Neutrality an elusive concept in 'site-neutral' payment talk

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James M. Berklan
James M. Berklan

It's fitting we're in the midst of Triple Crown season. That means it's time to pick a horse as your next winner — and it could possibly be a very big winner.

Providers are faced with much of the same challenge: There are a lot of fast-moving creatures out there and it would be helpful if they guessed right as to which one they should try to ride across the finish line.

The creatures we're talking about are potential new payment models for long-term care and other providers. The terms circle around the value-based pay movement and tend to spill into one another: bundled payments, accountable care organizations, managed care, and so on.

One of the “and so ons” that has already generated a lot of heat is the site-neutral payment campaign. Prodded by the Medicare Payment Advisory Commission, and allies, its aim is to create site-neutral payment policies across the entire post-acute care continuum.

Centering a payment system around patient characteristics, rather than care settings, would “dampen incentives” for facilities that might selectively admit some patients over others, MedPAC has noted.

The issue has advocates staunchly lined up on all sides. On the acute-care side, hospitals figure payment parity is not appropriate because their potential treatment capabilities, regardless of whether they actually come into play for a given patient, are far beyond non-acute providers'.

They figure they're liable to lose patients to less costly skilled nursing settings, so for several years they have been fighting back with position papers and statements extolling the virtues of inpatient rehabilitation facilities (IRFs). (There's also hospitals, campaigning that their off-campus physician groups should not be paid less than on-campus ones.) SNFs, for their part, have position-papered back, naturally. And then there's also home health providers, which hope to be seen as the "lower-cost provider." They're licking their chops at the prospect of catching any leaks out of SNFs' bucket.

Many observers, however, are not so sure site-neutral payment will be the boon that many predict it will be for skilled nursing. First of all, getting it more thoroughly into play will mean winning a battle against the well-armed and well-funded hospital lobby.

Beyond that, SNFs have some catching up to do on the floor. Of all the players who might take part in the caregiving chain, it is only SNFs that are not well versed yet in episodic care. SNFs are used to being paid by the day, not the episode. To play in the new world, they'll have to learn how to better make friends and then play nicely with them.

They'll also have to beef up their clinical capabilities.

“Right now, the average SNF is not doing clinical complexity near what an LTAC [long-term acute-care hospital]  should be doing,” Betsy Rust, a partner in the healthcare consulting arm of Plante Moran, told me. “They have the most learning to do to get ready for site-neutral payments.”

A big part of that will be each LTC provider recognizing what it can truly handle clinically. Throughout all of this value-based purchasing shift, experts expect SNFs will lose some of their “easier, cheaper” patients to home health providers. But by the same token, SNFs will look to siphon low-hanging fruit from LTACs and IRFs.

Sensing the coming tide from CMS, the American Health Care Association has issued its own proposed payment system based on episodes of care. At least one industry insider doesn't think it will amount to much but credits the association for at least starting a dialog.

CMS also doesn't think much of the AHCA proposal, apparently. That's because the plan would incentivize quicker discharges to downstream settings, much like hospitals were incentivized to do when diagnostic-related groups (DRGs) came into being. In other words, while higher-acuity patients might start being treated more at SNFs, more would also be sent to home health and other downstream settings. (“We don't really get ahead,” one veteran explained.)

There seems to be no way to escape that fact that SNFs are going to start seeing more complex patients if they want to survive. To do that properly, they're going to need more RNs, (as opposed to LPNs). That means all those investors who “increased” nursing hours in recently acquired chains by simply swapping LPN hours in for fewer RN hours, are going to have to take a harder look or not ramp up to take higher acuity patients.

Another big need experts have identified for SNF operators will be connectivity, as in electronic records that can talk to each other and share information among other providers and levels of care.

The big opportunity for SNFs amid all this potential change is to get good at something more complicated than they now do, and then exploit it. Rust suggests ventilator-dependent patients or those requiring advanced wounds care are strong possibilities.

IRFs, which typically specialize in severe rehab cases for people who were in auto accidents or the like, might also have lower-end cases that will be ripe for the plucking by SNFs.

There's a gap between the Ultra High therapy levels that require 100-plus minutes of therapy per day and IRF patients, who are supposed to be able to tolerate 180 minutes of therapy per day. The provider that can close that gap and get patients home faster than the current average length of stay yet cheaper than a typical IRF's costs, should find success.

But IRFs, and allied consumer groups, are not going to stand idly by while someone raids their pantry. 

MedPAC's aim to create a site-neutral payment model for post-acute care, “all sounds theoretically good,” notes LeadingAge Vice President Cheryl Phillips. But what should cause some concern among providers is a lack of attention to residents' individual needs and characteristics. This person-centered focus, ironically, is also an appeal used by IRF-aligned groups referred to in the paragraph above this one.

Since site-neutral payment considerations are so complex, it's possible a tenable solution might never fully be realized. Or at least not found before other payment reforms become more effective.

There is a real chance, several experts agreed at recent policy conferences, that the fervor for site-neutral pay could fade as other options emerge stronger. To the extent providers at all levels can "police themselves" and perhaps "peel off some excess costs," pressure could be released from the site-neutral drive, Rust acknowledges.

That could be a blessing in disguise for SNF operators, whom it cannot be pointed out enough, often lose when it comes to policy battles pitting them against hospitals.

Follow James M. Berklan @JimBerklan.


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Daily Editors' Notes

McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Marty Stempniak.