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Bundled Payments' Disruptive Effects Detailed

By Gregory A. Freeman  
   July 14, 2015

Hospitals are likely going to cut out their one- and two-star SNFs to mitigate the risk of penalties during the post-discharge period, says David Friend, MD, MBA, consulting managing director with the Center for Healthcare Excellence and Innovation of BDO consulting in New York City. Friend expects 25% of SNFs to close soon, while medically advanced SNFs will flourish.

The SNFs most likely to close are those that have low star ratings, lack of IT integration with hospitals, poor physical therapy, lack of full interact clinical protocols, poor physician alignment, and lack of a full time medical director rounding on patients every day, he says.

David Friend, MD, MBA

"It is already happening, but is just going to accelerate," Friend says. "We thought it would take five years with a closer rate about 5% a year. We now believe bundling will dramatically accelerate the trend because no integrated system that bundles these services will want to work with a less than excellent therapy and skilled nursing providers."

Baggot agrees that SNFs will be squeezed, but she expects more of a tempered response from hospitals and health systems.
"While I don't see hospitals severing ties per se, as there is still an element of patient and family choice, they will absolutely de-emphasize SNFs with higher cost-per-case and poor quality performance, which we are already seeing," she says. "We should expect to see continued consolidation in this area of the market."

SNFs that see their share of Medicare dollars fall as a result of being cut out of these programs will have a tough time surviving, Friend says. Those SNFs that become medically advanced skilled nursing facilities, and can deliver their portion of the bundle efficiently and with quality, will thrive.

No More Blank Checks
The move by CMS will require a sea change for providers and hospitals in the ways they approach knee and hip replacement surgery, says Mike Lessila, director of business development with Vestica Healthcare, a medical benefits administration company based in Menomonee Falls, WI.  

Rather than having a "blank check for services," as they do now, their reimbursement will be based on a fixed amount of money, he says. Under the proposed rules, this means that the hospital systems will be taking a financial risk for these common procedures and guaranteeing the outcome of the surgery.

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