Assisted living meets managed care.

To some, it is a distant prospect - but the opportunities are real and worth considering

With the growth of the assisted living population, managed care companies (MCOs) are looking to assisted living providers for help in addressing many of the ongoing issues facing the healthcare needs of the senior population. Presently, around 150 million people, or half the U.S. population, received their health care through some form of managed care program. Approximately 14% of Medicare beneficiaries, or 4.8 million, are enrolled in a managed care plan. That proportion is expected to reach approximately 30 to 40$ within the next few years.

There are many possible opportunities for assisted living providers to partner with and profit from relationships with MCOs. Here are a few possibilities to consider:

Step-Down Facilities

One option is for MCOs to utilize assisted living as a lower-cost alternative for certain types of elder care, similar to how they have used subacute care in the acute care environment to produce significant reductions in inpatient hospital utilization.

Subacute care centers and skilled nursing facilities themselves are starting to see reductions in utilization and average lengths of stay, while home care services have experienced a dramatic increase in use. That trend makes it reasonable to assume that assisted living, with its ability to deliver quality long-term care, can benefit as a lower-cost setting.

The dramatic increase in home care is largely attributable to improvements in the delivery of high-tech services in patients' homes at lower costs with better outcomes. These services include respiratory care and infusion therapy, as well as cardiac monitoring and other diagnostic services. If these services can be provided in a senior's home, there is no reason they can't be made available in assisted living communities.

One may even make the case that caring for a patient in assisted living facilities is less costly than caring for a patient at home. For example, one nurse could provide care for multiple residents in assisted living, greatly reducing the expenses of travel time to individual homes, wasted time due to missing supplies, and delays in charting. With the skyrocketing costs of home health care, MCOs will have to deal with cost control in home health soon.

Admittedly, this type of step-down care is very different from the custodial care typically provided in assisted living, yet expanding services makes business sense, as residents age in place. Residents who require more healthcare assistance can either stay or move on. Many assisted living providers easily make the service and delivery adaptations to specialize in Alzheimer's care. Similarly, nonspecializing facilities can make adaptations to retain and attract residents needing slightly more care. Indeed, facilities might even expand to other forms of specialty care, including dialysis, cancer treatment and mental health care.

Disease State Management

Another opportunity to link assisted living and managed care rests with today's growing understanding of disease state management. Disease state management theory suggests that the cost of controlling certain chronic diseases can be significantly reduced through proactive intervention, clinical protocols and consumer education. The objective is to maintain continuity of care as a patient moves through the continuum from acute care, subacute, long-term care and assisted living. Assisted living is an ideal point from which to operate disease state management.

In acute care, the advent of DRG reimbursement created incentives to manage care and discharge patients quickly. Clinical pathways provide clear benchmarks to assist healthcare professionals in the management of specific surgical or medical interventions. Today, multidisciplinary teams use clinical pathways as a standardized practice pattern to achieve predictable, high-quality outcomes. Tomorrow, similar pathways will be developed to manage chronic illnesses.

Effective disease state management requires prevention. The quick-fix approach will not work. As an industry, assisted living providers must look at healthy daily living and alternative medicine. Assisted living can expand its programming for exercise, social activities, health education and family involvement.

By promoting healthy living and prevention, MCOs can reduce the cost of care for which they are responsible. This will entail a paradigm shift, as assisted living providers become partners with MCOs. To realize this opportunity, assisted living providers must develop a new mind-set about their business. Perhaps they will be reimbursed on a fee-for-service basis for case management, or perhaps they will participate in capitated risk pools, if they can establish that their efforts result in positive healthcare outcomes.

Marketing Opportunities

By partnering with the assisted living companies, MCOs may expand their reach to seniors. MCOs may find it beneficial to provide financial incentives to assisted living companies to create a win/win situation. Assisted living providers can effectively meet the healthcare needs of their residents not only through wellness and preventive programs, but also through such typical managed care benefits as vision, dental or prescription plans (with no deductibles or co-payments). It will be critical, however, for assisted living providers to choose wisely in selecting the appropriate managed care partner to ensure the highest possible quality of care for their communities.

Data Collection

Assisted living providers will need to be information seekers and data collectors to maintain a role within this new environment. Until now, assisted living providers have focused primarily on accounting/financial and marketing software from the many information systems available in health care. It will be necessary not only to collect healthcare data, but to train staff to interpret and apply it to improve healthcare decision making. Furthermore, the issue of how to capture data at the point of care or the site of observation remains a challenge for all of health care, not only for assisted living.

Conclusion

The assisted living industry must consider both the current managed care market and its long-term implications. Assisted living companies may be required to accept greater financial risk in delivering healthcare services, increased government regulation and increased scrutiny from various accreditation bodies. While assisted living is justifiably resistant to the sort of regulation that nursing homes have faced, some new requirements - e.g., accreditation, provider credentialing - are inevitable if managed care does penetrate this marketplace. We can also anticipate that competition from other sectors of the healthcare industry will continue to put downward financial pressures on assisted living companies. Assisted living will need to deliver high-quality care with measurable outcomes. Providers will need to establish complex relationships including joint ventures, alliances and other partnerships with hospitals and physicians, as well as MCOs and other payer sources. It will most definitely not be "business as usual" over the next five years.

Daniel Gold is president of Assisted Living Ventures, LLC, Fairfax, VA, which specializes in ancillary healthcare services, medication management programs and managed care strategies. He is chairman of the Assisted Living Federation of America's Managed Care Task Force. For further information, [phone].