Rae Woods (00:02):
From Advisory Board, we are bringing you a Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods, you can call me Rae. In 2023, we're seeing an unprecedented number of post-acute care centers, specifically skilled nursing facilities, cutting beds or even closing down entirely and there doesn't seem to be an end anytime soon. That's why on today's episode, I want to explore the reasons behind those closures. And to do that, I've brought two post-acute care experts, Monica Westhead and Blake Zissman. Hey, Monica. Hey, Blake. Welcome to Radio Advisory.

Monica Westhead (00:45):
Thanks for having us.

Blake Zissman (00:46):
Hey Rae, thanks for having us.

Rae Woods (00:48):
I want to admit some fault at the beginning of this episode. This is only the second time that we'll have talked about the post-acute space on Radio Advisory. And the first time we talked about it was literally at the very beginning of this podcast's existence, our fifth episode ever back in 2020. So I am glad that the two of you are here to finally give more voice to this part of the industry.

Blake Zissman (01:12):
Excited to not be neglected anymore.

Rae Woods (01:14):
You can go ahead and say it's my fault for not having another post-acute episode. It's okay, I am absolutely admitting fault here.

Blake Zissman (01:21):
You are the host.

Rae Woods (01:21):
Well, I want to start us off by making sure that the three of us, our listeners, are actually all on the same page. Define for me the post-acute part of the healthcare ecosystem. What services are we talking about? What facilities are we talking about? And where do you want us to focus our attention today?

Monica Westhead (01:56):
When we talk about post-acute care at Advisory Board, it's a pretty broad term. It encompasses a lot of different settings that you might go to after hospital discharge for rehab, for additional care. So post-acute, as we think about it, includes LTACHs, long-term acute care hospitals, earth inpatient rehab facilities, SNFs or skilled nursing facilities, home health, hospice or end of life care, and occasionally senior living as well. It's a little bit different from the other parts of the industry, but it still is part of the post-acute continuum. But today, I think if we're talking about the parts of the industry that are potentially needing our focus the most right now, we're going to talk about SNF.

Rae Woods (02:39):
And how would we describe the state of skilled nursing facilities, of SNFs today?

Monica Westhead (02:45):
It is a rough time to be a skilled nursing facility. It is a very challenging industry to be part of, it always has been, but the conditions most recently have certainly become untenable for a large portion of the industry.

Rae Woods (03:02):
What do you mean the conditions? Is it that demand has just gone up? I'm thinking about the aging population, I'm thinking about the fact that patients that we have tend to have more complex care needs because of everything that we've been living through across the last couple of years. Is that why the situation has gotten harder.

Blake Zissman (03:19):
So it's not just because of demand. There's two fronts here. You've got an unprecedented SNF staffing shortage and issues with funding. So on the staffing shortage side, SNFs are the only industry across the entirety of the continuum that haven't gotten back to 100% their pre-pandemic staffing level. Every other site has, it's not projected to get back there until 2027. So now funding. When SNFs are reimbursed, primarily about 62% of their residents are on Medicaid, which is the lowest reimbursing insurance payer.

Monica Westhead (03:57):
That's right.

Blake Zissman (03:58):
Now, especially as Medicare Advantage expands, which prioritizes shorter length of stay, SNFs are having an even greater difficulty here.

Monica Westhead (04:08):
It's also important to point out that Medicare Advantage also pays less per day than Medicare Fee-For-Service. So as more Medicare beneficiaries choose Medicare Advantage, the SNFs are receiving less per day to care for those patients and they're also seeing fewer days for those patients as well.

Rae Woods (04:27):
So things aren't good for skilled nursing facilities, but just how bad are we talking about here?

Blake Zissman (04:33):
An unprecedented number of SNFs are closing.

Rae Woods (04:35):
Do you think that the rest of the industry knows that? I mean, I'm thinking about all the members that Advisory Board has, I'm talking about all of the listeners that listen to this podcast. Are folks aware that this is such a big problem right now?

Blake Zissman (04:48):
I'd say primarily, no.

Monica Westhead (04:50):
I think at this point it's still pretty locality specific. There are areas of the country where there have been enough closures to significantly disrupt hospital discharges and that's why we're starting to see so much more attention paid to this. I've been working in the post-acute space for about a decade now and this year is probably the biggest year that I've had yet for hospitals and health systems asking me questions about skilled nursing facilities because it's starting to impact their throughput. If you have these SNF closures happening, what happens is you can't discharge patients from the hospital into the SNF, you can't get patients from the emergency department into the hospital, and that impacts the hospital's bottom line.

Rae Woods (05:37):
And my understanding is that same challenge happens even if the SNF isn't closing because of all of the challenges that Blake just mentioned, that we still aren't able to get people out of the hospital and into the SNF?

Monica Westhead (05:50):
Yes. The throughput problem is obviously most severe in markets where SNFs are actually leaving the industry, but even where SNFs are not closing, we're still seeing them not being able to accept new patients due to staffing shortages. We're seeing them having to close units or having to close beds as a result. So everything that Blake was saying about the staffing issues as well as the reimbursement issues, which are making it harder for them to pay more staff are causing these backups throughout the entire delivery system.

Rae Woods (06:24):
But our listeners might be thinking about the fact that there are alternatives to skilled nursing facilities. I'm thinking specifically about any kind of home-based care that we know that people tend to like more and be better for the patient experience than necessarily going to something like SNF. Isn't that just an alternative that people can use here?

Monica Westhead (06:47):
In some cases, yes. It is not a universal alternative. It doesn't work in all cases. So part of the reason why you can't just send everyone home is because a lot of the people that are transferring to SNF need 24/7 support. They need someone to help them with their activities of daily living, they need someone to make sure that they take their medications on time. Medicare Certified Home Health does not cover that. So it'll cover the [inaudible 00:07:13] visit or the therapist visit, but it won't cover someone to be in your home and help you get dressed and help you eat.

(07:21):
And so when someone has those needs, which the vast majority of people going into a skilled nursing facility do, if you want to have that in the home, either you need to be able to pay for it out of pocket, which can be extremely expensive, or you need to have a loved one who is available to be with you 24 hours a day. So home-based care at this point cannot be substituted for all skilled nursing facility utilization and it's important for the industry to understand that many of these people can't just safely be sent home.

Rae Woods (07:54):
It sounds like there's some misconceptions around what SNFs are, what they are not, what they can do and the relationships that they have to other entities in healthcare. Is that right?

Monica Westhead (08:07):
Relationships between skilled nursing facilities and specifically health systems have been fraught for a very long time. As long as Advisory Board has been in the post-acute space, we have been doing research on partnerships between acute and post-acute care. Fundamentally, acute care providers and post-acute providers have different incentives that actually oppose each other and as a result there is mistrust between the two types of providers.

Rae Woods (08:37):
Monica, you mentioned earlier this idea that other stakeholders even within our own industry may not fully understand the scope of this challenge. Why do you think that is?

Monica Westhead (08:51):
Hospitals and health systems have very different incentives from skilled nursing facilities and it puts them at odds a lot of the time. So hospitals and health systems operate in a world where they are accountable for outcomes that occur after the patient leaves the hospital. Think readmission penalties, think value-based payment programs, bundled payments, organizations that are ACOs or that operate their own health insurance product. Post-acute providers largely are cut out of those programs. So SNFs cannot by themselves participate in the VBP program. They do have a readmissions penalty, but it's very differently structured than the one in the hospital. So what you have is a hospital that's desperately trying to contain costs for patients after discharge, and you have a skilled nursing facility that is trying to remain profitable and able to take care of those patients. And the more you reduce that length of stay, the more you reduce that SNF utilization, the more challenging it is for them to do that.

Rae Woods (09:53):
And that strikes me as really hard because these two stakeholders also need each other quite a bit, but their incentive structure is set up for them to do very different things.

Monica Westhead (10:04):
That's absolutely the problem here, and it's been the problem for years. The misalignment of incentives causes tension, it causes conflict and it frankly puts organizations in a bit of a power struggle with each other that doesn't necessarily result in the best outcome for either of those providers or certainly for the patients, despite both sides trying their hardest to make things right for the delivery system.

Rae Woods (10:31):
So why are things so much worse now if that tension has always been there?

Monica Westhead (10:35):
When you think back to years ago, before the pandemic, there was a lot of progress that had been made toward preferred provider networks. So hospitals were building preferred provider networks, they were doing what they could to select higher quality post-acute providers to partner with, there was some work being done to try to narrow those networks. During the pandemic, all of that went out the window and we actually saw a lot more collaboration than I think we had seen in the past with hospitals and health systems providing additional support, training, clinical staff, supplies.

Rae Woods (11:10):
Yeah, that was exactly what we talked about three years ago.

Monica Westhead (11:12):
Exactly.

Rae Woods (11:13):
The last time we talked about acute care.

Monica Westhead (11:16):
It was a time where everybody realized how badly they needed each other and they came together.

Rae Woods (11:22):
Well also, SNFs and post-acute facilities in general were raised up as heroes. They were suffering so much more from the context of the coronavirus and we were trying to think about ways to uplift this stakeholder because they're caring for these incredibly vulnerable people.

Monica Westhead (11:41):
I would actually push back on that. I think SNFs almost got left out of the push to recognize people as healthcare heroes.

Rae Woods (11:49):
Oh, really?

Monica Westhead (11:51):
When you think back to early 2020, there was a lot of blame being placed on post-acute providers for the sheer number of cases and frankly, the mortality rate in those facilities. We know now that largely that was just due to the demographics of the virus, that these facilities were taking care of extremely vulnerable people. But if I think back to 2020, I think the skilled nursing industry was pretty vilified for what happened in those early months and I don't know that the reputational harm has recovered from that even as we know so much more now about the groups of people that were the most vulnerable.

Rae Woods (12:32):
Okay. Which speaks to, again, your point, Monica, about how these tensions have been here forever. But I'm going to come back to my question. Why are things so much worse now to the point where we are starting to see more and more SNFs closing?

Blake Zissman (12:46):
So just going back from the beginning, talking about staffing, that's always going to be that main issue. Now, you have all these patients coming in, still need that SNF care, but because this lack of beds and the plethora of other issues, there's all these delays in care transitions from hospitals. And the reason people are starting to finally pay attention to this is that other people are starting to feel the pain. Hospitals can't get a new DRG filled for their beds because the patient that they're caring for they can't send downstream is stuck at their facility. So now it's starting to affect other parts of the continuum and people are starting to finally wake up to it.

Monica Westhead (13:30):
I would also say that as we've moved into this stage of the pandemic, we're no longer in this, everybody help each other, kind of mode. We are now back in a mode of everybody has to manage their own business and each of those businesses have had some pretty significant challenges across the pandemic. And so hospitals and health systems are saying, "Look, I just need to focus on myself right now and make the changes that I need to make in order to be profitable or to operate the services that I need." Skilled nursing facilities are very much struggling with staffing in particular, and because everyone else is also struggling with staffing, SNFs find themselves at the bottom of the hiring chain because they're not able to provide the same kind of pay or sign on bonuses or other types of wraparound benefits that some of the other employers might be able to offer.

Rae Woods (15:37):
Is there some third party that is going to be able to come in and save some of these skilled nursing facilities, preventing them from getting to the point where they need to close?

Blake Zissman (15:47):
So you look at the government and there's just not a likelihood they're going to send in fundings to these facilities, but what they are about to announce is a SNF staffing mandate.

Rae Woods (15:59):
And that is a good thing because we know that we want to have more staff to be able to care for some of these vulnerable populations. Or are you going to tell me that this is not actually a good thing?

Blake Zissman (16:12):
I think you kind of guessed right. So on its face, yes, it is a good thing, we want the higher staffing mandate so patients can be cared for, but like I already mentioned, there's no financial incentive or funding coming along with this.

Rae Woods (16:29):
But is there a penalty if you aren't able to meet the mandate?

Blake Zissman (16:33):
Yes. We're unsure of what that penalty will be, but there will be a penalty. Essentially, there's only a punishing aspect here, there's no reward for these skilled nursing facilities that meet the mandate

Rae Woods (16:45):
And no extra money to be able to get the staff, let alone the fact that the entire industry, as we've talked about a nauseum on this podcast, Monica, you've been involved in those episodes. We have our own staffing crisis in every corner of healthcare, not just skilled nursing facilities, not just post-acute care.

Monica Westhead (17:03):
I spoke with a leader at a skilled nursing facility who said, "Even if CMS gave me enough money to increase pay for my nursing staff by 50%, I still would not be able to meet any kind of added benchmark because those people just do not exist in my market. There's no one out there for me to hire."

Rae Woods (17:22):
And because the nature of this mandate includes a stick but not a carrot, I'll say stick instead of punishment, it almost feels like we might get stuck in a vicious cycle. There's not enough staff and that's creating a challenging financial situation for skilled nursing facilities anyways, not to mention tensions rise between skilled nursing and the rest of healthcare. But if they're then penalized for not being able to make that mandate, that's even less money to go around, are you saying that this could actually make the problem of closures even worse?

Monica Westhead (17:58):
It could, but what I will also say is that we don't yet know what the actual staffing mandate bar will be. So we don't know how many hours per patient day are going to be required.

Rae Woods (18:11):
Do you have a hypothesis though of how this is going to go?

Blake Zissman (18:13):
We do. I don't have an exact hour, but it's going to be on the conservative side where a lot of SNFs are going to be able to reach that minimum. The reason for that is there was a study done last year by CliffLarsonAllen that looked at three different thresholds, hours per patient day and 4.1, which is the national suggested ratio, only one place in the country meets that, and that's Washington DC. No other state gets close to it.

Rae Woods (18:46):
Well, DC's not a state. Sorry.

Blake Zissman (18:49):
Yep, there we go. If the government were to propose that 4.1 hours per patient day threshold, only 6% of SNFs nationwide would meet that number today. And in fact, it would cost the industry $10.1 billion annual.

Rae Woods (19:05):
Wait a minute. That felt really significant. Let me repeat this back. You're saying that if the staffing mandate is significant, which I think is what those numbers would mean, meaning a strong mandate in terms of the number of staff in place at these skilled nursing facilities, only 6% of skilled nursing facilities in the country can meet that today?

Blake Zissman (19:26):
Only 6%. And if we were to go look at other thresholds they've described, so let's say 3.1 instead of 4.1, you're looking at only 27% that would meet it nationwide. And it's going to cost the industry $3.5 billion annually still.

Rae Woods (19:41):
So now it's starting to make sense to me why you are both speculating that the mandate, it can't be that significant because otherwise the consequence is massive closures.

Blake Zissman (19:55):
Massive closures.

Rae Woods (19:57):
So what does this then mean for the industry if we still have this problem of not enough staff, but we know that the mandate approach is not necessarily something that is going to affect change?

Monica Westhead (20:08):
The mandate is well-intentioned. We all want more staff in these facilities, we want more people taking care of our loved ones that are in these facilities. The challenge is just that as of right now, those people are not there. And so we as an industry need to start thinking more about partnership, need to start thinking more about alternative methods of funding. There probably will be some consolidation within the post-acute space. We are seeing a lot more interest from private equity investments in post-acute care to try to get that infusion of cash in order to get more staff in the building. But I think we also need to start thinking about things like education and better career pathing options or pipeline options to get more people into the post-acute space.

Rae Woods (21:00):
The two of you have painted this pretty dire picture of the state of skilled nursing facilities and frankly, the ripple effects that the current status has on the rest of the industry, let alone what will happen if we continue to see closures. I guess my question is, what has to change about the way the industry sees and frankly works with skilled nursing facilities in order to keep them open and keep them stable in a way that they can still meet the needs of real patients?

Monica Westhead (21:34):
The big thing that comes to mind for me is just understanding the industry, understanding that skilled nursing providers are struggling, but they're not doing it on purpose. They're not refusing to take patients because they don't want to, they're not being difficult in declining patients. Certainly there are some organizations that do, but the vast majority are just struggling. And so I think from a acute care health system perspective, looking at the skilled nursing industry as a partner and trying to work through some of these challenges together, whether that's through working with payers to try to reduce the burden of pre-authorization for Medicare Advantage patients. Or whether that's creating better transportation options to get patients from the hospital to the post-acute provider or providing additional clinical education to new staff at the skilled nursing facility. What I would love to see is more collaboration beyond just the preferred provider network.

Blake Zissman (22:37):
So what SNFs need to specifically do is really think about how they're handling recruitment retention. On the recruitment front, there is a number of ways to really show why post-acute is a special place to work. So for instance, you're having a lot more autonomy and decision making than you are, say, at a hospital. A lot more opportunity to develop skills as well that you wouldn't in those other settings. There's different goals of care as well that allows you to take a different focus about what the patients you're caring for and the type of duties you're doing on a daily basis. And speaking of that, you get the longer term patient and family relationships. You get to actually build those with the patients you're caring for in those locations.

Monica Westhead (23:22):
And I think skilled nursing facilities need to articulate that.

Rae Woods (23:25):
Yeah, I was going to say, that's so beautiful. That is the opposite of the way that we typically think about skilled nursing as a place to work.

Blake Zissman (23:33):
Exactly. It really needs to get painted in.

Rae Woods (23:36):
So what else needs to change about the way that the rest of the industry thinks about and approaches skilled nursing?

Monica Westhead (23:43):
The rest of the industry needs to understand the value that skilled nursing facilities hold in the continuum. Hospitals and health systems need to understand how important they are to a patient's discharge trajectory and ultimately their recovery or their personal goals of care. Non-provider entities need to understand that these organizations want to be included in value-based payment initiatives, they want to be part of the broader healthcare ecosystem and just the structure has them being left out. And so I think part of this is the industry just needs to recognize and realize the value that these facilities provide in order to elevate them to an appropriate place of partnership in the delivery system.

Rae Woods (24:28):
Well, Monica, Blake, thanks for coming on Radio Advisory. I promise I will not wait another three years to do another episode on post-acute care.

Monica Westhead (24:37):
I will hold you to that.

Blake Zissman (24:38):
Yeah, looking out for my invite.

Rae Woods (24:44):
My takeaway from this episode, and frankly what I think should be your takeaway as well, is that the entire industry, including the people who work in healthcare, need to take a different view of the value that skilled nursing and that post-acute care plays in the industry. That's our first step to creating more stable skilled nursing facilities. And remember, as always, we're here to help.

(25:18):
If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods, as well as Katy Anderson and Kristin Myers. The episode was edited by Dan Tayag with technical support by Chris Phelps and Joe Shrum. Additional support was provided by Carson Sisk and Leanne Elston. Thanks for listening.