Nurse with Chart Talking to Woman in Hospital Bed

Recent studies show the potential financial vulnerability of CAHs and rural PPS hospitals that provide PAC services, particularly for those that utilize swing beds.

Innovation and disruption

Rural Hospitals: Promote the Value of Your Post-Acute Services

  • Jennifer Boese
  • 5/15/2018

As health care payment transformation continues, all providers are looking at where they will fit into the evolving landscape. The drivers of activity are higher quality and a more efficient use of limited health care resources. Over the years, the Centers for Medicare and Medicaid Services (CMS) and its Center for Medicare and Medicaid Innovations (CMMI) have been testing value-based payment models. These demonstrations range from mandatory or voluntary bundled payments to primary care models to Accountable Care Organizations (ACOs).

Rural hospitals trying to move along with their larger counterparts into this new value-based payment world face unique challenges, including lower patient volumes due to rural geography, a larger aging demographic, fewer post-acute care options, and, often, a higher percentage of patients on government insurance programs like Medicare and Medicaid. Additionally, some payers are increasingly looking to narrower networks, which can often result in the exclusion of rural hospitals and providers.

As health care continues to progress towards new value-based reimbursement models, look into the implications for rural prospective payment systems (PPS) or Critical Access Hospitals (CAHs), and what they should do to best position themselves to compete in the market.

High percentage of rural hospitals offer post-acute care services

As CMS began testing value-based models in Medicare, it became clear that the models did not always fit well into rural settings. Low patient volumes, lack of rural-relevant quality metrics, fewer resources, differing payer mixes, less ability to take on downside risk, differing Medicare reimbursement systems, and isolated geographies all created obstacles for rural providers’ ability to fully participate in many of these new payment models. Since that time, CMS has worked to better incorporate a rural perspective. Some of the models being tested now directly target rural providers, including the ACO Investment Model (AIM), the Frontier Health Community Integration Project Demonstration, and the Pennsylvania Rural Health Model.

However, as the industry continues moving in the direction of paying for higher quality and constraining costs through new payment models, rural providers need to make sure they are proactively demonstrating their unique value proposition to patients and payers, especially in providing post-acute care (PAC) services. Several reports released by the North Carolina Rural Health Research Program (NCRHRP) confirm just how important this will be in the future. In their studies, the NCRHRP found a high percentage of rural PPS and CAHs provide PAC services. In fact, 96 percent of CAHs offered PAC or hospice care. The NCRHRP also found a correlation between a rural PPS and CAH providing more PAC services as their geographic remoteness increases. One of the key ways CAHs, in particular, provide PAC services is through the use of swing beds.

Swing beds provide significant revenue stream

Swing beds are a Medicare feature available to CAHs and rural PPS hospitals under 100 beds. The term “swing bed” can be simply thought of as a bed that moves or “swings” from an inpatient bed to a skilled nursing bed as needed. In rural communities, hospital-based swing beds are vital in keeping PAC services close to home, as well as helping ensure coordinated care for rural Medicare beneficiaries. According to the most recent Census, 97 percent of the country’s land is considered rural and almost 20 percent of the nation lives in these communities. Not only are swing beds essential as an access point for these millions of Medicare beneficiaries, but they are frequently an important revenue stream for CAHs. According to NCRHRP’s study of a sub-set of CAHs, the mean Medicare revenue for swing beds in 2016 was over $1.2 million.

“We know swing beds are crucial to rural and Critical Access Hospitals. These beds provide flexibility for services in rural settings and provide seamless care close to home. Medicare beneficiaries and CAHs depend on swing bed services revenue so ensuring those capabilities continue into the emerging payment reforms is essential.”
- Korey Boelter, Principal

Value-based payment models impact PAC services

A study by the NCRHRP found that if a rural hospital provided the original hospitalization for a Medicare beneficiary, the PAC services were almost always provided in the rural PAC setting. However, if the original hospitalization was at an urban hospital, the PAC services were only provided in a rural setting about half of the time.

Medicare Spending for Post Acute Services Under BPCI Model

In another study, The Lewin Group evaluated for CMS the outcomes of the Bundled Payment for Care Improvement (BPCI) Models 2-4. Their findings revealed Medicare spending was reduced in two key settings: reduced hospital costs (such as using a lower-cost device or reducing length of stay) and reduced PAC costs.

CliftonLarsonAllen’s (CLA) Rob Schile summarized the latter, stating “For the episodes analyzed, the primary factor in driving reduced Medicare spending was due to decreased utilization of skilled nursing (SNF) or independent rehabilitation (IRF) facilities and increased utilization of home health services.”

Keep in mind that swing beds are reimbursed even higher than SNFs, making them an easy target for an ACO or bundled payment model to bypass in favor of a perceived lower cost setting. For CAHs and rural PPS hospitals that use and depend on swing beds for PAC, the implications of these studies are clear — rural hospitals need to proactively work to educate providers and patients about the value of their PAC swing bed services.

How to demonstrate rural PAC value

Your hospital can do a lot to promote the value proposition of your swing bed services. In order to position your hospital’s PAC services in the market, you’ll need to start by answering these questions:

  • Local PAC market — What does the PAC market look like in your area? Are there few or many PAC options? What are your referral patterns? Do you know where leakage happens? What is your relationship with neighboring tertiary hospitals?
  • Cost — How do your costs stack up against others PAC providers? What are your lengths of stay? Are those shorter than your competitors? Does this translate into lower total costs for an episode of PAC services?
  • Quality and outcomes — What are your readmission rates? Are they lower than your competitors? What quality metrics can you point to about the care you provide? How do those compare to other PAC providers? Do you review CMS’s Star Ratings for other PAC providers in your area, and do you use those ratings to positively position your swing beds? What do your patients say after using PAC services?
  • Acuity levels — What are the acuity levels of your swing bed patients? Are they more complex than your competitors? Does this help explain why your costs may be higher? Does this help demonstrate your ability to treat a more complex set of patients?
  • Patient-centered care. Rural hospitals are uniquely situated to take advantage of CMS’s desire to toward put Medicare beneficiaries at the center of health care, as many Medicare beneficiaries desire to receive their care locally. Are your patients aware you provide these services and that they can choose to receive PAC services from you, regardless of where they had an inpatient stay? Are you highlighting to tertiary hospitals that local care helps reduce travel time and stress, which also helps in patient recovery? Are you emphasizing patient satisfaction scores or other intangibles that speak to this desire to receive care close to home?

While this information is a start, the answers to these questions are only the tip of the iceberg. Redefining your swing bed services in this evolving payment system will require ongoing effort. CLA can help.

How we can help

If your rural hospital utilizes swing beds, you’ll need to prepare for these shifts in payment and care patterns. CLA can help you define your value proposition in terms of access, quality, outcomes, and cost. From market comparisons to financial modeling and strategic insights, our goal is to know you and help you thrive in this changing payment world.