that have ISNPs, MA plans, and D-SNPs and C-SNPs but they’re larger organizations. There was a time where we could be part of a bundle payment for improvement initiative, but once they moved to BPCI advanced, that went away. This is really the only risk-based model that we could pursue.
Can you talk a little bit about the role that you see technology playing as these payment systems evolve?
We saw a lot of great examples of how telehealth made sure that people had access to care during the pandemic. That’s been really positive. At the same time, we know that activities of daily living, like helping somebody take a shower, are not really doable via telehealth. One challenge with technology is that hospitals and physicians got meaningful use dollars to implement electronic health records to pursue interoperability and all of those things. We in the post-acute space did not receive the same dollars to make those investments.
On top of it, electronic health records are unique to each setting. The needs of the providers are very different if you’re a post-acute provider versus a hospital. Sometimes people think, “I should just get the same EHR that the hospital has.” But the hospital delivers different types of care. They’re doing different things. It doesn’t make sense to have the same EHR, but it does make sense to make sure that policies are put in place, those things talk to each other.
CMS put out another rule for comment on interoperability and improving prior authorization, which puts a lot of the onus on the plans to develop APIs. Basically [APIs allow] different software packages to talk to each other.
I think that’s one of the areas where technology really could help us in a lot of ways. By reducing providers’ administrative burden and costs related to prior authorizations and data sharing across settings and payers. In addition, CMS sought feedback on other initiatives like creating a national provide directory to eliminate some of the duplicative work that providers must do and ensure better information for beneficiaries in the process.
A couple of complete-the-sentence questions. The first one is, if “I could change one thing about the healthcare payment landscape, it would be…”
Right now we’re struggling with rate adequacy and getting at that and there’s a lot of different ways to look at it, but that’s one area, especially coming out of the pandemic that I think we need to look at. We need to rethink how we pay for things and what we pay for.
“The future of healthcare payment is…”
…Shifting towards managed care and private payers and without appropriate guardrails, there’s going to be access to care issues, I think and I think that’s one area that’s worrisome right now. CMS doesn’t have a lot of control. There’s something called a non-interference clause that keeps them from setting a rate floor for the plans or establishing any quality metrics for the networks that those plans develop and I think that’s worrisome for us as a system as a whole.
Is there anything that you think is that skilled nursing or nursing home providers are misunderstanding about the payment landscape today that you want to clarify or debunk?
The thing that sticks out for me is I’m going back to this whole per diem concept. We talk about wanting to shift towards accountable care and yet we’re maintaining a fee-for-service structure that’s still designed to pay for a day. Do we want care delivery reform or don’t we? Until the providers are part of that value, risk, reward, part of the equation, I don’t know how we can get to real change and all those payers need to be aligned. Right now we’re applying an antiquated process to an evolving environment, I guess.
Again, this is why we’ve been pushing towards more value-based arrangements that really provide the financial backdrop. This is the interesting thing. Policymakers took away from the pandemic that providers who were in value-based arrangements or accountable care-related risk-based models survived the pandemic better. However, these were physicians and specialists and others that were getting a capitated per person per month payment. If that is the assumption for why we need to move faster to accountable care then we need to make that everybody who contributes to better outcomes for beneficiaries is rewarded.