The rise of managed care plans among nursing home beneficiaries has meant that nursing home providers have had to make tough choices to balance the pros and cons of such plans to reap profits. And, despite a proven track record of handling higher acuity, many providers may not think to use this to their advantage in negotiating better rates.

The crucial role played by nursing homes during Covid in tackling higher acuity has today imbued the sector with stronger bargaining power – an ability that providers should act upon more often, according to leaders. Nursing home operators are now pulling more weight in contract negotiations with insurers, provided they work collectively and act on the power they’ve earned from being reliable acute care partners alongside hospitals.

That said, amid a growth of managed care, nursing home providers have to contend with some realities, including playing down their expectations to continue to take 70% of what Medicare would pay while expecting to also provide the same quality of care for managed care patients, said Kim Majick, chief development officer for Carespring Healthcare Management.

Majick, along with J. Mark Traylor of Traylor-Porter Healthcare and Heidi Wold, chief clinical officer for Longevity Health Plans, dove into a discussion on managed care at Skilled Nursing News’ RETHINK event recently. Longevity is an integrated health plan care management platform with a focus on Institutional Special Needs Plans (I-SNPs).

“The negative for us as a sector is that we’ve been willing to accept less from [managed care providers] over the years. Our levels-based contracts pay about 70% of Medicare, and have a significantly higher administrative burden, which has increased costs associated with them,” added Majick.

In levels-based contracts, care delivery is often segmented into levels of treatment and costs as part of an MA plan.

For perspective, in 2017 about 35% of Medicare beneficiaries were enrolled in a Medicare Advantage plan. This year that statistic reached 50%. The Centers for Medicare & Medicaid Services (CMS) has set a goal to shift all Medicare Part A and Part B beneficiaries to managed care plans by 2030.

Meanwhile, Traylor lamented that all too often, nursing home operators don’t recognize their bargaining ability. “Our sector is the only sector that negotiates rates below 100% Medicare,” said Traylor.

Bargaining power

On a positive note, it appears nursing homes have more bargaining power than in years past when it comes to managed care plans, Majick and Traylor said. SNFs have been able to collectively say “no” to subpar rates when at the negotiating table, compared to having stagnant rates in the last several decades.

Operators and long-term care associations have also been toying with convincing CMS to force managed care plans to pay 95% of Medicare or more as a way to fund the proposed staffing mandate, Majick said.

Another way around the problem is the creation of Institutional Special Needs Plans (I-SNPs). Traylor-Porter is among 24 operators in Alabama to create an I-SNP, all provider-owned, and having “one heck of a network” has changed the conversation when it comes to managed care contract negotiations.

Creating such an I-SNP means taking a page from the physicians’ playbook – doctors have banded together for collective bargaining power in the past. These I-SNPs also afford SNFs with the valuable ability to take on higher acuity.

Moreover, the role that nursing homes have played in taking on higher acuity patients – especially during the Covid era – makes them less dispensable partners today. And they should embrace this power when negotiating with managed care providers, executives said.

“(SNFs) are realizing that we have a breadth that we didn’t have before. We have a negotiating position now,” said Traylor. “There is no substitute for quality … I think that managed care companies are starting to get to that realization. The larger ones are finally starting to understand it.”

It’s a powerful move to come to the negotiating table with a willingness to take on high acuity populations, added Wold. Knowing a facility has a level of expertise and that the insurer can’t get in every nursing home gives an operator a “position of strength,” she said.

Nursing homes were recognized as a “vital solution” during the pandemic as well, Majick added, with hospitals and SNFs partnering to place patients and make space for Covid cases.

“I’m not going to let that go. I’m not going to go back to being the stepchild of health care. That’s the attitude that we all need to have as providers – we’re vital,” said Majick.

When coming up with insurance contracts, coming to the table with acute care partners could sway conversations as well, Majick noted.

“We had some really good luck with a large payer, asking our most trusted hospital system to go to the table with us and to share with that system what would happen if we left the network,” said Majick. “That was significantly impactful in our negotiations … they knew if we left the network, they were going to have significant throughput issues.”

Building relationships, and coming to the table with partners from other care settings, are moves that have been “extraordinarily helpful” in assuring Carespring is getting “somewhat fair” reimbursement, said Majick.

Still, nursing home providers must make a concerted effort to engage in conversations with insurance network representatives, and establish relationships between the medical team, case management workers and insurance representatives.

Consumerism and a listening ear from CMS

Traylor said it’s been a “mixed bag” of positives and negatives as managed care continued to proliferate in the skilled nursing space. But, CMS has finally started turning an ear to the industry, in terms of what needs to change with managed care to have it better fit in with the nursing home business model.

CMS earlier this year, after numerous complaints, took action to ensure Medicare Advantage plans can’t apply coverage criteria that is more restrictive than traditional Medicare coverage, or divert care to home health instead of skilled nursing.

“I’m starting to actually see a more positive [trend] than I have in the past five years or so,” he added. “We’re catching up. That’s what I’m excited about. I think people are finally starting to voice opinions, and we have more numbers, our numbers are working in our favor.”

In the past, large health insurance networks were built around the hospital, Wold said, with a main focus of getting acute care system doctors in network, and then other settings are added based on what CMS requires.

Now, Wold said the “tides are changing.” Insurance companies must think about the whole care continuum now more than ever, and ensure they have good, valuable partners in every care setting, not just hospitals. But, hospitals are still a starting point when building a network, so knowing what a SNF operator brings to the local hospital system and having that provider in your corner at the table still packs a punch.

“We have consumerism and health care going on at the same time,” she added. The “consumerism” of health care, she said, focuses on a controllable cost so that residents and their families know how much to pay out of pocket at the end of the year.

Medicare Advantage provides that peace of mind, Wold said, but it’s not the perfect fit for the nursing home space. I-SNPs are better suited for the industry with prepaid Part A and Part B services, gain share, quality bonuses and in some instances, operator ownership.

“They know it’s 50% of the people. And there’s consumerism driving that too,” Wold said of managed care plan companies. “We want to train and teach the Aetnas and Humanas of the world … those two really needed some more work on the post-acute side.

Longevity has taken on the role of convener in this sense, but in their absence, Wold said operators can do the same thing in their communities, along with hospitals.