The proposed federal staffing mandate is a potential “kill factor” for nursing home providers, while the rise of Medicare Advantage (MA) is a “major challenge” — and how well the sector responds to these threats will play a major part in shaping the future.
This is the perspective of Phil Fogg Jr., CEO of Marquis Companies and the immediate past chairman of the American Health Care Association (AHCA). He took to the stage Wednesday for the skilled nursing keynote session at the National Investment Center for Seniors Housing & Care (NIC) Fall Conference in Chicago.
With regard to Medicare Advantage, providers must work together to maximize negotiating power with large insurance companies, while operators also move toward “owning our risk” to generate financial upside for delivering cost savings and quality care, Fogg said.
In terms of the staffing mandate, Fogg reiterated the dire message that has been put forward by many industry leaders, saying, “When you have federal mandates without any association to the reimbursement … it changes the economics in a way that can absolutely kill you.”
Beyond defeating the mandate, nursing home providers are facing severe workforce shortages that were in play prior to Covid-19 and have been exacerbated by the pandemic. Going forward, nursing home operators and advocates must adopt a macro viewpoint and look to global solutions. Specifically, better immigration policies are needed to increase the flow of workers in the near-term, creating breathing room for strengthening the U.S. education system to create a pipeline of health care professionals, Fogg argued.
Despite these — and other — challenges, there also are tailwinds that providers can ride in the next few years, including the long-awaited demographic demand created by aging baby boomers, and Fogg does see a path toward a sustainable and successful future.
Negotiating power for Medicare Advantage
Medicare Advantage recently hit an inflection point, enrolling more beneficiaries than fee-for-service Medicare, Fogg pointed out. But Marquis and other providers in the Pacific Northwest have been on the leading edge of the MA trend for many years, and the West Coast now has reached 68% MA penetration.
As penetration has increased, skilled nursing operators have felt the sting of lower payment rates as well as access issues, as MA companies — including insurance behemoths such as UnitedHealthcare, Humana and Aetna — have sought to cut back on SNF use in favor of lower-cost options such as home health. In fact, the SNF sector is losing about $275 million annually for every 1 percentage point increase in the total proportion of Medicare beneficiaries enrolled in MA, according to an analysis shared in August by Zimmet Healthcare Services Group CEO Marc Zimmet.
“I will tell you that you’ve got to be able to increase your negotiating power,” Fogg said at the NIC conference. “And that means that you’ve got to be able to come together with providers, even if they’re your competitors, to be able to lift the payment bar — and you need to do it in a way that’s compliant with antitrust laws.”
Collaboration is essential because the MA plans are highly focused on network adequacy, so providers must have the scale to meaningfully impact beneficiary access to high quality care.
“If you don’t have the ability to influence that … you’re going to be at risk, they’re going to do whatever they can to you,” Fogg warned.
Already, skilled nursing providers are experiencing the pain that Medicare Advantage insurers can cause, being one of the few provider groups — with diagnostics being perhaps the only other example — to routinely be paid below the fee schedule for traditional Medicare. Fogg has observed that other types of providers would begin negotiations at 105% of the Medicare fee schedule, whereas skilled nursing facilities would be in the 70% to 85% range.
Marquis has succeeded in collaborating with other nursing home providers, using the messenger model, to gain greater leverage in Medicare Advantage negotiations while avoiding antitrust concerns. But working with competitors is not a simple proposition, Fogg said.
“It’s relational,” he told Skilled Nursing News. “And you’ve got to work through that first barrier, which is, ‘I think I have a great rate, and I’m going to to protect me.’”
Antitrust exemptions allow industry associations to negotiate on behalf of the profession for standard Medicaid and Medicare rates, and Fogg believes this might ultimately come to pass for Medicare Advantage as well.
Already, AHCA has worked at the state level to help providers form networks to negotiate with MA plans. The initiative has generated some success and is set to expand to three new states this year, AHCA CEO Mark Parkinson said last month at SNN’s RETHINK event in Chicago.
Ultimately, Fogg believes that nursing home providers must go at-risk in payment models rather than simply taking rates from insurers — that is, payments must be tied to how well costs are contained while quality outcomes are achieved.
To this end, Marquis has launched its own Medicare Advantage Special Needs Plans. Doing so is a daunting endeavor, which Fogg has spoken about frequently over the years, including at previous NIC conferences. Despite the complexities involved, the alternative is that other entities will be rewarded for the work being done by SNFs, he emphasized on Wednesday.
“We need to be able to go at-risk and stop having other third parties trying to monetize savings on post-acute care episodes, or on Part A and B costs,” he said.
Interplay of MA and skilled nursing accessibility
In addition to payment rate adequacy, access issues related to Medicare Advantage also are weighing on nursing home operators. The Centers for Medicare & Medicaid Services (CMS) has stepped in with a measure to cut down on the diversion of MA beneficiaries from nursing homes to home health or other settings.
“They are starting to take action,” Fogg said, of CMS’ efforts to rein in insurance companies and more tightly control certain practices.
However, despite the Federal Trade Commission (FTC) being aggressive throughout the Biden administration’s tenure, Fogg said that the agency has taken a light touch with the health care insurance giants. And the legislative branch also is largely hands-off.
“I will tell you that the Hill, Congress, is very reluctant to engage with [or] get in the middle of free market negotiations; the problem is, they’re not free market negotiations,” Fogg said.
While nursing home providers have decried the diversion of MA beneficiaries into lower-cost settings, the reality on the ground has been that many facilities have recently been hard-pressed to take new admissions.
Marquis has been a case in point. The worker shortage made it impossible for the provider to fill all its available beds while staying in compliance with Oregon’s stringent staffing level requirements, causing Marquis to cap admissions, Fogg said.
This situation has been repeated across the country, involving many different nursing home companies and raising alarms about patients languishing in hospitals while unable to access post-acute care.
These bottlenecks — unfortunate as they are for patients — do demonstrate the crucial role that SNFs play in the continuum of care and sharply capture the attention of CMS, state governments, and hospitals, Fogg said.
Already, there have been cases of hospitals advocating for higher payment rates for SNFs and for other policies that would help break the current bottlenecks.
Fogg anticipates that with worker shortages sure to persist, and demand for post-acute care set to rise with the aging of baby boomers, access issues will remain in play. And a positive byproduct of this difficult situation is that SNF providers will gain greater negotiating power in the next three to five years, able to not only push for better MA rates but increases in traditional Medicare and Medicaid reimbursements.
Staffing strains and solutions
The proposed federal staffing mandate is an existential threat for nursing home providers, with rural facilities in the most precarious position, Fogg said — echoing concerns raised last week by Parkinson and other industry leaders. In fact, Fogg believes that nursing homes in rural and semi-rural markets could disappear if the mandate goes through.
To prevent this outcome, scrapping the staffing rule is necessary but might not be sufficient; the government might have to create a designation and reimbursement structure for rural nursing homes similar to that of critical access hospitals, Fogg suggested.
He is “not sure it’s the answer,” given that the creation of a critical access nursing home designation still would not solve the supply-demand issue facing some rural markets. Marquis itself only has one facility left in what he would term a rural market, he noted.
“I think rural health care is going to be challenged,” he said.
But whether an operator is focused on rural or urban areas, all are feeling the strain of severe workforce disruption, which Fogg said he did not properly anticipate coming out of the Covid-19 public health emergency.
“I didn’t think about what would happen with the licensed nurses that had gone through this very stressful period; I didn’t think about hospitals that kind of burned out their nurses, and that they would start going down into our pool,” he said. “This is personal, now, I don’t think we reacted to those challenges.”
Addressing these challenges demands looking beyond the micro-level of supply and demand in U.S. labor markets, and focusing more on the macro-level of international health care workers, Fogg said. He is not pleased at what he sees, when zooming out.
“We’re losing this battle … we’re getting our butts kicked by Canada and England and Germany,” he said.
He shared an anecdote about a pre-Covid visit he made to Croatia, where a surplus of English-speaking health care workers existed — most of them going to work in Germany. When the pandemic did hit, H1-B visa applications and approvals went from 1.2 million to 600,000 a year. And this year, the State Department enacted a green card retrogression policy that further limits immigration of nurses to the United States.
The lack of immigration has been a “major contributing factor” to workforce woes for nursing home providers, Fogg believes.
“I think in the next three to five years, we need to get the foreign health care worker into the United States,” he said.
His comments came a day after Paul Ryan, former Speaker of the U.S. House of Representatives, took the NIC stage and described immigration reform as a necessary part of the cure for the “unique” labor crisis facing nursing home and senior living providers.
But increased immigration should only be seen as a stop-gap, while the U.S. education system “gets its act together” to increase the flow of health care workers, in Fogg’s view. Indeed, this is part of the picture that he painted of an “optimal world,” which would enable him to say this at NIC in five years:
“We were able to affect foreign health care worker visas that brought in 200,00 to 400,000 health care professionals a year, and the education system filled the gap of need. In an optimal world, we filled up the buildings, and because there’s not a lot of increase in capacity, we create access issues, that increases our negotiating power, and that will create an economic model that’s going to make this profession very sustainable.”
Companies featured in this article:
Aetna, AHCA, Humana, Marquis Companies, NIC, UnitedHealthcare, Zimmet
