The transition to a health care delivery model that positions care and payment based upon the value of the care is a dramatic change from the traditional method of being paid based upon the volume of care provided. The goals of this new model are focused on in the Institute of Healthcare Improvement’s Triple Aim, which can be summarized as better patient outcomes, reduced cost of care and an improved patient experience.
The Federal government and numerous providers have created, modeled and implemented innovative ways to achieve the Triple Aim Goals. For example, the Center for Medicare and Medicaid Innovation Center (CMS Innovation Center) was created to test alternative payment and delivery models related to the reduction of cost and improving care. From Fiscal Years 2013 through 2016, CMS Innovation Center has announced or implemented 39 service delivery models and initiatives. Through these and other initiatives, the March 2017 Medicare Payment Policy Report to the Congress states “the Congressional Budget Office (CBO) testified (in 2016) that the CMS Innovation Center’s activities are expected to reduce federal spending by roughly $34 billion from 2017 through 2026.”
Post-acute care services (skilled nursing, home health, long-term care hospitals, inpatient rehabilitation facilities, other inpatient hospitals and readmissions) is a large percentage of the cost of care paid by Medicare. In fact, based on Avalere’s Vantage Care Positioning System analysis of the 2015 Medicare Fee-For-Service file, “43% of all national hospital discharges were followed by a post-acute care stay.”
One strategy for the value-based service delivery method increasingly being adopted by acute providers and payors is the development and utilization of a post-acute preferred or Narrow Network of providers.
The transition to value-based services and payments has altered the current management and care of post-acute patients creating even greater risk for skilled nursing facility (SNF) operators and owners. The industry is increasingly experiencing a shift of select patients that historically would have gone to a SNF for short-term rehabilitation services but are now often bypassing the SNF and going home from the hospital with home health care, which is a less expensive care alternative. The SNFs that do get referrals are having to deal with higher acuity patients combined with pressures to reduce the length of stay and improve outcomes.
The increase of alternative payment models has also seen a growth of at-risk insurance options, including Managed Medicare or Medicare Advantage plans. According to the Kaiser Family Foundation, total Medicare Advantage enrollment grew by about 1.4 million beneficiaries, or 8 percent, between 2016 and 2017. On average, Managed Medicare plans reimburse nursing home operators about 20 percent less than the typical Medicare payment of about $500 per day, according to Senior Housing News. The managed plans are also usually more aggressive about controlling patients’ length of stay and getting them discharged more quickly to a lower cost setting.
These pressures are some of the reasons post-acute providers are often eager to join a Narrow Network. Additionally, if they do not, they may have their referrals for short-stay Medicare and Medicare Advantage patients reduced and even eliminated. This very real threat has prompted some post-acute providers, in particular independent SNFs, to view Narrow Networks as a survivability strategy. They recognize that they often do not have the capital, other resources and skillset to compete with larger, better capitalized chains and must take action.
Building a Narrow Network
Once created, there are several challenges to optimizing a Narrow Network. According to a Premier Inc. survey, “while 85 percent of health system leaders are interested in creating or expanding partnerships with preferred and local post-acute care providers, more than 9 out of 10 report they may experience challenges in creating these partnerships.” Several health systems have implemented a Narrow Network, including Banner Health, Catholic Health Initiatives, the Cleveland Clinic and the Henry Ford Health System.
To determine which post-acute providers should be part of a Narrow Network, careful due diligence must be completed. The acute providers cannot rely upon those to whom they have discharged the majority of patients historically. Those referrals are often based upon personal relationships between hospital discharge planners and post-acute provider marketing and admissions personnel, emotions, and ease of discharge based upon frequency. Instead, the selection of the Narrow Network members should be based upon at least these five criteria:
- Quality metrics (measures and reliability of data)
- Bed capacity
- Geographic coverage (to support patient preference)
- Skill set (services, staffing, equipment and clinical capability)
- Like-minded, flexible leadership operating a stable provider