Panelists Discuss Post-Acute Strategies at NIC Fall Conference
With so much uncertainty about the changing health care payment and delivery system, can operators create new successful business strategies that attract investment, or is that just a dream on the far side of the rainbow?
It’s a question that panelists discussed during the session titled, “Somewhere Over the Rainbow: Where Winning Post-Acute Strategies Attract Investors,” at the 2016 NIC Fall Conference, September 14–16, in Washington, DC. This session brought together CEOs from publicly-traded post-acute care and seniors housing companies to discuss both challenges and opportunities in post-acute care.
Challenges Abound
In 2014 alone, Medicare spent nearly $60 billion on post-acute care, accounting for 12% of total Medicare spending. About half of that went to skilled nursing operators. For post-acute care operators, "the key question in today’s discussion is whether reimbursement pressure from Medicare and Medicaid managed care will continue, or will those that adapt to new payment regimes reap huge benefits from the expanding Medicare population and new payment approaches,” said panel moderator Jerry Doctrow, principal, Robust Retirement, LLC.
The evolution of the health care system and its “sea change” of volume-based incentives, said George V. Hager, CEO, Genesis HealthCare, Inc., has caused the post-acute care system to become expensive. Now, "more isn't better . . . so you've really turned the incentives of the healthcare system completely on their head." Reducing utilization across the board while maintaining high-quality outcomes for patients, Hager explains, is pressuring post-acute care operators.
The panelists each spoke to the challenges facing the sector, including variation in Medicaid reimbursement rates, which have not grown significantly in the last few years. Pressure on both length-of-stay and overall utilization also poses a challenge for operators, especially for those serving Medicare patients. Benjamin Breier, president and CEO, Kindred Healthcare, Inc., said that "in the post-acute world, we still very much live in a fee-for-service environment," and said that he expects "that to continue for some period of time."
Larry Cohen, CEO, Capital Senior Living Corporation, noted that the private-pay seniors housing sector does not have the robust data source that skilled nursing has through CMS to prove its ability to participate in post-acute care models. However, he believes that seniors housing can provide care at a much lower cost.
Another challenge is increased labor costs, although pressure on wage rates varies by markets. Panelists suggested that wage rate growth may be overstated for the post-acute setting on the whole, but for certain positions (nurses), the pressure is palpable.
As Do Opportunities
The panelists were optimistic about opportunities in post-acute care. Managing risk—or, as Breier put it, "going upstream"—is critical for post-acute care providers to take the "choppiness" out of fee-for-service. He underscored the importance of post-acute care providers' participation in risk-management mechanisms, affirming that those providers who operate as their own middlemen will be able to "control [their own] destiny." Post-acute providers, said Breier, will make good managers of risk, circumventing conveners, because that is where public policy is driving the transition. Furthermore, he said, post-acute providers already provide the housing for their patients, so they, rather than other entities, are best poised to manage risk for their residents.
Much of that risk management is rooted in partnerships, which Kindred Healthcare, Inc., Brookdale Senior Living, and Capital Senior Living Corporation all have prioritized. Andy Smith, president and CEO, Brookdale Senior Living, confirmed this necessity, saying that there is "big opportunity for the core seniors housing business to find better ways to create partnerships . . . We think [seniors housing] is part of the opportunity for lower-cost settings, better outcomes, again at a lower cost."
Cohen expressed a similar sentiment, saying there is "enormous opportunity." Investments in technology will also help post-acute care providers follow patients through their recovery.
According to the panelists, scale can provide benefits to patients and payors, especially where it can create efficiencies. Potentials for mergers and acquisitions may drive an increase in scale for some providers, although large-scale strategic mergers and acquisitions are unlikely. Other opportunities for scale are in accountable care organizations and other insurance-based organizations operating in the post-acute space.
Meanwhile, Hager reaffirmed that while scale is important, healthcare is still inherently local. Much of the importance of local healthcare stems from the role narrow networks play in defining post-acute care business.
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