Strategic opportunities for hospice

Categories: Leadership.

(This article is the first in a two-part series published in NewsLine Spring 2016.)  It’s important for hospice leaders to understand how hospices can work with ACOs and health systems as part of a strategy to increase hospice referrals and other new revenue opportunities.

As the Director of NHPCO Edge, I have the opportunity to work with hospice clients around the country. Lately it seems no matter where I go, hospice leaders are worried about many of the same issues:

  • Flat or declining hospice referrals
  • Increased competition among hospices
  • Confusion about how best to partner with ACOs and hospitals

While these issues may seem distinct, they stem from the same root causes. We are now in the midst of a period of upheaval and change affecting providers throughout the healthcare continuum. Far from affecting only hospices, these changes are altering the playing field for everyone from hospitals to physicians to the patients themselves. The good news is that for hospices prepared to move decisively there may be unprecedented opportunities worth seizing.

Medicare: The Irresistible Force

The force behind all this upheaval is the Medicare program, and the need to prepare for a sea change in Medicare payment structures. HHS has set a goal of tying 85 percent of traditional Medicare payments to quality or value by the end of this year. Medicare is already tying payment incentives to programs like Hospital Value Based Purchasing and the Hospital Readmissions Reductions Program, and intends to tie 50 percent of traditional Medicare payments to Alternative Payment Models (APMs) by 2018.

The squeeze to reimbursements in other parts of post-acute care contributed to the explosion in the number of hospice programs over the past decade. That’s one reason why hospices everywhere are feeling the pressure of increased competition for a patient population that is no longer growing in most parts of the country. At the same time, hospice is now more highly regulated than ever as CMS seeks to ensure that hospice remains a high quality and high value benefit under Medicare.

And yet I’m as optimistic about the potential for individual hospices to grow and expand as I’ve ever been. The reason is that I see a strategic advantage for hospice providers operating within the new world of alternative payment. Hospices have essential skills that other, larger, parts of the health care system now need.

Think about it: now everyone in the healthcare continuum needs to learn how to do what hospice has been doing ever since the beginning of the Medicare Hospice Benefit. Hospice providers have learned how to manage patients that:

  • Are high-need with complex, life-threatening illness
  • Out in the community in a home or home-like setting
  • Under a risk-based payment method, controlling costs of car

The World of Alternative Payment Models

Bundled payments, ACO incentives and penalties, global budget models—all are designed to put providers at risk for the cost of patient care. While hospices have been at risk from the beginning, this is new stuff for many other providers. Hospital CFOs are used to fee-for-service incentives, where the rule is “do more, get paid more.” Under risk-based payment, that gets turned on its head. The new mantra must be to give the “right care, in the right place, at the right time”.

That’s going to be a painful transition for many hospitals and health systems. We know from experience that fee for service and risk-based incentives don’t mix well. In fact they’re diametrically opposed in every way. (Does anyone else out there remember the wave of capitated payments for physician group practices back in the 1990s? And the bankruptcies that followed?)

But for those providers who succeed in making that switch sooner rather than later, tremendous benefits may accrue. They’ll be better prepared to profit from CMS’ stated goal to keep moving purchasing into value-based structures.

MACRA is the latest law that adds weight to the trend. Last April, Congress passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The primary attention at the time was to the “doc fix”, which reformed the physician fee schedule and fixes the way physicians and other healthcare professionals are paid for services to Medicare beneficiaries. But also included were provisions for new incentives for participation in alternative payment models. Those incentives will begin three years from now in 2019, with initial payment adjustments of +/- 4%. Incentives grow to +/- 9% by 2022. Note that these really are more than positive incentives; they also include downside risk that payment will be reduced if targets are not met.

The rules creating Medicare ACOs, or Accountable Care Organizations, were first developed in 2011 as required under the ACA. Program participants have come and gone as individual ACOs have found success or failure, but on balance, each year has added more participating providers and more covered lives. By the beginning of this year, CMS announced that 8.9 million Medicare beneficiaries in 49 states and the District of Columbia were covered by ACOs.

And don’t forget that a majority of ACOs actually cover commercial, or non-Medicare patients. Leavitt Partners, a firm specializing in analysis of ACOs, counted 782 ACOs by the end of 2015. Their analysts estimate that the total number of lives covered by ACOs (both Medicare and non-Medicare) could grow to as many as 100 million by 2020 given the incentives of MACRA.

January 2016 saw creation of the first Next Generation ACOs. Next-Gen ACOs in particular are required to select a network of preferred providers and connect their patients to those preferred providers. Hospices that can achieve preferred status are thus guaranteed to receive referrals from that ACO’s physicians and facilities, while hospices that are not selected may be left out in the cold.

The Implications for Hospices

Whereas formerly I heard from many hospice CEOs that they found it hard to get attention from hospital leadership, that’s no longer true in many markets. Health systems and ACO owners are now actively looking for skilled partners in the healthcare continuum to help them achieve their financial and quality goals. Hospices can be essential partners in the effort to provide the right care in the right place at the right time, and I would add, to the right patients—the highest cost ones.

But this opportunity won’t last forever. Players are choosing panels and partners right now, and hospices cannot afford to wait to be approached. It’s an old truism, but worth repeating: If you’re not at the table, you may be on the menu. In Part Two of this article I’ll talk more about practical strategies to help hospices make sure they have that seat at the table.

See the companion article published on ehospiceUSA, “What are Alternative Payment Models?”


A Preconference Seminar on the Topic

At the NHPCO Management and Leadership Conference in April, Sue Lyn Schramm, MA will be leading a half-day preconference session on the topic of hospice strategies for working with ACOs.

Taking Hospice Skills Upstream: New Ways Hospice Can Partner with Health Systems and ACO’s (PC05)
Wednesday, April 20, 9:00am – 12:00pm

Sue Lyn Schramm, MA, National Hospice and Palliative Care Organization, Alexandria, VA
Randall Wagner, MD, Washington Adventist Hospital, Takoma Park, MD
Robin Stawasz, LCSW, Director Innovation, CareFirst Hospice and Palliative Care, Corning, NY

Healthcare payment reform is creating a new set of challenges and opportunities for hospitals and health systems. This seminar will help the hospice administrator evaluate opportunities to become an active partner with hospitals, Accountable Care Organizations (ACOs) and other at-risk organizations in your market. In this session, you’ll gain clarity and a sense of direction for your organization’s strategies by learning from the perspective of three speakers: a hospice strategist, a hospice provider, and an ACO physician and owner.

Attendees may want to consider combining attendance at this cutting-edge preconference session with the 2nd Annual Executive Business Summit, Beyond the Benefit: Delivering on the triple aim in healthcare through palliative care, happening April 20 from 5:00—6:00pm.

Online registration is open until March 31, 2016.

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