Why the Dynamic Between Medicare Part B and I-SNPs Could Affect the Nursing Home Bottom Line

A big question that operators must ask themselves when considering involvement in an institutional special needs plan, or I-SNP, is ultimately wrapped up in how much money is being made on the Medicare Part B therapy side, some say.

It might not make financial sense to sign up for an I-SNP if a SNF operator is getting a lot of revenue on the Medicare Part B side, some experts say. And this is true especially if therapy services are already provided in-house. But, it’s a different story for those SNF operators that routinely bring in a third party to offer physical therapy services to residents, and the majority of their revenue is going to the therapy provider.

Medicare Part B helps cover therapy and medically-necessary services like doctors’ services and tests, outpatient care, as well as other medical services, including some preventive services.


“There are two parts of the I-SNP discussion: clinical and financial,” said Marc Zimmet, CEO of Zimmet Healthcare Services Group. “The idea behind I-SNPs is that between cost savings and shared saving, you net more money than you would have under fee-for-service.”

And yet, some facilities rely on a reimbursement model that just doesn’t hold up under an I-SNP program, Zimmet said.

“The I-SNP is great clinically, no doubt about it. But the problem with I-SNPs is that no one really understands how they’re making out financially from the program,” said Zimmet. “Reimbursement has become so complicated, we needed to borrow a term from Wall Street to solve for the I-SNP equation: We call it I-SNP arbitrage.”


And some experts agree that understanding reimbursement for an I-SNP plan is important to the business decision for the varying degrees of participation for such a program.

However, other industry leaders, including American Health Plans Chief Development Officer Hank Watson, don’t believe concerns of financial risk – namely, that it doesn’t make financial sense for an operator to sign up for an I-SNP if they’re already getting a lot of revenue from Medicare Part B – are entirely justified.

After all, I-SNP growth would not have happened if there was such a financial risk to facilities or clinical risk to residents, or to case mix index performance, he said.

Just like other managed care plans, I-SNPs have grown substantially over the last five years, with more than 100,000 SNF residents participating across the country, said Watson.

Moreover, Watson said that whether Part B therapy services are in-house or through a third party, in a fee-for-service world, the operator is taking a risk on revenue collection, regardless. In fact, he believes operators are putting themselves at greater financial risk by having large Medicare Advantage organizations managing prior authorization. Meanwhile, the presence of an I-SNP program mitigates that risk.

“Whether it’s third party or in-house, the I-SNP is giving Part B therapy revenue through capitation.”

This allows the provider the trust and autonomy to go deliver the service – it’s fundamental to why I-SNPs and Part B line up, Watson said.

Capitated payments from I-SNPs

From a financial standpoint, Watson said it makes sense that the presence of I-SNPs will allow SNF operators to dictate how they want to invest therapy dollars through care management – something facilitated by a “capitated model.” Under the capitated model, the federal government, a state, and a health plan enter into a three-way contract to provide comprehensive, coordinated care.

“The capitation gives providers the freedom to provide the right care at the right time – that’s the main point. When you own the Medicare premium for your residents, you’re taking a holistic [perspective],” said Watson. “Part B is a fundamental part of the I-SNP model of care. Capitated payments for Part B therapy provides that framing element [and reduces the] worry about prior authorizations and the like.”

Mary Long, COO and executive vice president of clinical services and development for New York therapy provider, TheraDynamics Rehab Management, echoed these thoughts, adding that the presence of an I-SNP enhances clinical capabilities of a facility. But, it’s also important for a therapy provider to understand the various financial arrangements that SNFs make, she said, and then monitor the reimbursement that follows, she said.

“I do think there’s justification, particularly for those that do have high Part B revenue,” said Long. “You are not really going to get that from the I-SNP … I don’t think it’s a myth. It’s not the greatest opportunity for facilities when an I-SNP comes in and takes over [a facility’s] entire long-term care population.”

Part B and I-SNPs can mix, agreed Dawn Greaves, chief clinical and innovation officer for Texas-based Aegis Therapies, but it all depends on what challenges the operator is looking to solve in their buildings.

Whether or not Part B and I-SNPs make for a good combination depends on how the individual provider who is signing up for the I-SNP decides to approach it, she noted. And, it also depends on the specific I-SNP plan. Operators are likely to see a decrease in Medicare Part B utilization when an I-SNP player is participating, Greaves said. But, it’s all about having a proactive approach and maintaining care levels for residents, as opposed to not providing needed Medicare Part B services.

“Plans reimburse differently for Part B, they reimburse differently sometimes for Part A … I think that feeds into the dynamics of it as well,” said Greaves. “But in general, yes, I think therapy needs to be a component of the I-SNP and we need to shape what that looks like.”

Ben Lerer, chief markets and analytics officer at Longevity Health Plan, said it’s hard to generalize whether a facility would be a good fit for an I-SNP just with one factor.

“Every building is different. There are a number of factors that determine whether a building is a good fit for the I-SNP program. It’s hard to say that one thing or another totally changes the equation,” said Lerer.

When talking with facility leaders, Longevity looks at a long list of factors that could potentially determine readiness and appropriateness for the program, he added.

“We emphasize transparency with operators in so far as saying, ‘[here’s what we think the program can and will accomplish, here’s the impact it may have on the building,’ in a number of different regards,” said Lerer. “Only once we feel that the operator has a detailed understanding of the impact that program may have, do we decide to go for it.”

Therapy is crucial for I-SNP success

In order for providers to be on the road to making profits with an I-SNP, hospitalizations have to be low. That’s a given, Zimmet said. And beyond that, Part B therapy is the biggest factor determining whether an operator is making money, he said.

Therapy companies, whose business model is the exact opposite of an I-SNP, can be a big part of I-SNPs and benefit, but the industry needs to align their incentives first.

“The I-SNP blows that business model out of the water. Once you take away the fee-for-service financial incentives, patients may get less formal therapy but more alternative, lower cost rehab or maintenance treatment,” said Zimmet.

Such involvement could be “instrumental” to offering the right balance of services within an I-SNP, he noted. But, therapy providers are often holding on too tightly to Part B fee-for-service.

“Medicare Part B, and the long-term care population, that’s like the last bastion of unbridled fee-for-service anywhere in health care. You’ve got very little managed care … it’s all fee-for-service and nobody wants to let that go,” said Zimmet.

Moreover, companies that provide mental health services, along with any other company that bills Part B, are in the same situation as therapy providers.

“It’s a real risk that patients will get less therapy without any kind of financial incentive, no Part B, and no case mix,” said Zimmet.

It becomes a question of, how does this work from a facility standpoint, and what does that transition to a capitated model look like, Watson told Skilled Nursing News.

“Part B is at the heart of that conversation,” said Watson. “Part B historically is a fee-for-service reimbursement program, managed through ADRs and prior authorizations; there’s meaningful pressure on rates.”

I-SNPs, which offer a capitated payment structure, is really putting the trust back with providers, Watson said.

“Here’s the money, here’s the cash flow at the beginning of the month. We’re going to trust you to provide the services necessary for the residents as part of this more global model of care, rather than a siloed fee-for-service volume,” Watson said of the I-SNP program.

Financial incentives are ‘completely opposite’

Truth behind the popular notion that operators heavily into Part B are not good candidates for I-SNP involvement depends on certain factors, Zimmet said. It’s facility-specific, and oftentimes a result of area resident population needs.

That said, heavy use of Part B therapy does not reconcile with the I-SNP, he said. Financially, the incentives are “completely opposite.”

Ultimately, therapy companies are the logical partners of I-SNPs – and such providers should be willing to get more involved in this type of plan, he said.

Watson, on the other hand, says Part B therapy is a fundamental care model, and that it has the potential to mesh well with I-SNP plans under a broader model of care. The idea that it has to be one or the other is a misconception, he said.

American Health Communities (AHC), American Health Plans’ sister nursing home company, owns its own Part B therapy company as an in-house model, Watson noted, adding that it “works wonderfully” inside an I-SNP because it is integrated inside such a broader model of care.

“The challenge is making the transition from a fee-for-service standalone, siloed clinical model into being part of an integrated model of care within the I-SNP,” said Watson.

Greaves added that understanding reimbursement for an I-SNP plan is an “important component” when a provider makes a business decision to be a member, or an owner member for such a plan.

I-SNPs usually offer a capitated payment for Medicare Part B services, but there have been instances of flat per-visit rates, she said.

“It really is all about helping the individual to age in place, and the [Medicare Part B] component is just one part of it,” added Greaves.

Watson is seeing third party therapy providers lean into the I-SNP model and work with facilities in a sub-capitated relationship to ensure the operator is maintaining what it needs out of the Part B therapy program, while also incorporating it into the broader model of care.

I-SNP ownership allows the nursing home provider to rethink all the levers of care, he noted, and Part B is no longer existing in a vacuum. Significant dollars are being reinvested using nurse practitioners or case managers alongside Part B therapy.

“They’re not at odds,” said Watson. “It’s more of a coordinated approach and the third party Part B therapy providers are identifying that; we’ve been pleased with their willingness to engage and collaborate with TruHealth, our care management group, as well as our nursing home facility partners in accomplishing the clinical goals of the I-SNP.”

How Part B works, and Medicaid complications

Usually, once a patient has a decline, there’s a recommendation, a referral for physical therapy, and caregivers conduct a screening and evaluation with the physician eventually writing an order for OT, PT or speech treatment under Medicare Part B, Zimmet said.

If an operator has a contract with a third party therapy provider, the facility bills to Part B and the therapy company takes 90%-95% of that revenue, he said.

“When the facility starts an I-SNP and they weren’t making the money on Part B themselves, then they’re not getting hurt. They put pressure on the therapy companies to come up with restorative nursing or other lower cost modalities,” said Zimmet.

But they still have the financial incentive with case mix – even if there’s a situation where the facility can’t bill Part B and it’s coming out of their pocket, the service helps with case mix data. In the case of the Patient-Driven Payment Model (PDPM) for Medicaid, however, that incentive is lost since rehabilitation doesn’t count in case mix anymore.

Medicaid systems that use RUGs are still driven by therapy, Zimmet explained, so Part B wasn’t the whole reimbursement story. With Medicaid RUGs becoming PDPM, therapy goes from a revenue center to strictly a cost center for long-term care patients, just like it did under PDPM under Medicare Part A.

“The facility didn’t really care how much Part B therapy was provided by a therapy company … Part B was a higher sell,” said Zimmet. “Now it becomes a direct cost for the facility’s bottom line, and they have to pay a therapy company for Part B therapy.”

But again, Zimmet is thinking about high volume Part B therapy providers. Many other SNF operators could be leaving money on the table by ignoring I-SNPs.

“We don’t have prior authorization for Part B therapy as a result of the capitated structure,” Watson said of I-SNPs. “That is a freeing mechanism to the therapy provider, whether it’s in-house or third party, and they’re able to maintain [case mix index], [activities of daily living] and programming, while also being part of a broader, more holistic model of care.”

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