Nursing-home quality gets its close-up
This article was originally published in Crain’s Health Pulse.
New York area hospitals are preparing to accept mandatory bundled
payments from Medicare for knee and hip replacements, a change that puts pressure on the nearly 600 local nursing homes where patients may go for rehab after surgery.
Launching on April 1, the initiative accelerates Medicare’s move toward value-based payments and requires hospitals to pay close attention to their post-acute care referrals to skilled-nursing facilities and home health agencies.
As hospitals narrow their networks of preferred providers, rehab facilities will increasingly be asked to demonstrate that they outperform peers in preventing readmissions and post-operative complications, said Joseph Tomaino, a principal in Grassi & Co.’s health care management consulting practice.
Nursing homes are still paid per day, so they’ll need more referrals to offset declining length of stays, he said.
“You’re getting less revenue,” Tomaino said. “The only way that works is if [hospitals] reduce [their] partners from 20 to five nursing homes.”
The consulting firm BDO is advising health care clients to analyze the total cost of episodes of care to weed out laggards. In a recent case study, a hospital client’s analysis found the two skilled-nursing facilities that were receiving its highest volume of patients had higher costs, longer average LOS and readmission rates of more than 20%, well above the 16.6% national benchmark.
“It becomes very Darwinian, and survival of the fittest truly kicks in,” said Patrick Pilch, a BDO consulting managing director, who leads the firm’s health care advisory practice.
CMS recently waived the requirement that patients must have a three-day hospital stay for Medicare to reimburse care at a skilled-nursing facility. The catch: Medicare will honor the waiver only if the patient is referred to a SNF awarded three or more stars from CMS’ rating system, which reflect health inspections, staffing and quality measures.
That could be a death sentence for facilities with one or two stars, said Dr. David Friend, chief transformation officer at BDO. In the New York area, 23% of nursing homes have one- or two-star ratings, according to a Modern Healthcare analysis of CMS data.
Some SNFs will have to make substantial investments to get to a three-star rating, hiring new staff and addressing metrics, such as the portion of patients who report new pressure sores or falls with major injury. That will cut into margins even as these lower-rated facilities see referrals fall, Friend said.
“The winning SNF is going to get more business and be profitable,” he said. “The losing SNF is going to go out of business.”
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