‘Elephant in the Room’: Medicare Advantage a Huge Factor in CCRC Decision Making Around Nursing Home Services

Soaring costs associated with skilled nursing – and problematic payer sources – are making it harder for continuing care retirement communities (CCRCs) to provide such labor intensive post-acute care.

CCRCs have to ask themselves some hard questions when it comes to what services they can reasonably offer, and if it’s worth it to keep open skilled nursing facilities or SNF wings that are hemorrhaging money, experts say. Some CCRCs, also known as life plan communities, say they need to scale up in order to survive the higher costs of care. Others say contracting with SNF operators may be an option too. Meanwhile, some CCRCs are scaling back or closing their long-term care facilities altogether.

Reimbursement rates on the Medicare and Medicaid side have improved in recent years, but they have been “not so generous” in the past, said Fred Bentley, managing director at ATI Advisory’s post-acute and long-term care and senior living practice, during a webinar on Thursday. As facilities work with tightened expenses, reimbursement rate increases may not be enough to keep pace with labor costs and the dramatic workforce shortage affecting all areas of the care continuum, he said. 


Moreover, with the growth of Medicare Advantage plans, which are linked to a higher rate of denial of skilled nursing services and delays in payment, CCRCs providing skilled nursing services may be forced to pare these down or cut them out completely, said Phil Chuang, senior vice president of healthcare services at HumanGood. Medicare Advantage is the “elephant in the room,” Chuang said, when it came to decision making around scaling back skilled nursing services from the CCRC.

“Certainly we’ve seen a shift in the Medicare market. In 2023, finally more than half of Medicare beneficiaries are now in Medicare Advantage,” said Chuang. “If that’s not the tipping point, we’re certainly speeding toward that tipping point.”

HumanGood operates 23 life plan communities across California, Washington, Arizona, Idaho and along the East Coast.


Chuang was one of three panelists on the ATI-led webinar about the crossroads and challenges CCRCs currently face in today’s market. Other panelists included Nicole Fallon, LeadingAge’s VP of Integrated Services and Managed Care, and Ted Goins, president and CEO of Lutheran Services Carolinas.

A tipping point for MA, and government scrutiny

HumanGood has seen anywhere from 20% to 70% MA penetration in certain markets. A deciding factor comes down to what the CCRC’s mission is, whether or not they can find the right alternative in their market, and what can be done in a sustainable way.

“It’s one thing to get paid less, but it’s another thing to have to manage shorter stays, more work for the team, with higher acuity in-house,” Chuang said of MA in CCRCs.

There is a hopeful “tipping point,” he said, with the Centers for Medicare & Medicaid Services (CMS) and Congress looking more deeply at MA plans, particularly plan utilization control and appropriate authorizations.

“But, that kind of regulatory change takes time. We have to figure out from an economic perspective, and again in honoring commitment to our residents, what are we going to do for the next five to 10 years? I think that’s the real question,” said Chuang.

In the short term, Fallon said she’s seen progress with advocacy efforts to add more oversight to MA plans and in turn make skilled nursing and the MA payer more viable for CCRCs. CMS is honing in on “pain points” for the skilled nursing space, including prior authorizations and coverage determinations.

“Hopefully this year with new rules in place we’re going to get a little relief,” said Fallon.

Long-term, Fallon said MA payment issues will continue to be a problem. MA plans currently reimburse 60% to 80% of what Medicare Fee-for-Service reimburses.

“Same job, same duties, except now you have all the administrative burden that goes with it. So not a real viable solution unless you can figure out how to do what you do today for $80 to $100 less per day,” said Fallon.

In some cases, providers have even opted to add more Medicaid beneficiaries while limiting MA payers since reimbursement is comparable, Fallon said.

The payment piece is a “harder nut to crack” because it’s something that needs to be solved with legislation, she said. Right now, the non-interference clause ties CMS’ hands from telling MA plans how they have to pay providers, so they can’t even set Medicare FFS as a baseline.

Scale and high performance

Lutheran Services started out as solely a SNF provider, and added CCRCs later, Goins said. Currently, the North Carolina provider has been adding to its SNF services, an outlier of sorts when compared to what other CCRCs are changing in the face of economic headwinds. 

“We either need to get bigger or get out,” said Goins of CCRCs and skilled nursing service lines. “It’s getting harder and harder and harder, even more so today. We decided to go upstream … go against the flow and added now up to nine Medicaid certified facilities. We’ve been able to get enough scale and that’s what it’s all about.”

If CCRCs, or standalone SNFs for that matter, plan to continue offering skilled nursing services into the future, they need to scale up and ensure they have the resources to deliver proper care. If they don’t have that scale, or if they plan to scale back these services, CCRCs should consider contracting with a SNF provider in the area, preferably a nonprofit, said Goins.

To that end, Lutheran Services opened a new life plan community in Wilmington, North Carolina, he said, which was purposely built two miles away from an existing nursing home also owned by Lutheran, so they could contract internally.

In terms of MA plans and skilled nursing care, Chuang added that HumanGood has enough size and a strong relationship with area organizations, and gets a “fair rate.”

“A lot of it depends on the plan. Some [MA] plans have a more clinical focus and are willing to work with key partners,” said Chuang. “How do you get yourself to be a key partner?”

Being a high performing health center is a good start, along with having a robust occupancy number and favorable payer mix. But, sometimes it just makes sense to get out of certain MA contracts, said Chuang. 

One high quality life plan provider, Fallon said, decided to fill the beds with Medicaid beneficiaries instead of MA beneficiaries since the rates were similar, and the two parties couldn’t reach a higher rate.

One unintended side-effect of this move – happier staff.

“His staff are actually happier and he’s had lower turnover because [staff] aren’t sitting on hold with the MA plans all the time. But, I really think what is happening in your market is the key to those decisions,” said Fallon.

Companies featured in this article:

, , , ,