One of the burning questions fueling healthcare provider discussions is: What’s going to happen to the Affordable Care Act? The first answer was provided on March 24, 2017, when House Republican leaders pulled the proposed American Health Care Act legislation from a vote. However, on May 4, 2017, the House passed the American Health Care Act.
Now, we wait…
For post-acute care (PAC) providers, the big question is: Regardless of any future legislative action, what should we do to be successful – given the pressures that won’t be going away?
How We Got Here
Before exploring where PAC might be going, it’s valuable to revisit how it got here in the first place. In the 1970s, nursing facilities provided custodial care – lengthy stays for individuals who had private funds to pay for care or who had few financial resources and qualified under Medicaid. Typically, admission drivers were chronic physical illnesses or declining cognitive abilities. Therapy services were also provided.
By the early 1980s, people were living longer, there were advancements in joint replacement surgery and the federal government provided generous reimbursement under Medicare Part A for post-surgical therapy services to help keep seniors independent. This created strong incentives for skilled nursing facilities (SNFs) to expand their rehabilitative services. More SNFs were built, and by the early 1990s, the total number of SNFs increased to an all-time high of 15,000.
Between 1980 and 1990, Medicare expenditures rose from $35M to $109M. Reimbursement was retrospective and cost-based; providers were only required to track their expenses in providing Medicare-covered services (everything from labor, food and supplies to medications) and send the government the bill. As a result, the race was on to hire rehabilitation therapists, acquire or build additional SNFs, expand dedicated Medicare beds and optimize lengths of stay.1
When the Party Ended
As Medicare Part A reimbursement substantially increased, the federal government had an epiphany: reimbursing providers based upon volume of services provided with little requirement of positive outcomes (value for dollars paid) was more than problematic. There were also concerns that providers weren’t incorporating solid utilization management strategies in all operations, especially in respect to labor or other costs.
Everything changed with the Balanced Budget Act of 1997, which changed the Medicare Part A reimbursement system to a prospective one: the Prospective Payment System (PPS).
Through frequent assessments, Medicare Part A residents were assigned to a specific per diem reimbursement category based upon projected need/cost of care for a specific period of time. The next assessment reset the payment either lower or higher. Within six months, in 2000, seven major nursing home organizations filed bankruptcy (1,651 SNFs, accounting for 175,000 residents), largely due to their inability to service debt within a reduced reimbursement environment.
The Past as a Prologue
Since the implementation of PPS, the Centers for Medicare & Medicaid Services (CMS) have continued to move toward value-based reimbursement, targeting 50 percent of all payments to be made through alternative payment models by 2018. On top of this, the regulatory survey process seems more rigorous, Civil Money Penalties more frequent and pressure is increasing to reduce Medicare lengths of stay. To participate in newer financial models also includes the expectation that financial risk will be shared across the continuum following both hospital and SNF discharges.
For current PAC organizations, evolution drives four primary challenges:
- How can SNFs optimally perform in state surveys, especially given their impact upon Five Star Ratings?
- How can one be financially viable within current (and any future) payment models where risk is shared across the entire continuum?
- How can SNFs attract Medicare/insurance admissions within an increasingly competitive marketplace, especially as lengths of stay shorten and provider networks narrow?
- What improvements can increase staff efficiency, the largest SNF expense category?
The Part Pharmacy Should Play
First, pharmacies serving PAC facilities need to rigorously evaluate their value proposition. To obtain and maintain accounts in the future, pharmacy must describe its impact upon:
- SNFs’ Regulatory Performance: Pharmacy services remain a target area for surveyors. In the top 25 most frequently cited deficiencies, pharmacy accounts for numbers 5, 19 and 24 (drug records/labeling, provision of routine/emergency drugs and consultant pharmacy services, respectively). Repeat deficiencies, ones that fail to be cleared immediately or ones requiring multiple visits by state surveyors, reduce SNFs’ Five Star Ratings. It also impedes SNFs’ value-based bonus opportunities and attractiveness to referrers, payers (insurance) and potential staff.
- Optimized Financial Viability/Utilization Management: As SNFs seek to provide increasingly higher acuity care as part of their Medicare Part A financial strategy, identifying any and all margin-enhancing opportunities is paramount. Using technology that reduces labor costs, eliminating waste and assuring optimum medication management will be areas of scrutiny and factors in choosing pharmacy services. Pharmacies able to demonstrate their financial impact and those that can provide both single- and multi-facility reporting to PAC leaders/owners will have a competitive advantage.
- Selection of PAC Facility by Referrers: Referrals to PAC facilities decline due to high emergency department visits and re-hospitalizations following admission and discharge. CMS Quality Measures (QMs) target low emergency department utilization and re-hospitalizations as quality markers. Every pharmacy providing services to SNFs should examine what strategies they provide to support their clients’ success in these two QMs. Identifying residents at risk for (medication-related) falls, as well as prevention of adverse drug events, should be areas of focus. PAC pharmacy providers should examine their facility support with respect to first-dose availability and their ability to quantify their value proposition with increased consulting services (for facilities with ultra-short stays/high resident churn). Under the Improving Medicare Post-Acute Care Transformation (IMPACT) Act, medication reconciliation will be a requirement by October 2018.
In April 2017, CMS released the Advance Notice of Proposed Rulemaking document, highlighting a new possible payment method. The new system would replace the current two case-mix adjusted components (therapy and nursing) with four components: physical/occupational therapy, speech language pathology, nursing and non-therapy ancillaries (includes medications).
In its March 2016 report to Congress, the Medicare Payment Advisory Commission wrote, “Almost since its inception, SNF PPS has been criticized for encouraging the provision of unnecessary rehabilitation therapy services and not accurately targeting payments for non-therapy ancillary (NTA) services such as drugs.”2
Within the document, CMS finally acknowledged earlier stakeholder concerns that “Prescription drugs or medication therapy were frequently noted areas of concern due to their potentially high cost for particular residents.”3
1 Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities: Revisions to Case-Mix Methodology. Federal Registry: The Daily Journal of the United States Government. April 21, 2017. Web. 2 June 2017. https://www.federalregister.gov/documents/2017/05/04/2017-08519/medicare-program-prospective-payment-system-and-consolidated-billing-for-skilled-nursing-facilities
2-3 March 2016 Report to the Congress: Medicare Payment Policy. Medicare Payment Advisory Commission. March 15, 2016. Web. 1 May 2017. http://medpac.gov/-documents-/reports