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Skilled nursing facilities (SNFs) do not like the prior authorization requirements, limited lengths of stay for residents, and lower Medicare reimbursement rates that are associated with Medicare Advantage (MA) plans. Some SNFs are responding to these concerns by starting their own special type of MA plan called an Institutional Special Needs Plan (I-SNP). I-SNPs are MA plans that are limited to beneficiaries who require, or are expected to need, institutional long-term care for 90 days or more. While SNF providers can enjoy financial benefits from operating an I-SNP, the outcomes for beneficiaries may be less positive.

I-SNPs are insurance plans, which means that SNFs that operate them are responsible for all of the health care costs of plan members. By operating its own I-SNP, a SNF directly receives the full Medicare payment for plan enrollees, controlling whether and how Medicare dollars are spent. The CEO of AllyAlign, a company that helps providers, including SNFs, implement provider-sponsored managed care plans, describes the model: “The construct is to grab the [Medicare] premium dollar directly if you’re an LTC provider, and then manage in the best interests of the patient.”[1]

Between 2016 and 2018, the number of provider-led I-SNPs doubled from 12 to 24 and the number of enrollees in provider-led I-SNPs more than doubled, from 5,014 to 12,488.[2]  In 2019, there were 60 provider-led I-SNPs, covering 18,320 beneficiaries.[3]

Although I-SNPs are difficult and expensive to start[4] and are not an option for all providers,[5] some SNFs see I-SNPs as a profitable way to take control over their MA reimbursement.  The Medicare Payment Advisory Commission reported in March 2019 that I-SNPs had average margins of 9.4% (compared to MA plans’ average margins of 2.7%).[6]

As discussed below, however, whether I-SNPs are good for Medicare beneficiaries is another question.

Like other MA plans, I-SNPs have authority to waive the three-day inpatient hospital requirement for coverage of a stay in a SNF. Reducing re-hospitalization of residents is a goal of all SNFs under the Value-Based Purchasing program.[7]

Avoiding hospitalization at the front end of a nursing home stay – by avoiding the three-day inpatient requirement – or during a nursing home stay – by providing care to residents at the SNF and not sending them to the hospital – is especially advantageous financially for I-SNPs, since the most expensive medical cost for an MA plan is hospitalization of enrollees.[8]

An early I-SNP called Evercare reduced hospitalizations by placing advanced practice clinicians (nurse practitioners and physician assistants) in SNFs. These clinicians helped coordinate and provide care to residents during their SNF stays.  United Healthcare developed and uses the Evercare model in its I-SNPs.

A recent observational analysis,[9] comparing 8,052 United Healthcare I-SNP members with 12,982 beneficiaries in traditional Medicare in 13 states[10] in 2014-2015, found significant differences (when differences in the demographics of the two groups of residents were adjusted) in the settings where I-SNP beneficiaries received care:

Care setting I-SNP nursing home residents Traditional Medicare residents
Inpatient hospital stays 310 per 1000 beneficiaries 500 per 1000 beneficiaries
Emergency department visits 217 per 1000 beneficiaries 441 per 1000 beneficiaries
30-day hospital readmissions 175 per 1000 beneficiaries 318 per 1000 beneficiaries
SNF utilization 514 per 1000 beneficiaries 242 per 1000 beneficiaries

In short, I-SNP beneficiaries’ utilization of inpatient hospitals was 38% lower than beneficiaries in traditional Medicare; utilization of emergency departments, 51% lower; and 30-day hospital readmissions, 45% lower. However, use of SNF care was 112% higher.[11]

The analysis did not review the quality of care that I-SNP enrollees received, whether enrollees who should have been hospitalized were not, or even whether the SNF care that enrollees received was actually covered by the I-SNP.

In 2017, Kaiser Health News looked at Erickson Advantage, an I-SNP offered solely to residents of Erickson Living, its continuing care retirement community (CCRC).[12] It reported that the Erickson Advantage plan denied coverage to a resident at a Massachusetts Erickson CCRC 11 days after her admission to the SNF on campus. Telling the resident’s daughter that her mother no longer needed therapy five days a week, a requirement for coverage under the plan, the CCRC billed the resident $463 per day, later increased to $483. At the time of the Kaiser article, the CCRC’s bill for the enrollee resident’s SNF stay was $30,000, and increasing daily.

As the Erickson example illustrates, there is an essential and inherent conflict of interest in having a single entity be both the provider of care and the insurance company that determines whether it will cover (i.e., pay for) the care. The increasing number of SNFs starting or joining I-SNPs[13] is cause for concern.

January 9, 2020 – T. Edelman


[1] Maggie Flynn, “Ally Align CEO: I-SNPs Will Form ‘Permanent Pillar’ in Changing Skilled Nursing World,” Skilled Nursing News (Jan. 27, 2019),
[2] Anne Tumlinson and Elizabeth Walsh, “Long-Term Care Providers Drive Growth in Special Medicare Advantage Plans,” Skilled Nursing News (Dec. 18, 2018),
[3] Alex Spanko, “I-SNP Case Studies Show Promise in Era Where Fee-for-Service Medicare Looks Unsustainable,” Skilled Nursing News (Oct. 28, 2019),
[4] Optima, “White Paper: Skilled Nursing Takes on Value-Based Care With I-SNPs”  (2019), available at
[5] Alex Spanko, “Under PDPM, Benefits of In-House Medicare Advantage Plans Will go Beyond Money,” Skilled Nursing News (Aug. 5, 2019),
[6] Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy 358, 357 , respectively (Mar. 2019),
[7] Section 215 of the Protecting Access to Medicare Act of 2014, 42 U.S.C. §1395yy(g), reporteVBP-Page.
[8] Alex Spanko, “Under PDPM, Benefits of In-House Medicare Advantage Plans Will Go Beyond Money,” Skilled Nursing News (Aug. 5, 2019).
[9] Brian E. McGarry, David C. Grabowski, “Managed Care for Long-Stay Nursing Home Residents: An Evaluation of Institutional Special Needs Plans,” American Journal of Managed Care, Vol. 25, No. 9 (Sep. 2019); Am J Manag Care. 2-10’ 25(9)”400-405,
[10] The states are Arizona, Colorado, Connecticut, Florida, Georgia, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Washington, and Wisconsin.
[11] Brian E. McGarry, David C. Grabowski, “Managed Care for Long-Stay Nursing Home Residents: An Evaluation of Institutional Special Needs Plans,” American Journal of Managed Care, Vol. 25, No. 9, p. 403 (Sep. 2019); Am J Manag Care. 2-10’ 25(9)”400-405.
[12] Jordan Rau, “Nursing Homes Move Into The Insurance Business,” Kaiser Health News (Jul. 13, 2017),
[13] Maggie Flynn, “‘All the Stars Aligned’: Operators Boast 30% Readmissions Reductions, Market Gains with I-SNPs,” Skilled Nursing News (Jan. 2, 2020),

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