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/.