How to survive the likely shift to bundled payments

Let’s take a trip back in time to 1982. Hair was big and Olivia Newton-John was even bigger. Hospitals were paid based on the bills that they submitted. This form of payment focused on increasing the number of service rather than the quality of the care itself. 

It was right around then that two researchers were tasked with “fixing the system” by looking at patterns in patient data. After examining the correlation between diagnosis, medications and costs they determined that the fewer co-morbidities, the smaller the cost to the healthcare system. This realization lead to a huge change for the U.S. healthcare system as it moved from fee-for-service to bundled payments.

Now fast forward in time to 2016 and we are seeing the post-acute care industry go through a similar transformation. The same philosophy is being used yet again to maximize value for patients at SNF and ALF facilities; moving away from RUGs-based reimbursement to an episodic payment model. The Triple Aim objective has brought a renewed focus on quality measures, readmissions, and even length of stay.  All post acute facility managers need to come to grips with the fact that in the very near future all ALFs and SNFs will be compensated based on an ability to meet pay for performance benchmarks.

So what lessons can we learn from 1982 to help us make this shift today?

1. Understand your costs. I am still shocked by the number of post-acute facility owners and managers that do not have a handle on costs. In order to manage your operation in the future, you will need to be able to project your costs by diagnosis and obvious co-morbidities.  
   Start with the basics. Are you capturing the primary diagnosis form the hospital at admissions? If you don’t know what Mrs. Smith was being treated for in the acute setting, you will struggle to understand the costs associated with other patients with similar ailments.  

2. Involve your facility in models and start tracking data. By working with partners and government institutions that are spearheading marketplace models, you can learn a great deal about your bottom line. By tracking everything from the average length of stay to the basic diagnosis path, your facility will have a better understanding of the costs associated with each treatment. If you are serious about the commitment to tracking costs, consider reevaluating your approach to accounting.  
   The SNF financials of tomorrow will have costs broken down by more than a Per Patient Day (PPD).  Future operators will know their costs by diagnosis.  

3. Determine the optimal length of stay for each patient. We continue to see conveners and managed care payers reducing utilization arbitrarily. Yes, this often saves money to the system; but at what cost to the patient? By using data modeling, facilities can overlay functional improvement data with readmission figures to find the optimal date range when patients should discharge. For example, a patient headed back to a home setting with multiple stairs will likely need a higher mobility CARE score.