Grand Slam Guide: Navigating Value-Based Care Programs for Skilled Nursing Facilities

Getting to Know the Plays

While the skilled nursing industry is well ahead of other healthcare sectors in adopting the principles of value-based care (VBC), it still faces many challenges. Chief among the hurdles is the complexity of transitioning from a traditional fee-for-service model to one centered on value and outcomes. This shift requires substantial adjustments in care delivery processes, data management systems, reimbursement methodologies, and organizational culture, to name a few. However, there are resources and support available to guide SNFs through this transition, ensuring a smooth and successful adaptation. 

 Successfully navigating this transition will take a “triple play” strategy encompassing:

  1. Understanding the current VBC marketplace and the benefits it offers.
  2. Exploring key programs associated with VBC and their relevance for SNFs.
  3. Implementing advanced data and analytic solutions. 

We’ll round out the overview of these crucial issues by highlighting the real-world proven best practices SNFs can follow to participate more fully in and benefit from VBC programs.

Effective VBC programs help SNFs to . . . 

  • Increase reimbursement
  • Improve performance/quality ratings within value-based purchasing (VBP) programs
  • Negotiate more favorable terms with payers
  • Gain the confidence and knowledge to take on more risk
  • Use program highlights for effective marketing

Understanding the VBC Roster

Value-based care is a term we’ve heard often over the past several years. Yet, finding a definitive explanation for SNF providers is still hard. 

The most helpful definition is that it is a healthcare delivery model in which the SNF is reimbursed based on the quality and efficiency of care they provide rather than the volume of services delivered. The primary goals are to improve patient outcomes, enhance patient experience, and reduce healthcare costs. Transitioning from traditional fee-for-service models is an ambitious quest. However, CMS is committed to a healthcare system focused on quality, not quantity, and more equitable outcomes for all patients. 

VBC will impact virtually every type of SNF contract in the coming years. CMS administers VBC programs at the federal level and approves state programs. Its goal is to merge the two and take a more holistic view of VBC across settings and patients. And, get ready, CMS wants to do this in just a few years—by 2030

While change of any type can be concerning, it’s important to remember the overall goals of VBC, which are:  

  • Achieving improvements in patient outcomes
  • Enhancing quality and safety
  • Cost efficiency
  • Supporting better care coordination
  • Facilitating a more patient-centered approach to care
  • Championing prevention and population health improvement
  • Encouraging data-driven decision-making

Ensuring patients have a place at the table will also be emphasized. We are encouraged to recognize that each patient has unique needs and preferences. Leaning into the Social Determinants of Health (SDOH) and population health management to reduce chronic diseases and promote overall health will be crucial. 

Embracing data-driven decision-making and using data analytics is another crucial aspect of VBC. This shift in approach is necessary to measure performance, identify areas for improvement, and support evidence-based decision-making.  

Hitting It Out of the Park: Exploring Key VBC Programs for SNFs

The first value-based care programs for Skilled Nursing Facilities (SNFs) began with the implementation of the Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program, which was established by the Protecting Access to Medicare Act (PAMA) of 2014.   

In addition to the SNF VBP, SNFs can participate in value-based care programs in other ways. Pay-for-performance, Accountable Care Organizations (ACOs), and Full-Risk Capitation are all part of the broader shift towards value-based care, but they play distinct roles and have different mechanisms for incentivizing quality and cost-effective care. Let’s look further at how each works for SNFs today. 

In 2025, the focus of SNF VBP will be on reducing hospital readmissions. SNFs that achieve high performance or significantly improve their readmission rates will receive higher reimbursement.   

Centers for Medicare & Medicaid Services

Pay-for-Performance (P4P)

Pay-for-performance, or P4P, is a payment model that uses financial incentives to motivate providers to achieve specific performance goals and outcomes. It’s a familiar concept to SNFs as it incorporates many FFS principles they have used for years.  

In fact, many in our industry view P4P as an ideal entry point for VBC. Providers are rewarded financially based on specific quality metrics and outcomes (which we’ll explore later). Providers receive supplemental payments—incentives—when they reach predetermined performance targets. P4P incorporates several processes in its model, including: 

  • Quality metrics and targets—Define the specific quality metrics that providers must meet or exceed to receive financial incentives. 
  • Measurement and evaluations—Whereby providers’ performance is measured periodically and evaluated against defined quality metrics using a range of industry and benchmark data. 
  • Financial incentives—When providers exceed targets, they become eligible for increased revenue or bonuses. This is good news for providers who stress they need to be compensated for tasks like care coordination, which is incentivized under VBP. 
  • Penalties or withholdings—Conversely, providers may face financial penalties if they fail to meet metrics. Note that providers lose the incentive, not the fee, in this model.
  • Patient-centered care—Encourages providers to take proactive steps to improve patient outcomes and quality. Keep in mind that patient satisfaction is essential in VBC programs.  
  • Care coordination—Involves a comprehensive approach to managing patient care across different settings and providers. Key components include interdisciplinary care teams, individualized care plans, use of EHRs to enhance communication, and care transition plans, especially for patient discharge.
  • Continuous improvement—CMS wants to encourage providers participating in VBC programs to continuously look for ways to improve care.  The aim is to motivate providers to make changes and implement best practices on an ongoing basis.

Financial Incentives

The SNF VBP Program withholds 2% of Medicare payments from SNFs annually and redistributes these funds based on performance on quality measures, particularly the all-cause hospital readmission rate. High-performing SNFs can earn back more than the 2% withheld, potentially receiving bonuses. Depending on their performance, SNFs can earn back up to 1.6% more than the initial 2% withheld, resulting in a net positive financial adjustment. 

 Skilled Nursing Facility Performance and Readmission Rates Under Value-Based Purchasing, JAMA Network Open, 2022

ACOs + Shared Savings + Bundled Payments

ACOs are groups of healthcare clinicians, including doctors, nurse practitioners, hospitals, and other provider groups, who come together voluntarily to provide coordinated, high-quality care to their Medicare patients.  

The goal is to ensure that patients receive the right care at the right time, avoid unnecessary duplication of services, and prevent medical errors. 

ACOs share in the savings they achieve for the Medicare program if they meet quality and cost benchmarks. This model emphasizes coordinated care and shared financial incentives among all participating providers, including SNFs that may be part of an ACO network. ACOs typically contract with SNFs. This allows ACOs to include SNFs in their network to coordinate and manage patient care effectively while leveraging the SNFs’ existing infrastructure and expertise. 

Under the model, the ACO is responsible for managing the health of a defined population and sharing in any cost savings it achieves. For example, if the contracted SNF successfully reduces healthcare costs while meeting quality targets such as reducing UTIs or preventing falls, it receives a portion of the savings.  

Financial Penalties

To illustrate the potential financial impact of these penalties, consider an SNF with 100 Medicare patients, each with an annual reimbursement of $50,000. If the SNF fails to meet performance benchmarks, the organization faces a 2% penalty under both the SNF VBP Program and QRP. A hypothetical financial loss would be: 

100 patients X $50,000 per patient X 0.02 X 2 = $200,000

Figures based on CMS data. For more information, see FY 25 Skilled Nursing Facility Prospective Payment System Proposed Rule (CMS 1802-P)

Shared Savings

According to CMS, shared savings is a specific approach where groups of providers form ACOs or similar networks to cover a designated population of patients. They share financial responsibility for the overall cost and quality of care. If the ACO meets specific cost and quality benchmarks, the SNF and other ACO members can share the savings achieved.  

In addition to the SNF, shared savings programs typically consist of PCPs, specialists, hospitals, and other healthcare facilities that work together to coordinate care to a defined patient population. As with all types of VBC programs, quality outcomes are critical.  A crucial step toward effective shared savings programs is the establishment of benchmarks that define cost and quality goals for a specific set of patients—such as those in a SNF. Providers, payers, and other stakeholders should develop benchmarks collaboratively and include historical spending data adjusted for factors like age and health.  

Bundled Payments for Care Improvement (BPCI): SNFs can also participate in bundled payment programs where they are paid a single, comprehensive payment for all services provided during an episode of care. The payment model encourages SNFs to coordinate care efficiently to avoid unnecessary costs and complications. 

With the model, successful management of care episodes can result in shared savings if the total cost of care is below the predetermined threshold while maintaining or improving quality. For more information on the potential of BPCI, see Skilled Nursing Facility Participation in a Voluntary Medicare Bundled Payment Program: Association with Facility Financial Performance

Full-Risk Capitation

While decades old, capitated programs remain a significant reimbursement model. Providers assume all financial risk for the cost and quality of care for a defined population and set of services. In return, they receive a fixed payment (e.g., capitation) per person per month (PMPM) and are responsible for managing all aspects of care. The plus side of the model is that providers who can successfully manage costs while maintaining high-quality care can achieve significant financial rewards. 

Full-risk capitated programs are typified by contractual agreements between providers (e.g., ACO, physician group, or healthcare system) and payers like Medicare, state Medicaid, or commercial insurers.   

Strong data gathering and analysis are crucial for full-risk contracts. Risk assessment based on demographics, health conditions, and past healthcare usage is crucial for estimating expected healthcare costs.  

Full-risk contracts include performance metrics covering outcomes, patient experience, and preventive measures. As with other types of contracts, quality metrics are a core element in full-risk plans. Examples of metrics include functional improvements, such as mobility, reductions in pressure injuries, and the appropriate use of antipsychotics. 

Other Noteworthy Value-Based Care Programs  

There are other VBC programs for SNFs to note. The SNF Medicare Quality Reporting Program and the Medicare Advantage Special Needs Programs (SNPs) are vital to the value-based care framework for SNFs. According to CMS, an SNP is a type of Medicare Advantage plan designed to cover special needs individuals, including 1) an institutionalized individual, 2) a dual-eligible individual, or 3) an individual with a severe or disabling chronic condition, as CMS specifies. 

One of the crucial elements of the QRP program is that it requires SNFs to submit data on various quality measures, including outcomes, processes of care, and resident experiences. The data collected is used to evaluate the performance of SNFs and is then made public. One of its goals is to foster transparency to enable consumers to make informed decisions about SNFs and to improve overall quality.  We’ll discuss the importance of data gathering and reporting in Chapter 2. 

Both programs incentivize SNFs to improve care quality by linking Medicare payments to performance on specific measures, such as hospital readmission rates and functional improvement.   

In a recent Net Health webinar with SNFs interested in exploring VBC programs, we asked attendees about their critical concerns about the program’s rapid expansion.  Multiple responses were allowed. Here are the poll results.

  • Administrative burden – 38%
  • Risk of patient selection – 25%
  • Financial viability and uncertainty – 64%
  • Data and technology infrastructure – 52%
  • Accuracy and performance metrics – 57%

Outcomes Measured in SNF VBC Programs

We’ve talked a lot about measuring outcomes in VBC programs. While variations depend on the program, almost all share several standard metrics.  

OpenAI’s ChatGPT (2024) shows typical outcomes measured in value-based care programs for skilled nursing facilities, including 30-day hospital readmission rates, functional improvement, and patient satisfaction. Additional metrics measured are: 

1. Functional Improvement

  • Mobility and Activities of Daily Living (ADLs): Measures the improvement in patients’ ability to perform daily activities and overall mobility during their stay at the SNF. 

2. Quality Measures

  • Pressure Ulcers: The percentage of residents with new or worsened pressure ulcers. Lower rates indicate better skin care and pressure ulcer prevention practices.
  • Falls with Major Injury: The incidence of falls that result in significant injury among residents. Fewer falls indicate a safer environment and better preventive measures.  
  • Antipsychotic Medication Use: The percentage of residents receiving antipsychotic medications without a diagnosis of schizophrenia, Huntington’s disease, or Tourette’s syndrome. Lower use indicates more appropriate medication management.

3. Patient and Family Satisfaction

  • Survey Scores: Results from patient and family satisfaction surveys that measure their overall experience and satisfaction with the care provided at the SNF.

4. Infection Rates  

  • Healthcare-Associated Infections: Rates of infections such as urinary tract infections, respiratory infections, and others acquired during the stay at the SNF. Lower infection rates indicate better infection control practices.

5. Timely and Effective Care  

  • Vaccination Rates: The percentage of residents who received influenza and pneumococcal vaccinations. Higher rates reflect effective preventive care.  
  • Pain Management: The effectiveness of pain management strategies as reported by residents or identified through clinical assessments.

6. Discharge Outcomes  

  • Successful Discharges: The percentage of residents discharged to their home or community setting indicates successful rehabilitation and recovery.

7.  Rehospitalization Avoidance 

  • Measures how well the SNF manages patients to prevent avoidable hospitalizations after discharge.

8. Staffing Metrics  

  • Staffing Levels and Ratios: Metrics on the adequacy of staffing levels, such as nurse-to-patient ratios and staff qualifications. Better staffing ratios and qualifications are associated with higher-quality care.

9. Clinical Outcomes

  • Wound Healing Rates: The effectiveness of wound care management and the rate of wound healing for residents with chronic or post-surgical wounds. 
  • Chronic Disease Management: Providers can measure the effectiveness VBC programs targeting chronic conditions, such as diabetes, heart disease, and COPD, through clinical indicators like blood sugar levels, blood pressure, and respiratory function.

10. Care Coordination and Transitions

  • Care Transition Quality: Measures the effectiveness of care transitions from hospital to SNF and from SNF to home or another care setting, including the timeliness and accuracy of communication and care planning.

By monitoring and improving these outcomes, SNFs can enhance the quality of care they provide, improve patient satisfaction, and reduce healthcare costs, aligning with value-based care goals. 

VBC for SNF Game Wrap-Up

In summary, while the SNF VBP Program, ACOs, and capitation are distinct models, they share common objectives and can complement each other in transitioning to value-based care. SNFs can participate in ACOs and capitation arrangements, benefiting from multiple incentive structures designed to improve care quality and efficiency. This triple play of value-based care strategies—SNF VBP Program, ACO participation, and capitation—creates a robust framework for SNFs to enhance patient outcomes, streamline operations, and achieve financial sustainability. 

Adding to this winning lineup, Medicare Advantage Special Needs Programs (SNPs) and the Quality Reporting Program (QRP) further strengthen SNFs’ ability to succeed in value-based care. SNPs provide specialized, coordinated care for high-need populations, while the QRP ensures accountability and transparency through mandatory quality metric reporting.  

These initiatives encourage SNFs to collaborate with other healthcare providers, develop comprehensive care plans, and continuously improve their services. By leveraging this triple play of value-based care programs, SNFs can hit it out of the park, delivering high-quality, patient-centered care while efficiently managing costs and resources. 

Preview of Chapter 2

The goal of Chapter 1 is to clearly outline why CMS is championing VBC for SNF and the major reimbursement models and delivery systems. In Chapter 2, we will dive into one of the more crucial elements for success in VBC: data. Data is vital to developing benchmarks, measuring performance, and providing documentation and reports. We’ll dig deeper into the mandated quality reporting requirements and how you can streamline and optimize the value you get from the process. 

Plus, we’ll take a look at the technology needed for effective programs and how to optimize reimbursement by focusing on four key areas: 

  1. Improving outcomes for conditions like UTIs, preventing falls, reducing hospitalizations
  2. Using data to negotiate quality metrics and reimbursement with payers
  3. Developing best practices to improve quality
  4. Enhancing operations, including efficiencies and operations

To bring it all home, we’ll share success stories and best practices from winning programs. Stay tuned for more on this crucial topic for SNFs.      

Learn more! Check out these resources: