Characteristics of Accountable Care Organizations’ Preferred Skilled Nursing Facility Networks

ABSTRACT

Objectives: To describe the prevalence and characteristics of preferred skilled nursing facility (SNF) networks established by Medicare accountable care organizations (ACOs).

Study Design: Cross-sectional analysis of a 2019 Medicare ACO survey.

Methods: We analyzed surveys from 138 Medicare ACOs to assess preferred SNF network prevalence, characteristics, and challenges. Chi-square tests compared ACOs by proportion of ACO Medicare admissions going to preferred SNFs (higher vs lower network use).

Results: Results focus on the 77 ACOs that reported having a preferred SNF network (n = 77), with 38% being relatively new (formed in 2018 or 2019). Most ACOs (91%) did not offer financial incentives for preferred SNFs. ACOs reported a range of expectations of preferred SNFs, the most common being cost/quality data sharing (62%), automatic notification of patient admission or discharge (53%), and meeting length-of-stay targets (52%). ACOs also reported some clinical collaboration with preferred SNFs, with the top activity being developing condition-specific care pathways (49%). Commonly reported challenges included poor hospital discharge practices, SNFs’ willingness to accept complex patients, and the availability of high-quality SNFs. ACOs with lower use of their preferred SNF network reported more difficulty impacting hospital referral patterns and receiving timely SNF admission notifications.

Conclusions: Establishing preferred SNF networks is a known strategy among Medicare ACOs to manage postacute care spending and quality. Future research should document these partnerships more in depth and evaluate operational and financial alignment strategies among ACOs, hospitals, and SNFs in managing postacute care.

Am J Manag Care. 2024;30(12):In Press

Takeaway Points

Establishing preferred skilled nursing facility (SNF) networks is a known strategy for managing postacute care quality and costs. Limited research exists on the prevalence and structure of accountable care organization (ACO)–SNF partnerships. We surveyed Medicare ACOs to better understand activities and challenges in establishing preferred SNF networks.

• More than half of the ACOs in our survey have established preferred SNF networks.
• ACOs with preferred networks have varying expectations of, and collaborative activities with, their preferred SNFs.
• Common challenges include poor hospital discharge practices, SNFs’ willingness to accept complex patients, and the availability of high-quality SNFs.
• Understanding evolving ACO-hospital-SNF relationships and promoting collaborative partnerships is needed for effective postacute care management.

Effective management of postacute care is an important strategy for Medicare accountable care organizations (ACOs) seeking to improve quality while reducing costs. ACOs are groups of health care providers responsible for the cost and quality of care delivered to a defined patient population. They participate in payment models with financial incentives to manage health care spending below a prespecified target and, if successful, share in the savings generated. Better management of postacute care, particularly at skilled nursing facilities (SNFs), can be a significant opportunity for ACOs to reduce unnecessary utilization and improve patient outcomes.1 There is wide geographic variation in SNF spending,2 as well as within markets. In 2022, traditional Medicare spent $27 billion on 1.8 million SNF stays at an average cost of nearly $15,000 per stay.3

Previous research shows that ACOs reduced Medicare spending on postacute care by lowering SNF admission rates and reducing lengths of stay without compromising care quality.4,5 ACO-affiliated hospitals, especially those that partner with SNFs, were more effective than other hospitals at lowering SNF spending, lengths of stay, and readmission rates.5-7 SNFs have strong financial incentives to admit and retain patients with Medicare coverage because they are paid on a per-diem basis for up to a 100-day benefit period. Traditional Medicare rates are much higher than those paid by Medicaid and by many Medicare Advantage plans.8,9 Conflicting financial incentives can be a barrier for ACO-SNF partnerships, even as there is mutual interest in coordinating care across settings.

Some ACOs include SNFs as members, but they more commonly engage with them by forming preferred SNF networks. Preferred networks are arrangements in which an ACO or health system partners with a select group of high-performing SNFs to improve the quality and cost-effectiveness of postacute care.10,11 Collaborative activities between ACOs and SNFs may include shared care protocols and information systems, regular meetings, and dedicated staff focused on care coordination and performance improvement.12,13 Although the structure and formality of these networks vary substantially, they all aim to enhance quality and outcomes while improving coordination of care across settings.14 Medicare patients are free to select the facility of their choice and are not limited to preferred providers. But ACOs can help beneficiaries make informed decisions by sharing information about SNF quality and describing the advantages of using preferred SNFs that may include enhanced sharing of information and coordination with their primary care provider.

Despite the increase in ACO use of preferred SNF networks, research is limited on the structure and prevalence of these arrangements. This study offers a snapshot of Medicare ACOs with preferred SNF networks from a 2019 survey, currently the most recent national survey data available. Although predating the COVID-19 pandemic, our findings provide a valuable foundation for future research on the evolution of ACO-SNF partnerships.

METHODS

We conducted a national survey of Medicare ACOs to assess the prevalence and characteristics of preferred SNF networks. The survey targeted senior executives of ACOs participating in the Medicare Shared Savings Program (MSSP) or Next Generation ACO (NGACO) model as of July 1, 2019, and through 2020 (n = 505). Web-based survey responses were collected from September 2019 through January 2020. Weekly email reminders were sent to nonrespondents for the first 4 weeks and biweekly reminders were sent over the next 4 months. Respondents were asked to report results from their most recent fiscal year. Two-thirds of respondents were identified as the ACO president or executive director, chief medical officer, chief operating officer, director of population health, or director of case management. Survey results were merged with information on ACO characteristics from the MSSP and NGACO public use files.

Survey questions were developed in consultation with industry experts to establish face validity. We pilot tested the survey with 5 ACOs and made modifications based on their feedback. The SNF preferred network questions were a subset of a more extensive survey also covering home-based care initiatives.15 Survey questions focused on SNF network size and utilization, ACO expectations of preferred SNFs, collaborative activities, and challenges ACOs encountered in managing SNF care (eAppendix Table 1 [eAppendix available at ajmc.com]).

Our descriptive analysis focuses on ACOs that reported having a preferred SNF network (n = 77). In addition to describing preferred network characteristics, we looked at the proportion of ACO Medicare admissions going to preferred SNFs. Chi-square tests were used to compare ACOs based on network utilization. Given the nature of the multiple-choice question (eAppendix Table 1), lower utilization was defined as 0% to 60% of Medicare admissions to the preferred network, with higher utilization being 61% to 100%.

RESULTS

Characteristics of ACOs With Preferred SNF Networks

We received 138 completed surveys for a 27% response rate. This paper and subsequent results focus on the 77 ACOs that reported having a preferred SNF network. Fifty-two percent of ACOs with preferred SNF networks participated in an ACO track where they shared both savings and losses with Medicare compared with 39% of all Medicare ACOs (eAppendix Table 2). ACOs with preferred SNF networks were also larger than other ACOs and more likely to include a hospital.

Sixty-two percent of ACOs with preferred SNFs had networks formed in 2017 or earlier (Table 1). Networks had a mean of 18 (range, 2-90) preferred SNFs. One-third of ACOs—many with a hospital—reported high usage of their preferred network (defined here as 61% or more of their Medicare SNF admissions). Few ACOs (9%) offered financial incentives for preferred SNFs that met performance targets. Seventy-eight percent of ACOs regularly sent clinical staff (ie, physicians, advanced practice clinicians [APCs], registered nurses) into preferred SNFs to visit ACO patients, deliver clinical care, or manage utilization. Of these, approximately 60% used physicians or APCs in the SNFs and 40% primarily used case managers (data not shown).

ACO Expectations of Preferred SNFs

The 3 most common expectations selected by respondents from a list of 7 options (Table 2) were regular sharing of cost and quality information (62%), technology to notify the ACO when a beneficiary was admitted to or discharged from the SNF (53%), and meeting average length-of-stay targets (52%). Almost half (47%) of ACOs reported that they expected preferred SNFs to have onsite physicians or APCs several days per week.

Approximately one-third of ACOs reported an expectation that preferred SNFs communicate patient clinical status changes within 24 hours (32%) and that they utilize the ACO’s preferred home health providers (31%). Three-quarters of the ACOs with preferred SNF networks also reported having preferred home health agencies (data not shown). Additional expectations were captured via open-ended responses (n = 18). Common themes included a minimum Star Rating, admissions and care coordination criteria, meeting other quality goals, and participation in patient clinical reviews and performance improvement meetings.

ACOs were also asked about the use of telehealth in SNFs. Only
5 (6%) ACOs in our survey reported that virtual visits for acute events during nights and weekends were expected of preferred SNFs. Very few respondents provided or contracted for virtual consultations with their SNF patients at the time of the survey. Only 3 ACOs reported routine video or telephone visits, and 9 ACOs reported pilot testing them (data not shown).

Collaboration Activities, Challenges, and Opportunities With Preferred SNF Networks

Approximately half of ACOs reported collaboration with preferred SNFs on clinical improvement activities (Table 2). The top activity was developing care pathways for specific conditions (49%), followed by providing clinical training for SNF staff (45%). Open-ended responses (n = 25) yielded similar themes of shared protocols, educational activities, and participation in patient review and performance improvement meetings.

ACOs reported several challenges to effectively managing SNF care (Table 2). Sixty-one percent of ACOs reported poor hospital discharge practices (eg, poor transfer documents, premature discharge, lack of medication reconciliation), and the willingness of SNFs to accept complex patients as major or moderate challenges. Over half stated the following as challenges: availability of high-quality SNFs (56%), willingness of hospital staff to refer patients to preferred SNFs (55%), and willingness of SNFs to work with the ACO on reducing length of stay (51%). ACOs with a smaller share of admissions to preferred SNFs were more likely to report certain challenges compared with ACOs with greater use of their network, including lack of hospital staff support in referring patients to preferred SNFs and lack of timely notification when ACO patients were discharged to a SNF.

DISCUSSION

Our survey found that 56% of ACO respondents had preferred SNF networks, but that many of these were relatively new, with 38% formed in 2018 or 2019. Research from 2012 through 2015 indicated that less than half (44%) of Medicare ACOs had any formal relationship with SNFs.11 As with prior research, ACOs that invested in preferred SNF partnerships tended to be larger systems that included hospitals and were more likely to take on risk contracts. Our findings shed light on the characteristics of ACO-preferred SNF arrangements, including interorganizational processes and activities supporting care coordination.

Consistent with prior research, few ACOs with preferred SNF networks share financial risk or savings with partner SNFs.10,11 One study based on interviews with ACO executives revealed that sustained or increased referrals were the primary motivators for SNF participation in preferred networks.11 ACOs with greater market power may be better positioned to engage SNFs in forming mutually beneficial partnerships. Our findings support this in that ACOs with greater preferred SNF network use were less likely to report issues regarding timely notification of patient SNF admissions, suggesting that ACOs with a larger market share may be able to leverage their influence to establish clear expectations and communication channels for timely information exchange with their preferred SNFs.

Hospital relationships play a critical role in ACOs’ ability to influence postacute care referrals and care transitions. Hospital-affiliated ACOs typically have more capital and resources than physician-run ACOs to establish SNF networks. However, our study found that ACO respondents with lower network use, including some hospital-based ACOs, reported more difficulties having an impact on hospital referral patterns. This highlights the complex dynamics at play in ACO-hospital-SNF arrangements. Because hospitals ultimately control referrals, they likely have greater negotiating power with SNFs than ACOs. Some hospitals already have established SNF relationships, but their objectives are often less about managing SNF spending and more about facilitating timely hospital discharges. One study found that preferred network formation alone did not lead to higher volume or better outcomes for preferred SNF patients from ACO hospitals, suggesting additional strategies may be needed to influence referral patterns.16 Future research should identify effective care coordination approaches between ACOs and hospitals, considering specific market dynamics and preexisting organizational relationships.17

One common ACO strategy involves sending clinicians to SNFs. The number of clinicians specializing in nursing home care, known as “SNFists,” is growing,18 and their presence has been associated with lower emergency department and rehospitalization rates.19,20 Telemedicine services can reduce emergency department and hospital utilization in nursing homes,21 offering a cost-effective alternative. Although few ACOs in our study used telehealth with SNFs—consistent with research showing that only 0.15% of provider visits to nursing home residents were virtual in 201922—the COVID-19 pandemic accelerated adoption, with virtual visits increasing to 15% in 2020 before declining to 2% by mid-2021.22 Although current ACO usage rates are unknown, the pandemic has highlighted telemedicine’s potential to support ACO-SNF collaboration.

The COVID-19 pandemic significantly disrupted postacute care coordination efforts. Although the specific role of ACOs in supporting SNFs during the pandemic is not well documented, prior hospital relationships became crucial for SNFs in weathering the crisis, as hospitals helped SNFs secure supplies, develop testing protocols, and access resources.23 Effective partnerships will be necessary as care patterns change and the pressure to coordinate care increases.

Limitations

This study has several limitations. The survey response rate was relatively low (27%) and is not generalizable to all Medicare ACOs, given that respondents are larger ACOs and more likely to participate in risk contracts. The low response rate likely reflects limited ACO executive time, survey length, and specialized content. Additionally, duplicate responses for ACOs owned by the same national corporate entity were removed, reflecting the difficulty in getting nuanced information for ACOs with central administration. Although not generalizable, the survey results provide a profile of activities undertaken by a large group of leading ACOs before the onset of the COVID-19 pandemic. Further research is needed to understand how ACO–preferred SNF arrangements have changed in the aftermath of the pandemic.

CONCLUSION

By 2019, more than half of the Medicare ACOs we surveyed had established preferred SNF networks to manage postacute care spending and quality. Our survey results highlight that ACOs with preferred networks had varying expectations of their preferred SNFs, engaged in a range of collaborative activities, and faced fairly consistent challenges regarding hospital discharge practices, SNF willingness to admit high-cost patients, and the availability of high-quality SNFs in their markets. ACOs with lower use of their preferred SNF network reported more difficulty impacting hospital referral patterns and receiving timely SNF admission notifications. Future research should assess partnerships between hospitals, ACOs, and SNFs in more detail to determine which strategies and practices lead to better outcomes and lower costs for Medicare beneficiaries.

Acknowledgments

The authors thank the ACO respondents whose participation in the survey made this paper possible, as well as Sam Sobul and Mike Vetter for their work on an earlier version of this paper.

Author Affiliations: Institute for Accountable Care (LS, JP, REM), Washington, DC; Suffolk University (LH), Boston, MA; Brandeis University (JP, REM), Waltham, MA.

Source of Funding: This research was funded by the West Health Institute. The Institute for Accountable Care receives some funding from ACOs and through the National Association of ACOs.

Author Disclosures: The authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (JP, REM); acquisition of data (JP, REM); analysis and interpretation of data (LS, LH, JP, REM); drafting of the manuscript (LS, LH, JP); critical revision of the manuscript for important intellectual content (LS, LH, REM); statistical analysis (LS, JP); obtaining funding (JP, REM); administrative, technical, or logistic support (LS); and supervision (REM).

Address Correspondence to: Louise Secordel, MBA, Institute for Accountable Care, 2001 L St NW, Ste 500, Washington, DC 20036. Email: lsecordel@institute4ac.org.

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