Skilled nursing facilities and other senior living facilities that offer post-acute care are facing a rapidly changing and uncertain competitive landscape.
One thing, though, is certain: the traditional fee-for-service model, where Medicare or a private payer assume the risks, will soon go the way of the rotary phone. Value-based payment programs and performance metrics will shift the risk to post-acute providers.
Post-acute care providers face other challenges as well:
In short, to survive and thrive, organizations must be able to measure, support, and improve relevant quality measures.
Skilled nursing facilities will become increasingly dependent on upstream referral sources, such as hospitals, and will face increasing competition to gain those referrals.
Those referral sources will place an increasing emphasis on the facility’s ability to capture and analyze key data and measure performance against industry standard metrics, such as the Medicare Star ratings. A key component will be the previous three years’ annual survey, with the more recent carrying the most weight.
Hospitals will be tracking the following factors, amongst others, when evaluating a potential referral partner:
But that data isn’t the only data an organization should be collecting and analyzing. Organizations should also conduct an in-depth financial analysis, or bring in a knowledgeable third party, to understand the true, internal costs of providing every service as it relates to contracted rate structures under consideration by the facility.
Do the per diems of an upcoming contract fully cover the costs of providing the services that patients will require? Are there ways to increase efficiency and reduce internal costs?
Being able to answer those questions with a high degree of confidence, based on in-depth financial analysis, is critical, as is demonstrating the ability to efficiently coordinate care and manage clinical programs.
The time to conduct this internal data collection and analysis is now, to prepare for risks that will become part of the senior health landscape within the next two fiscal years.
Building a value proposition begins with reviewing every department and function. The goal is to demonstrate to a referral source that the organization is effective, efficient, and capable of producing measurable results that benefit patients.
Many skilled nursing facilities rarely, if ever, conduct comprehensive internal reviews. But hospitals will want to know key metrics, such as 30-, 60-, and 90-day readmission rates and average length of stay. They’ll want to know how providers manage and care for patients, which will result in lower rates and, more importantly, what monitoring and processes are in place to ensure those rates will remain steady or improve.
Whether done completely in-house or with the aid of a third-party expert, those reviews should include the following:
The results of those reviews should show potential referral sources that an organization does more than render services. The goal is to position the skilled nursing facility as a chronic care “case manager” that will extend a hospital’s level of care and improve its quality-of-care metrics.
An organization’s value proposition is a series of quantifiable benefits that can be used to attract and retain referral partners, such as hospitals. That value proposition can also be used to support both managed care and value-based contracts.
A strong value proposition should incorporate the following:
The ability to demonstrate measurable value to prospective partners will enhance a skilled nursing facility’s appeal and negotiation strength in preferred provider arrangements.
Although managed care and value-based contracts apportion risks among hospitals, payers, and downstream providers in different ways, many of the same strategies address the requirements of both. Those strategies include the following:
Finally, organizations should consider exploring potential partnerships, affiliations, mergers, or acquisitions. Depending upon the results of internal analyses and the surrounding competitive landscape, survival and profitability may dictate one or more of those business models. With hospitals, Medicare and private payers shifting the risk to post-acute care providers, smaller operations may not be able to survive in their present form.
To prepare for the impending paradigm shift in the post-acute care space, senior living organizations with skilled nursing facilities need to develop a plan to understand their current level of risk readiness. Done correctly, results of this assessment can help organizations define critical action steps to help prepare for new reimbursement models and operations. This insight will also help them explore and negotiate potential preferred provider arrangements.
Finally, post-acute care providers need to review existing contracts and evaluate new contracts, armed with detailed knowledge of their legal obligations and their internal costs. If an organization lacks internal resources or doesn’t have a thorough understanding of best practices, the expertise and perspective of a third party can be invaluable.
Risks will continue to shift towards post-acute care providers. The key to survival and growth is to prepare for those upcoming risks now.
For more information on this topic, or to learn how Baker Tilly healthcare specialists can help, contact our team.