As nursing homes and hospitals confront lingering concerns with inpatient backlogs, lengths of hospital stay, and tighter operating margins, the growth of Medicare Advantage plans – and now greater scrutiny over their prior authorization protocols by the federal government – will only serve to squeeze profits margins.
“So those are additional headwinds that will benefit enrollees in Medicare Advantage plans, but could cause a further drag on earnings of the (MA) plan,” Brian Ellsworth, VP of Public Policy & Payment Transformation at Health Dimensions Group, said of the policy changes recently put forth by the Centers for Medicare & Medicaid Services (CMS).
Ellsworth provided this outlook during a webinar hosted by Health Dimensions Group on Tuesday, titled “Top Trends Tuesday: Optimizing Post-Acute Strategies for Hospitals and Health Systems.” He, along with John Capasso, executive advisor of Senior Care at HDG, delved into the evolving landscape of skilled nursing care, highlighting impacts from shifts in discharge destinations for Medicare beneficiaries, recent decreases in inpatient hospital length of stay, a greater influence of Medicare Advantage plans and recent policy changes by CMS on these plans.
In the midst of these changes, these experts stressed the importance of collaboration between hospitals and post-acute care providers, strategic planning, and leveraging of technology to enhance care delivery and patient outcomes.
Historical trends in post-acute care
Ellsworth said that historically, there has been a shift in discharge destinations for Medicare beneficiaries, noting that in 2019, more discharges were directed to skilled nursing facilities compared to home care, but this trend reversed in 2020 due to the COVID-19 pandemic.
“And that trend has continued over the last two years,” he said. “Although, as we see, in 2022, the proportion of patients being discharged to home health and those being discharged to skilled nursing has started to narrow. So, it will be interesting to see whether or not those two data points cross over in 2023 or 2024.”
Moreover, he said the recent decrease in inpatient hospital length of stay could signal a potential rebound from earlier increases during the pandemic, although concerns about inpatient backlogs and tight operating margins persist.
“It turns out that there’s some evidence now that hospital work stays have been coming back down,” he said. “In fact, the length of stay for overall discharges has decreased by 4% in 2023 compared to 2022, indicating that there has been some rebound on this question. And that said, concerns still remain about inpatient backlogs, higher lengths of stay, and tight operating margins in many markets. So, despite the good news, there are still ongoing concerns about the overall length of stay and acuity levels in inpatient hospital care.”
Influence of Medicare Advantage plans
Capasso emphasized the increasing influence of Medicare Advantage plans, citing statistics that over 50% of eligible beneficiaries are now enrolled and forecasting a rise to 60% by 2030. However, he also noted challenges facing these plans, including heightened utilization and recent policy changes by CMS, such as requirements for equal service provision and prior authorization protocols.
Capasso highlighted potential headwinds resulting from policy changes by CMS effective January 1, which require Medicare Advantage plans to offer the same level of services as fee-for-service participants, maintain prior authorizations for the duration of medical episodes, and conduct annual reviews of denial policies, subject to physician review.
Ellsworth further elaborated on the impact of these policy changes on routine discharges to post-acute care, highlighting delays caused by prior authorization processes, particularly affecting Medicare Advantage patients.
“It’s going to be really interesting to see how these changes actually play out in reality. People have been advocating for some of these issues for years, and CMS is now issuing guidance,” he said. “Recently, they just issued a FAQ on these policies, and it remains to be seen how this will unfold in reality.”
He underscored the significance of these changes for routine discharges from hospitals to post-acute care, highlighting observations from their client work. He said that Medicare Advantage patients sometimes experience longer hospital stays due to prior authorization delays, potentially affecting numerous patients daily.
“This can amount to between five and 10 patients on any given day that are sitting in the hospital awaiting a routine discharge and can’t go there because of these prior authorization delays and other problems,” he said. “And so hopefully this will make some improvement in this area, but that definitely remains to be seen.”
Transitioning to the issue of complex care discharges, Ellsworth referenced a study by the Hospital Association of New York State, which estimated the substantial costs associated with prolonged inpatient care. He outlined a range of factors contributing to these challenges, including medical complexity, guardianship, and behavioral issues. He said these issues not only strain hospital resources but also hinder patient flow and profitability.
“They estimated some of the primary reasons, things like medical complexity, guardianship, various kinds of behavioral issues, and so on and so forth,” he said. “And so these issues for hospitals create a variety of problems including just sheer backup in the hospitals, it can then cause the hospitals to incur direct cost of care as well as lose what’s referred to as ‘opportunity costs’ in terms of bringing new patients in for more profitable service lines.”
Capasso and Ellsworth underscored the importance of collaboration between hospitals and post-acute care providers, strategic planning, and leveraging technology to enhance care delivery and patient outcomes.
“Certainly both sides of this equation are going to have to understand the market pressures that each other is facing,” he said.
Capasso highlighted the necessity of forward-thinking leadership and addressing workforce issues, emphasizing the need for licensed clinicians to operate at their full capacity across all healthcare settings.
Ellsworth also discussed the federal government’s initiative, known in the industry as the “value-based moonshot,” which aims to transition all Medicare and Medicaid beneficiaries to some form of value-based payment arrangement by 2030. He underscored the critical role of value-based payment arrangements in facilitating such collaborations.
Moreover, Ellsworth stressed the significance of interoperable technology – tech that allows data to flow between diverse systems with limited human intervention – for seamless information exchange between healthcare entities. He emphasized the need for actionable and usable data while acknowledging the challenges associated with interoperable technology, such as incomplete or excessive information. He also advocated for greater integration of acute, primary, and long-term care strategies, citing programs like the Program of All-Inclusive Care for the Elderly (PACE) as vital models for integrated care moving forward.
“The increased use of interoperable technology is going to be vital in terms of transferring information back-and-forth two way communication,” he said.
Companies featured in this article:
Centers for Medicare & Medicaid Services, Health Dimensions Group
