Value Based Healthcare & ACOs: What Senior Living Operators Must Know

Providers in the senior living space that have held back from participating in accountable care organizations (ACOs) might want to gear up soon for participation. Value-based care–once considered to be voluntary or for front-running organizations–is on a fast track to becoming a national standard for care.

Senior living space providers are an important part of the continuum of healthcare and they can expect to play a significant role as healthcare payment structures change and healthcare in America is transformed.

That transformation took a big leap forward in 2008, when the Centers for Medicare & Medicaid Services (CMS) proposed improving the U.S. healthcare system through the simultaneous pursuit of three aims: improving the experience of care, improving the health of populations, and reducing per capita costs of healthcare. Now, known as “the triple aim,” it has become the standard of value-based care.

After all, “cost, quality and customer experience truly is how we all measure value in the end on anything we purchase,” says Kris Hansen, CEO of Western Home Communities, a continuing care retirement community in Cedar Falls, Iowa.

In June 2015, CMS finalized its most recent rule on the Medicare Shared Savings Program, and a large part of it is intended to ensure continued growth for ACOs.

The final rule is part of a new federal campaign to engender “better care, smarter spending, and healthier people.” The rule coincides with an announcement made earlier this year by the Obama Administration, which calls for 30 percent of Medicare payments to be tied to quality and value through alternative payment models–such as ACOs–by 2016, then bumping that up to 50 percent by 2018.

What’s in the new rule for the senior living space?

The June 4 final rule included an important measure specifically designed for what the federal government calls skilled nursing facilities, or SNFs. For some qualifying SNFs participating in ACOs, it will allow a waiver of the 3-day hospital stay, beginning in 2017. This will make it easier for hospitals to release patients to SNFs, however only hospitals and SNFs participating in the “Track 3” part of the Shared Savings Program can use the waiver. Track 3 requires the participating organizations to take the greatest financial risks.

This means either big rewards or big losses for those participants. If the ACO saves money, the participating organizations will receive part of the savings. If they fail to save, they will have to pay Medicare back for the loss. This is intended to keep hospitals from overusing SNFs via the waiver.

Medicaid will be part of value-based care, too

The federal change from fee-for-service reimbursement is also extending to Medicaid. “Medicaid Managed care is running a parallel track and there will be quality incentives based on triple aim type measures,” Hansen says. “There will also be penalties for poor performers.”

A Health Affairs blog has called the Medicaid Managed care proposal, issued June 1, “a game changer.”

Competition for ACO participation will be high for senior living care providers

The importance of senior living settings in ACO partnerships has been increasingly recognized since October 2011, when CMS issued a final regulation to include nursing homes in ACO participation, according to Richard G. Stefanacci, founder of the Connecticut Geriatrics Society in a recent article in the Annals of Long-Term Care.

Stefanacci, a physician on staff at Greenwich Hospital in Greenwich, CT, says ACO participation will be challenging for nursing homes that are struggling with quality of care, but in a good way, it will put pressure on weaker care facilities to improve standards.

ACOs are only as strong as their weakest link, and participants in successful ACOs are not likely to partner with a nursing facility that has poor quality ratings, he says. On the other hand, senior living organizations that provide high quality care have an opportunity to save an ACO a lot of money by reducing hospital readmissions. Because of this, competition will be fierce for senior living communities that wish to participate in an ACO.

“We have an opportunity to prove our value as members in the senior living space, and we need to be prepared to explain and show why we are of value to be that preferred partner to the ACOs,” Hansen says.

Is my community ready for an ACO?

This talk of ACOs is all well and good. But how can you tell if your community is ready to join an ACO? Dominic Madigan, a Richmond, VA-based healthcare attorney who specializes in helping LTC facilities advises senior living operators to ask themselves these questions before jumping into ACO participation:

  • Is the leadership and staff of my community able to accept and implement the changes necessary for successful ACO participation?
  • Is my organization able to accept the financial risk of ACO participation? If my community contributed Medicare savings for the ACO’s patients, but the overall cost of Medicare for the ACO’s patients increased, can I negotiate a favorable arrangement for my organization?
  • Is my community equipped to use integrated electronic health records to coordinate care with other providers?
  • Is my community able to collect and measure data regarding quality measures and costs? Do I know my organization’s costs well enough to understand risks associated with ACO participation?
  • How is my organization’s relationship with physicians and hospitals in my service area? Whether or not my facility pursues involvement with an ACO, what am I doing to improve relationships with physicians and hospitals, as well as home health agencies, assisted living facilities, “medical home” sponsors, and hospice providers?
  • What does the market look like in my service area? Are hospitals and physicians in my service area developing ACOs? If a competitor chooses to participate in an ACO and I do not, how will that affect my community?
  • Why would an ACO choose to partner with my organization rather than one of my competitors? Do I have the means to provide and expertise in short-term rehab? Can I point to superior readmission rates and resident outcomes? Will my senior living organization contribute to the quality metrics used by CMS to evaluate ACOs?
  • If not ACO participation, what is my organization doing to anticipate future shifts in reimbursement and resident referral patterns?


To sum it up

ACOs are flourishing. They are saving the federal government and healthcare providers money. As time goes on, society is embracing them. They are not likely to go anywhere. If anything, they are likely to become the HMOs of the future. Many have argued that ACOs will achieve what HMOs of the 1980s tried to do: bring down costs while improving care.

Senior living organizations that provide higher levels of care can play a pivotal role in the future of healthcare, as they take on the later responsibilities in the continuum of care a resident needs in a lifetime. Lawmakers and regulators know that without contributions from senior living operators, savings won’t be achieved. It’s not a matter of if, it’s a matter of when you decide to participate.

“All in all this can be seen as an opportunity to create and show your value or it can be seen as a threat, and this will push some folks out,” Hansen says.

But, “make no mistake,” Hansen adds, “value-based care is coming, or is already here depending on your market. Providers need to prepare for it either way.”

Do you think ACOs can be avoided, or do you welcome taking part in one? When do you plan to jump in? If you aren’t ready yet, what is holding you back? Let us know in the comments section below.

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