PAC Consolidation Brings Partnership Possibilities, Better Care Coordination

Not only is the hospital clinical team charged with providing the best inpatient care, but they also must constantly ask themselves: “What level of care is needed for my patient postdischarge?” and “Who is the right provider for postdischarge care?” Answering these questions early in a patient’s stay allows time for the case manager to facilitate the transition needs of the patient, and ease patient and family concerns over postdischarge needs. Today, three major forces are currently evolving to shape how these questions can be best answered: patient placement tools, preferred provider networks and post-acute provider consolidation.

Law Brings Uniformity to Patient Placement Tools
Both health systems and commercial vendors are trying to implement tools and develop predictive analytics to help clinicians answer the question of appropriate site of care placement. Soon CMS may also play a part. In October 2014, the president signed into law the IMPACT Act (Improving Medicare Post-Acute Care Transformation). A big part of the legislation will be a common assessment tool for post-acute care (PAC) providers. As of now, home health agencies perform a different assessment for new patients than skilled nursing facilities (SNFs), who do a different assessment than inpatient rehab facilities (IRFs), etc. The tool will offer a uniform methodology to assess patient postdischarge needs and document care quality and outcomes across all PAC settings, which may ultimately help optimize PAC site selection. Analysis of these data in the future could lead to a number of changes, such as rebasing rates to incentivize discharge to appropriate sites of care, setting limits on patient conditions by site of care and even establishing site-neutral payments.

Performance Metrics Help Identify Preferred PAC Partners
Answering the question of who is the right provider has traditionally been driven by insurance coverage, availability of open beds and patient preference. Given that the US has over 12,000 home health agencies and 15,000 skilled nursing facilities, one would think access to these levels of post-acute care would be readily available. However, navigating the fragmented industry to identify high-quality providers has been a challenge for health systems and patients alike. Quality and performance can differ significantly by facility type, among different facility owners and even within the same owner’s suite of services. CMS collects and displays basic quality data for nursing homes and home health on its Compare websites, but due diligence must extend well beyond this rudimentary information.

Hospitals and health systems seeking to create a “preferred provider network” for PAC sites and services can use quality metrics such as readmission rates, unscheduled returns to the ED and nosocomial infections. On top of these, they can layer on an evaluation of operational metrics such as length of stay with the PAC provider and average daily bed availability. They can even assess the level of advanced capabilities in areas such as dialysis or wound care to help determine who would be the best partner. Identifying which players would be the best partners is step one in creating the preferred network. Beyond identification, health systems must determine the level of investment they are willing to make, the number of partners required to meet their patient demand and the structure of the partnership.

PAC Consolidation Gains Steam
Large, for-profit post-acute care providers are looking to help clinicians and health systems answer both questions around level and site of care by offering multiple options under one umbrella. Consolidation and vertical integration within the post-acute sector has proliferated with a recent wave of mergers and acquisitions, as inpatient rehab facilities buy SNFs, SNFs acquire home health agencies, and so on.

The wave of consolidation started in August 2014 when Genesis HealthCare and Skilled Healthcare merged to offer nearly 450 SNFs. It continued with Kindred’s acquisition of home health giant Gentiva. The $1.8B deal helps Kindred offer comprehensive post-acute care across several markets, with all post-acute levels under one umbrella (long-term acute care, inpatient rehab, skilled nursing and home care). Inpatient rehab provider HealthSouth could likely mimic part of this strategy given its own recent acquisition of Encompass Home Health and Hospice, a provider of skilled home care in 140 markets across 13 states.

Consolidation Creates Unique Opportunities
If a post-acute provider owns multiple levels of care, it could transition the patient among levels as soon as clinically appropriate. This sets the provider up to have multiple strategic plays. First, the provider could approach hospitals and physician groups with its coordinated offerings to build their referrals (and in essence, offer an outsourced post-acute care service to hospitals and payers). Integrated PAC providers also have the opportunity to develop unique contracting methods with both hospitals and payers. They could seek bundled payment arrangements for high-cost, high-volume conditions. The consolidated PAC providers would be well positioned to seek Model 3 bundled payment contracts with Medicare, managing all post-acute costs for a given condition for 30, 60, or 90 days postdischarge. There are currently 89 organizations with 1,817 Medicare Model 3 bundle payment arrangements. We expect this number to balloon during the next wave of bundled payments, particularly within those PAC providers who control the full post-acute spectrum.

Consolidation by major PAC providers could offer health systems a great partnership opportunity. On the other hand, if the health system owns part or the full continuum of PAC, the consolidation wave could represent growing competition. The impact of consolidation must be taken into consideration as your health system crafts its post-acute care strategy.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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