The shift towards value-based care in senior living is continuing in 2025, driven by rising resident acuity, tight margins and payer expectations.
As acuity drives changes in how operators manage their communities, senior living providers are more closely tracking health outcomes to show the benefit of the services they provide to keep people from moving “downstream” in the care continuum, such as into the emergency room.
In value-based care, the model shifts from fee-for-service to reaping reimbursement dollars to keep people healthier through plans like accountable care organizations (ACOs) or through private Medicare Advantage (MA) alternatives.
Through value-based care models, operators now have a unique opportunity to get paid for the time they care for residents, along with preventing hospitalizations, emergency department visits and extending quality of life, according to senior living operators active in value-based care efforts, including HumanGood and Lifespark.
Leaders of those operators believe the future of senior living lies in value-based-care. To get there, operators must prioritize care coordination, establish a data collection system and build new relationships with other providers active with MA or ACO structures.
This is a tricky path to tread as residents arrive at communities more frail, margins remain tight and large insurance plans “won’t listen unless you bring scale,” according to HumanGood Senior Vice President of Healthcare Services Philip Chuang.
HumanGood in late 2024 joined the Perennial Consortium, an operator-owned MA plan, after purchasing shares from Christian Living Communities and partnering with Pine Park Health, a primary care group to deliver health services.
St. Louis Park, Minnesota-based Lifespark operates the Lifespark Complete model, taking on risk for patient outcomes. The program includes a “complete life record” focusing on areas including primary care, home health and hospice, along with a new in-home urgent care and emergency response team.
Pressure driving operators to rethink payment models
For HumanGood and many other operators, providers look to ferry residents from independent living into assisted living according to their needs. But in a growing trend, older adults want to age in place for “as long as possible,” Chuang said. This creates many challenges for operators to market towards those unwilling to move into a new community or move up in the continuum, even while they might need that level of care.
“It’s about figuring out how we support that higher acuity at that level,” Chuang said. “There’s been a real shift in our resident mix and we’re seeing folks that want to stay in assisted living as long as possible.”
In the last five years, operators have dealt with steep costs of new development and rising operating expenses. That’s not to mention the headwinds of staffing, from improving retention to recruiting new folks to work in communities. When a senior living provider sends out a resident for a hospital or emergency department visit, operators lose all care revenue fees for the duration of that stay, which can erode net operating income (NOI) over time, according to Lifespark CEO Joel Theisen.
This has created pressure where the senior living industry aims to provide both hospitality and healthcare. By entering into a value-based care arrangement, Theisen said operators have the chance to “monetize” a community’s clinical success and improve resident outcomes.
“I believe we all need to think carefully about how to monetize and bring together all the assets around a person into one vehicle,” Theisen said. “The goal is to serve them with the greatest compassion, empathy and value.”
With past experience in health insurance, Chuang said oftentimes that insurers see a “very narrow slice” of a resident’s overall health, only available through claims history. This combined with a need for scale to reap the rewards of a value-based care network puts operators in a position where they must collect more data.
The need for scale stems from insurers typically partnering with organizations with hundreds of thousands of members, but Chuang said those numbers are just simply out of reach for standalone providers today.
“I believe in strength in numbers and it’s coming together with other operators to build both the number of lives that’s meaningful to a plan and we can work together to build the data infrastructure that’s really needed to understand what’s happening with our residents, ” Chuang said.
To achieve successful outcomes, Theisen said operators should consider a value-based care arrangement as a “proactive payment for health” services provided in thousands of communities nationwide.
Value-based arrangements move beyond a fee for service model where operators “do more and bill more” that is a reactive and post-medical event, but value-based models “do what matters and measure results” in a preventative and proactive way, Theisen said.
Theisen calls the current system mostly “sick care” and urges a shift to paying for health and well-being.
“I don’t care about the actions, I care about the outcome,” Theisen said.
Finding balance between ‘hospitality and health care’
Senior living residents don’t want to feel like they live in a mini-hospital, Theisen said, but he noted that transitions in care levels and care coordination must “get tighter” to train staff on these key periods of a resident’s health care journey in a community and use data to make more informed care decisions.
“It’s the balance of hospitality and health care and we’re trying to quantify how residents can live their best lives,” Thiesen said.
Both Theisen and Chuang said operators should consider partnering with experienced medical groups on a limited, piloted basis that are “built for senior living,” able to offer contracting, data and care coordination
MA ‘a rodeo’ and challenges for ACOs
Challenges in managing MA plans properly lie in adverse selection of residents to include on a plan and small overall plan volumes, Theisen said.
“There’s a lot of encumbrances and so that’s the rodeo part, and I like the ACO route,” Theisen said. “I like the ACO avenue much better than the MA plan market and I agree with Phil, going in alone is fatal.”
Value-based care adoption in senior living is “the right direction” for the industry because it’s important that operators reap the benefits of the value they create through improved health outcomes and improved quality of life.
Another challenge lies in physician attribution and how plan members are paired with their new health care provider, noting that “nobody understands it.” This means operators must know their physician partners and establish stronger ties with them.
“Only a fraction of the residents a physician sees actually ‘count’—those who meet Medicare requirements and are attributed to that physician within the ACO—so a panel that looks like 100 might really be six,” Chuang said. “With such a small, delayed payoff, the effort often isn’t worth it, which is why understanding the data and relationships upfront is essential.”
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