Health Care Insights and Outlook 2017
February 21, 2017

Health Care Insights and Outlook 2017

Post-Acute Consolidation in Value-Based Health Care
In the shift from volume- to value-based care delivery models, many are asking the question: What will the consolidation of post-acute providers look like over the next five to ten years, and how will this consolidation drive value to the consumer—if at all? Given the current trend of enhanced utilization of community- versus facility-based care options, such as in-home and outpatient service providers, the role of the skilled nursing facility (SNF) has changed drastically. For most SNF providers, gone are the days of waiting lists and low-acuity patients. Instead, providers are required to transition and retool with an intense focus around investing in technology and enhancing the competencies of staff to handle a much sicker population while simultaneously driving down post-hospital lengths of stay. Under payment reform, survival of post-acute providers will hinge more than ever on hospital system preferred network inclusion. The good news for skilled nursing providers is that most hospital systems are seeking partnership arrangements and typically not employing an acquisition strategy to fill that component of the care delivery continuum. This environment will bode well and remain opportunity rich for organizations willing to venture into what may be unfamiliar waters.

Health Systems Create Continuum of Care Through Post-Acute Care Relationships
Health systems will enhance efforts to create a continuum of care through strategically establishing formal functional relationships with select post-acute providers to secure high-quality, cost-competitive services. A mix of buy, build, joint venture, and contract approaches will be commonly employed based on market dynamics, access to capital, and individual health system assets and competencies. The continued pressure of value-based payment arrangements, increasing presence of Medicare Advantage, and the rise of two-sided risk accountable care organizations (ACOs) are among the drivers. To succeed, execution of an effective post-acute strategy will demand that health systems not only ensure access to high-quality services with competitive cost profiles, but also effectively manage the patient across the continuum. This will give rise to further investment in risk stratification, non-acute care management, and redesign of care delivery outside of the acute setting—areas often not strengths of health systems.

Momentum for Value-Based Payment Transformation Continues
The shift from rewarding volume-to-value through Alternative Payment Models (APMs), such as bundling and accountable care organizations (ACOs), is likely to become more pronounced as payment models grow and evolve. In 2015, the Medicare program established a goal that 50 percent of the fee-for-service payments be made through APMs by the end of 2018 and, so far, it has been on track to easily meet this goal. While the election has created some uncertainty about health care policy, ongoing budget pressures and the need for “advanced” alternative payment options under newly–implemented physician payment system, will create continued impetus to move forward with APMs. Those providers diving in to the deep end of the risk-taking pool, through directly taking risk under bundled payments or seeking gainsharing opportunities with other at-risk entities, will learn the quickest how to implement effective care redesign and survive in these swirling currents.

Select Post-acute Providers Emerge as Care Aggregators in At-Risk Marketplace
To secure a higher value position in an increasingly at-risk marketplace, select post-acute providers with favorable market dynamics, scale, capabilities, and capital will emerge as “aggregators” to create non-acute networks that provide, arrange for the provision of, and coordinate post-acute and community-based services. As key partners to health systems and ACOs that need access to a true continuum of care, but lack the assets, ability, or interest to create and manage it, these aggregators will have the capability to accept and manage risk. These efforts will position the aggregators to thrive in an at-risk environment: capturing a portion of the value created and distinguishing themselves from their more traditional post-acute brethren who will be viewed as contracted, low-margin, commodity services.

Community-Based Primary Care Is Key to Providing Value-Based Health Care
The role of primary care providers has never been more in the forefront of reshaping health care delivery to the most frail and medically complex patients. High-quality, high-touch care provided in the community or post-acute setting by house call or SNFist practices can be key to meeting value-based payment criteria for acute care, skilled nursing, and home health providers. Enhanced payment opportunities for advanced care planning, chronic care, and transitional care management supports the role these providers can play in population health management and risk mitigation. Additionally, these programs create significant value for at-risk and managed care players, positioning providers to participate in the value created. The expansion of efficient, effective, and compliant community-based practices addresses the quadruple aim: improved patient experience, better outcomes, lower costs, and greater provider satisfaction. Clinically integrated community-based medicine will enhance delivery of care to those at greatest risk of fragmented care and high costs.

Medicare and Medicaid Managed Care for Elderly & Disabled Populations Continues to Grow
As baby boomers age into Medicare eligibility, there appears to be less resistance to managed care. Accordingly, the penetration of Medicare Advantage has grown by over 30 percent since 2010, with five states that now average greater than 40 percent penetration. In addition, plans in some areas are more aggressively courting influential doctors by raising fees and moving towards shared savings payment models. At the same time, state Medicaid programs are increasingly turning to Managed Long Term Supports & Services (MLTSS), whereby long-term care populations are either voluntarily and mandatorily enrolled in managed care plans, in some cases integrated with a Medicare managed care product as well. In response to these trends, providers will need to up their game on managed care contracting, including strategies to achieve enough scale to attract plans’ attention in order to implement value-based payments. This will include post-acute providers forming “Independent Provider Associations (IPAs),” once the exclusive province of doctors and hospitals, as a strategy to achieve scale. This strategy is not for the faint of heart, however, as these otherwise competing providers will need to agree to self-imposed quality standards and meaningful strategies for clinically integrated care and sharing risk in order to be effective and pass legal muster.

Health Care Consumers’ Involvement in Their Care Continues to Grow
While the impact of a new administration on changes on delivery of and payment for health care is unknown, one thing is known—the trend of patient involvement in their care will continue to grow. Health care consumers have become more educated, more financially involved, more empowered, and more outspoken in their health care spending and decision-making. Supporting this change in health care consumer behavior is increasingly core to providers’ success. Providers must respond to this trend by offering the services that consumers need and want—at the price and convenience they are looking for. When health care consumers can go to a local retailer for in-and-out diagnosis, what keeps them engaged and loyal to a provider organization? The answer may vary by market but most answers will be consumer focused, such as wellness programming, health information access, continuum of services, and convenience and affordability of options.

Continued Focus on Readmissions
In 2016, CMS announced that significant progress has been made in reducing readmissions in the Medicare program over the last five years, noting that 11 states had a 10 percent reduction in 30-day readmission rates. At the same time, CMS announced that the readmission penalties imposed on hospitals rose by one-fifth, penalizing hospitals to the tune of $500 million this coming year. Now SNFs will get into the act. Effective October 1, 2018, SNFs will get penalized (and possibly rewarded, though that is not clear yet) for their achievement or improvement (whichever is better) in their 30-day readmissions rate for patients admitted to SNFs. Although October 2018 sounds far away, the performance period for the adjustment actually already started on January 1, 2017, so SNFs should be reducing readmissions now to mitigate the consequence of readmission penalties later next year.

Community-Based Organizations Partner with Health Systems, ACOs, and Payors
Due to increasing recognition of the clear association between addressing the social determinants of care and providing sustainable value, community-based organizations (CBOs) offering and coordinating social support services will build more structured relationships with health systems, ACOs, and payors. A recent national study of ACO executives noted that 84 percent felt such relationships were key to achieving meaningful improvements in population health outcomes. While referrals to CBOs have long been common, formally integrating them into the care plan and managing across the continuum has not. These partnerships will face several challenges. Among them are cultural and language barriers; a still limited appreciation for the value from the traditional provider community; high variability in the quality, capability, and infrastructure of CBOs; and the continued lack of functional outcomes measures and reimbursement mechanisms.
Palliative Care Achieves Widespread Recognition
Palliative care will achieve more widespread recognition for improving quality and delivering value, leading to greater acceptance and penetration, particularly in community-based services. As health care and community-based providers feel continued pressure to create value by improving care while reducing costs, palliative care is emerging as an underutilized tool in the care delivery toolbox. Patients that receive consultative or integrated palliative care at varied points throughout their lifespan to address complex health needs experience greater satisfaction with overall care, as well as less depression and anxiety; palliative care also reduces hospitalization, emergency department, and overall health care costs. Integrating palliative care strategies across the care continuum will support patient, provider, and payor goals in achieving quality, while managing risk and enhancing population management acumen.

PACE Continues to Grow Through Traditional and Non-Traditional Sponsors
Long considered the gold standard in person-centered care delivery for community-dwelling, but nursing home qualified dual eligible seniors, Programs of All-inclusive Care for the Elderly (PACE) are poised to continue the significant growth of recent years. New opportunities for regulatory and enrollment flexibility through updated proposed regulations released in July of 2016 and in the PACE Innovation Act of 2015 (PIA); faster time to market with a more efficient application process; and the new opportunity for previously discouraged for-profit program sponsorship has created much deserved interest in PACE. These developments, among others, indicate the Centers for Medicare and Medicaid Services (CMS) believes in the financial and clinical outcomes of PACE and is encouraging faster growth and expansion. As recently as December 2016, CMS released a request for information seeking public input on potential adaptions to the PACE model of care and expansion to serve additional populations, such as individuals with physical disabilities, those who are under 55, or those who have not yet reached nursing home eligibility. When viewed as a key population health management tool for select segments of medically complex individuals, ACOs, health systems, managed care organizations, and senior living communities are increasingly recognizing the symbiotic relationships possible with PACE. In 2017, PACE will continue to grow, attracting interest and investment from traditional and non-traditional sponsors.

Workforce Shortage Drives Employee Engagement Programs and Wage Increases
Workforce issues are confronting providers at all locations and levels. Large markets are seeing fierce competition for the same employees, and small markets are seeing critical shortages of caregivers. Shortages include primary care practitioners and direct caregivers. Population forecasts suggest an ongoing trend of decreasing numbers of workers to care for the rapidly growing segment of those aging, many with advanced and chronic illness, and providers are responding. Workforce challenges have hastened the focus on employee retention and engagement; driven the development of employee education programs; and increased wages in many markets. As providers endeavor to respond to these changes, they must work with local educators, communities, and other providers to ensure a strong and steady workforce to care for a rapidly aging America, while seeking to achieve lower cost of care goals.

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