Industry pressures and possibilities: The future of skilled nursing facilities

Skilled Care Facilities (SNFS) provide valuable services to the community to meet the needs of people with complex medical conditions who need short-term rehabilitation or long-term care. Unfortunately, SNF is driving an increasingly complex operational environment shaped by shrinking capacity, labor shortages, new payment models, rising costs and regulatory pressures. The shift from traditional Medicare to Medicare Advantage, coupled with insufficient Medicaid funding, has led to an under-step on revenues that are associated with higher costs associated with staffing challenges and inflation. Instead, changing demographics and evolving market demands open the door to new income streams and care models.

To remain resilient in volatility, SNF needs to maintain maximum impact and consider strategic opportunities. This is an important trend to watch.

An incredible move towards value

The shift in value-based payments (VBP) in Medicare and Medicaid continues. To ensure reimbursement in these models, SNF must consistently exhibit positive quality outcomes, such as reduced hospital readmissions, improved patient satisfaction and better long-term residents’ health.

SNFs that perform well in these models are ruthlessly focused on quality; develop plans to understand and improve key metrics; and designate a person or team to lead the work of quality improvement. They incorporated quality measures into the dashboard and discussed them with benchmark data to show their comparison with peers.

Even outside of VBP, there are many benefits to making quality improvement a priority. Strong quality results help signing, reimbursement, marketing and even family satisfaction. They can also make SNF more attractive to the participation of responsible care organizations or hospital partnerships.

Turn to Medicare Advantage (MA)

Medicare Advantage enrollment continues to surpass traditional Medicare Part A, posing challenges for post-acute care providers. Compared to traditional Medicare, MA plans typically have shorter hospital stays, lower reimbursements, and a more troublesome pre-authorization process.

Building strong relationships with regional hospital networks and physician groups can bring admission to SNF positions, which can help offset some of the challenges of MA.

SNF should be linked to MA plans on the market to review reimbursement rates. Some plans have not raised interest rates for providers recently, which provides SNF with the opportunity to proactively contact to negotiate higher rates. Preparing for SNFs that exhibit positive quality outcomes, including reduced hospital readmissions and stable CMS 5-Star ratings, is more likely to succeed in these conversations.

Move to Medicaid Patient-driven Payment Model (PDPM)

In October 2019, SNF changed from a quantity-based carpet-IV reimbursement model to its Medicare repayment patient-driven payment model. Most SNFs have made a smooth transition and by early 2020, they are proficient in new payment models. Now, by the end of 2025, most states are moving to Medicaid from PDPM, and this transition may be even more complicated. Data show that the mix index of Medicaid PDPM is lower than that of Carpet-IV.

Many states are using Medicaid PDPM step by step to give organizations time to fully understand how to complete the smallest dataset of the new model and to evaluate the impacts associated with Medicaid reimbursement. This also gives the National Medicaid time to adjust its calculations and reimbursement methods (if needed). SNFs that have not yet adopted Medicaid PDPM will benefit from connecting with peers in other states who may provide lessons learned and best practices to mitigate the transition.

A larger review of wage-based diary (PBJ) reports

Despite the improvement, the SNF continues to struggle with staff shortages. This combined with a review of reviews submitted by a salary-based journal (PBJ), which means that SNFS should improve the accuracy and reporting work of its PBJ.

PBJ submissions affect the organization’s star rating. When the SNF misses deadlines or the data is obviously inaccurate, it can lead to a 1-star staff rating, which reduces the overall 5-star rating of the organization. For those programs that link payments to star ratings, this could negatively impact hosted care contracts, recommendation source relationships, and Medicaid reimbursement.

It is crucial to stay alert to the report deadline. Many organizations miss PBJ application dates or send incorrect staffing data because they lack proper internal processes. Having multiple people involved in PBJ submissions, establishing calendar reminders and using PBJ-centric software is a relatively simple way to avoid losing deadlines. It is also wise to review PBJ reports before the deadline, allowing enough time to check data accuracy and make appropriate adjustments.

Diversified income streams

As profits tighten, SNF began exploring additional revenue opportunities such as short-term rehabilitation facilities, ventilator units, dialysis services and memory care areas to list some.

Before pursuing new services, SNF must first understand the market, whether there is a need for underserved and who the competitors may be. An organization can collect this information from discussions with hospital referral sources and consider conducting market research to understand demographic data as well as hospital DRG and discharge data.

Organizations should also think through operational logistics. What clinical skills or functions are required? Are there special certifications, physical space requirements or equipment requirements? Census and Payers – How will the mixture be affected?

Potential reimbursement should also be considered. Is there a higher reimbursement through Medicare? Is it also compensated through state Medicaid programs such as ventilator services, memory care, or behavioral care?

Collecting and analyzing this data seems daunting. Here, third parties can be useful, collect and interpret information to help make informed decisions.

Institutional Special Needs Program (I-SNP) Participation

The I-SNP proposes another opportunity for income streams, highlighting quality, with the aim of maintaining personal health and minimizing unnecessary hospitalizations.

I-SNPs often provide nurse practitioner enhancement techniques and obtain best practice clinical pathways that can enhance the clinical operation of the tissue. Providers participating in I-SNP may be eligible for bonuses if they receive a specified quality benchmark.

Residents benefit from I-SNP participation, as these programs are designed for the nursing home industry. While a standard managed care plan may offer gym membership or other benefits designed specifically for active seniors who are still at home, I-SNP may offer SNF-focused benefits such as dentistry, free barbers and beauty services.

All SNFs should evaluate the potential for I-SNP participation. Due to the quality focus of these programs, they often improve long-term outcomes, which can provide additional benefits if SNF is part of a state Medicaid program with a value-based or quality-based reimbursement component. Participation in ISNP allows providers to share financial rewards to achieve reliable clinical outcomes, but only upward space toward MA organizations.

Strategic approach is necessary

SNF is facing a period of great change, driven by emerging payment models, cost pressures and growing demand for services. This environment requires clear priorities and strategic plans that connect day-to-day work with long-term goals. With a continuous focus on quality improvement, SNF can position itself as adaptation, competition and prosperity now and in the coming years.

Photo: Baona, Getty Images

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