As the healthcare landscape continues to evolve, payment models are also shifting. One significant change is the move by major payers from traditional per diem payments to episodic payments, a model in which reimbursement is based on the total care provided during a specific period or episode, rather than on a daily rate. While this approach may seem complex at first, it presents a valuable opportunity for skilled nursing facility (SNF) owners. With the right discharge planning and a well-negotiated contract, episodic payments can offer both financial and operational advantages, rewarding providers for efficient, high-quality care.
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LTC Ally’s Contracting Department has extensive experience guiding SNF operators through this transition, offering expertise on how to capitalize on episodic payments and enhance financial outcomes in a sustainable way. Here’s what SNF owners need to know.
What Are Episodic Payments?
Under an episodic payment model, providers are reimbursed a single, lump-sum payment for all care services provided during a defined care episode, which may be based on a certain length of stay, specific diagnosis, or treatment plan. Unlike the traditional per diem model—where facilities are paid for each day a patient stays—the episodic payment system encourages streamlined care that addresses patients’ needs within the scope of the “episode” rather than by daily utilization.
Why Payers Are Moving to Episodic Payments
Several factors are contributing to this shift in payment models:
- Value-Based Focus: Episodic payments align with the healthcare industry’s broader move towards value-based care, rewarding providers for positive outcomes rather than for the quantity of care.
- Cost Efficiency: By incentivizing shorter, effective stays, payers aim to reduce overall healthcare costs. For instance, episodic payments can lead to fewer rehospitalizations when paired with effective care planning.
- Care Coordination: Episodic payments encourage collaboration between providers, creating a more cohesive care experience that leads to better patient outcomes.
Financial Opportunity: The Potential of Episodic Payments for SNFs
For skilled nursing facilities, episodic payments offer a chance to enhance revenue if approached strategically. By reducing length of stay, improving discharge planning, and ensuring that the patient’s care needs are efficiently met, SNFs can achieve positive outcomes while making the most of the episodic rate. When effectively managed, episodic payments can lead to greater profitability than per diem payments by minimizing excess days and focusing on targeted care that aligns with reimbursement structures.
1. Effective Discharge Planning
Discharge planning becomes an essential component in maximizing the benefits of episodic payments. Planning for a patient’s discharge from the outset, rather than as an afterthought, can significantly reduce unnecessary extended stays. This requires a clear understanding of each patient’s needs, proactive care coordination, and support systems for safe discharge, including follow-up care and community resources. Discharge planning that prepares patients for successful transition, reduces rehospitalization risks, and enhances patient satisfaction is key to financial success in an episodic payment model.
2. Contract Negotiation: Setting the Right Terms
A well-negotiated contract with payers is critical for success in episodic payments. LTC Ally’s Contracting Department has extensive experience in negotiating favorable episodic payment contracts for SNFs, using detailed market data and their industry relationships. Establishing clear payment parameters, defining what is included in the episodic rate, and ensuring reasonable expectations for the episode duration can significantly impact a facility’s financial performance. Effective contracts provide clarity on the scope of care, payment expectations, and potential additional reimbursements for specialized services, safeguarding facilities from financial shortfalls.
3. Optimizing Care Delivery Within Episodes
When care teams work within the constraints of episodic payments, they become more intentional about each patient interaction. Episodic payments require streamlined care processes that efficiently meet patient needs without sacrificing quality. With a focus on maximizing each day’s impact, SNFs can achieve better patient outcomes and positive financial returns. A well-coordinated, multi-disciplinary approach to care—from therapy to nursing to social services—ensures that patients receive comprehensive care while reducing the risk of complications and rehospitalizations.
How LTC Ally’s Contracting Department Can Support SNFs
LTC Ally’s Contracting Department is well-equipped to guide SNFs through the complexities of episodic payment models. With industry-leading expertise, the team can help SNF owners develop competitive contracts. Using market data and payer relationships, LTC Ally can negotiate favorable contracts tailored to episodic payment structures that benefit your bottom line.
Preparing for the Future of Long-Term Care Payments
As more payers transition to episodic payments, SNF owners and operators have a valuable opportunity to rethink their financial strategies. With the right guidance, including effective discharge planning and contract negotiation, episodic payments can lead to stronger financial performance and improved patient care. By working with LTC Ally’s Contracting Department, SNFs can navigate this transition with confidence and reap the rewards of a well-planned episodic payment approach.