The push toward value-based purchasing by the Centers for Medicare and Medicaid (CMS) means significant changes for operators, said Ray Thivierge, a well-known and respected skilled nursing industry leader. He moderated “The Ever-Changing World of Skilled Nursing: The Impact of CMS Initiatives,” a session at the 2016 NIC Fall Conference in September. The session’s panelists were: Trissie Copses Farr, senior vice president, Formation Capital Healthcare Group, LLC; Jason Feuerman, SVP, Strategic Development & Managed Care, Genesis HealthCare, Inc.; Dr. David Gifford, Senior Vice President, Quality and Regulatory Affairs, American Health Care Association; and Nanci Wilson, vice president, R&D, Plum HealthCare Group, LLC.

Thivierge told conference attendees that aggregated payments to the nation’s 15,700 nursing homes equal $110 billion. Of that amount, 80% or more is derived from two public sources: Medicare and Medicaid. Because such a high percentage of payment comes from Medicare and Medicaid, nursing care operators must pay close attention to the CMS push to reduce costs through value-based purchasing.

Fee-for-Service vs. Value-Based Purchasing

In a fee-for-service world, Thivierge noted, skilled nursing providers are playing “a census game.” They invest their resources in keeping occupancy high, which then translates into higher volumes of reimbursements. This model, he said, prevents home-based care providers from penetrating the post-acute space.

Now CMS is driving the entire health care space to move away from a fee-for-service model to a value-based model. The “new normal” for skilled nursing reimbursement will focus on care transitions— coordinated care—that are built on a foundation of measurable quality outcomes. Eventually, this transition will incorporate more risk sharing on the part of health care providers, something that, Thivierge said, is “obviously changing the paradigm of the game” and potentially will lead to an era of global payments.

CMS has already exceeded its goals for transitioning to value-based payments for 2016, Thivierge told attendees. CMS’ ultimate goal is to tie 90% of fee-for-service payments to value-based payments by 2018. The innovations the agency is implementing to reach that goal include mandatory and voluntary bundles, accountable care organizations, managed long term care support services, and value-based purchasing for hospitals. As Thivierge explained, skilled nursing’s response to CMS’ innovations relies on what he calls the three driving forces: five-star ratings, reimbursement (rewards and penalties), and participation in preferred networks.

All of these driving forces, said Thivierge, are—and will be even more so—dependent on the collection, analysis, and sharing of data in a transparent fashion. As he explained, “alignment takes a while,” and will require strategic data collection that demonstrates not only operators’ past performance but also their vision for health care delivery in the future. CMS is also providing incentives for operators to take advantage of care coordination, placing the patient back in the center of care. Finally, Thivierge said, shared accountability will redefine how operators deliver healthcare in this dynamic space. As risk bearers decrease skilled nursing utilization as a means to lower overall costs, the industry may experience an excess of nursing care beds

Industry Experts Weigh In

David Gifford, American Health Care Association, acknowledged that a number of changes are occurring and that “the details can be overwhelming.” He pointed out that some common themes exist—and these are where operators should put their focus. Avoiding hospital utilization, not just rehospitalization, he said, is where the best operators are investing resources, along with building strong relationships with hospitals in their referral regions. Furthermore, Gifford maintained that while rehospitalization is an important metric, operators must be aware that it takes time before that metric responds to investments in quality.

Trissie Copses Farr, Formation Capital, explained that operators need data that is “descriptive, predictive, and prescriptive.” The one “who has the best data will win,” she said.

When asked what strategies and areas of focus operators are employing to adapt to the changing environment, all panelists echoed what Thivierge said earlier in the presentation: that the transition to value-based purchasing is inevitable. Nanci Wilson, Plum HealthCare Group, said, “You can’t sit and wait . . . If we aren’t looking five years ahead, you’re going to be left at the train station.”

The panelists also noted that to adjust to the new paradigm, operators need a culture shift, especially when it comes to risk management. Dr. Gifford said that many operators are expressing that “2019 is so far away,” but in reality, the shift in operator perspective needs to happen now. Jason Feuerman, of Genesis HealthCare, has experience managing risk through a Medicare Advantage plan. He said that he believes that when providers have financial incentives and data, “quality and outcomes and savings will come from that.” As Farr stated, “we are people caring for people, and so by definition, we are at risk. But how to you manage that risk?”

At the end of the day, the panel concluded, payments tied to value and quality outcomes are the inevitable future of the sector. Ultimately, they indicated, these changes will result in better outcomes for patients.