Hospital inpatient volume is declining while outpatient is increasing. In some markets, hospitals and healthcare systems are diverting patients from skilled nursing facilities to home.
And, in most areas, a large number of SNFs receive only a small portion of a shrinking market of fee-for-service patients as more and more Medicare beneficiaries sign up for Medicare Advantage plans. To make matters more challenging, these plans shorten length of stay and often pay lower rates than traditional fee-for-service Medicare.
Many industry experts believe the challenges are temporary — that SNFs only have to hang on until demographic shifts kick in. But I worry about this strategy. In the years between now and then (starting in 2020), hospitals, health systems, ACOs and Medicare Advantage plans will be increasingly aggressive in shifting the site of care to outpatient and home, even for frailer and older beneficiaries.
So what’s a SNF operator to do? I see two paths forward.
1. Double-down on aggressive revenue strategies. If ever there’s a time when SNF operators need a tight game for pursuing volume and negotiating rates, this is it. SNFs must do the following really well.
• Deliver a high-quality product. This is the price of entry. If your facility isn’t performing well on Centers for Medicare & Medicaid Services quality measures, it’s hard to get in the game. Your SNF needs to be able to manage complex patients through the continuum of care, and prevent readmissions in your facility and following a discharge. This requires strong care management capabilities, the involvement of primary care physicians or extenders, and technology to support the integration of everyone’s activities.
• Use data resources very strategically. We hear a lot about using data but not much insight about the different types and to what end. Consider three types of data: the kind that helps tell the story of your organization, the kind that offers intelligence about your market, and the kind that shows intelligence about your referral sources’ greatest challenges. Of these three, the third is the most important and should guide the marketing and sales conversation with referral sources.
• When you want referrals, ask for advice on quality. Strong referrals require a partnership with referring hospitals. A partnership isn’t about improving the relationship with discharge planners, although that’s always important. It’s about redesigning the care processes from hospital to SNF so that the care is integrated and everyone’s working as a team. Persuading hospitals to partner with you is a huge challenge; however, a request for help in improving care quality rather than a request for referrals, and to offer your assistance in solving their problems, is a more effective strategy (see data resources in the bullet above).
After you execute these strategies, you’ll still have to grapple with managed care payers who shorten length of stay and pay rates lower than fee-for-service, which has led some SNF operators to move toward the second available path.
2. The Premium Dollar Strategy. Out of sheer frustration with managed care payers and referral sources, a handful of savvy nursing facility organizations have formed and launched their own Medicare Advantage plans, under one of the special needs plan (SNP) authorities. This is a wholesale turning upside down of the traditional SNF business model. Having worked with operators pursuing this approach, I’ve learned the following:
• You don’t have to be very large. I’ve seen successful plans launch with fewer than 500 enrollees. It’s less about the number of residents than how committed you are to supporting the enrollment process for the residents you have. Also, several nursing home provider-led plans that launched with small numbers, within their own organization, are now offering the plan to residents of other nursing home organizations.
• The premium dollar changes the game. With a premium dollar, SNFs can pay for capabilities to be successful in reducing hospital and ER use. You need strong primary care physician involvement and integration, care management and technology. All of these are part of the value you finance through the health plan, with the savings they generate going back to the plan and the care residents receive.
• But the commitment is everything. As Will Saunders, CEO of AllyAlign likes to say, “this will change the DNA of your organization.” You are growing a new organization and learning a whole new compliance language. It will work if you commit to it.
The bottom line is that SNFs, better than anyone, know how to serve the highest cost Medicare beneficiaries in a highly managed setting. What we’re learning is that if you don’t control the healthcare dollar, someone else will. And the value SNFs deliver will not return to them.
Anne Tumlinson is the CEO of Anne Tumlinson Innovations (ATI) and founder of Daughterhood.com. ATI is a healthcare advisory firm specializing on issues around the care of our frailest adults — from caregivers to providers to payers to policymakers. Expert researchers and analysts look for innovative approaches that benefit all involved , and society as a whole.