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New Tools in the Toolbox: The Use of In Lieu of Services for SNF Diversion/Transition to Assisted Living

By Jason Bloome

Long-term services and supports (LTSS) are health expenditures that encompass a broad range of health care expenses and assistance for individuals that need care over a long period of time. LTSS spending in the United States accounts for a large portion of state and federal dollars spent on health care. In 2021 more than $475.1 billion was spent on LTSS, which represents more than 14.7% of the $3.4 trillion spent on health care in the United States. To contain LTSS expenses, many states use managed LTSS (MLTSS) models—the delivery of LTSS under capitated rate managed care plan (MCP) arrangements. Currently, 24 states have MLTSS programs.

MLTSS enables states to accomplish many goals including LTSS rebalancing: the shifting of long term care delivery from expensive Medicaid funded skilled nursing facilities (SNFs) to more affordable home and community-based settings alternatives (eg, assisted living homes). The largest share of institutional LTSS spending is for SNFs where most residents on LTSS are at least 65 years old. Many of these older adults are eligible for transition to assisted living, but state programs that enable this option are usually limited in scope, have a cap on enrollment, and long waitlists.

CMS offers states a new tool, In Lieu of Services (ILOS), to increase LTSS rebalancing and create new pathways for SNF diversion/transition to assisted living. ILOS are cost-efficient and medically appropriate settings or services substitutes “in lieu of” traditional Medicaid-funded services that MLTSS MCPs can offer members to reduce unnecessary institutionalization. MLTSS MCPs recapture their ILOS expenses during annual capitated rate calculations.

In December 2021, CMS approved California’s request to proceed with its ambitious California Advancing and Innovating Medicaid Program, a statewide MLTSS initiative to streamline Medicaid delivery system using Enhanced Care Management and ILOS. Six MLTSS MCPs are offering members the ILOS for nursing home diversion/transition to assisted living, with more expected to follow in 2023.

More than 9% of California SNF residents (37,000) have low level care needs that could be met in assisted living homes, according to the AARP/SCAN 2020 LTSS report card. Program data from California’s Assisted Living Waiver program shows every SNF transition to assisted living saves the state $27,000 in Medicaid dollars annually. Shifting 10% of LTSS recipients from SNFs to assisted living homes will generate $99 million in annual Medicaid cost savings: a portion of which could be refunded to MLTSS MCPs through cost savings incentives.

The use of ILOS in California to promote SNF diversion/transition to assisted living is still evolving. States that choose to follow California’s lead might want to consider the following program components:

1) Development of a robust assisted living network to accommodate a large volume of eligible MCP members.

2) Development of a sufficient distribution of assisted living providers in large rural and urban areas to minimize travel distances and match geographic preferences for MCP members and their families.

2) Reimbursement for providers for “bed hold days” for members who temporarily transfer for medical care to hospitals and SNFs.

3) Creation of program flexibility that allows MCPs to recapture costs for members with specialized care needs (eg, nurse visits to assisted living homes to provide insulin injections for members who are unable to self-inject).

4) Utilization of a mixture of large 100-plus bed assisted living homes that have enhanced activities and socialization but low staff-to-resident ratios for members with low acuity care needs and smaller four- to eight-bed residential assisted living homes with high staff-to-resident ratios for members with higher acuity care needs.

5) Recruitment of potential ILOS participants from SNF Minimum Data Set 3.0, Section Q annual surveys, which indicate residents capable of receiving care in community-based care settings.

6) Deployment of outreach programs to inform MLTSS MCP members and their families about the new ILOS programs.

7) Development of a public state website that tracks the annual number of SNF diversions/transitions to assisted living by MLTSS MCP and provides fiscal incentives to plans that demonstrate program success.

– Jason Bloome is owner of Connections Care Home Consultants, an information and referral agency for care homes for older adults in Southern California.