Skilled nursing facility (SNF) providers are reeling after all the
changes with PDPM and COVID-19. While providers surface after a
challenging year, the truth is that skilled nursing has turned upside
down in many communities. Providers are seeking for answers that will
lead to a win for the residents and a win for their operations.
As
providers scratch their heads over the undeniable shortcomings of the
federal and state governments to support their needs during the
pandemic, they are left to search for ways to fund their unexpected
extra costs and balance their budgets.
In a recent presentation
by LeadingAge, Ruth Katz noted that a provider who only needed 6 gowns
per month prior to COVID-19 was now purchasing hundreds per month. She
equated this to the average person’s consumption of toilet paper, which
costs about $8/month for 8 rolls. The exponential costs and numbers of
personal protective equipment (PPE) required for providers is similar to
raising this cost to over $1,600/month per person in toilet paper.
These costs would be unsustainable for us as individuals, and they have
been disastrous for the senior living continuum as well.
Providers
have begun to consider therapy as an opportunity to recoup some of
their losses by bringing therapy in house, either with or without a
management agreement. Gravity Healthcare Consulting recently conducted
research on behalf of Reliant Rehabilitation, one of the largest
nationwide contract therapy providers. The goal of the research was to
uncover the actual provider operational costs and margins associated
with contract rehab versus management agreement models and in-house
therapy.
Life plan communities, in the same geographical area
with the same wage index, were compared. They were very closely matched
for census and case mix. The results were enlightening – in-house
therapy programs, either with or without a management agreement, yielded
lower reimbursement and higher provider costs than contract rehab. The
study spanned Q1 of 2020 and examined the data of multiple real sites.
Let’s break down the numbers:
- Minutes: Advocates all over the
senior care industry were campaigning to have accountability for therapy
minutes, since PDPM no longer tied reimbursement directly to the number
of minutes provided. The Centers for Medicare & Medicaid Services
listened, and they have stated that they will be watching closely to
make sure that providers continue to supply each resident with
individualized and medically indicated services.
However,
this new risk has made some providers begin to consider bringing their
programs in-house, so they can internalize therapy oversight and ensure
that resident needs continue to be met within the framework of the new
payment system. The fear is that contract therapy companies will
inappropriately slash therapy minutes in an effort to increase margins.
The study showed that overall the majority of therapy partners
have only made 10-20% cuts in the average delivery of therapy minutes.
Most residents receive around 450-550 minutes, a Rehab Very High (RV)
level of services. However, research conducted by Hye-Young Jung about therapy dosing showed that residents at the RV level achieved the same
outcomes as those who were elevated to a Rehab Ultra High, or RU level
of therapy at 720 minutes per week.
Additionally,
residents in the RV therapy range are 3.1% more likely to return to home
versus those who received less minutes. Managed Medicare companies have
been pushing this evidence-based range of therapy treatment for over 5
years. While there have been growing pains, this model has forced
therapists to reinvent their approach. It has proven therapists can do
more with less. Shorter lengths of stay with moderately reduced therapy
minutes yield the same functional outcomes and discharges to home when
governed by a clinically strong therapy team.
- Labor
costs: Contract therapy only cost $1,557 more than the staffing costs
for therapy under a management model (excluding the actual management
agreement fees) and was actually less than the salary costs for the
in-house programs. Therapist salaries are the largest for in-house
programs, at the 75th percentile and beyond. Departments overseen by a
management agreement see some cost control through salaries in the 60th
percentile. Contract rehab is able to manage their costs best on behalf
of the provider, and they generally pay around the median salary.
While
it may appear that staffing for a contract rehab arrangement would be
more difficult with lower salaries, because of the plethora of
therapy-specific benefits and the opportunity to advance within the
company, contract therapy companies usually excel at fulfilling the
staffing needs.
Providers who partner with a proven
contract rehab vendor, such as Reliant, reap all the included benefits
that the therapy company offers for virtually no additional expense, or
even a cost savings!
- Margins: As may be expected,
contract therapy partners obtain and maintain the highest productivity
levels. And while there can be concerns with unrealistic productivity
expectations over 100% with the new model, generally speaking, contract
therapy targets a reasonable productivity expectation of between 80-90%.
Most jobs have some sort of productivity requirement, such as a certain
number of widgets, reports, or sales that are due each week.
The
secret sauce, however, was not the focus on productivity. Rather,
contract rehab was armed with clinical expertise and research, and the
therapy champions from a contract rehab
management team empowered
the therapists to function at the top of their game. By focusing on the
clinical needs and medical necessity of each individual resident,
contract therapy showed an increased number of residents who were
evaluated and appropriately treated in long term care. Additionally, the
average therapy dose per day (number of minutes) for long term care
residents was actually higher with contract therapy than with management
agreement or in-house models.
This focus on productivity
and clinically appropriate service delivery yielded the largest
provider margins with contract rehab in the Gravity study. SNF margins
for in-house programs were on average 71% less than with contract rehab.
Management agreements didn’t fare much better, with an average SNF
margin of 61% less than contact rehab. This is both due to cost and
reduced revenue consistently seen with both the in-house and management
agreements.
- Compliance: The study showed significant
difference in compliance between the various therapy models. In-house
models scored 50% or less on therapy compliance audits. Management
agreement models fared a little better, averaging between 75-85%.
Contract rehab got the win with compliance audits usually at 95% or
greater.
Stephanie Parks, MBA, MS, CCC-SLP, Chief
Development Officer with Reliant Rehabilitation, sums it up well,
saying, “Clinical and documentation quality assurance and performance
improvement are best achieved when the reviewers are reputationally and
financially accountable for potential claim losses and litigation risks
related to poor performance, as is the case with full-service therapy
partners.”
When collaborating with the right therapy
partner, the interests of both parties are closely aligned, and drive
compliance upward. While it may be tempting to bring therapy in house or
to a management agreement to reduce the provider’s liability, the
results show that compliance is best left up to the contract therapy
experts.
Many early projections for a transition to in-house or
management anticipate improved provider margins with the transition away
from contract rehab. However, the research shows that the actual costs
are greater, and revenue tends to decline. Some of these additional,
often unforeseen costs include the cost of a management agreement, the
cost of the therapy electronic medical record, the human resources costs
(which include some additional costs unique to therapy), and the
compliance and denials management costs.
The uncertain times
surrounding COVID-19 make the decision to insource therapy even more
risky. The Gravity study showed there are increased liabilities,
potential losses, and reduced outcomes for residents of in-house or
management agreement models. If you would like to have a complete,
unbiased third-party analysis of your current therapy program, please
contact us today.
Reliant Rehabilitation is a national provider
of rehabilitation services. The Company utilizes a proprietary care
model that emphasizes early intervention and assessment and properly
designed clinical care plans, as well as pathways to improve patients’
functional levels. Reliant differentiates itself by providing proven
program performance management, customer marketing support, and
industry-leading compliance systems. Our Mission is "Care
Matters.” We are completely committed to our employees, patients, and
the customers we serve. At Reliant, we strive for optimal patient
outcomes in the most efficient matter. www.reliant-rehab.com.
For more
information, please contact Stephanie Parks at sparks@reliant-rehab.com.
Melissa (Sabo) Brown, OTR/L, CSRS, CDP, is the Chief
Operating Officer of Gravity Healthcare Consulting. She is an
Occupational Therapist with over 15 years of experience in skilled
nursing, continuing care retirement communities, and home health.
Reference
1.
Jung, H.-Y., Trivedi, A. N., Grabowski, D. C., & Mor, V. (2016,
January). Does More Therapy in Skilled Nursing Facilities Lead to Better
Outcomes in Patients with Hip Fracture? Retrieved May 21, 2020, from
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4706596/.