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Analysis of 52 PAC Trends

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November 28th, 2016

I’ve been a Licensed Nursing Home Administrator (LNHA) since 1999 and I’ve yet to see so many changes at one time in Post-Acute Care (PAC). Major market moves are at play, including Kindred’s announcement earlier this month to exit the Skilled Nursing Facility (SNF) business and focus more on its home health (Gentiva) and LTAC business lines.

PAC represents the next frontier of opportunity for the success of ACOs, BPCI Model 2 participants, and CJR hospitals. In fact, of the ACOs which achieved shared savings, most attribute their success to closer PAC care coordination. Hospitals are narrowing networks, wanting to find the best PAC partners possible, and stronger care pathways and coordination are taking place at unprecedented levels.

Our PAC research team recently studied many variables affecting SNFs, Home Health Agencies (HHAs), and Hospice Agencies. Our research consisted of:

  • Interviewing 22 hospital and PAC industry leaders
  • Conducting a literature review
  • Examining reimbursement data
  • Examining PAC trend data

Below are tables summarizing our analysis for the future of SNFs, HHAs, and Hospice Agencies. The tables show variables affecting that each respective entity, a color code indicating the effect of that variable (negative, cautionary, or neutral), and a timeframe of when we project these respective variables and effects will play out. A “notes” column indicates overview thinking.

Our team is actively tracking SNFs, HHAs, and Hospice Agencies trends, as discussed in the following sections. If you would like to discuss any of the variables in more detail please contact me at shawn.matheson[at]leavittpartners.com or 801-326-3586.

Skilled Nursing Facilities (click image to expand)
analysis-of-52-pac-trends-table-1

Key SNF Takeaways: Progressive SNFs have reduced their Medicare Length of Stay (LOS) (their largest lever to control costs) and increased their quality (as evidenced by their OSCAR/CASPER and five-star ‘Nursing Home Compare’ scores — link to SNF compare tool here). SNFs offer advantages of being able to care for higher acuity individuals. However, in the post-CJR environment more SNFs are embracing value-based care and ensuring they are strong partners for surgeons and hospitals so they are not skipped.  We expect that SNFs will continue to “up their game,” but we also expect to see some less advanced SNFs fail and either be acquired or go out of business. Our Leavitt Partners PAC team will soon be publishing a white paper focused on the SNF value proposition in value-based care.

Home Health Agencies (click image to expand)analysis-of-52-pac-trends-table-2

Key Home Health Takeaways: HHAs are seeing a surge of admissions secondary to hospitals increasingly “skipping the SNFs” in the post-CJR world (since April, 2016). Although it will take time for discharge data to illustrate the movement, anecdotally it is a solid trend that is benefiting HHAs. The main question in this shift is: Are HHAs ready to manage higher acuity patients, as historically the sickest patients were first sent to SNFs? We expect to see the pendulum of hospital discharge patterns continue to swing favorably for HHAs, but then swing back for SNFs if hospitals find HHAs are not ready for heavier acuity management, as manifested by patient/caregiver concerns and higher hospital readmissions. Simultaneously, we are seeing HH rates decrease secondary to sequestration, the 2018 HH PPS Final Rule, and the pending HH Value-Based Purchasing (VBP) program. Collectively, these factors create an environment where smaller HH providers, of which there are many, will fail or be acquired, while larger HH providers will grow and increase in their acuity management capabilities. We also expect to see more HH providers utilize technology for virtual visits and telemonitoring.

Hospice Agencies (click image to expand table)
analysis-of-52-pac-trends-table-3

Key Hospice Takeaways: Hospice is the most stable sector within PAC and enjoys a measure of public sympathy and political protection. Hospice agencies have fared well this year, despite the new u-shaped payment curve implemented in January, 2016. Hospice has been a small portion of Medicare spend and generates savings to the Medicare program, but it’s increasingly grown. The main issue to watch is MedPAC’s concern that for-profit agencies have significantly higher Length of Stay (LOS) (107 days) compared to non-profit agencies (67 days). It may take Medicare a couple more years to implement a new payment method, but watch for CMS to control for LOS, which is the main lever of hospice agencies to generate profit. Some future payment methods may include a departure from daily rates and a future in case rates.

Also watch for language from the Senate Chronic Care Working Group, which has proposed Medicare Advantage (MA) plans be “carved-into” the hospice benefit. Currently all MA beneficiaries under hospice care automatically revert to traditional Medicare. Differently stated, the hospice benefit is currently a MA “carve-out”. However, if hospice becomes a MA “carve-in”, MA plans will create narrow hospice networks at the least, or an MA plan will have their own hospice agency and natural steerage at the most.

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