A Surprising Trend Among Medicare Advantage Plans


By Anne Tumlinson Innovations

From continued enrollment growth to expanded flexibility to offer non-medical supplemental benefits, Medicare Advantage (MA) plans are playing an increasingly important role in the lives of older adults. Providers have long offered MA products, but more and more are developing and offering Institutional Special Needs Plans (I-SNPs). In fact, the number of provider-sponsored I-SNPs and enrollment in these plans have both more than doubled in the few years.

I-SNPs are a type of MA plan for Medicare beneficiaries who meet their states’ criteria for institutional level of care. Today’s I-SNPs, now a permanent part of the Medicare program, originated from a demonstration of the Evercare model, in which nurse practitioners at nursing homes deliver onsite care aimed at reducing unnecessary hospitalizations.

Of the 125 I-SNPs on the market, 44 are led by provider organizations. Drilling down even more, three of the provider-owned I-SNPs are led by healthcare/hospital systems and 41 are led by long-term care organizations that operate nursing homes and/or assisted living facilities

Owning an I-SNP gives these organizations direct Medicare funding — through the health plan premium — to finance robust onsite primary care and care coordination and to reduce inpatient hospital admissions among their residents.  

Pivoting the Business Model

Nursing home organizations, in particular, are accelerating I-SNP growth out of necessity. Their traditional business model — one that relies on patient/resident volume and daily rates — faces an unprecedented number of challenges. Hospital admissions dropped during the first part of this decade, translating into reduced referral volume to nursing homes for their higher-margin Medicare short-stay patients. At the same time, enrollment in MA has been growing, and MA plans tend to tightly control utilization and pay lower daily rates than fee-for-service for the short-stay patients.

Despite volume and rate challenges, nursing homes must deliver improved outcomes for MA plans and upstream partners (e.g., hospitals/health systems) who participate in accountable care organizations (ACOs) or other risk-based models (e.g., bundled payment demonstrations). But even the top-performing nursing homes report that they have insufficient market leverage to secure value-based contracts that allow them to share in savings with ACOs or MA plans.

These business challenges have motivated nursing homes to explore options for taking on some form of health care risk themselves – such as participating directly in bundled payment demonstrations, forming ACOs in partnership with physician groups, or forming their own health plans. They see health care risk as the only option for gaining more control over their financial future and capturing the savings from reduced hospitalizations, shorter stays, and coordinated transitions.

They see I-SNPs as providing the financing for much-needed primary care and care coordination.

Exploring the Benefits of Risk

Developing and offering a health plan requires providers to take full financial risk for the health care costs of their enrollees. But taking on this risk means that these providers also have access to a stream of premium revenue to fund enhanced primary care, better care transitions and care coordination, and improved technology.

Long-term care providers, such as nursing homes and assisted living facilities, have important advantages in their ability to successfully operate I-SNPs. Nursing home and assisted living facility settings enable providers to observe complex care populations in the environment where they live permanently and to efficiently manage their needs in one location. Nursing homes can leverage strong clinical capabilities to divert emergency department visits and effectively bring the hospital-level care to the nursing home.

Many of these providers contract with the Centers for Medicare & Medicaid Services (CMS), with the help of partner organizations that bring insurance and compliance expertise. Despite this administrative help, there are still many challenges that providers must overcome in forming and operating an I-SNP, including licensure and reserve requirements, forming provider networks, and recruiting and training nurse practitioners.

Leveraging Experience 

Hospitals and health systems that operate MA plans can also take advantage of the opportunity to enroll and manage facility resident populations, either in their MA plans or in adjacent I-SNP products. Some may own nursing homes or assisted living and can extend their MA plans into these facilities. Others can offer to extend their MA platform to facility operators who want to add health care capabilities but are not willing or able to form their own plan. Hospital-led plans can offer value-based or sub-capitated contracts to facilities, along with enhanced primary care and care management.

Regardless, hospital-led MA plans are in a particularly good position to manage health care risk in facility settings. They often own or work closely with primary care providers, such as nurse practitioners, who can efficiently and effectively manage facility residents and prevent unnecessary hospitalizations. They possess information from hospitalizations and physician care that is critically important to preventing future hospitalizations and managing medications.

Any system that is already delivering primary care at home to high-risk older adults should consider extending those programs into nursing homes or assisted living.

The most important consideration for hospitals considering offering an I-SNP or extending their MA enrollment into a nursing home or assisted living setting is to ensure that the financial incentives are aligned to allow for maximum clinical integration and support for primary care and care management interventions. Additionally, the plan and the facility will need to work closely together to ensure sufficient enrollment of residents in the plan. The end result can be a highly effective and successful plan with better outcomes for residents.