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Looking through the hospital’s lens at reimbursement can foster better relationships and more referrals for skilled nursing and other post-acute and long term care centers. More than ever, providers and practitioners alike need to have 20/20 vision about how hospital reimbursement works and how they can work with acute care organizations to best maximize quality care and manage costs.

While hospitals and nursing centers are two systems that traditionally have functioned in different siloes with distinct incentives, the rules are changing, and facilities that can align their services, data, capabilities, and outcomes with hospitals’ needs are more likely to have a seat at the table and fill their beds moving forward.

The move from fee-for-service to value-based medicine, while inevitable, is shaking up systems and relationships. “With fee-for-service, everyone had their own way of billing. But it was pretty simple—you did the work, you billed, and you got paid. There was no master system like Medicare tracking utilization and outcomes,” says Dheeraj Mahajan, MD, FACP, CMD, CIC, CHCQM, president and chief executive officer of Chicago Internal Medicine Practice and Research (CIMPAR).

Now, the Centers for Medicare & Medicaid Services (CMS) has introduced the Hospital Value-Based Purchasing (VBP) Program, which rewards hospitals with incentive payments for quality provided to Medicare beneficiaries.

Today, Medicare is a key driver in both hospitals and skilled nursing centers. As the over-age-65 population grows and hospitals see more older patients, they are becoming more entrenched in Medicare. Medicare pays hospitals per beneficiary discharge via the Inpatient Prospective Payment System. The base rate for each discharge corresponds to one of 700-plus Diagnostic Related Groups (DRGs) that are adjusted for patient severity; that is, DRGs related to higher levels of care are assigned higher payments.

With the growing older population come multiple comorbidities, polypharmacy issues, and disabilities. However, hospitals are expected to move these patients to post-acute or home care more quickly than ever.

“The lengths of stay in hospitals have dropped. Ten years ago, a patient with pneumonia might stay in the hospital five to seven days,” says Jason Heffernan, MD, regional medical director for post-acute programs, West Coast TeamHealth in Spokane, Wash.

“Now, lengths of stay for a similar admission are closer to three to five days, with hospitals becoming more adept at assessing patients quickly and being expected to transition them over a shorter time period safely into a lower level of care, while achieving better outcomes.”

At the same time, a growing number of hospitals are part of accountable care organizations (ACOs) and bundled payment efforts. As a result of these shifts in payment models, “they are seeking post-acute partners whose incentives are aligned with theirs,” says Joanna Hiatt Kim, vice president of payment policy at the American Hospital Association. “They want to create relationships with skilled nursing facilities that can provide the best value in the most cost-effective manner.”

ACOs, bundled payments, and similar programs involve “episodes of care,” the patient’s entire treatment necessary for an illness. For instance, if a patient breaks a hip, the episode would involve everything done to treat the condition, including rehabilitation and other post-acute care. As a result, hospitals are more interested than ever in what happens to patients after they are discharged from the hospital.

Accordingly, they are seeking partners they are confident will enable them to meet targets, keep costs down, and get patients home safely—without bouncing back to the hospital or nursing center. “Hospitals are looking at data to determine who the best partners would be,” Kim says.

ACOs present a huge opportunity for nursing centers, Mahajan says. “Many ACOs have thousands of people within hospital settings and have no nursing home experience. They come to people like us [CIMPAR] who know nursing homes and also how hospitals operate. Getting your foot in the door and letting hospitals know that you understand how they work and that you share their concerns and support their goals is essential.”

It is important that the move in payment models is not just from fee for service to VBP but from setting-based to population-based care—using services appropriate for the population as opposed to the setting.

In population-based payment arrangements—such as those in many ACOs and bundled payment arrangements, the provider entity takes responsibility for the health of a group of patients in exchange for a set amount of money. A goal of this is to get and keep the patient in the most cost-effective care setting safely and for as long as possible.

One advantage of population-based care is that it encourages better communication and relationships between hospitals and nursing centers. Previously, says Mahajan, “Hospitals and nursing homes had no idea how each other worked. They operated and made money independently.” This has been a huge problem, he says.

“There is a major disconnect in many areas. For example, there is a whole set of guidelines for ordering a urinalysis in the nursing home, but it’s much different in the hospital.” Now, he says, “All providers are responsible for ensuring better care at lower costs.” As a result, hospitals and nursing centers are learning to coordinate care and focus on doing what is right for the patient, regardless of the care setting.

“The biggest driving factor right now is the 30-day readmission rate. Everything else falls underneath this, and all metrics are tied to it,” Heffernan says. “Hospitals are looking at this 30-day window, and they want to see the patients come to you and then go home without coming back to the hospital.” Hospitals, he says, want the post-acute facilities to get more efficient and effective in the time they have with patients.

If the hospital is part of an ACO, bundled payment effort, or other payment model where it is paid for episodes of care, length of stay becomes highlighted, placing additional pressure on post-acute providers.

Insurance companies also care about length of stay. Most, Heffernan says, will generally pay for a certain number of days in the nursing center, and “you need to show that the patient is showing improvement or progress,” he says.

Effective care transitions are one way to solidify relationships with hospitals. “You need warm, clean handoffs, not just a discharge summary two weeks later,” Huss says. The nursing center needs to make sure it has all the information necessary to care for patients and get them home as quickly as possible.

Kim agrees. “In some bundled payment programs, CMS has allowed waivers so that hospitals can do home visits. Clearly, we need to go beyond a sheet of discharge instructions,” she says.

Heffernan says that post-acute and long term care physicians are perfectly positioned to take the lead on interacting with hospitalists and other practitioners.

“I think a lot of physicians go to medical school to do exactly what post-acute physicians do. Medicine is much more complicated, and it requires a greater physician presence and communication between practitioners,” he says. “We have the ability to use our medicine to affect outcomes on a larger scale.”

“The warm handoff is so important,” Mahajan adds. “There is a lot of room for real-time conversations about patients between settings, and this is the pillar of our program—whether the patient is coming into the nursing home or going out to another setting.”

Weiner of Avant Healthcare Consulting suggests seeking “a way to interface with the ER [emergency room] so there is a face-to-face handoff” when patients go to or come from the nursing center to the hospital. If practitioners in the ER are confident that the patient will be “seen in a timely manner” when they go back to the nursing center, they are less likely to admit them to the hospital. He also suggests seeking ways to admit patients safely after hours and on weekends.

Right now, says Weiner, “There is inadequate communication between settings. The hospitalist rounds at 7 a.m. and thinks the patient is going out soon. But things happen. There are all sorts of reasons that a patient cleared for discharge in the morning isn’t ready to go until after 4 p.m. But if the nursing center says it can’t take the patient until the next morning or Monday for a Friday discharge, the hospital has to keep the person for more nights, and this costs money,” he says. “If you can find a way to coordinate these discharges so that you can take [patients] when they are ready, it would give you a huge advantage over other facilities.”

Verbal communication between the hospitalist and the nursing center physician not only would make hospitals happy, but it also would increase satisfaction among patients and families, Weiner says. “It lets the patient and family know that practitioners in both settings know the patient and understand his or her issues.”

At the same time, nursing center physicians should take the opportunity to help hospital physicians understand the “three-day rule,” which they may not be aware of. In the long term care setting, beneficiaries must have a prior inpatient hospital stay of no fewer than three consecutive days to be eligible for Medicare coverage of inpatient skilled nursing care. However, says Mahajan, “Hospital physicians often aren’t aware of this rule and how it impacts payments.”

Under its Shared Savings Program, CMS offers a waiver of the three-day rule to eligible ACOs, designed to reward them when they lower growth in Medicare Parts A and B fee-for-service costs and meet quality-of-care performance standards. This waiver can be beneficial for nursing centers working with ACOs.

However, it’s important not to assume that every ACO has the waiver in place. “When people don’t follow the guidelines around using waivers, that’s when we can run into problems,” Mahajan says.

Another important step to take is to make sure the care plan started in the hospital is completed, Weiner says. This will prevent any gaps in care, and, he says, “it would be a great relief to the hospitalists.” If the nursing center has an electric health record, give the hospitalists a portal for their patients. “It’s all about good communication,” he says. “It doesn’t matter how good you are if you don’t communicate. Invest time in developing and maintaining relationships. Facilities that don’t do this won’t get or stay on referral lists very long.”

Communications with specialists also would be useful, Weiner says, so facilities can ensure that they have the physical therapy and other services and equipment necessary to help a patient after joint replacement surgery or a stroke, for example. Weiner stresses that all of this communication must be initiated by the physicians. The nursing center medical director or attending physician, as opposed to the administrator or admitting nurse, needs to reach out to the hospitalists, he says.

Just as hospitals will be checking out post-acute providers, it’s important that providers know the hospitals in their areas. Skilled nursing facilities “have an interest in making sure they partner with hospitals that are providing very good care,” Kim says. A good starting place is CMS’ Hospital Compare site (www.medicare.gov/hospitalcompare/search.html). Not only can providers see how different hospitals in the region are doing, they can view the data sources and methodology for the quality measures posted on the site.

The shift away from fee for service to VBP presents challenges and anxiety for providers, but with changes come chances. “I think these changes represent a unique opportunity for providers in post-acute and long term care to drive and manage patient outcomes and patient care above and beyond any other area of medicine,” says Heffernan.

As the siloes continue to come down and relationships are forged, and nursing centers and hospitals gain a greater understanding of each other, the result will be quality care wherever the patient goes. At the same time, financial incentives will enable profitable partnerships that are a win-win for all parties.