Ever since the Accountable Care Act became law in March 2010, HHS has set a breakneck pace for transforming traditional Medicare fee-for-service payments into a value-based system. It has projected that nearly every fee-for-service payment the agency makes in 2018 would be tied, in some way, to value.
With the election of Donald Trump, everything appears to be up in the air.
The last six years have been a frantic and confusing time for the skilled nursing facility space. Headwinds have been fierce, even for the most dedicated SNFs with whom I work. Many have invested bravely in new clinical capabilities, new infrastructure, and better data; and have trudged over to the hospital C-suite to make their case for a differentiated Medicare service. Many have been worried about whether their investments will be enough to make a difference.
The election creates further uncertainty about the future payoff for these efforts – especially when much-trumpeted components of House Republican’s A Better Way include elimination of the Center for Medicare and Medicaid Integration, and capping federal contributions to Medicare coverage through a design called “premium support.”
Fortunately, we have enough information about the Republican House leadership’s Medicare plan to make some solid predictions about what to expect based on many of the less controversial elements. The following are three specific Medicare changes that SNFs should anticipate and how they can prepare as the new Administration and Congress get underway.
More Aggressive Payment Reform in Fee-For-Service Medicare
CMMI or no CMMI, value-based payment is not going away and neither is the volume pressure related to it.
The administrative chaos that is typical of party transitions will slow some initiatives temporarily – such as the final rule for the new mandatory bundles. But once the new folks get going, you can expect them to push harder than their predecessors to advance aggressive, two-sided risk arrangements that are relatively rare among today’s accountable care organizations.
Republicans will be less squeamish than Democrats about using executive branch levers aggressively to increase the risk that providers take, and to give them more tools to manage that risk.
SNFs should respond by continuing the work they’ve started. Even if value-based payment hasn’t yet altered referral relationships in their particular market, it will. So SNFs need to make sure they understand what the hospitals, health systems and physicians in their markets will need to do to perform under down-side risk; and to figure out what value their SNFs can offer in that system.
Faster Medicare Advantage Enrollment Growth
Nearly a third of Medicare beneficiaries are enrolled in managed care today and the Congressional Budget Office has projected this portion will grow to 41% in the next ten years. Several of House Republican proposals — taken together — will further supercharge this enrollment growth.
Less controversial Republican proposals include increasing health plan payments, which — because of how the program incentives work — ultimately will improve insurers’ ability to attract more enrollees by lowering their premiums and adding supplemental benefits. Also included in the mix of incremental changes is a proposal to make it easier for Medicare beneficiaries to switch from fee-for-service to Medicare Advantage.
A more contentious proposal that may not have caught your eye yet is the Republican plan to reduce out-of-pocket protection available through Medigap plans. If this idea becomes law, Medicare managed care options would compare quite favorably to diminished Medigap coverage; pushing even more people to choose managed care over a fee-for-service/Medigap combo.
But regardless of what happens to Medigap, the combined impact of less controversial ideas means even faster growth in Medicare Advantage, which will require every SNF to develop a strategy targeted specifically to health plan concerns — one that focuses squarely on boosting insurer financial performance through higher STAR ratings and thorough risk coding.
More Possibilities For SNFs to Capture the Value They Provide
A bright spot on the managed care horizon is that policymakers – both Republicans and Democrats – recognize the need for policy change that will refocus health plan investment on interventions that potentially bend the cost curve and provide better care to the highest cost, highest need Medicare beneficiaries – the patient population with which SNFs have a great deal of expertise.
Senators Ron Wyden (D-OR) and Orrin Hatch (R-UT) introduced legislation to give Medicare Advantage plans more flexibility to offer a wider array of supplemental benefits that support not just health but also functioning of enrollees.
Speaker Ryan has also proposed allowing health plans more flexibility in benefit design. And, he has supported improving how health plan payments are risk adjusted to take into account individual characteristics other than medical conditions. One of these characteristics could include enrollee functional status, which my research has shown to have a significant relationship with healthcare spending.
There is some risk here for beneficiaries (and SNFs). Speaker Ryan will need to balance flexibility with ensuring that beneficiaries get benefits to which they are entitled; and that SNF and other important care is not being denied arbitrarily.
However, on net, all these developments could be good for SNFs, senior housing providers or any organization that specializes in serving Medicare beneficiaries with functional impairment. They open up a wide range of possibilities for product development, not the least of which includes the opportunity for SNFs to successfully take on risk themselves.
While a potentially frightening possibility for many SNF organizations, taking or sharing risk may be the only chance they have to ensure they are in control of these decisions and to truly benefit financially from the value they provide.
Under risk arrangements, real-estate based businesses have the opportunity to shift their business models from being dependent on volume to being dependent on value.
Developing value-add products instead of generating volume is the ultimate goal for which all real-estate based businesses should be aiming and preparing, regardless of the payer or the political party in charge.
Anne Tumlinson is the CEO of Anne Tumlinson Innovations. Contact her here.