SNF Medical Directors’ Role in Utilization Management

Historically medical directors were selected by facilities based on their ability to fill beds. Then, with the introduction of the Centers for Medicare & Medicaid Services (CMS) Five-Star Quality Rating System,¹ directors became loosely responsible for the oversight of care, especially as measured by the star rating. With the shift to value-based care, medical directors are now becoming directly involved in utilization management strategies, but their role and responsibilities in this context is still evolving. 

Below is a discussion of the complexities of the regulations pertinent to the medical director role and potential areas of opportunity for medical directors to better support their facilities, thereby improving care quality and management.

How Medical Directors Can Impact Resource Utilization 

Drug Spend

The beginning of utilization management for medical directors began with their involvement in reducing the facility’s drug spend. During a Medicare Part A subacute stay, the facility is responsible for most of the resident’s drugs. While many believe the facility is responsible for all drug costs, this is actually not the case—there are two significant exceptions to this “all.” The first is regarding vaccinations. All vaccinations, both those covered under Medicare Part B and Part D, can be billed to those parts even during a Medicare Part A stay. Under Medicare Part B, these vaccines include: influenza, pneumococcal, tetanus, and hepatitis B; under Part D, this includes the shingles vaccine. The other exception is drugs that are given in relationship to dialysis, as these drugs are bundled in the dialysis payment. These can include erythropoiesis-stimulating agents and antibiotics.

It is also important to note situations that cannot be used to shift the cost of drugs during the Part A subacute stay. This includes efforts by facilities to move patients to outpatient offices for infusion of treatments under Medicare Part B; this cannot be used for a resident of the Medicare Part A subacute facility. Another example of when shifting the drug cost is not possible is when the hospital agrees to provide the medication to a facility, so that the facility will accept a patient on an expensive treatment for admission. Unfortunately, there is no legal path for shifting these financial responsibilities away from the skilled nursing facility (SNF). As a result, this places an additional responsibility on the part of the medical director—utilization oversight of new admissions. In order to oversee new admissions, the individual’s medication list must be reviewed to identify opportunities for changes and potential issues regarding whether their medication expenses exceed the facility’s reimbursement. Medical directors can collaborate with their consultant pharmacist or institutional pharmacy provider to assist with these assessments and get recommendations for more cost-effective treatments.

Length of Stay

The most recent utilization management job to be handed to medical directors is the management of length of stay (LOS). Management here requires a balancing between several conflicting stakeholder priorities. There are several key stakeholders, each with very different priorities: patients and their families, payers, and nursing home (NH) administrators. Of course the patient is the priority, and they must find the balance between improving their health at the facility and paying copayments, which begin after 21 days. This balance of the right LOS involves, at the other end of the spectrum, at-risk stakeholders like payers and providers too. 

Payers and providers are shouldering risk for the total cost of care, which includes the LOS during the subacute stay—shorter LOS equals less cost, longer LOS equals more cost. Providers taking on risk through bundled payments are included as well, where the priorities are the same as payers: shorter LOS. Managed care organizations (MCOs), as a direct payer, also want shorter LOS. Enrollment in Medicare MCOs continues to grow (Figure 1), and while penetration varies by market—ranging from more than half in Minnesota to under 10% in 3 states, according to Kaiser Family Foundation data for 2018—the benefits to Medicare beneficiaries mean that uptake will likely only increase over time.² For these at-risk groups, the drive for shorter SNF LOS needs to be balanced against the risk that, if a LOS that is too short, it could result in an even more costly rehospitalization. These pressures have caused a significant drop in SNF LOS.

At the other end of the spectrum is the NH administrator, who has historically benefited from longer LOS that had gone unmanaged by traditional Medicare. But there are conflicts even among the priorities of the NH administrator in this context. For example, while they strive for longer LOS, they must balance this against alienating their referral stream from at-risk providers who are monitoring and deselecting high-cost SNFs (long LOS and high hospitalizations) for referrals. 

Of note, new CMS readmission penalties are focusing again on balance to achieve the “right” LOS. The vast majority of SNFs received a penalty on their Medicare payments for fiscal year 2019 for poor 30-day readmission rates back to hospitals. Of the 14,959 SNFs subject to the CMS Skilled Nursing Facility Value-based Purchasing Program, 73% received a penalty while 27% got a bonus.³ The penalties, which went into effect for the first time on October 1, 2018, were mandated by the Protecting Access to Medicare Act of 2014 in an effort to transition SNFs from fee-for-service to value-based payment. Under the program, SNFs can see up to a 1.6% bonus in their Medicare Part A payments or up to a 2% cut.³ This is over $100,000 at risk for an average 120 bed SNF—an amount certainly getting SNFs’ attention.

Squarely in the middle of all this is the patient and their family. Patients are looking to both increase their quality of life through greater independence and more time at home. But some balancing must even be done in this group, as patients are also interested in ensuring that they are not paying extra for anything from which they would not truly benefit (Table 1). It is important to note that for those patients who are dual eligible (having Medicare and Medicaid) their out-of-pocket costs are zero throughout their entire SNF LOS regardless of the number of days—as such, they tend to have much longer LOS.⁴

Given all of these interests in LOS, the target for many medical directors is going to be 20 days LOS, because on that 21st day there are two groups, both fighting to get out—the patient and the at-risk stakeholder. As such it will be difficult for medical directors to argue for keeping someone in their facility for a longer period of time. Of course, there will be situations when this will not be possible, including situations where the patient is at high risk of readmission should they be discharged too soon. A longer LOS will be easier to argue in those dual-eligible patients because of their limited out-of-pocket obligations.

Conclusion

Optimal utilization management in SNFs will require that medical directors have a thorough understanding of all of these intertwined elements and stakeholder relationships to determine for each individual patient when is the appropriate time for discharge to home. In many cases, not everyone will be happy with their decision, but if medical directors keep the patient as their top priority, they should not be too far off track with the other stakeholders. 

References

1. Centers for Medicare & Medicaid Services (CMS). Five-Star Quality Rating System. Cms.gov website. https://www.cms.gov/medicare/provider-enrollment-and-certification/certificationandcomplianc/fsqrs.html. Updated January 30, 2019. Accessed February 6, 2019.

2. Jacobson G, Damico A, Neuman T. A dozen facts about Medicare Advantage. Henry J Kaiser Family Foundation. https://www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advantage/. Published November 13, 2018. Accessed February 6, 2019.

3. Castellucci M. Most skilled-nursing facilities penalized by CMS for readmission rates. Modern Healthcare. November 28, 2018. https://www.modernhealthcare.com/article/20181128/NEWS/181129930. Accessed February 6, 2019.

4. Medicare Payment Advisory Commission (MedPAC). Chapter 8, Skilled nursing facility services. In: Report to the Congress: Medicare Payment Policy. https://www.medpac.gov/docs/default-source/reports/mar17_medpac_ch8.pdf. Published March 2017. Accessed February 6, 2019. 

5. Galewitz P. Medicare Advantage riding high as new insurers flock to sell to seniors. Kaiser Health News. October 15, 2018. https://khn.org/news/medicare-advantage-riding-high-as-new-insurers-flock-to-sell-to-seniors/. Accessed February 6, 2019.