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Integration could bring additional referrals
Hospices are at a crossroads. One path keeps them on the same road of dependence upon Medicare reimbursement, while the less traveled road leads in the uncertain direction of managed care.
To take the first road, a hospice needs only to continue business as usual, including battling the diminishing length of stays and per-diem payments that often do not cover the entire cost of patient care. To choose the more risky path, a hospice must be willing to enter into strategic partnerships with competitors or give up some autonomy to enjoy the vast resources offered by larger organizations, including integrated delivery systems.
Despite the negative publicity managed care has received lately, hospice and post-acute experts see managed care’s growing influence on the health care marketplace as an opportunity for hospices to forge strategic partnerships.
"Networks clearly provide hospice program leaders with options, as well as challenges," says Lisa Spoden, president of Columbus, OH-based consulting firm Strategic Health Care and chairwoman of the National Hospice Organization’s Managed Care Task Force. "They offer agencies a forum for competing in larger geographic arenas, as well as protecting their market share and leveraging their buying power."
As hospices become more familiar with managed care organizations (MCOs) such as HMOs, they will quickly find out that MCOs are often loath to deal with freestanding or independent hospices, instead preferring to contract with health systems or a consortium of providers.
Hospice leaders cannot ignore managed care as a frontier for added revenue. The majority of Americans are covered by some form of managed care, not limited to just HMOs. Furthermore, federal and state governments are becoming increasingly prudent about health care spending. This is evidenced by the 65% growth of Medicare risk plans between 1987 and 1994, according to Spoden’s own research.
What do they want?
So the question for hospices becomes: What about this vast, untapped revenue source?
"With states such as California and Arizona leading the way with almost 40% of their Medicare populations covered through risk plans, providers cannot ignore managed care," Spoden says. "If an agency hopes to work with MCOs, it is critical that they be aware of the preferences and biases of MCOs and develop appropriate response strategies."
As mentioned, those biases focus on their desire to shop for health care services in a one-stop shop environment. They are looking for organizations that can either provide services over a wide geographic area or across an entire continuum. That propelled the Hospice of the Western Reserve in Cleveland to join 21 other hospices throughout Ohio, forming a statewide hospice network from which private and government-sponsored health plans can contract.
The impetus was the emergence of a state managed care Medicaid program. "At the time, it was imbued with anticipation that much of the resources would be purchased on a much broader level than they are now," says David Simpson, MA, executive director of the Hospice of the Western Reserve. "We felt we needed to organize ourselves as opposed growing an individual hospice to cover the entire state."
The Hospice of the Western Reserve represents one example of potential hospice strategic partnerships. While they can take on a number of shapes, including local networks, regional, state, and even national, they generally fall under two general forms:
• Horizontal integration. Like the Hospice of the Western Reserve, horizontal integration involves partnerships among like organizations.
• Vertical integration. This involves organizations from various segments of the health care industry in an attempt to form a seamless continuum.
Ohio’s example of forming a statewide network of hospices offers some guidance on how potential competitors can come together. Trust is perhaps the most important ingredient, Simpson says. Because hospice administrators around the state were familiar with one another, trust was not something leaders had to gain.
Second, the network was set up to avoid geographic overlap to avoid referral disputes. Simpson advised that hospices looking to form a similar network also do the following:
• Use centralized billing and referral office. It enhances trust, Simpson says, when there is one place for members to review the books.
• Set up a fair dues structure. Members should pay based upon the number of referrals they receive.
• Establish a quarterly quality assurance meeting and invite insurers to participate to show payors the organization’s quality process.
While vertical integration offers hospices safety in numbers, horizontal integration can perhaps anchor their spot in the health care continuum. "Affiliating with vertical networks can be another strategy," Spoden explains. "The right affiliations can ensure an agency referrals from physician groups and hospitals."
Having a continuum of services with effective linkages for coordinated discharge planning will be more important to managed care companies, says Scott Buckley, MPH, MsPH, executive director with Southfield, MI-based Superior Consultant Co., a post-acute consulting firm.
"What’s important to managed care, as well as to Medicare, is the ability of the provider to cost-effectively manage a patient across the entire continuum. Under previous reimbursement incentives, particularly under Medicare, the provider considered the provision of services in each component as a discrete episode of care. The philosophy now has to look not at individual units of care, but the entire episode of care, with each unit connected together in the continuum."
What’s in a post-acute network
But in many communities, post-acute providers are still a collection of independent providers treating patients from the narrow scope of their own company. To be competitive, hospices and other segments of the health care industry will have to form partnerships that assure a seamless continuum.
Developing a vertical post-acute continuum begins with identifying the components that exist within a community and gauging each provider’s willingness to participate. Knowing which providers would be available will help organizers construct a seamless continuum. A hospice should consider a continuum that includes:
• Acute care hospital. Most likely, the acute care hospital will be the driver of the system. It is the facility with greater access to money, managed care contracts, and patients. It will act as a referral source to post-acute providers along the continuum. In many cases, it will act as the central case manager, working with case managers of the other post-acute providers to move patients along the continuum.
• Long-term care hospital. This is an acute care licensed facility that serves patients who require an average length of stay of 25 days or greater. Patients usually experience many comorbid or coexisting conditions along with the primary reason for the hospital admission. Patients requiring a long-term hospital stay need daily medical surveillance, 24-hour professional nursing care approximating seven to 10 average hours per patient day, and one to two hours of therapy intervention per day, five days a week.
• Subacute care. A facility for less intensive monitoring and assessment than an acute hospital stay, and provides continuous nursing services and more skilled medical services and procedures, such as rehabilitation. The care may occur before or after, or in lieu of an acute rehabilitation stay. Subacute care can be delivered in a hospital-based unit or in a skilled nursing facility.
• Skilled nursing facility (SNF). This site provides skilled nursing care to residents needing continuous nursing, rehabilitative, and other health or social services. The facility may be freestanding or part of a hospital. All Medicare-eligible facilities require a three-day hospital stay within the last 30 days prior to SNF admission. Medicare reimbursement pays up to 100 days per episode of illness. However, most nursing home patient days are not paid for by Medicare.
• Assisted living. This a specialized combination of housing, personalized supportive services, and health care services designed to respond to the individual needs of those who require help with activities of daily living, but do not need the skilled medical care provided in a nursing home. While many facilities are freestanding, many others are part of retirement communities that include skilled nursing facilities, independent living facilities, and geriatric centers. Health care services can be provided internally or contracted from a health care provider.
• Home health care. Provides complex medical services to homebound patients who do not require an acute facility stay and may have difficulty obtaining access to outpatient services. Services include nursing services, home health and personal care, social services, and other ancillary services, as well as home medical equipment, infusion therapy, enteral therapy, and clinical respiratory therapy.
• Adult day care. A site that provides programs committed to helping families care for older adults, allowing seniors to continue to live with their families. The primary emphasis is on promoting independence, self-esteem, and health. The adult day care programs provide needed emotional support and respite for families. Program components include: health monitoring, exercise retraining, community outings, group activities, hot lunches, and morning snacks.
• Comprehensive rehabilitation facility. A Medicare-funded facility that is required by the federal government to provide physical therapist, social services, and physician services. Optionally, the facility may provide occupational therapy, respiratory therapy, and speech therapy. Hospitals sometimes place comprehensive rehabilitation facility within a long term care facility, which includes a hospital-based therapist delivering therapy services.
Managed care, Buckley says, the more aggressively it is managed, exerts greater influence on a market. For continuum development, this means providers will need to develop programs to allow patients to be admitted directly to post-acute facilities rather than patients entering the health care system from an acute hospital because it is more cost-effective.
Integration will be a tough road
Certainly, the most sound method to bring all these services together would be in a formal organization, such as a health care system that integrates not only post-acute providers, but physicians and hospitals.
But the reality may be that unless market forces conspire to push post-acute providers into mergers or allowing themselves to be bought, most post-acute providers will remain independent businesses. So building a continuum will hinge on providers’ ability to strike joint ventures or an organization of loosely affiliated providers, similar to independent practice associations for physicians.
Organization interests vs. individual interests
Forming an organization of independent providers, the larger organization risks territorial battles and infighting once the individual interests of providers clash with one another. For example, if a post-acute organization takes capitation from an HMO for the entire post-acute continuum and distributes the per-member-per-month payment among the various providers, conflicts could arise as a result of patients moving along the continuum. A home care provider may find itself at odds with the subacute provider because patients are being discharged to home care too early, causing the home care provider to expend more money to care for its patients.
"It’s going to have be something that the providers are going to have to resolve amongst themselves," Buckley says. "The home care agency will have to be more cautious about the patients it accepts and the development of their care plans to ensure they are taking patients whose needs can be appropriately met."
For the greater good
If that is the case, then the larger organization must decide whether to continue using the same care plan, revise care so that patients remain longer in the subacute facility, or adjust the capitation payment to reflect more home care services and less subacute care. Whatever the decision, somebody loses for the greater good of the organization.
Diminished independence will also come in the form of abdicating patient flow to central function: a case manager. There needs to be a central case management function that guides patients from one point in the continuum to the next, working closely with case managers at the individual provider level, Buckley says. While it would be difficult, if not impossible, to develop clinical paths that cover the entire continuum, the central case manager will have to work with provider case managers in developing clinical paths for each provider site.
"It’s clear that you have to have [clinical] paths at each level of care, or at least the acute care, subacute, home health, and comprehensive rehabilitation facility," Buckley says. "You have them to make sure resources are being used correctly, and you need a strong case management at each level. And you have to have some integrating function to make sure that all these processes are working appropriately and effectively."
As managed care proliferates and Medicare reimbursement is reduced, the knee-jerk reaction of some post-acute providers would be to focus on reallocation of costs to compensate for reductions in payment. But the key to long-term success lies in managing costs by placing patients in the most appropriate setting.
"To succeed in the long term, providers must think not in terms of enhancing reimbursement, but in terms of controlling and managing costs, and in terms of episodes of care rather then units of service," Buckley says. "This requires placing patients in the most clinically appropriate and lowest cost setting and moving them through the continuum as dictated by patient needs."