9/30/2018 1 9/30/2018 Long Term Care Payments in a Changing - PDF document

9/30/2018 1

9/30/2018 Long Term Care Payments in a Changing Landscape NCPA 2018 Annual Convention Frank Grosso, RPh, HealthCare Consults, LLC Principal Disclosure Frank Grosso is the Principle of HealthCare Consults. The conflict of interest was resolved by peer review of the content. 2

9/30/2018 Learning Objectives 1. Summarize key policy and regulatory changes important to the independent pharmacy LTC operators. 2. Describe developing policies and market changes for 2019 and beyond that may affect the LTC market for the independent practitioner. 3. Explain the reimbursement model shift contained within recent CMS regulations and its implications for skilled nursing facility revenue. LTPAC Regulatory & Legislative Changes 1965 1965 1974 1974 1980s 1980s 1990s 1990s 2000s 2000s 2010s 2010s ACA • OBRA 87 • Title XIX • DRR • BBA 97 • MMA • ACA • Title XVIII • PPS • Part D • Impact Act 2014 Part D PPS • Mega Rule • PDPM Where do we go from here… 3

9/30/2018 The industry reacted… Inside Health Policy, May 7, 2015 AHCA/NCAL Set 2018 goals to improve nursing home quality of care: 1. Decrease nursing staff turnover by 15% 2. Reduce < 30 day rehospitalizations by 15% 3. Improve discharge back to the community by 10% or maintain a discharge rate of at least 70% 4. Reduce off-label use of antipsychotic drugs 7 Headlines… Skilled Nursing News, Nov 30, 2017 “Reimbursement and occupancy challenges facing our entire industry have negatively impacted the Genesis HealthCare stock price and those of other providers in the industry,” CEO George Hager said in a statement. Skilled Nursing News, March 2, 2018 “Toledo, Ohio-based ManorCare, one the largest skilled nursing providers in the nation, is expected to file for Chapter 11 bankruptcy protection”. 4

9/30/2018 McKnight, August 24, 2018 Skilled nursing growth continues to lag, NIC* finds “Skilled nursing continues to have the weakest inventory growth out of long-term care property types, with independent living leading the pack… the nursing care segment had the weakest overall inventory at -0.4%, a 2 percentage-point decline in occupancy”. “The independent living segment, housing seniors who require the lowest level of care, saw 5.7% inventory growth. Occupancy only decreased by 0.3 percentage points, from 91% to 90.7%”. *National Investment Center for Seniors Housing & Care (NIC) “Medicare Advantage Profits Skyrocket ” Anthem profits skyrocket 234%, Healthcare Finance, February 1, 2018, Available at: http://www.healthcarefinancenews.com/news/anthem-profits-skyrocket-234 5

9/30/2018 SN Providers Launch Special Needs Programs March 13, 2018 How In-House Insurance Plans Can Boost Skilled Nursing’s Fortunes 1 “The Milwaukie, Ore.- based Marquis Companies , which operate 18 skilled nursing facilities and five assisted living communities, launched its AgeRight Advantage I-SNP plan in January, 2017. So far, the program has netted Marquis $10 million in revenues, and helped to position the provider in the overall managed care landscape — an area of the skilled nursing world that’s rapidly growing.” April 3, 2018 Providers Move Into Insurance to Ride Medicare Advantage Momentum 2 “As of March of this year, there are 49 contracts with Medicare covering 97 I-SNPs, with a total of 73,472 enrollees, according to data from CMS’ Health Plan Management System. One of those I-SNPs is Great Plains Medicare Advantage, which offers plans in South Dakota, North Dakota, and Nebraska — and is owned by the Evangelical Lutheran Good Samaritan Society, a not-for-profit that provides a variety of senior care services, including skilled nursing, in 22 states.” 1. https:// skillednursingnews.com/2018/03/house-insurance-plans-can-boost-skilled-nursings-fortunes / 2. https:// skillednursingnews.com/2018/03/house-insurance-plans-can-boost-skilled-nursings-fortunes / “Medicare Advantage Insurers Consider Senior Living Acquisitions” “As the popularity of Medicare Advantage plans continues to grow, commercial health insurers are starting to look at senior living not only as a partner but as a potential acquisition target .” “While the number of senior living providers partnering with Medicare Advantage programs is small, the opportunity is significant and will only get bigger, according to Dan Mendelson, president of Washington, D.C.-based consulting firm Avalere Health, a subsidiary of Inovalon." Medicare Advantage Insurers Consider Senior Living Acquisitions, Senior Housing News, Yedinak, John, March 27, 2018. Available at: https://seniorhousingnews.com/2018/03/27/medicare-advantage-insurers-consider-senior-living-acquisitions/ 6

9/30/2018 “CMS Proposes Regulatory Cuts for States with High Medicaid Advantage Rates” “ The Centers for Medicare & Medicaid Services on Thursday issued a notice of proposed rulemaking that would ease some regulatory requirements for states offering Medicaid Advantage programs .” “The proposal would exempt states from analyzing certain data and monitor access to fee-for-service plan when the vast majority of covered residents receive services through managed care plans.” McKnight’s: March 23, 2018, Kimberly Marselas Hospital Outpatient DRGs Medicare DRGs – For Non- Only Medicare 7

9/30/2018 Number of Hospitals in the US HCFA Introduced 1983 DRGs SNF/NF Discharge to Community SNF Admissions & Discharges 2017 Q 2 • 2.1 million admissions from hospitals • 1.2 million SNF discharges to community Source: ASCP estimate calculated from CMS MDS Data, Prepared by AHCA: Discharges to Community , defined as individuals who are discharged back to the community alive (i.e., private home, apartment, board/care, assisted living, or group home, as indicated on the MDS discharge assessment form) from a skilled nursing center within 100 days of admission and remain out of any skilled nursing center for at least 30 days 8

9/30/2018 Skilled Nursing Center Growth 1,800,000 16,100 17,577 Fewer Beds 1,600,000 16,000 1,400,000 15,900 1,200,000 15,800 1,000,000 800,000 15,700 600,000 15,600 400,000 15,500 200,000 - 15,400 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Certified Beds 1,678,634 1,674,807 1,671,645 1,668,815 1,666,800 1,665,845 1,671,226 1,667,884 1,667,033 1,663,537 1,662,757 1,662,070 1,661,184 1,661,057 Patients in Certified Beds 1,434,812 1,430,367 1,426,460 1,415,915 1,407,975 1,397,149 1,394,537 1,386,097 1,380,718 1,368,986 1,368,351 1,347,073 1,336,299 1,333,799 Certified Facilities 16,012 15,914 15,823 15,726 15,684 15,665 15,679 15,673 15,668 15,650 15,632 15,651 15,646 15,647 Certified Beds Patients in Certified Beds Certified Facilities Source: Computed from AHCA research staff using CMS NF standard health survey data. Percent Distribution of the Oldest-Old Population 1990, 2000 & 2010 Source: U.S. Census Bureau, 2012 Population Estimates and 2012 National Projections 9

9/30/2018 Number of Adults > 85 YOA 85 years and older (Millions) 20 18 18 16 14 14.1 12 10 8 8.9 6 6.7 5.9 4 2 0 2012 2020 2030 2040 2050 85 years and older 5.9 6.7 8.9 14.1 18 (Millions) Source: U.S Census Bureau, 2012 Population Estimates and 2012 National Projections Home Healthcare Market Worth $517.23 Billion by 2025 “The global home healthcare market size is anticipated to reach USD 517.23 billion by 2025 , according to a new report by Grand View Research, Inc., progressing at a CAGR of 7.8% during the forecast period.” Home Healthcare Market Analysis Report By Component (Equipment (Diagnostic, Therapeutic, Mobility Assist), Services (Rehabilitation, Infusion Therapy, Respiratory Therapy Services)) And Segment Forecasts 2018 – 2025, Grandview Research, August, 2018, Available at: https://www.grandviewresearch.com/industry- analysis/home-healthcare-industry 10

9/30/2018 ALF Construction Trend Growth in the senior living industry tracks closely with the older adult population in the U.S. in recent years. Between 2001 and 2014, the number of senior living communities increased 39%. During the same period, the U.S. population aged 85 and older rose 43%. As a result of the similar growth rates, the number of senior living communities as a proportion of the senior population has been relatively steady. Senior Living Satisfaction Scores 11

9/30/2018 > 65: The Fastest-Growing Group of Internet Users 14% Future Trends 1. Medicare Advantage reached 33% nationwide uptake in 2017  CBO predicts 4% growth annually  Avalere Health data predicts 6-7% growth annually 2. Narrowing of referral networks 3. “Patient Driven Payment Model” (PDPM) 12

9/30/2018 Medicare Advantage Opportunity! PAC PAC PAC Source: Chandra, A., Dalton, M., Holmes, J., “Large Increases in Spending on Postacute Care In Medicare Point to the Potential for Cost Savings in these Settings”, Health Affairs, August 2013, available at: https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2012.1262#EX4 Managed Medicaid & Medicare Advantage LOS Rehab $’s $’s Rx $’s ACO & Managed Care 13