SNF Industry and Evolving Revenue Models August 2016 Medicare - - PowerPoint PPT Presentation

SNF Industry and Evolving Revenue Models

August 2016

SNF Industry and Evolving Revenue Models, August, 2016

Medicare Challenge and Opportunity

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CMS must encourage decreased SNF lengths of stay through non-FFS payment models in order to meet the needs of a surging patient population, as Medicare funds are limited. Nevertheless, overall SNF Medicare patient days are projected to grow with increasing Medicare enrollment. Sophisticated, Value-Driven SNF Operators Will Thrive  Shifting payment systems will incentivize patient outcomes and cost efficiency  Demographic trends and increasingly selective networks will provide volume

SNF Industry and Evolving Revenue Models, August, 2016

Medicare Payment System Continues to Evolve

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Shift Away from Traditional Fee-for-Service (FFS) from 2010 to 2015, Continued but Slower Growth in Alternative Payment Going Forward 2010 2015E 2020E

Sources: CMS Office of the Actuary for Spending and Enrollment. Avalere analysis for alternative payment model projections.

SNF Industry and Evolving Revenue Models, August, 2016

Medicare Payment System Continues to Evolve

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Increasingly FFS Payments will be Bundled or Subject to Value-Based Adjustments

Sources: CMS Office of the Actuary for Spending and Enrollment. Avalere analysis for alternative payment model projections.

SNF Industry and Evolving Revenue Models, August, 2016

Attractive Fundamentals: Increasing Volumes

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SNF days projected to grow due to increasing enrollment, even while Medicare patient lengths of stay decline under alternative payment models (bundling, managed care, ACOs)

47.72 55.83 64.47 81.97 92.40 105.79 81.97 91.22 101.53 81.97 91.22 96.59 40 50 60 70 80 90 100 110 2010 2015 2020 (Millions of Days or Beneficiaries)

Yearly Medicare SNF Volume (Days)

Total Medicare Enrollment (Beneficiaries) Conservative Moderate Aggressive

Source: SNF Volume from November 2015 Avalere Health projection model (“Assessment of SNF Reimbursement and Utilization Landscape” Report); Medicare enrollment from 2015 Medicare Trustees’ Report

Note: Conservative, Moderate, and Aggressive refer to model assumptions about rate of growth in alternative payment models (not traditional fee-for-service)

SNF Industry and Evolving Revenue Models, August, 2016

Goals of the Centers for Medicare and Medicaid Services (CMS)

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 CMS Quality Strategy developed to align with the three broad aims of DHHS National Quality Strategy:

• Better care
• Smarter spending
• Healthier people, healthier communities

 CMS Goal #1: 50% of Medicare payments tied to quality or value through alternative payment models (ACO’s and bundling programs) by end of 2018  CMS Goal #2: 90% of Medicare payments tied to quality or value through alternative payment models or value-based purchasing by end of 2018

SNF Industry and Evolving Revenue Models, August, 2016

Types of Alternative Payment Models and Bundling Programs to Date

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 Medicare Advantage (MA)

• Commenced in 2006 as Medicare Part C benefit
• Plans include HMO’s and PPO’s
• Replaces traditional Medicare FFS for Part A and B services
• Medicare beneficiaries can enroll voluntarily
• Plans bill Medicare for A and B services based on beneficiary

risk assessment; bill beneficiaries for out-of-pocket costs or additional coverage options  Accountable Care Organizations (ACO’s)

• Authorized by 2010 Affordable Care Act (Obamacare)
• Networks of doctors, hospitals, and other providers

responsible for coordinating care for large groups of Medicare beneficiaries (min. 5,000)

• Replace traditional Medicare FFS for Part A and B services
• Unlike MA plans, must meet quality standards to realize

savings, and beneficiaries can choose out-of-network providers

SNF Industry and Evolving Revenue Models, August, 2016

Types of Alternative Payment Models and Bundling Programs to Date

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 Value-Based Purchasing (VBP)

• Authorized by Protecting Access to Medicare Act of 2014

(PAMA)

• Commencing October 2018
• Traditional Medicare FFS discounted by 2%
• SNF’s can earn back some or all of discount based on ranking
• f rehospitalization rate for prior calendar year
• Only 50% to 70% of total discount will be returned to SNF’s,

resulting in overall savings to Medicare

SNF Industry and Evolving Revenue Models, August, 2016

Bundling Programs

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 Comprehensive Care for Joint Replacement (CJR)

• CJR 1: 5-year pilot bundling program commenced 4/1/16

and runs through 2020, covering hip or knee joint replacements

• CJR 2: 5-year bundling program to commence 7/1/17 and

run through 2021, covering surgical hip or femur fracture treatment

• Provides episodic payments (capitation) for hospitalization

and post-acute care (PAC) for 90 days’ post-discharge

• Mandatory participation by 800 hospitals in 67 MSA’s

(covering 25% of nation’s population)

• PAC for hip/knee joint replacements and for surgical

hip/femur fracture treatment represents 7% and 6%, resp.,

• f SNF Medicare revenue nationally

SNF Industry and Evolving Revenue Models, August, 2016

Bundling Programs

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 Cardiac Bundle

• 5-year bundling program to commence 7/1/17 and run

through 2021, covering heart attacks and bypass surgeries

• Provides episodic payments (capitation) for hospitalization

and PAC for 90 days’ post-discharge

• Mandatory participation by hospitals in 98 MSA’s to be

selected randomly

• PAC for heart attacks and bypass surgeries represents 2% of

SNF Medicare revenue nationally

SNF Industry and Evolving Revenue Models, August, 2016

Bundling Programs (cont’d)

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 Bundled Payments for Care Improvement (BPCI)

• 3-year pilot program now in year 3; just extended by CMS for

2 years to allow for better evaluation of effectiveness in improving care and reducing costs

• Voluntary participation by over 1,500 providers to date

(hospitals, physicians, SNF’s, and other PAC providers), including 5% of SNF’s nationally

• Provides episodic payments under varying bundling models

for up to 48 diagnostic conditions  Other Payment Concepts:

• In March 2016 MedPAC recommended to Congress a unified

PAC PPS system to replace FFS system

• AHCA advocating legislation for similar SNF-bundled PAC

payment system, currently under review by the CBO

SNF Industry and Evolving Revenue Models, August, 2016

Keys to SNF Success

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1. Patient Satisfaction 2. Patient Outcomes 3. Cost Efficiency 4. Coordination of Care with Other Providers

SNF Industry and Evolving Revenue Models, August, 2016

Keys to SNF Success: Patient Satisfaction

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 Best single measure of quality of care and services  Key element of CMS star ratings of hospitals  Harvard study (JAMA, April 2016): strong positive correlation between hospital patient experience and hospital patient outcomes  Opportunity to cast SNF’s in positive light vs. negative perception from compliance surveys  For hospital discharges to SNF’s, patient choice trumps network preference  Omega to commence CoreQ satisfaction surveys of facilities

SNF Industry and Evolving Revenue Models, August, 2016

Keys to SNF Success: Patient Satisfaction (cont’d)

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2015 National SNF Patient Satisfaction Survey Results (Short-Stay upon Discharge)

Source: National Research Corporation, 2015 surveys in 5,478 SNFs

SNF Industry and Evolving Revenue Models, August, 2016

Keys to SNF Success: Patient Outcomes

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Notable New CMS Quality Measures Effective April 2016:  Rehospitalization Rate (all-cause, 30-day, risk-adjusted)

• National average currently 21.1%; estimated target at three points

below average for full return of Value-Based Purchasing discount that commences October 2018

• Joint replacement episode cost doubles with rehospitalization

 Discharge rate to the community – reflects improved condition from SNF treatment  Functional ADL improvement during SNF stay

SNF Industry and Evolving Revenue Models, August, 2016

Keys to SNF Success: Patient Outcomes (cont’d)

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Majority of CMS Quality Measures can be Misleading:  Limited to issues of compliance and patient incidents, rather than

• utcomes

 Do not account for patient conditions upon admission  Quality Measure ratings to date can provide misleading results based on characteristics of patients SNF’s choose to admit  New Quality Measures (rehospitalization, discharge to community, functional improvement) represent better indicators of SNF outcomes

SNF Industry and Evolving Revenue Models, August, 2016

Keys to SNF Success: Patient Outcomes (cont’d)

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Star Ratings Can Be Misleading:  Do not denote quality of care, just degree of regulatory compliance or rate of adverse incidents  Nevertheless, ratings used in establishing some networks and for 3-day stay waiver under CJR and cardiac bundles  Examples:

• “Perfect” survey yields a 5-star Health Inspection rating but does

not address quality of care in meeting patient needs

• Overstaffed facility can achieve a 5-star Staffing rating but could be

incurring excessive operating costs and operating inefficiently

• A facility choosing to treat high-acuity patients with complex

nursing issues could yield a 1-star Quality Measure rating but could be providing good quality of care

SNF Industry and Evolving Revenue Models, August, 2016

Keys to SNF Success: Cost Efficiency

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 Continued necessity given revenue limitations from government funding sources and move toward episodic payment models  Eventual return to expanded group and concurrent therapy protocols with episodic models  Improved care coordination to reduce episodic costs

SNF Industry and Evolving Revenue Models, August, 2016

Keys to SNF Success: Coordination of Care

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 Patient medical records – shared electronically with other providers (hospitals, doctors, home health agencies, etc.) to facilitate efficient care delivery  Care pathways – treatment protocols (evidence-based practices, telehealth, patient education, etc.) developed in consultation with other providers  Discharge follow-up – patient progress monitored periodically to reduce risk of rehospitalization  Medicare hospital/PAC networking will provide census opportunities for top SNF performers in each market – potential narrowing of SNF discharge partners by hospitals

SNF Industry and Evolving Revenue Models, August, 2016

Attractive Fundamentals: Primary PAC Site

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SNFs – preferred post-acute care environment with growing demand and limited supply

Medicare Acute Hospital Discharges 43% Sent to Post-Acute SNFs 48% HHAs 39% IRFs 9% LTACHs 3%

Source: MedPAC Data Book, June 2016

SNF Industry and Evolving Revenue Models, August, 2016

Attractive Fundamentals: Demographic Trends Will Drive Volume

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Source: CMS Nursing Home Data Compendium, 2015 Edition

Percentage of U.S. SNF Residents by Age

6,304 6,727 7,482 9,132

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 2015 2020 2025 2030 Population

Projected Population Growth: Aged 85+ 2015 to 2030

5,792 6,470 8,061 10,513

• 2,000

4,000 6,000 8,000 10,000 12,000 2015 2020 2025 2030 Population

Projected Population Growth: Aged 80-84 2015 to 2030

Source: US Census Bureau, December 2014 Release Source: Avalere analysis of U.S Census Bureau Projections.

SNF Industry and Evolving Revenue Models, August, 2016

Growth in Post-Acute Usage, By Age Cohort

1,205,769 1,225,715 1,240,487 1,257,585 1,283,196 1,107,184 1,327,144 1,488,322 1,573,947 1,531,215 1,417,238 1,692,609 2,171,329 2,619,429 2,966,516 1,343,325 1,433,250 1,594,347 1,945,734 2,537,487

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 2015 2020 2025 2030 2035

Discharges to Post-Acute Facilities

85 or More 75 to 84 65 to 74 64 or less 22

Source: Xcenda analysis of 2013 Healthcare Cost and Utilization Project’s National Inpatient Sample for volume of post-acute care hospital discharges by age cohort and of U.S. Census Bureau Data for population growth projections for 2015-2035.

Discharges to Post-Acute Care (PAC) are expected to increase by 64% in the next 20 years, fueled by the 75-84 and 85+ age cohorts. If SNFs continue to receive 48% of PAC discharges and average length of stay remains constant, current SNF bed supply will be insufficient to meet demand in less than 10 years, likely requiring the expansion of both SNF supply and home health PAC services.

SNF Industry and Evolving Revenue Models, August, 2016

Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Dec '15 Certified Beds 1,667k 1,670k 1,665k 1,667k 1,666k 1,663k 1,662k Patients in Certified Beds 1,400k 1,394k 1,384k 1,383k 1,372k 1,368k 1,357k Certified Facilities 15.7k 15.7k 15.6k 15.7k 15.7k 15.6k 15.7k 15.7k 15.7k 15.6k 15.7k 15.7k 15.6k 15.7k 15.0k 15.1k 15.2k 15.3k 15.4k 15.5k 15.6k 15.7k 15.8k 15.9k 16.0k 1,300k 1,350k 1,400k 1,450k 1,500k 1,550k 1,600k 1,650k 1,700k Certified Facilities Beds & Patients

Trend in Certified Nursing Facilities, Beds and Residents

Attractive Fundamentals: Limited SNF Supply

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Supply of facilities and beds to meet increasing future demand is limited due to CON restrictions, increasing occupancy prospects for existing facilities

Source: Compiled by American Health Care Association Research Department from CMS OSCAR/CASPER survey data (2009-2015)

SNF Industry and Evolving Revenue Models, August, 2016

Attractive Fundamentals: Stable Occupancy Rates

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2009 2010 2011 2012 2013 2014 2015 OHI Occ. % 84.6% 84.0% 83.9% 83.3% 83.3% 84.3% 82.1% Industry Occ. % 84.0% 83.4% 83.1% 82.9% 82.3% 82.3% 81.6% 50.0% 55.0% 60.0% 65.0% 70.0% 75.0% 80.0% 85.0% 90.0% 95.0% 100.0% Occupancy

Source: Industry data compiled by AHCA Research Department from CMS OSCAR/CASPER survey data (2002-2015) (1)

• Stable Occupancy Rates

1) 2015 OHI occupancy reflects inclusion of legacy Aviv REIT facilities

SNF Industry and Evolving Revenue Models, August, 2016

Attractive Fundamentals: Reimbursement Outlook

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Medicare  2.4% FFS rate increase on October 1, 2016 Medicaid  Rates expected to increase modestly on average across Omega’s states  Omega's geographic diversification helps minimize impact of rate changes in any particular state

1) Rate for each month is calculated by dividing total Portfolio Operator Medicare/Medicaid revenues by total Portfolio Operator Medicare/Medicaid days.

Average Medicare and Medicaid Rates by Quarter for Omega’s Entire Portfolio (1)

(through March 31, 2016)

$300 $325 $350 $375 $400 $425 $450 $475 $500

$PPD

Medicare PPD

$115 $125 $135 $145 $155 $165 $175 $185 $195 $205 $215

Medicaid PPD

SNF Industry and Evolving Revenue Models, August, 2016

Medicaid Considerations

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 Medicaid will remain an important funding source for the majority of SNF long-stay residents.  Can Medicaid eligibility reform create future funding stability and enhance long-term care insurance as an important SNF payer source?

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

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Percent of CY14 SNF Medicare Payments by Major Diagnostic Categories & Bundles

MDC/Bundle Description National Omega

CJR Bundle 1 (a) 7% 5% CJR Bundle 2 (b) 6% 5% Cardiac Bundle (c) 2% 2% Musculoskeletal (d)(f) 12% 10% Circulatory (e)(f) 11% 10% Repiratory (f) 11% 12% Nervous (f) 9% 10% Infections/Parasitic (f) 9% 10% Kidney/Urinary 9% 10% Digestive 6% 6% Factors Influencing Health 5% 4% Endocrine/Nutritional/Metabolic 3% 4% Skin/Subcutaneous/Breast 3% 3% Mental 2% 4% Remaining 14 MDC's 5% 5% 100% 100% (a) Hip and knee joint replacements (b) Hip and femur fractures (c) Heart attacks and bypass surgeries (d) Excluding CJR bundles (e) Excluding cardiac bundle (f) See breakdown on following slide Source: Xcenda analysis of CY2014 Medicare inpatient and skilled nursing facility Standard Analytic Files

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

28 Breakdown of CY14 National SNF Medicare Payments Within Five Largest Major Diagnostic Categories

MDC/DRG Description % of MDC % of All Musculoskeletal System & Connective Tissue (a):

• Back problems

13 2

• Lower extremity procedures, excl. hip, foot, femur

11 1

• Hip/pelvis fractures

11 1

• Fractures, excl. hip, femur, pelvis, thigh

10 1

• Spinal fusion

7 1

• Revision of hip/knee replacement

6 1

• Tendonitis, myositis, bursitis

4

• Other <4%

38 4 100 Circulatory System (b):

• Heart failure

35 4

• Vascular disorders/procedures

13 1

• Cardiac arrhythmia

12 1

• Syncope (fainting)

7 1

• Pacemaker implants

5 1

• Cardiac valve procedures

4

• Other <4% 24

2 100 Respiratory System:

• Pneumonia and pleurisy

29 3

• Respiratory infections and inflammations

16 2

• Chronic obstructive pulmonary disease (COPD)

15 2

• Respiratory diagnosis with ventilator support

11 1

• Pulmonary edema and respiratory failure

10 1

• Pulmonary embolism

4

• Other <4%

15 2 100 (a) Excluding CJR bundles (b) Excluding cardiac bundle

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

29

Breakdown of CY14 National SNF Medicare Payments Within Five Largest Major Diagnostic Categories (cont’d)

MDC/DRG Description % of MDC % of All Nervous System:

• Strokes (c)

37 3

• Degenerative nervous system disorders

14 1

• Traumatic stupor and coma

8 1

• Seizures

7 1

• Nonspecific cerebrovascular disorders

6 1

• Transient ischemia

4

• Other <4%

24 2 100 Infectious and Parasitic Diseases and Disorders:

• Septicemia or severe sepsis

80 7

• Infectious and parasitic diseases with O.R. procedures

13 1

• Postoperative and post-traumatic infections

5

• Other <4%

2 100 (c) Includes the following DRG’s: intracranial hemorrhage or cerebral infarction and acute ischemic stroke

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

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State OHI Facilities State OHI Facilities Alabama 1 New Mexico 1 Arizona 4 North Carolina 11 California 24 Nevada 1 Colorado 6 Ohio 17 Florida 46 Oklahoma 3 Illinois 7 Oregon 2 Indiana 20 Pennsylvania 9 Kansas 2 South Carolina 1 Kentucky 2 Tennessee 6 Louisianna 1 Texas 11 Michigan 3 Utah 4 Missouri 12 Washington 5 Mississippi 2 Wisconsin 4 Grand Total 205

Omega Facilities in the 67 CJR MSA’s

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

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Attribute BPCI (Model 2 – hospital/PAC) CJR 1, CJR 2, and Cardiac Bundles Participation Voluntary Mandatory Scope Up to 48 DRG’s Hip/knee joint replacement (2 DRG’s), hip/femur fractures (3 DRG’s), and heart attacks and bypass surgeries (15 DRG’s) Length of bundle 30, 60, or 90 days 90 days Target price Own historical data trended Phase-in to regional prices trended Reconciliation of FFS payments to target price Quarterly Annually Gainsharing Allowed under waivers Allowed under waivers 3-day SNF waiver Majority of SNF’s must be rated 3 stars or higher SNF’s must each be rated 3 stars or higher in 7 of the last 12 months

Comparison of BPCI with CJR:

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

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BPCI details  Commenced in September 2013, 1,522 participants as of 4/1/16 in four designated models; all but 11 enrolled in Model 2 or Model 3  Model 2 covers all non-hospice Part A and B services during the initial hospital inpatient stay, PAC period, and readmissions – comparable to CJR  Model 3 covers all non-hospice Part A and B services during the PAC period and readmissions  Under Model 2, hospital incurs risk of repayment to CMS for excess of traditional FFS payments to all providers in bundle over target price upon periodic reconciliation; gainsharing arrangements with PAC providers are allowed  Target price is based on three-year, provider-specific, historical FFS average, inflated to current year by national average growth rate, and discounted by 2%-3% depending on episode length  Under Model 3, PAC bundler incurs such risk (same reconciliation process); gainsharing with other PAC providers in bundle allowed  No requirement to meet quality metrics for gainsharing payments

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

33

CJR Bundle 1 and 2 and Cardiac Bundle Details  The hospital incurs risk of repayment to CMS for excess of traditional FFS payments over target price (for all acute and post-acute Part A and B services through 90 days post-hospital-discharge), effective for years 2 through 5  Stop loss limits of 5% in year 2, 10% in year 3, and 20% in years 4 and 5 reduce overall exposure to hospitals  Target price is calculated in the same manner as BPCI, except that provider- specific historical averages are phased out in favor of regional averages

• ver the five-year model period

 Hospital must meet quality metrics to qualify for payment of any savings (target price exceeds FFS payments) or for incentive payments  Stop gain limits of 5% in years 1 and 2, 10% in year 3, and 20% in years 4 and 5 parallel the stop loss limits to equate exposure for CMS  Specifically, hospital must achieve a weighted composite score at or above the 30th percentile of all CJR hospitals  Score weightings: 50% for hospital complication rate, 40% for patient experience survey results, and 10% for patient outcome measures  PAC providers participating in CJR bundles will benefit with good performance on quality measures, cost-efficient service, and gainsharing

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

34

CoreQ Patient Satisfaction Surveys

Given the variety of satisfaction survey tools currently in use throughout the SNF industry, the American Health Care Association, in conjunction with University of Pittsburgh professor Dr. Nicholas Castle, developed the following SNF satisfaction survey questions to provide a benchmark process by which all SNF’s could be measured and compared on a consistent basis (just as hospitals are measured via a singular survey tool). These CoreQ questions have been incorporated into most of the various vendor survey processes currently in use and have been submitted to the National Quality Foundation for review and endorsement (expected later this year). Questions for both short-stay (up to 100 days) and long-stay patients/residents: 1. In recommending this facility to your friends and family, how would you rate it overall? 2. Overall, how would you rate the staff? 3. How would you rate the care you receive(d)? Additional question for short-stay patients: How would you rate how well your discharge needs were met?

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

35

CMS SNF Quality Measures Existing as of March 2016:

 Long-Stay Residents:

 Percentage of residents experiencing one or more falls with major injury  Percentage of residents with a urinary tract infection  Percentage of residents who self-report moderate to severe pain  Percentage of high-risk residents with pressure ulcers

• Percentage of low-risk residents who lose control of bowel or bladder

 Percentage of residents who have had a catheter inserted and left in bladder  Percentage of residents who were physically restrained  Percentage of residents whose need for help with daily activities has increased

• Percentage of residents who lose too much weight
• Percentage of residents who have depressive symptoms
• Percentage of residents assessed and appropriately given the seasonal

influenza vaccine

• Percentage of residents assessed and appropriately given the pneumococcal

vaccine  Percentage of residents who got an antipsychotic medication  Measure used to derive Quality Measure star ratings (8)

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

36

CMS SNF Quality Measures (cont’d) Existing as of March 2016:

 Short-Stay Residents:

 Percentage of residents who self-report moderate to severe pain  Percentage of residents with pressure ulcers that are new or worsened

• Percentage of residents assessed and appropriately given the seasonal

influenza vaccine

• Percentage of residents assessed and appropriately given the pneumococcal

vaccine  Percentage of residents who are newly administered an antipsychotic medication  Measure used to derive Quality Measure star ratings (3)

SNF Industry and Evolving Revenue Models, August, 2016

Appendix – Supplemental Information

37

CMS SNF Quality Measures (cont’d) New as of April 2016:

 Long-Stay Residents:

 Percentage of residents whose ability to move independently worsened

• Percentage of residents who received an antianxiety or hypnotic medication

 Short-Stay Residents:

 Percentage of residents who were successfully discharged to the community  Percentage of residents who have had an outpatient emergency department visit  Percentage of residents who were rehospitalized after a nursing home admission  Percentage of residents who made improvements in function  Measure used commencing August 2016 to derive Quality Measure star ratings (5)