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Hospital – Skilled Nursing Relationship in Flux

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By Liz Liberman, Health Care Analyst, NIC

Recently the American Academy of Family Physicians (AAFP) sent CMS a letter encouraging the agency to finalize a proposed rule that would improve discharge policies in hospitals and address the gaps in communication that occur during patient transitions.

In California, hospitals will face the challenge of improving discharge policies even before CMS has the opportunity to act on a federal level. On April 7, 2016, the insurance marketplace in California, Covered California, approved a proposal that would result in hospitals that perform poorly based on cost or outcomes being excluded from provider networks. Naturally, providers oppose the move because they face the threat of network exclusion. Insurance companies alsooppose the proposal because they would be responsible for identifying outliers—hospitals that cost too much—and removing them from the networks. As part of the outlier identification process, insurance companies would have to disclose the rates they brokered with hospitals, which is something insurers all but refuse to do. If it passes next week, the proposal would require insurers to exclude costly hospitals by 2019 and would apply to other provider types later.

In California, providers are fiercely opposed to the proposal to eliminate high-cost, low-performing hospitals and eventually providers from private insurance networks. Across the country, providers are similarly in opposition to the bundled payment for joint replacement program being rolled out by CMS beginning April 1, 2016. The program, Comprehensive Care for Joint Replacement (CJR), was already delayed by three months by CMS, and two Georgia House Representatives proposed legislation in March of this year to push the start date even further out to January 2018. The legislators (one Republican, one Democrat) argue that providers need more time to adjust to the CJR requirements, under which Medicare will reimburse providers in a lump sum for hip or knee replacement surgery, thus creating risk-sharing for hospitals performing the surgery.

CJR affects skilled nursing properties (SNFs), as they are often the recipients of patients having undergone hip and knee replacement surgery. CJR pushes SNFs and hospitals to work closely together during the transition of care—more closely than these two provider types have worked in the past. One component of care that hospitals and SNFs must address jointly under CJR is the fact that many patients suffer from multiple conditions, chronic conditions, and dementia. A recent study from the University of British Columbia in Vancouver found that dementia patients experience a significant number of transitions in care settings in the first year of dementia diagnosis. The study also found that dementia-specific care improves outcomes for these patients, specifically in the context of transitions from one care setting to the other. In other words, when hospitals discharge dementia patients, SNFs or assisted living (AL) properties that specialize in dementia care will probably create better outcomes for their patients than if those patients were discharged directly to the community, or to post-acute settings that do not specialize in dementia care. In fact, Steve Littlehale of PointRight recently conducted a similar study that produced similar results. SNFs that treated a higher volume of patients with dementia had better outcomes for those patients, reinforcing the idea that “practice makes perfect.”

Impact on the Industry: 
What we heard at the 2016 NIC Spring Investment Forum and what the stories above demonstrate is that SNFs and hospitals are going to have to get cozy with each other. Managed care, bundled payments, value-based payments, and outcomes-driven payments are all pushing these two service providers together into a close-knit relationship. This development is new for most SNFs, but as many speakers at the NIC Forum explained, the most savvy SNFs are already playing ball with hospitals, and the rest of the sector must get on board or else be left out of vital Medicare and Medicaid reimbursement schemes.

When SNFs and hospitals cooperate to provide care, two points of vulnerability emerge: transition of care and reshospitalization. The moment of transition from discharging facility to receiving facility is one of the most vulnerable points in a patient’s continuum of care; if handled incorrectly, patients may have worse outcomes. Communicating the details of a patient’s care is not easy, but if any of those details are lost in translation, the patient suffers. Now, under new payment models, hospitals and SNFs may suffer, too. In the AAFP’s letter to CMS, the organization emphasizes the importance for cost and outcomes in relation to communication at the transition-of-care moment. Though the AAFP primarily speaks to primary care physicians who oversee patients’ recovery, the argument is perfectly valid for skilled nursing.

Skilled nursing also could be greatly affected by the measure in California to force insurers to exclude low-performing hospitals from networks. How can SNFs play ball with hospitals if those hospitals are excluded from their networks? Patients may suffer from narrowed networks, but so will providers who are being pushed into cooperative arrangements for care. The fact that insurers are expected to cooperate with Covered California and disclose provider rates is of concern in terms of the initiative’s viability. California is telling insurers that they have to reveal their “secret sauce” that drives how their networks are created. The only aspect of this measure that is working in California’s favor is the fact that California is so huge; insurers will likely still operate in California despite this rule’s threat to privacy—something that insurers care most about—because of the share of the market that state represents. SNFs are not exempt from the rule, either. Hospitals are the first target, but eventually all providers will be covered by this rule. All providers will be on the hook to keep costs low and performance high.

It seems as if whenever we talk about efforts to keep costs down while improving quality, we cannot escape CJR. Like hospitals and insurers in California, providers are pushing against this program, asking for more time to adapt to the requirements. The program involves 67 metro areas and is mandatory within those areas. The bipartisan effort out of Georgia to delay the program may be too little too late. Congress is usually amenable to passing program delays and this program was already delayed once. The timing is tight, though, as the program went into effect on April 1, with the bill to the delay the program stalled on March 30. Also, the requested delay is perhaps longer than CMS would be willing to compromise on; January 2018 is much father from the original April 1, 2016, effective date than CMS or the Obama administration would like.

Lastly, the studies on care transitions for dementia patients reinforce that the moment of transition is pivotal in the care continuum. The studies also reinforce the idea that outcomes are better for patients when they get appropriate care. The SNF industry is under threat of attack by CMS, which is trying to push more care to the home-and-community based (HCBS) setting. Hospitals understand that discharging patients to appropriate settings, such as dementia-specific nursing homes or assisted living facilities, results in better outcomes for patients but also drives up costs. SNFs can use these studies to demonstrate their value proposition to discharging hospitals faced with the tough choice of saving costs upfront by discharging to the community or saving costs in the long-run by discharging to the most appropriate care setting.


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