Direct Contracting: A Collaborative Relationship Between DCEs and SNFs

By December 8, 2020 May 19th, 2022 No Comments

6 Ways Skilled Nursing Facilities Should Leverage Themselves as a Direct Contracting Entity Partner

For over a year, the Centers for Medicare and Medicaid Services (CMS) have been preparing to kick off a new value-based healthcare model—Direct Contracting.

December 8, 2020

In October, the Center for Medicare and Medicaid Innovation (Innovation Center) announced that 51 Direct Contracting Entities (DCEs) would participate in the Implementation Period of the Direct Contracting Model for Global and Professional Options, which runs through March 31, 2021.

The goal of Direct Contracting is to reduce administrative burden through partial or full capitation payments for Medicare Part A and Part B services. It launches on April 1, 2021.

The DCEs fall into two profiles, according to Brian Fuller, CEO of Integrated Care Solutions (ICS). “One is a very successful health system that has been in other risk arrangements and has the capability and sophistication to be successful. The other is the small regional health plan that has the provider network, contracting and revenue cycle capabilities that are required for the program, but can use this program as part of their overall enrollment or beneficiary growth strategies. However, all participants will require significant community transformation and care coordination capabilities to be successful under this program.”

An example of that is Clover Health—a Direct Contracting applicant—that recently went through an IPO and valuation. “The reason given for that valuation was primarily their future Direct Contracting growth projections, not their historical results,” Fuller said. “We’ve heard a lot of optimism around Direct Contracting and a lot of interest generally among those two profiles of organization types.”

To succeed in the program, DCEs must assess their ability to take on and manage risk. Care management capability and processes ensure patient outcomes, reduce rehospitalizations, and ultimately return money into risk-bearing organizations’ pockets.

In other words, this is a ripe opportunity for collaboration between DCEs and skilled nursing facilities (SNF).  

A collaborative partnership is particularly exciting for SNFs, which have been traditionally left out of such programs. Why? Generally, SNFs have suffered two fates. First, they have had minimal opportunities to directly participate for various reasons—most commonly, program design. For example, BPCI’s Model 3 was one of limited programs where SNF providers had the opportunity to directly participate, but once that program ended direct participation was not continued under the BPCI-A program. Historically, the second fate they’ve suffered is due to other programs growing. As Medicare-run programs like ACO, BPCI-Advanced, and Medicare Advantage have grown, it has disadvantaged SNF providers in the form of lower revenue. The coffers have dried up by either lower reimbursement, as is the common case with Medicare Advantage plans, or by pressure on utilization (number of beneficiaries who go to a skilled nursing facility and pressuring down the length of stay). 

Skilled nursing gets stuck in the crosshairs as the only per diem paid Medicare service. However, it doesn’t have to seal a disadvantaged fate. Opportunities exist. 

SNFs need to position themselves as a valued partner, and DCEs need to think of SNFs as a valued partner.

“Will Direct Contracting be the waterfall moment where the industry really starts paying attention to and thinking about SNF quality in a different way?” Fuller asked. “This would allow SNFs to get paid for that higher quality care either through direct contracted rates that are higher for higher quality or via greater patient volumes by being in a very closed or narrowing network of beneficiary care.”

DCEs are currently going through the exploratory phase where they align legal, vet processes, and find partners as needed to determine how and if they will participate in Direct Contracting. However, April is around the corner. DCEs and SNFs must act now to create collaborative relationships under this new model.

3 Reasons Direct Contracting Entities Should Partner with Skilled Nursing Facilities 

  1. SNFs can serve as key clinical partners to help avoid hospitalizations, readmissions, and ED visits. 
  2. A significant portion of the Medicare population utilizes SNF services annually, making SNFs a key partner to be able to lower total cost of care. 
  3. SNFs can be utilized to coordinate key community resources to ensure optimal transitions of care back into the community.

“The newest models under value-based care ultimately reward days at home over everywhere else and disincentivize hospitalization over everything else,” said Dana Strauss, VP of Partner Engagement at ICS. “For SNFs, there is market share to claim as an alternative, appropriate site of care for a portion of these patients.”

Below are ways SNFs can prepare for—and partner with—a DCE for long-term market sustainability.

Be a Hospital Alternative

  • Direct admission for chronic condition exacerbations as the local ER’s solution of choice for diversion from the geriatric/medical and surgical units.

“Because DC models don’t require a hospitalization before admission to a SNF, the most progressive and clinically-competent SNFs can position themselves as microcosms of the acute care hospital community to manage exacerbations of chronic conditions. With additional market pressures coming from SNF at Home and Hospital at Home programs, hopefully we will see some strong leadership in this area.”
—Dana Strauss

  • Compete with market disruptors by offering SNF at home, urgent care to hospital at home, palliative care at home, and other at-home type services. 

Enter into Preferred Provider Relationships

  • DCEs will treat preferred provider relationships seriously and sell their preferred providers to their population.

“Preferred providers in Direct Contracting look different than ‘contracts’ with health systems seen in ACO and BPCI-A care continuum relationships. These are going to be financial contracts to accept a rate or payment design along with specific planning around utilization and outcomes. Successful SNFs will be up for bonuses based on performance. SNF need to know what they could offer, what they could proactively propose, and what reasonable goals they would have to achieve as they negotiate with a Direct Contracting Entity. Laying out the plan to increase utilization of the preferred SNFs and addressing the total number of preferred providers being chosen are important components for the SNF to keep in mind during the process.”
—Dana Strauss

Provide High-Value Clinical Care Delivery

  • Be best-in-class at managing clinical and functional outcomes of DCE beneficiaries on the lowest possible length of stay and cost per day.

“We anticipate that a high-functioning, high-performing DCE will create a very closed, well-defined network in order to be successful. SNFs will either be in that network or out of that network.”
—Brian Fuller

Expect Voluntary Attribution to Shrink FFS Patients 

  • DCE’s can grow voluntary attribution. As many of the DCEs are run by Medicare Advantage plans and others accustomed to full risk, it’s expected that they will market to patients to grow their population size.

“Part of this marketing effort should include the DCEs and their Participating Providers’ in-network/preferred provider facilities. SNFs should ensure this is also discussed in contract negotiations.”
—Dana Strauss

Structure Contracts to Leverage Revenue & Bonuses

  • DCE’s preferred providers/market share should increase, and SNFs can—if quality improves—be part of the bonusing inherent to these preferred provider contracts under Direct Contracting. The networks will be more closed than the networks under previous fee-for-service (FFS) VBC arrangements.

Innovate & Think Differently 

  • SNFs have a chance to be innovators and design creative solutions to improve quality and reduce DCEs’ risk. Investment in high-quality clinical care has never been more attractive.
  • There are now robust solutions for interventional analytics and point of care documentation for SNFs that make it easier to provide quality care.
  • Participating Providers of the DCE who provide care to SNF patients can be tapped to support quality improvement initiatives, which can help lower the total cost of patient care.

“I think any health system would tell SNFs that if you come with a great solution and can back it up, we are willing to work with you. That has always been a great idea, but this model allows SNFs to benefit from their innovation financially.”
—Dana Strauss

The 2020 Direct Contracting application window has closed, but CMS plans to reopen the Direct Contracting program in the spring of 2021 for new applicants. 

“There is plenty of time for DCEs and SNFs to partner for Direct Contracting. Though, it is very likely opportunities for SNFs won’t end here,” Fuller said. “They should prepare now to be ready for the future and be able to partner with DCEs or other entities that evolve through CMS’ constantly evolving value-based care programs and initiatives.” 

SNFs play a vital role in the care continuum, particularly in caring for some of the most fragile, highest-cost patients for which a DCE is responsible. Partnering with experts in care management and processes is essential to be successful in these value-based care programs.

ICS’ staff and leadership team commit to solving problems and managing them through resolution. Often, this is when the patient is at home, and that close management is tied to preventing an admission to hospital care. But many admissions to acute care cannot be prevented. With more than one transition of care and several different providers managing a patient in an episode, the care continuum means patients’ care must be tightly managed to ensure the best outcomes.  

“The way ICS views patient management in Direct Contracting and other value-based models,” Strauss says, “is that the patient is never ‘discharged.’ They may be transitioning, they may be preparing for a transition, or we may be trying to prevent a transition (from the home), but they are never off our radar. We have always worked closely with SNF providers, providing care coordination and oversight on every patient and with every SNF. Now, we are hopeful SNFs will be more open to that collaboration and to the opportunities they can tap into under the Direct Contracting models to reimagine and grow their role.”

Additional Resources on Direct Contracting
Direct Contracting: Moving the Risk from CMS to Providers
Post-Acute Care Solutions for Direct Contracting Entities

If you are a Direct Contracting Entity or SNF provider in need of a partner with expertise in value-based care and proven results working with risk-bearing organizations, contact ICS today for a free consultation.

ICS helps organizations improve community care coordination and drive the transformation to value-based care. Learn more about how ICS delivers results for organizations by putting patients first. Call us today: 860-622-7645.


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