PMD Advisory Services White Paper: Post-Acute Care Strategies

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A Paradigm Shift in Traditional Skilled Nursing Care Business Models is Upon Us: For Post-Acute Care Providers, the Time to Act is Now!

Healthcare reform, accountable care, bundled payments…the environment within which healthcare professionals operate is being rapidly altered and as hospitals and physician groups revise their business models to account for regulatory and Medicare-imposed changes, post-acute care providers opting to continue with the status quo will soon be confronted with a wake-up call. More specifically, hospitals and physician groups, anxious to mitigate many of the new risks and penalties enforced upon them, are taking aggressive measures to improve care, reduce costs, and lessen occurrences of re-hospitalizations. And to accomplish these objectives, they are introducing new financial arrangements and service delivery methods, whereby risks are being transferred to operators of skilled nursing facilities (SNFs). With Medicare payments to hospitals and physician groups now reflecting total patient care, including post-acute care, providers of skilled nursing care are being held more accountable than ever, resulting in an immediate need among SNFs to re-evaluate their strategies and hospital relationships, lest they face deterioration in market share. This white paper provides an overview of the evolving landscape and offers three strategies to confront it head-on, protect market share, and emerge among the winners.

The Evolving Landscape and the Impact on Post-Acute Care Providers
Until recently, hospitals had little reason to consider the actions of SNFs and their impact on hospital readmissions. But in 2012, the Centers for Medicare & Medicaid Services (CMS) began to penalize hospitals for readmissions. And taking it one step further in 2013, CMS started to factor in total Medicare spending per beneficiary, holding hospitals participating in value-based payment plans accountable for total spending per patient episode, commencing three days prior to hospital admission and ending 30 days following discharge. These changes resulted in greater financial risks for hospitals.

Hospitals, in response, have made strides to reduce readmissions and control costs. And in doing so, they are transferring much of their newfound risk to providers of skilled nursing care by holding them responsible for post-acute care costs and re-hospitalizations. Moreover, post-acute providers will soon be accountable for readmissions not only by hospitals, but also by Medicare directly, which will phase in readmission penalties for nursing facilities by 2017 (and it will do so using 2016 data).

With hospitals now becoming increasingly selective in the SNFs to which they discharge patients, they are choosing those offering high quality of care (as measured by CMS Five-Star Quality Ratings), cost-saving technologies, and fewer hospital readmissions. And while the selectivity applies most directly to SNFs participating in bundled payment plans, those that do not (or cannot) participate at this time face challenges, too. More specifically, risks include a potential loss of referrals and deterioration in market share as hospitals opt to refer patients to providers with which their goals are most closely aligned. For many SNFs, this could mean life or death.

To attract the attention of hospitals and physician groups and retain market share, SNFs should expect to demonstrate a willingness to accept greater financial risk, maintain high standards of operating efficiency, and make significant investments in technology. And to survive amidst the changing landscape, post-acute care providers must aggressively re-think their current strategies, lest their referral streams diminish and market shares will be threatened.

Developing a Win-Win Strategy
In designing an overall strategy to address the changing environment and expectations of greater risk and accountability, SNFs are encouraged to develop and pursue a strategy that is aligned with hospital goals. A collaborative approach, demonstrating cost-saving measures, a commitment to quality, shorter stays, and fewer re-hospitalizations, will be the most successful.

As SNFs re-think their existing business models, Maryann Timon, Director of Post-Acute Care Strategies for PMD Advisory Services, advises SNFs to adopt a three-prong approach. Rooted in an evaluation and understanding of readmission patterns and discharge behaviors of local hospitals and market shares of competing providers of post-acute care, strategies founded on these three focus areas award SNFs the upper hand in positioning themselves as hospitals’ partners of choice.

Sub-Strategy A: Readmission Analysis
To reiterate, hospitals face Medicare-imposed penalties for readmissions and starting next year, post-acute care providers will be directly penalized, too. As such, reducing readmissions is critical for acute and post-acute providers alike. And indeed, without a goal of readmission reduction, SNFs will certainly see both fewer referrals from hospitals and rising fines from CMS. But for those that do embrace a strategy to lessen re-hospitalizations, opportunities to partner with hospitals will emerge.

Crucial to joining in the conversation with hospitals is recognition of the diagnostic groups for which readmission rates trend higher than the national average. As such, in pursuing Sub-Strategy A, knowledge of readmission trends and “pain points” of local hospitals is essential. In essence, PMD’s Ms. Timon notes that an evaluation of hospital-specific readmission patterns for each of the seven disease states monitored by CMS (i.e., heart failure, hip/knee surgery, stroke, COPD, pneumonia, heart attack, and coronary artery bypass graft) allows post-acute care providers to develop disease-specific management programs to specifically address the disease states for which readmissions are highest, making possible the pursuit of hospital-targeted readmission reduction strategies. And in developing these programs, SNFs must be able to offer a complete suite of clinical guidelines, physical plant amenities, specially trained staff, and state-of-the-art equipment.

When armed with measurable specialty programs aimed at shortening stays and lessening repeat hospital visits for the most readmitted disease states, coupled with an awareness of re-hospitalization trends for all acute care providers within the market area, SNFs will be well positioned to approach hospitals suffering from the greatest readmission struggles. And with a common goal of readmission reductions, they will have an edge on the competition in capturing the attention of those hospitals.

Sub-Strategy B: Discharge Analysis
On average, approximately 20% of hospital patients are discharged directly to SNFs. And while discharges to SNFs are declining overall, discharges for some diagnostic categories are rising. In pursuing Sub-Strategy B, Ms. Timon of PMD Advisory Services advises post-acute care providers to analyze discharge patterns of local hospitals for each of the seven disease states monitored by CMS.

By gathering data on the number of patients discharged to SNFs and illustrating them graphically by hospital and diagnosis, providers can home in on the hospitals and the disease states that offer the greatest market opportunities. A clear understanding of hospital and diagnosis-specific discharges enables SNFs to redirect their focus on the development of disease-specific management programs that address not only the disease states most likely to be discharged, but also the hospitals most likely to discharge them. Furthermore, it allows for the prioritization of program development, such that providers can choose to dedicate more of their attention to the hospitals and disease states offering the most discharges to SNFs, less to those having more moderate numbers, and none or minimal to those with the least. And by having high quality, measurable specialty programs in place, designed with specific hospital and disease state discharges in mind, SNFs will significantly boost their odds of capturing the attention of hospitals.

It should be noted that leveraging data and intelligence regarding both readmissions and discharges engages hospitals to partner and that Sub-Strategies A and B are not mutually exclusive. In fact, the strongest opportunities to partner, protect/enhance referral streams, and maintain/increase market share lie in a combination of the two. Indeed, providers of skilled nursing care would do well to work toward strategically aligning with hospitals having above average readmissions and the greatest number of discharges to SNFs.

Sub-Strategy C: Market Share Analysis
Drilling deeper into discharge patterns of local hospitals, Ms. Timon suggests taking the analysis one step further to assess one’s own market share of discharges, along with market shares of each competing SNF within the immediate market area. Sub-Strategy C provides an additional, data-driven understanding of the actual state of the local market. And to pursue this strategy, hospital discharges by diagnostic type are quantified according to the number of discharged patients admitted to each competing provider of skilled nursing care within the area. With knowledge of one’s own market share of discharges across eight broad diagnostic categories (i.e., cardiology, medicine, neurology, oncology, orthopedics, pulmonology, surgery, and urology), coupled with an understanding of the competition’s market shares, a SNF can quickly gauge its position within the marketplace for a given diagnostic category.

While knowledge of one’s own share of hospital discharges relative to the shares of competing facilities is insightful, to formulate a market share strategy requires further analysis. Specifically, once the market shares of the competition are ascertained, Ms. Timon recommends an evaluation of each competitor to determine its ability to provide specialized care. How well equipped is the competition to care for discharged patients for each of the eight diagnostic categories? Once revealed, the answer will result in the identification of competitors having the most fertile ground from which referrals can be captured or a gap in the market capabilities in which lie an opportunity to capture market share.

Finally, with all sub-strategies in place, Ms. Timon favors the creation of a matrix, whereby the data gathered from each analysis are synthesized. By plotting the number of hospital readmissions and discharges to SNFs for each disease state, clear patterns emerge. Furthermore, when viewed in tandem with knowledge of the strengths and weaknesses of competing facilities, SNFs can discover untapped opportunities, thereby allowing for the prioritization and selection of disease-specific program development and hospital alignment and for the identification of a competitive advantage. And with this matrix, they can develop and pursue an overall strategy that not only is aimed at hospitals with the greatest number of diagnosis-specific readmissions and discharges, but also is sensitive to their competitors’ abilities.

A Win-Win Strategy…The Outcome
Realizing a need to strengthen ties with hospitals and ensure a steady stream of referrals well into the future, providers of skilled nursing often ask, “Once at the table with hospitals, how can we present ourselves as the best option for their discharged patients?” Following Maryann Timon’s three-prong strategic approach answers this question.

With knowledge of hospital readmission and discharge patterns, as well as market shares and competitors’ strengths and weaknesses, SNFs are provided with the basis to develop a plan to strengthen hospital relations and protect or grow market share. More specifically, by taking the data-driven outcomes of the readmission, discharge, and market share assessments and overlaying them with a qualitative evaluation, a customized, localized strategy evolves, whereby specialty programs, specific hospital alliances, and impacts on market share can be identified. With fully developed disease state management programs in place, each demonstrating measurable quality post-acute care, reduced re-hospitalizations, and an ability to seamlessly admit volumes of hospital discharges, SNFs will be well positioned to approach and capture the attention of specific hospitals within their marketplace. And while hospital partnerships and goal alignment are of greatest interest to post-acute providers participating in bundled payments, those that do not or cannot participate would likewise do well to pursue strategies aimed at addressing hospital discharge patterns and enhancing market shares (i.e., Sub-Strategies B and C). With a stable referral stream in place, providers of skilled nursing care will be well positioned for the changing landscape within which they operate.

The Recap Fact:
Healthcare is changing and the landscape within which providers of acute and post-acute care alike operate is becoming ever more costly and competitive. And in the face of this evolution, existing business models are threatened as Medicare-imposed penalties increase and parties are held more accountable than ever. In response, hospitals are looking to post-acute care providers for assistance with cost control and readmission reduction. And to ignore their demands and expectations means near-certain death for SNFs. To survive, prudent SNFs must embrace the situation at hand and arm themselves with knowledge of local readmission, discharge, and market share trends. With this information in place, opportunities to develop or enhance specialty programs, partner with hospitals, and capture market share become apparent, resulting in the formation of a winning strategy.

Don’t be Left Behind…The Time to Act is Now!
Maryann Timon, RN, is a veteran of the post-acute care industry, having more than 35 years of executive level experience in post-acute care, senior housing, and community-based services. As PMD Advisory Services’ Director of Post-Acute Care Strategies, she specializes in strategic planning for skilled nursing, sub-acute rehab, and home- and community-based services, with a particular emphasis on the impact of the Accountable Care Act on providers.

To take the next step and develop a winning strategy, contact Maryann at (443) 223-1115 or maryann.timon@pmdas.com

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