Closing the Revolving Door

The role of Residential Care Facilities for the Elderly in lowering hospital readmissions and in long term support and services rebalancing.


The Centers for Medicare and Medicaid Services estimates one in five elderly patients discharged from hospitals are readmitted within 30 days. Avoidable hospital readmissions is one of the leading problems facing the U.S. health care system and for three years CMS has penalized hospitals for high rates of readmissions. In 2014, more than $428 million in fines was levied against 2,610 hospitals.[i]

One source of hospital readmissions are skilled nursing facilities (SNFs) that unnecessarily transfer elderly patients back to hospitals in order to qualify for high Medicare payments when their patients return to them after discharge. Unnecessary SNF to hospital transfers waste millions of Medicare dollars each year. The Congressional Budget Office predicts new measures passed as part of the Protecting Access to Medicare Act (2014: H.R. 4302) that reward high performing SNFs to prevent unnecessary hospital readmissions will save Medicare $2 billion over the next 10 years.[ii]

Elderly patients discharged home who soon return to hospitals due to inadequate care support also account for hospital readmissions. Many low income seniors who lack family caregiver support rely exclusively on the In Home Support and Services (IHSS) program to receive household and personal care services provided by an IHSS worker. The maximum Medi-Cal funding for IHSS is 283 hours/month but very few recipients receive this amount; the average recipient receives funding for 72 care hours/month. Frail seniors with limited IHSS are likely candidates for hospital bounce-back.

Poor care coordination and transition planning also contribute to high hospital readmissions. A lack of a comprehensive strategy to track the well-being of patients discharged from hospitals results in fragmentation of care delivery services and in substandard care. In 2001, the Institute of Medicine report, Crossing the Quality Chasm, described the U.S. system of care coordination as decentralized, complicated, and poorly organized, specifically noting “layers of processes and handoffs that patients and families find bewildering and clinicians view as wasteful.”

Closing the revolving door to hospital readmissions and improving care coordination and care transition should improve as part of California’s Coordinated Care Initiative (CCI). Started in 2014, CCI will eventually enroll up to 456,000 dual-eligibles (beneficiaries who receive both Medicare and Medi-Cal) with state contracted Managed Care Organizations (MCOs) to manage Medi-Cal, and in some cases Medicare, services. CCI MCOs paid a per capita rate for each dual-eligible will have fiscal incentives to provide cost efficient, high quality health care services.

CCI goals include allowing patients to self-direct where they would like to receive their care and rebalancing long term support and services (LTSS) from expensive SNFs to more affordable home and community based care services.

A critical type of community based care are residential care facilities for the elderly (RCFEs) which are usually large 100+ bed assisted living settings or small homes where two staff provide care to 4-6 residents. Small RCFEs with high staff to resident ratios are ideal for patients who require 24-hour custodial care (e.g., require help with dressing, bathing, incontinence, are non-ambulatory, have dementia, etc.) including dual-eligibles frequently readmitted to hospitals due to inadequate care support at home.

Multiple care transitions (e.g. hospital — SNF — RCFE) results in several handoffs, disrupts care coordination and is stressful for the patient. For seniors who require short term rehabilitation services after leaving the hospital, moving directly to the RCFE where they intend to live long term might be an option. Current Medicare and RCFE licensing guidelines allow for independent home health agencies to provide certain types of rehabilitation services in RCFE settings (e.g. physical therapy). Since Medicare pays the independent home health agency and not the RCFE owner for rehabilitation services there is no fiscal incentive to readmit a patient unnecessarily to a hospital in order to recapture high Medicare payments when the patient returns after discharge.

LTSS rebalancing initiatives will involve CCI MCOs working with hospital physician and social workers to flag patients at risk of pre-mature institutionalization before they leave the hospital (SNF diversion) and within seven days of being discharged to a SNF (SNF transition). Tracking the well-being of SNF diversion/transition dual-eligibles who choose to reside in RCFEs could include CCI MCO care coordinators visiting the home once a month to conduct patient satisfaction surveys.

California currently has one program, called the Assisted Living Waiver (ALW), which allows Medi-Cal to pay for RCFEs but the program is deeply flawed: most RCFEs choose not participate with ALW; there are long six to eight month wait lists and, since it was not designed with small providers in mind, it restricts most participants to large 100+ bed settings that frequently have one staff to 20 to 30 residents during the day and one staff to 40 to 50 residents at night.

ALW liabilities also include a nonsensical income disparity outcome: Since ALW guidelines mandates providers give private rooms, low income participants end up receiving better accommodations than many private paid residents who can only afford shared rooms.

CCI MCOs have free reign to design their own programs that integrate RCFEs into their LTSS rebalancing initiatives and are not dependent on ALW. According to the DHS CCI Fact Sheet, “health plans do not have to offer [ALW] waiver services. The Managed Care Health Plans have the option to offer services similar to waiver services, but are not required to offer these benefits. Plans might choose to offer services similar to waiver services in order to assist the beneficiary in residing in their home or community safely.[iii]

A successful LTSS rebalancing program requires attracting a large pool of high quality RCFEs willing to accept dual-eligibles who choose to live in these settings. A good start would include paying RCFEs a fair market-based rate, requiring shared not private rooms and encouraging the participation of small providers with high staff to resident ratios.

CCI MCOs have strong fiscal incentives to promote SNF diversion/transition to RCFE whenever possible. Medi-Cal reimburses SNFs each month $5,300/patient. The average cost for RCFEs is $2,500/month. Every SNF diversion/transition to RCFE patient saves the CCI MCO approximately $2,800/month.

Another fiscal benefit of SNF diversion/transition to RCFE is satisfying CCI “quality measures” which allow CCI MCOs to recapture “quality withhold” capitated payments: 1 percent (Year 1), 2 percent (Year 2), 3 percent (Year 3).[iv] These “quality measures” include “improving beneficiary health outcomes”, “improving beneficiary satisfaction and experience”, “long term rebalancing and diversion effectiveness” and “overall cost saving for Medicare and Medi-Cal.”

A rocket ship cannot launch without first fabricating the components and assembling the parts that allow it to hurl skywards. LTSS rebalancing, lowering hospital readmissions and integrating RCFEs in the care continuum for low income seniors who choose to reside there are worthwhile endeavors that promise great rewards. It is not too soon to begin laying the groundwork. CCI MCOs will have strong fiscal incentives to promote LTSS rebalancing after CCI switches from four tiered capitated rates to one blended, capitated rate in January 2016.[v] In the meantime there is much to do.

Jason Bloome is owner of Connections – Care Home Referrals, an information and referral agency for care homes for the elderly in Los Angeles.