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Health Care Value Networks: Changing Industry Focus from Volume to Value


The transition to a health care delivery model that positions care and payment based upon the value of the care is a dramatic change from the traditional method of being paid based upon the volume of care provided. The goals of this new model are focused on in the Institute of Healthcare Improvement’s Triple Aim, which can be summarized as better patient outcomes, reduced cost of care and an improved patient experience.

The Federal government and numerous providers have created, modeled and implemented innovative ways to achieve the Triple Aim Goals. For example, the Center for Medicare and Medicaid Innovation Center (CMS Innovation Center) was created to test alternative payment and delivery models related to the reduction of cost and improving care. From Fiscal Years 2013 through 2016, CMS Innovation Center has announced or implemented 39 service delivery models and initiatives. Through these and other initiatives, the March 2017 Medicare Payment Policy Report to the Congress states “the Congressional Budget Office (CBO) testified (in 2016) that the CMS Innovation Center’s activities are expected to reduce federal spending by roughly $34 billion from 2017 through 2026.”

Post-acute care services (skilled nursing, home health, long-term care hospitals, inpatient rehabilitation facilities, other inpatient hospitals and readmissions) is a large percentage of the cost of care paid by Medicare. In fact, based on Avalere's Vantage Care Positioning System analysis of the 2015 Medicare Fee-For-Service file, “43% of all national hospital discharges were followed by a post-acute care stay.”

Narrow Networks

One strategy for the value-based service delivery method increasingly being adopted by acute providers and payors is the development and utilization of a post-acute preferred or Narrow Network of providers.

The transition to value-based services and payments has altered the current management and care of post-acute patients creating even greater risk for skilled nursing facility (SNF) operators and owners. The industry is increasingly experiencing a shift of select patients that historically would have gone to a SNF for short-term rehabilitation services but are now often bypassing the SNF and going home from the hospital with home health care, which is a less expensive care alternative. The SNFs that do get referrals are having to deal with higher acuity patients combined with pressures to reduce the length of stay and improve outcomes.

The increase of alternative payment models has also seen a growth of at-risk insurance options, including Managed Medicare or Medicare Advantage plans. According to the Kaiser Family Foundation, total Medicare Advantage enrollment grew by about 1.4 million beneficiaries, or 8 percent, between 2016 and 2017. On average, Managed Medicare plans reimburse nursing home operators about 20 percent less than the typical Medicare payment of about $500 per day, according to Senior Housing News. The managed plans are also usually more aggressive about controlling patients’ length of stay and getting them discharged more quickly to a lower cost setting.

These pressures are some of the reasons post-acute providers are often eager to join a Narrow Network. Additionally, if they do not, they may have their referrals for short-stay Medicare and Medicare Advantage patients reduced and even eliminated. This very real threat has prompted some post-acute providers, in particular independent SNFs, to view Narrow Networks as a survivability strategy. They recognize that they often do not have the capital, other resources and skillset to compete with larger, better capitalized chains and must take action.

Building a Narrow Network

Once created, there are several challenges to optimizing a Narrow Network. According to a Premier Inc. survey, “while 85 percent of health system leaders are interested in creating or expanding partnerships with preferred and local post-acute care providers, more than 9 out of 10 report they may experience challenges in creating these partnerships.” Several health systems have implemented a Narrow Network, including Banner Health, Catholic Health Initiatives, the Cleveland Clinic and the Henry Ford Health System.

To determine which post-acute providers should be part of a Narrow Network, careful due diligence must be completed. The acute providers cannot rely upon those to whom they have discharged the majority of patients historically. Those referrals are often based upon personal relationships between hospital discharge planners and post-acute provider marketing and admissions personnel, emotions, and ease of discharge based upon frequency. Instead, the selection of the Narrow Network members should be based upon at least these five criteria:

  • Quality metrics (measures and reliability of data)
  • Bed capacity
  • Geographic coverage (to support patient preference)
  • Skill set (services, staffing, equipment and clinical capability)
  • Like-minded, flexible leadership operating a stable provider

Benefits and Challenges of a Narrow Network

When successfully created and implemented, the contracted Narrow Network will, by design, reduce the number of SNFs the hospital will be working with and increase the number of referrals to those providers. A successful Post-Acute Narrow Network should reduce the instability of a fragmented post-acute market, reduce cost through lowering lengths of stay and re-admissions, enhance operational efficiencies and quality, and provide a better patient experience, including better outcomes.

However, even though a Post-Acute Narrow Network is a strong strategic option, many Post-Acute Narrow Networks fail. That is because the acute providers and payors have really only reduced the number of providers they work with, while doing little to connect the Narrow Network providers to enable the continual monitoring and improvement of care and implementation of best practices throughout the Narrow Network. Further, the acute providers and payors typically are contracting with and managing all of the providers within the Narrow Network separately, which is inefficient and, many times, ineffective. By the time quality metrics and other data requirements are made available from the individual Narrow Network participants to the acute providers and payors, the information is often old and cannot be used for truly effective real-time management.

The Optimal Solution – Evolve into a Post-Acute Value Network ©

To be truly optimal, a Narrow Network must evolve into a Post-Acute Value Network©. A successful Value Network organizes the post-acute providers through an innovative, standardized IT-based solution that is designed specifically for the operations of post-acute providers and in particular, SNFs. This IT solution should be mandated for use by all the SNFs within the Value Network, creating a common platform of monitoring, quality improvement and enhanced care. It should not replace a SNF’s medical record system, but instead be an overlay, so as to not interfere with a SNF’s operating platform and related operations and be able to work with a multitude of providers that may have disparate systems.

Measuring Four Key Functions of a Patient’s Stay

The IT solution should, at a minimum, focus on four key functions of a patient’s stay:

  1. Admission: The hospital discharge and SNF admission process is one of the most inefficient and manual components of a patient’s care and experience. From the SNF selection process for a patient while in the hospital to the actual patient admission into the SNF, the process is not only resource intensive and often confusing, but typically varies by hospital and SNF. The Value Network would create standard processes so each discharge and related admission are predictable, automated and easier for all stakeholders.
  1. Delivery of Care: Once the patient is in the SNF, the delivery of care must be consistent so any provider in the Value Network has standardized, measurable outcomes that can be reviewed, compared and used for quality improvement. By utilizing standardized care guidelines, the variability in the care and lengths of stay can be minimized. Patients with the same diagnosis and similar simultaneous disease states presented at different SNFs within the Value Network would be expected to have similar lengths of stays and positive outcomes. If they did vary, the IT solution would contain the data to perform a root-cause analysis to determine the factors that created the difference. If the care guidelines are different with varying expectations, comparative data analytics will provide little value.
  1. Discharge: The SNF discharge process typically begins upon admission. However, when the patient successfully completes his/her care, the actual discharge varies significantly by SNF and necessary support services often fall through the cracks. The Value Network IT solution would prompt those involved in the discharge process with the patient requirements and document that those required needs are in place. This would include capturing the patient experience and ensuring the discharge is to a safe and supportive environment. Otherwise, when the patient’s needs are not met at discharge, the opportunity for emergency department visits and hospital readmissions increases significantly.
  1. Post Discharge: When the patient has been discharged, the SNF must continue contact with the patient to again minimize the opportunity for emergency department visits and hospital readmissions. That ongoing patient engagement should create an avenue for communication between the SNF and other caregivers and the patient. By maintaining a strong relationship with the patient after discharge, the SNF can identify any patient needs that could be mitigated prior to an emergency department visit or readmission. The Value Network IT solution would monitor those communications and related interventions (if any) to determine common causal factors that could be improved upon and reinforced with the providers in the Value Network. This would help reduce unnecessary care costs and improve the patient experience throughout the market for the Value Network providers.

Achieving the Triple Aim

Only by connecting the Narrow Network providers through a common IT solution can the acute providers and payors evolve the Narrow Network into a Value Network. By capturing all of the care-related patient throughput and delivery in a uniform and predictable way, the Post-Acute Value Network© can truly reduce cost, improve care and enhance the patient’s experience.

Learn more about Health Care Value Networks by watching our short video.

Present_RonTo learn more about a Post-Acute Value Network©, contact Ron Present, Partner and Health Care Industry Group Leader, at 314.983.1358 or 



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