Health care executives are facing new management challenges as payers shift more risk to providers. As evidenced by the Bundled Payments for Care Improvement initiative and, most recently, the Comprehensive Care for Joint Replacement model, hospitals are being pushed to assume greater risk for care episodes. This risk can extend well beyond the acute care discharge. Until recently, participation in BPCI programs has been optional, but that is changing. With the April 1 launch of the CJR model, the Centers for Medicare & Medicaid Services has mandated which hospitals will participate and how much they will be paid. The days of opting out of bundled payment initiatives are numbered.
What are the implications for health care executives as they assume responsibility for care that extends beyond the walls of their hospitals? They will need to minimize variation in cost and quality for a bundled payment episode. Larger integrated delivery networks that already offer post-acute care, like skilled nursing facilities and home health care services, typically have a leg up in managing cost and quality. But even these networks can face challenges if they have not invested in integrated care pathways, care management and transition resources, and information systems.
Executives who are not part of an integrated network are navigating new terrain. They lack the formal mechanisms that might enable direct control of post-acute care, so they must establish relationships, processes and infrastructure to achieve coordination and control with trusted post-acute care partners. Only through these partnerships can they hope to deliver high-quality care at a cost below the established target price of the bundle.
Identifying and selecting post-acute partners has become critical. Post-acute care providers are no longer simply a downstream referral partner. They become an extension of the hospital’s care delivery model and have a much more direct impact on a hospital’s reputation and bottom line than they did before. Hospital executives will need to adopt different approaches to managing these relationships. Such approaches apply to the entire range of post-acute care providers.
Until recently, hospital case managers simply provided patients with a list of facilities, typically with little information about what differentiates one from another. Fifty percent of hospitals refer patients to 18 or more post-acute providers, and some hospitals send patients to as many as 30 or 40 different facilities. In such cases, patients generally fall back on factors like proximity and word of mouth.
Today, with risk-based programs such as BPCI and CJR, hospital executives should re-examine their post-acute provider relationships and hone in on a smaller group of strategic partners to ensure that high-quality care is delivered — at the right time, in the right place and at the appropriate cost.
At their base level, such arrangements involve a “preferred provider” status that includes data exchange protocols, transition of care milestones, issue escalation procedures, service level commitments and so forth. They can also be more elaborate, like the joint venture between Penn State Milton S. Hershey Medical Center and Select Medical, where a 98-bed rehab facility is located on the medical campus. Other variants include rental arrangements as with Trinitas Regional Medical Center in Elizabeth, N.J., which has leased space to CareOne for a 25-bed long-term acute care entity in the hospital.
Robust vetting process
Selecting strategic partners, regardless of the type of relationship, requires that new questions be asked during the vetting process. Here are some that are key:
How strong is the quality track record? Scrutinize clinical measures such as 30-day readmission rates, average length of stay, infection rates, and patient and family satisfaction rates. This information will vary depending on the institution, but understanding relative performance of these measures can help to guide provider decisions. Also, as is clear in the new CJR model, a CMS quality rating of three stars or higher is needed for the three-day-stay rule to be waived so patients can be transferred to post-acute settings more quickly. Today, only one out of every three nursing homes in the 67 CJR markets is rated three stars or higher. Strategic partners should have a proven record of delivering superior outcomes.
How easy is it to transfer patients into the post-acute setting? Hospitals need to understand a post-acute facility’s ability to accommodate the hospital’s referral patterns (volume, time of day, patient type, clinical complexity, discharging service lines). How is technology used to facilitate care transitions? Also, what is the average response time for referral requests? How efficiently does the referral process function for your busy case management team? The process for transferring patients to a post-acute facility should be both timely and frictionless.
How prepared is the facility for truly integrated care delivery? For post-acute providers to operate as an extension of a hospital’s care delivery model, there needs to be agreement on managing care pathways, key milestones and care transitions. Hospitals must be able to monitor patients in post-acute settings in much the same way as they monitor their own patients. Doing so places a premium on providers with care planning and management systems that enable real-time data exchange and that issue alerts to hospital case managers when specific milestones are at risk. Having access to the data is not enough. In a strategic partnership, both parties meet on a regular basis to review trends, identify readmission causes and understand why specific therapy milestones have not been achieved.
How efficiently are care and services delivered? Success with bundled payments comes from delivering the appropriate care at the lowest possible cost. Hospitals will need to analyze Medicare claims data to identify high- and low-cost providers. They will also need to assess providers’ ability to manage variation in cost and quality. Can they highlight outliers, identify causes and take remedial action? Are they willing to collaborate with their referring hospital partners to improve efficiencies? Hospitals need assurances that strategic partners are doing everything they can to deliver a bundled service at or below CMS-established price targets.
Disciplined selection and management
Selecting strategic partners will require a rigorous approach that should include comprehensive reviews of cost, quality and market data; requests for proposals that outline service and value expectations; on-site facility reviews; and interviews with senior leaders and key clinical staff. Once partners have been selected, new value-based collaboration agreements with gain-sharing methodologies will need to be negotiated. While some hospitals might already have adequate resources in place to take on broadened analytic and negotiation activities, others will need to expand their resources and should consider looking to other industries for talent.
As hospital executives develop their networks, they will find that many post-acute providers are already taking steps to differentiate themselves in the new world of value-based care and bundled payments. Failure to do so increases the risk that they won't make a hospital’s short list of potential strategic partners.
© 2016 by Numerof & Associates Inc. All rights reserved.
Michael N. Abrams, M.A., is managing partner and Gordon Phillips is a consultant at Numerof & Associates Inc. in St. Louis.