Reducing Senior Living Operating Costs with Value Based Care

Value based healthcare is built on the premise that better care provided earlier ultimately prevents more costly care later. This is especially important with adults over 65, because seniors incur the greatest portion of healthcare costs in the United States.

Caring for residents with chronic conditions, declining mental acuity, and end-of-life needs comes with the highest price tag, and hence is drawing a lot of attention from healthcare underwriters. How can these costs be contained? The answer everyone is starting to look toward is not the status quo. It’s something new, called value based care.

With the federal government transitioning Medicare and Medicaid services from volume-based care to pay-for-performance, or value based care—and private insurers following in its footsteps—senior living operators are (or will soon be) facing the serious challenge of revamping their operation strategies to keep up.

Participating in an Accountable Care Organization

Instead of striving to keep all beds full, under value based care strategies, it is wiser for senior living facilities that want to participate in an accountable care organization (ACO) to deliberately keep a portion of beds open for patient residents who are cycling through from rehab and acute care facilities, advises Kris Hansen, CEO of Western Home Communities in Cedar Fall, who serves on the board of directors for the International Association for Homes and Services for the Aging.

ACOs are currently the main opportunity for senior living organizations to take part in value based care. Competition is steep for senior living organizations to participate in ACOS, and only organizations that can prevent rehospitalizations and provide other cost-saving aspects of post-acute care will be able to compete for participation in one.

Making the Shift to Value Based Care

Hospitals are looking for senior living space partners that can provide post-acute beds for transfer of their patients. The shift from volume based care to value based care calls for senior living organizations to go from keeping beds full to helping patient residents get better, faster with higher quality more efficient care.

Preventing rehospitalization of these patient residents is the key to value based care—and the reduction of costs– because it holds down costs for an accountable care organization (ACO).  All participants in the ACO either gain incentives together, if they hold down costs, or they are penalized together, if they fail to do so. Value based care will require reinvesting your profits back into the senior living space.

Only senior living spaces that provide top-of-the-line services and technologies can compete with other organizations in the region for a spot in an accountable care organization (ACO), which operates according to value-based reimbursement structures. Not every senior living organization will be chosen by an ACO for participation – only those that can bring down the overall cost of care. And the way to do this will be with the use of technology to assist the human hands that will be caring for residents. In addition, preventative care and proactive care will be key.

The transition to value based care may cost money up front, but it will undoubtedly save money in the future

Senior living operators will need to purchase electronic health records (EHRs), estimated at $40,000 and upwards, to participate in any kind of value based care strategy, particularly an ACO. Information about the kind of care senior living spaces provide will be made more readily available as the senior care world adopts EHRs.

It’s not really a matter of “if” a senior living community should adopt EHRs, it’s a matter of “when.” The sooner EHRs are adopted, the more savings a senior community can accumulate through avoidance of medical errors and penalties, as aided by EHRs. In addition, the sooner these systems are adopted, the sooner a senior community can be invited to join one of the limited ACOs in the region to capture that portion of the senior resident market. All of this affects the bottom line in a positive way, but may not be brought to fruition for several years. It’s a matter of pay now, or pay later.

Electronic health records are very much a part of value based care, because it is through the electronic data they provide that population health can ultimately be improved and penalties avoided.

Researchers will analyze the data and provide guidance on methods and care techniques that are proven to provide better outcomes. In addition, data will be shared publicly about the medical outcomes made possible by ACOs that have adopted value based care models. If senior care communities are members of such organizations, the sharing of such positive outcome data can have an impact on a senior care organization’s reputation and provide a strong competitive advantage.

Currently, under Medicare and Medicaid, senior living organizations are not required to adopt electronic health records. However, according to a new 403-page proposed rule issued by the Centers for Medicare & Medicaid Services, they will still be required to report statistics on the care they provide. Reporting this data while still using paper records will be extremely difficult. Indirectly, this is how the federal government will force senior living spaces to adopt EHRs.

This proposed rule is just the tip of the iceberg, and it sheds light on the direction the federal government is leaning when it comes to senior care. Regulations will evolve from this proposal, which undoubtedly will include both carrots and sticks. The enforcement penalties that will evolve could affect your bottom line. Preparing now for these changes is likely the only way you can survive into the future and provide the type of services and care both seniors and payers will expect. Likewise, transitioning early to value based care by making strategic purchases in health IT, including electronic health records, will streamline care and save money. The sooner the better.

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