Medical News: Much of the focus of the conversation related to the Affordable Care Act (ACA) is focused on expanded Medicaid, however the program is much larger than that segment.  What changes have you seen that affect the long-term care industry?

      Joe Steier: The ACA was the largest land grab by the federal government since Medicare was first created. Unfortunately, the Medicaid expansion portion became noisy and polarizing because there is an unmet need, regardless of how you propose to solve it. The ACA is problematic because the rising costs related to the expansion is to be paid for by the following: provider cuts, reduced choice and new money from fines, penalties and additional enforcement that intensifies at each phase.

Constant compliance changes are adding excessive overhead to post-acute operators as they answer the new government mandates, as well as decreasing revenue for the providers doing the real work. Great companies such as Golden Living, Kindred and Elmcroft left the marketplace immediately because it was an unfair business proposal.  Only mission based organizations with extremely patient investors can stay in to see if there is any future, or to see if this period of punitive enforcement will disappear.

Long-term care (LTC) providers have seen a steady decline in census, occupancy and revenue per admission.  LTC providers have also seen operating costs related to wage inflation and medical malpractice expense. Headwinds are catastrophic and needed to become more innovative in piloting the future state of post-acute care to outpace and even keep up with the rate of industry change.

MN: Do you think that long-term care should emulate other forms of Medicaid and implement managed care?

JS: That depends. Consumer advocates worry that Medicaid recipients will lose some benefits in managed care because plans have an incentive to cut costs to increase profits. We are working with the state to analyze pros and cons of various states. Utilizing our market intelligence data and state best practices to include Florida, we’ll help the state run simulation modeling using the PAL index (Post Acute Leverage) which has gain-sharing built in. It could help create the appropriate utilization and incentives to change the managed care game.

We are in 10 states and have seen every model of states transferring control and authority to Managed Care Organizations (MCOs) to better manage the Medicaid dollar. All states have good intentions as they work to improve access and enhance affordability. However, these intentions are met with a wide range of outcomes, ranging from disastrous to excellent.

With most of the south having Republican governors, Medicaid Managed Care has rolled out in 24 states and will most likely happen here as well.  We are good with this, assuming legal reform is addressed at the same time.

The states we should model are Minnesota and Massachusetts, which were designed in compliance with the MCO Bill of Rights. If we follow the MCO Bill of Rights, Kentucky can get it right. The following should also be included: an active state office for bad behavior by MCOs; a strong ombudsmen office to protect residents’ rights; transparency in the state procurement process; rate guarantees set by the state; and timely payment within 30 days of a claim.

MN: What are the biggest challenges facing Kentucky’s long-term care community?

JS: Just trying to survive until the change comes! Most of our industry competitors and collaborative peers have left the state and we miss them. We have 141 hospitals and over half of those are designated as critical access hospitals. This leaves us with challenges no other states have.  Poor health demographics, bifurcated access, unfair legal process and system, regional talent shortage, older asset quality and a punitive regulatory environment are challenges. Since West Virginia secured tort reform, we are the single worst state to provide healthcare services in the U.S. Every out-of-town firm considers Kentucky the last great gold rush.

Other challenges include Medicaid expansion unknowns and the unrealistic medical malpractice climate. Also challenging is the unmet workforce capacity needs being felt by the entire healthcare industry. Not to mention the rate of healthcare change based on a higher acuity patient and often un-vetted reimbursement experiments challenging long-term care’s ability to take care of the escalating baby boomer population.

MN: What areas of care can the LTC address that can help reduce overall Medicaid costs for the state?

JS: We need to innovate, incorporate lean system thinking and expand technology utilization as providers with the combination of these five policy changes:

1. Medical panels combined with tort reform will reduce Medicaid costs by five to ten percent, depending upon design.
2. Favorable medical extenders policies to continue expansion to reduce various physician shortage areas in both geography and specialty.
3. Fair and equitable Medicaid case mix adjusted revenue rate for mental health and cognitively impaired population to reduce hospital costs and capacity problems.
4. Overhaul Medicaid reimbursement to maintain case mix scoring but add quality incentive payments for Q of L, outcomes, and utilization that is no longer a perverse incentive for aggressive utilization to reward providers for successful innovation.
5. Introduce community and home based services so the Medicaid dollars can extend and the cost per beneficiary could drop 20 to 25 percent.

The Kentucky Health Plan model is not accurate based on any demand analysis today due to life expectancy, demographic shifts and other state utilization based on having adequate options. The calculations should be modernized based upon more reliable healthcare data, and should include predictive modeling to consider other service integrations, such as out-patient services, non-medical home services, medical home integration and revised acute care assumptions. This would improve access, innovation and lower costs.

We should consider a type of waiver program for expanded service settings beyond LTC while reviewing the strict Certificate of Need policy. This can reduce overall access because the licensed operator has no major incentive to serve less profitable or reduced volume service areas like rural communities. With so few options, we cannot drive down costs per beneficiary as fast as we need to in order to meet expanding Medicaid enrollees. The key to affordability is integrating lower cost options into consumer options, while keeping enough restriction to maintain provider stability.