Why Value-Based Care Has Reached a Tipping Point in Senior Living

Senior living providers are more focused than ever on providing high-quality health care — and finding ways to be compensated for doing so. This is driving investment in clinical capabilities and pushing the industry to a tipping point on value-based care.

These are among my takeaways from the recent American Seniors Housing Association (ASHA) meeting in Scottsdale, Arizona.

In the early days of Covid-19, many industry leaders declared that the pandemic had settled the debate about whether senior living is primarily a health care or hospitality offering. Health care was declared the correct answer.

At the time, I wondered whether the pendulum would tilt back toward hospitality, once a deadly virus was no longer circulating so ferociously.

But I left ASHA convinced that a deeper dedication to care is a lasting legacy of the pandemic.

In this week’s exclusive, members-only SHN+ update, I offer further analysis and key takeaways, including:

• Capturing care revenue has never been more important
• Providers see the relationship between advancing care, improving staffing and building profitability
• “Wait and see” is no longer a viable value-based care strategy

Margin pressure driving care innovations

Senior living margins are being tightly squeezed while resident acuity remains elevated, meaning that providers are focused more than ever on accurately assessing care needs and charging appropriately for services being delivered.

August Health Co-Founder Erez Cohen told me this at ASHA, when I asked him why senior living providers are choosing to invest in August’s electronic health record platform even as they struggle to keep budgets in check.

Providers are being forced to confront the fact that they have been “flying blind,” without data on care-related information such as average acuity across their portfolio and how that has changed over time, Cohen said. Without such data, it is impossible to set appropriate care levels and corresponding charges, and providers cannot sacrifice any revenue in today’s tough operating climate.

At the same time, severe workforce disruption has made it more critical to run operations efficiently, compelling providers to make technology investments and go through the pain of implementation — particularly if they believe the new tech will be easier to use than legacy systems or burdensome paper-based processes, Cohen said.

Furthermore, he said, consumers want greater transparency about what they are paying for and have elevated expectations about nearly every aspect of the senior living experience, from ease of move-in to coordination of care.

These themes — how focusing on care can maximize revenue, enhance staff engagement and efficiency, and drive consumer satisfaction — were repeated again and again in conversations I had during ASHA.

For example, Ally Senior Living Founder and CEO Dan Williams explained why the company recently invested in a hospice business, saing that consumers will appreciate a more “streamlined” care experience. And Staff likewise should experience a more cohesive model of care, he said. He’s envisioning being able to staff the building with an extra CNA on a 24/7 basis through the hospice company when the need arises, to supplement assisted living care.

In our conversations, Williams and Cohen focused their comments mostly on assisted living and memory care, but Trilogy Health Services CEO Leigh Ann Barney emphasized the importance of accurately gauging care levels even for independent living or lower-acuity assisted living residents.

“If we have people that can take care of their own medications, we want to let them have that independence as long as possible,” she said. “Now, it’s helpful to us because we don’t have to staff for it, but it gives them a sense of independence, and then we make sure that they’re getting a break on their pricing for that as well.”

At the same time, echoing Cohen’s point, she emphasized that Trilogy has a system to track acuity over time and charge for escalating services — with pricing to encourage moves to more advanced levels of care at appropriate times.

Trilogy has made a concerted effort to enhance its care offerings across all levels of the continuum, given that the organization offers IL, AL and skilled nursing. In fact, when Barney took the CEO role in 2019, she made this a key goal. Of Trilogy’s clinical capabilities, she said:

“I wanted to elevate it to a higher level, to the point where we thought of our entire continuum of clinical excellence, not just skilled … but we provide clinical excellence in our assisted living, so that people can live in their home longer, and then with the IL product, which is newer in our history.”

Covid-19 temporarily forced Trilogy to pause certain initiatives, but the pandemic has become a “springboard” for the company — and the entire sector — to reach more ambitious care goals, Barney said.

“This is really a springboard for us to say, our industry can do these things, because we had to do these things,” she told me.

For Trilogy, “these things” include adding advanced capabilities such as on-site dialysis and stroke rehabilitation in skilled nursing and more robust wellness offerings in IL and AL. It should be “offensive” to Trilogy for any resident to go to the hospital for anything less than a “dire emergency,” Barney said.

Like Cohen and Williams, she tied this care philosophy to staffing. She highlighted the retention benefits that come from investing in training and education to enable clinicians to deliver more complex care, and the satisfaction they take from being able to practice in more clinically challenging environments.

From a revenue perspective, there is the obvious length-of-stay benefit that comes from promoting wellness and preventing hospitalizations. And these objectives also dovetail with the goals of value-based care, opening up the potential for Trilogy to make a play in Medicare Advantage or other managed care frameworks.

Indeed, Trilogy has an internal value-based care committee that has been studying the options, and Barney anticipates making a decision this year to be in “some type of ISNP.” And she believes the “biggest upside” might come from an IE-SNP to serve the company’s independent and assisted living residents.

‘Wait and see’ period over for value-based care

I believe other providers, not just Trilogy, will be announcing value-based care plays in the next 12 months.

That’s because just as more providers are focused on maximizing care revenue and making investments into care-related technology and ancillary services, more concrete proof now is being offered about the benefits — including financial upside — that can come from participation in managed care models.

For years, seemingly every industry event has featured some version of the same panel, in which a few evangelists — Juniper Communities CEO Lynne Katzmann foremost among them — have advocated for senior living providers to become involved in value-based care.

But the value-based care panel at ASHA was different. That’s because the group of senior living providers that have engaged in value-based care has grown, the options for participating in value-based models have increased, and pioneers such as Katzmann are now bringing results to the discussion.

Among those results:

• The Perennial Consortium — a group of providers that launched and own Medicare Advantage plans — was able to produce profits even in its first year.

• Lifespark — the “payvider” that acquired Tealwood Senior Living — is driving 5% to 15% improvement in net operating income (NOI) in its senior living buildings via its integrated care model.

• Lifespark has earned a net promoter score of 93 for its senior living offering.

• Curana Health, a Perennial partner that also works with other senior living organizations throughout the country to engage in value-based care, described providers receiving “multi-million dollar incentives” through their arrangements.

• Curana is willing to offer senior living operators 25% of gainshare payments earned from accountable care organization (ACO) programs that are attributable to residents in their communities.

There is still some vagueness on some numbers, but after two days of hearing about beleaguered margins, the messages about increased NOI — and length of stay, and customer satisfaction — landed with particular forcefulness.

And while there have always been multiple routes into managed care, speakers at ASHA described an expanded menu of options available to senior living providers, ranging from upside-only arrangements to those involving full upside and downside risk.

It’s obvious that an increasing number of senior living providers are selecting from this menu. Lifespark has 60 senior living campuses poised to join its network, The Perennial Consortium continues to add new members, and Curana is partnered with more than 1,000 senior living and skilled nursing communities.

Still, not everyone in the sector is convinced that the time is right to engage in value-based care.

“There’s a lot of hesitance among providers to really get into this space,” said Christian Living Communities (CLC) CEO Jill Vitale-Aussem. CLC is part of the Perennial Consortium.

The truth of her observation was in evidence, as other speakers at ASHA described value-based care as still being in the early stages, or noted that many of their residents still are not part of Medicare Advantage plans.

But the writing is on the wall. As CPF Living Communities CEO and Chicago Pacific Founders Co-Founder John Rijos pointed out, 50% of 65-year-olds currently are directly enrolling in an MA plan, and this proportion will continue to increase.

Meanwhile, the federal government is expanding and adjusting ACOs and other value-based frameworks to involve more providers, with a goal of having all Medicare enrollees in an accountable care relationship by 2030.

At the same time, MA behemoths such as UnitedHealthcare and Humana continue to pour massive amounts of capital into gaining more control over the whole care continuum, including through blockbuster acquisitions of home health providers. 

And as I’ve described above, senior living providers are facing intense margin pressure and permanently elevated labor expenses, a staffing crisis that demands long-term solutions, and rising consumer expectations (and resident acuity) — all issues that are addressed by value-based care involvement.

This is not to say that jumping into value-based care models is easy or that success is guaranteed, but I think that for senior living, the “wait-and-see” period is over. The time has come for providers to stop watching what a few trailblazing organizations are doing, and get in the game.