Can Health Care Savings Drive a NewFunding Model For Affordable Housing?

Shifts in Health Care Industry Provide Opportunity for a New Funding Model

1. Industry moving from “pay for volume” to “pay for value”

2. Shift from access to “sick care” to health care” and “well care”

3. Public Purchasers are shifting their patients to managed care plans

• Capitated rates with cost savings and risk potential for health plans

• Better potential for aligning costs and savings

Figure 4

Medicaid Managed Care Penetration Rates by State, 2008

IL

CT

ME

NY

NH

MA

VT

PANJ

RI

AZ

WA

WY

ID

UTCO

OR

NV

CA

MT

HI

AK

NM

MN

ND

IA

WIMI

NE

SD

MOKS

OHIN

IL

AR

MS

LA

KY

TNNC

VAWV DE

MD

DC

SCOK

GA

TX

FL

AL

Note: Unduplicated count. Includes managed care enrollees receiving comprehensive and limited benefits.SOURCE: Medicaid Managed Care Enrollment as of December 31, 2008. Centers for Medicare and Medicaid Services.

U.S. Average = 70%51-70% (20 states including DC)

71-80% (9 states)

0-50% (5 states)

81-100% (17 states)

4

Proposed Health and Housing “Products”1) Care Management services: generally focused on

increasing services and improving outcomes for existing residents or in new properties using traditional HUD/LIHTC deal structures

2) Supportive Housing– service-enriched housing, typically for formerly homeless individuals, including seniors, veterans and/or disabled

3) Service-enriched senior housing: Unlicensed housing with support services that do not reach the level of care and supervision of assisted living or skilled nursing

Funding Considerations

Funding Model Options1) Traditional approach (current): Reliant on public funding

for capital, services, and operations. Health and housing integration and innovation occurs at project level with some philanthropic support

2) Fee for service (proposed approach): directly contract with a health plan or provider for a monthly fee that covers health and housing costs in an integrated payment that is not dependent on health outcomes.

3) Pay for Success: Seek contract with public agency to pay fee in return for specific outcomes (e.g.. avoided hospitalizations, lower costs, etc.). Would require partnership with investor that would pay for the up-front costs of the housing and services in return for share of savings.

Factors that influence revenue potential

25% 50% 100% $-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Cost Savings Potential

Cost

Alignment / Access Control

Annual Medicaid Expense

Access: what is the process by which residents gain access to apartments

Alignment: Degree to which the residents are members, enrollees, patients of the health partner

Potential business models

Opportunity #1: Care Management

• service-enriched housing communities are a platform for comprehensive health promotion and risk reduction

• On-site staff can deliver targeted care coordination services in a

community-based setting

• Coordinators also facilitate access to residents for third party services such as health screenings

• Mercy Housing has the expertise and opportunity to reach individuals

who elude clinic-based case management

Core Wellness Practices and Programs

• Health and Wellness Interview

• Preventative and Primary Health Care

• Behavioral Health Care

• Health Benefits Acquisition

• Health Education and Risk Reduction

• Food

• Physical Activity

• WellBeing Checks

• Activates for Daily Living Screening and Support

• Transition Plan to and From Hospitals/Institutions

Examples of Third Party Services Coordinated by Mercy Housing

• Health screenings and immunizations

• Services to promote healthy pregnancies and help children

with special needs

• Hospice

• In-home Support Services/ Adult Day Health

• Food services: Meals on Wheels; Food Bank

Fee-for-service senior housing

Hot-spotter approach:Small percent of “high cost” individuals drive health care costs

• High-cost Medicaid enrollees (over $25,000 annual spending)

are 4% of all enrollees, 49% of all spending

• 49% are elderly and 43% are disabled.

• nursing homes or other long-term care represent 77% of cost attributable to elderly “high-cost enrollees” of Medicaid

Problem: Traditional “medical” solutions are unlikely to avoid key cost drivers of highest cost enrollees

• Nursing homes or other long-term care represent 77% of cost

attributable to elderly “high-cost enrollees” of Medicaid

• There is currently no affordable alternative to skilled nursing

• Homeless individuals and other extremely low-income individuals are

often difficult to treat for illness and/or discharge from hospitals because they lack stable housing and often fail to access behavioral health supports.

“Market Failure”

• Medicaid will pay for skilled nursing or residential care facilities at three to four times the monthly cost of Mission Creek

• Medicare will pay 20X the daily cost of Mission Creek for hospital beds for patients that lack a home to be discharged to.

• Once the patient’s medical needs have been met, hospitals pay the cost of “housing” the dual eligibles in their $1,000/night beds

Case Study:Mission Creek Senior Community San Francisco

• Service-enriched independent living alternative to nursing home beds

at Laguna Honda

• 50 of 140 units direct referral of SF Dept of Public Health from skilled

nursing, hospitals and shelters • SF DPH pays $700/month operating subsidy for exclusive

access to those units.

Case Study:Mission Creek Senior Community San Francisco

• Mercy’s on-site team provides a holistic “blended” approach to services

and property management

Service Coordination Health InterviewHealth Education Food banksPhysical Activity Well-being ChecksTransition Plans Benefits Acquisition

• SF DPH also provides access to a roving team that can meet the “medical” needs of residents

Study Findings: San Francisco Department of Public Health

• Medicaid/Medicare costs of the 50 original DPH referrals shrank

from $1.7 million per year to $253,000 • Per capita, $29,000 annual savings, Medicaid and

Medicare • Savings: reduced hospitalizations and skilled nursing

stays

Value Proposition:Estimated Total Costs & Savings

Net Savings

Fee

Health care cost

$65k-100k

per year

Impact of Independent Long

Term Care

Pre-Intervention With Independent Long-Term Care

Ongoing

health cost

How else might we understand pricing?

Mercy

LTC

Mod

el

RCFE b

ase

rate

- Lo

s Ang

eles

*

RCFE B

ase

Rate

+ A

dd. S

ervi

ces:*

ALWPP

Rat

e:**

Skill

ed N

ursing

Fac

ility

: LA

Skill

ed N

ursing

Fac

ility

: Sta

tewid

e

2565 2,865

4,133 4,889

5,418

1,300

2,568 2,575

4,195

5,463

3,518

Residential Care Options

low Average high