From Volume to Value: How Healthcare Reform has Affected Senior Living Operators (and what it means for you)

It’s worth saying that the senior living space has always emphasized valuable, high-quality care. Value is not new to senior care. But what is new is the recent rapid evolution toward payment models that reward for efficiency combined with quality in care, and penalize those that don’t achieve it. This is known as pay-for-performance, or value based care.

The largest piece of healthcare legislation since Medicare was passed in 1965, the Affordable Care Act (ACA), enacted in 2010, set out to reform the American healthcare system. Lawmakers proposed a host of changes in healthcare—including access to healthcare “for every American,”—with a hefty price tag. The Congressional Budget Office recently calculated that price tag to be $1.4 trillion.

Experts, politicians, analysts and the like have vigorously hashed out whether the American public can afford this change. Despite opposition to the law, two Supreme Court rulings (one in 2012 and one in 2015) deciding in favor of the ACA have ensured that it is not likely to be going anywhere.

Where does the ACA leave senior care?

The ACA’s premise is that healthcare can be made more affordable by increasing a host of efficiency measures. Better care is actually less expensive care, and more coordinated care helps to avoid redundancy in testing and medical errors – both of which come at a high price.

The senior living space is a critical part of the continuum of care. The reason? Most healthcare expenses are accrued at end-of-life, when chronic conditions start to add up. The Agency for Healthcare Research and Quality has conducted the most recent federal study on this topic, which showed that five percent of the population spends almost half of the total amount spent on healthcare. The same study shows the elderly (age 65 and over) made up around 13 percent of the U.S. population in 2002, but they consumed 36 percent of total U.S. personal health care expenses.

With Baby Boomers only just beginning to enter their senior years, you don’t have to be a math wizard to see where this is going. That’s why American health reform rests quite resoundingly on the increased efficiency, higher quality of care, and preventative care for seniors. Encouragingly, the federal government is showing signs it is willing to increase Medicare and Medicaid reimbursement for doing so.

But what about private insurance? They still pay fee-for-service.

Yes, they do, but probably not for long. Medicare – which currently covers 45 million people and is the largest U.S. purchaser and regulator of healthcare – exerts a major influence on the rest of the healthcare system. It is only a matter of time until private insurers embrace the reform movement.

Out with the old, in with the new

If all of the above has not convinced you that health insurance reimbursement is in an overhaul phase, consider this: In April of 2015, Congress voted to end the long-time, fee-for-service payment method for physicians and replace it with a new system, which will reimburse doctors on value-based care, beginning in 2019. Among other things, under the new system, doctors will be paid for meeting certain quality of care measures. This kind of thinking—the focusing on quality over quantity of care—is becoming entrenched. Leaders, stakeholders, lawmakers, and Americans are looking for a ways to bring down the cost of American healthcare, which runs rampant at 20 percent of our Gross Domestic Product. With this kind of crippling load, America can’t compete worldwide with countries that have already converted to value based healthcare. It’s sink or swim time.

Like any huge change, it will take many iterations of laws and regulations to turn this ship around. There will be false starts and do-overs, but in the end, promoters of value based care say it will prove to save money and improve quality of life across all levels of care.

How will senior living and care be transformed?

The way healthcare can be transitioned from volume based to value based is with the use of electronic health records (EHRs) and health IT. With EHRs, health data can be gathered and quality measures established and shared. It’s a way to analyze how well certain care is working and share that evidence-based medicine across all care providers. It is also a way for various providers along the healthcare continuum to exchange information about a patient’s care. Hospitals can transfer information about a patient to the senior living care provider, making that resident’s care more seamless and efficient. In addition, emerging health IT solutions like AI powered health monitoring solutions can help the senior living community improve quality of care and reduce total healthcare costs in a variety of ways..

In 2009, when Congress passed the American Recovery and Reinvestment Act, or stimulus package, it included billions in funding to incentivize eligible providers and hospitals to adopt healthcare IT through a portion of the bill called the HITECH Act. And it paid off. As of June 2015, the federal government reported that more than 471,000 healthcare providers participated in the program, with more than $30 billion in incentives paid out. Unfortunately, Congress did not include the senior portion of healthcare providers in the HITECH Act. There are, however, a few federal grant programs that have helped the senior living space adopt health IT.

What does the future hold for senior living and value based care?

The story for the senior living space and senior living operators is one of “last, but not least.” As the transition to value based care unfolds, lawmakers and policymakers are beginning to see that end-of-life care cannot be left out of the picture. Federal workgroups and panels, exploring the role of the senior living space, have been seen cropping up in recent years. Federal studies on the senior living space and health IT adoption have been conducted—drawing more attention to the fact that federal support is needed.

Meanwhile, senior living operators have known all along how important the care is that their organizations provide. Many have found a way to adopt health IT to provide better and more efficient care, despite lack of federal incentives. Value in care is not unknown to the senior living space, it has always been a part of our culture of caring.

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