Let skilled-nursing providers take risk in bundled-payment demonstration

We face a Medicare crisis. Millions of baby boomers are reaching an age where they depend on the program to meet their healthcare needs.

At the same time, the government is still struggling to control healthcare costs. This isn't a new problem, but it is one that we must approach strategically and united as an industry if we intend to find a solution.

There has been a recent palpable change in the way our leaders are now approaching this issue. HHS Secretary Sylvia Mathews Burwell and her team at the department set goals this year that reflect a new mindset and are spot on: We must make the shift from financial incentives for more services to payments that reward high-quality outcomes. And while it is encouraging to see ensuing policies that are reflective of this approach, there are areas of concern.

Consider the recently proposed rule from the CMS to measure the effectiveness—in a demonstration—of bundling payments for joint replacements in patients' hips and knees. The proposal makes sense in that it rightly recognizes that putting providers at financial risk and creating incentives for lower costs and better outcomes will work. The defect in the policy is that it allows only hospitals to take on the risk.

A better policy would be to not only test a rule with hospitals at risk, but also allow skilled-nursing facilities to take on the risk by evaluating a post-acute bundle. For the better part of 30 years now, skilled-nursing providers have been preparing for a time such as this—adapting and innovating to meet the changing needs of older Americans. Three factors affirm the timing is right for this:

The cost savings potential in Medicare is on the post-acute side, not with hospital stays. A 2013 Institute of Medicine study examining the cause of variation in Medicare spending found that 73% was in post-acute-care services. Under the current proposed rule, the acute providers are responsible for and at financial risk for the entire cost of the episode. In reality, their ability to reduce costs is limited. A post-acute bundle, managed by experts in post-acute care, offers the best chance to deliver cost savings.

Skilled-nursing providers are ready and willing to take on this task. Today's skilled-nursing facilities have changed significantly, becoming places where people go to get well and return home. They now treat more than 2.3 million residents each year on a short-stay basis. These are people who have been in the hospital, need some rehabilitation, get it at the skilled-nursing facility and then go home. The facilities have a proven track record of success in this area, something HHS should take advantage of. The facilities also have stepped up in the current HHS voluntary bundling program. Of the 1,906 providers in the program, more than half (56%) are within skilled nursing. These are providers who are embracing bundled care and have voluntarily stepped up to be a partner with HHS. They should not be shut out of mandatory bundles.

The CMS should use multiple demonstration projects to determine the best possible policy. A demonstration program is meant to test multiple models and determine which is most effective. In this vein, there are multiple accountable care organization models as well as multiple bundling models.

So how does it make sense to test only one mandatory bundle? It doesn't. No one idea alone should be a part of the demonstration. It makes the most sense—and would provide better effectiveness outcomes—to test both an acute and post-acute bundle. The CMS is unlikely to achieve the best results without testing all plausible approaches.

We have an opportunity. That opportunity is to deliver high-quality care to America's aging population while reducing costs through proven, effective spending programs. I'm optimistic that we can have a lasting impact on the way we as providers deliver healthcare if we appropriately implement the smart changes being considered in Washington.