Rehabilitation Feature: The short view
Despite pressure from hospitals and potential Medicare cuts, more providers are attracted to short-term therapy services.It seems that, for once, government is smiling on nursing homes – at least in the field of short-term, post-acute therapy.
Thanks partly to the so-called 75% rule, more short-term post-acute patients are coming to long-term care facilities, yielding operators precious Medicare Part A revenues. These dollars have helped to bolster providers' businesses while creating new revenue streams in the form of short-stay units.
Experts say the trend does not show signs of stopping, as long as the government continues to believe in nursing homes as the best low-cost alternative to inpatient rehab facilities. A government assessment tool in the works to determine rehab payment also could operate in favor of nursing homes.
Still, there is not 100% optimism. Some experts downplay talk of a boom. Also, the environment continues to face challenges – not only from competing rehab settings but also from a severe therapist shortage that is exerting pressure on prices. And potential Medicare cuts also could affect the payments that facilities receive to provide therapy.
Right place, right time
It's hard to disagree that nursing homes have experienced a windfall from government policies in this area.
"When you look at the bargain that most facilities get nowadays, a product of a brutal contract therapy price war that only recently ended, nursing facilities are doing quite well from a rehab margin perspective," says Brian Hatch, vice president of business development for SYNERTX Rehab.
The 75% Rule, which is currently in effect, at a 60% level, has resulted in the diversion of patients to skilled nursing facilities. (Quick primer: The 75% Rule by next year will mandate that facilities have a minimum of 75% of patients with qualifying conditions to qualify for higher Medicare revenues.)
Medicare has created a disincentive for rehab hospitals to admit certain patients who don't have the qualifying conditions, says Mark Richards, director of clinical services for Aegis Therapies.
"So, in essence, Medicare has participated in this process, this drive for elderly to go to SNFs," he says. "We're certainly taking advantage of that opportunity."
Contract therapy providers say the number of short-stay residents at long-term care facilities continues to increase each year.
This climate is most attractive to providers with a high Medicare and private-pay population, experts say. Providers with a higher Medicaid mix struggle more financially.
Everything old ...
Some observers have found similarities between the current boom and the period before the federal prospective payment system took effect in 1998.
"It is similar to the 1990s, in that many SNF providers are advertising short-stay units (taking both rehab and medically complex patients)," said Lou Ann Soika, vice president of customer relations and strategic development for Genesis Rehab Services, a unit of Genesis HealthCare. "I believe the difference is that the customers are much more sophisticated today. More information on quality of care is available via the Internet, allowing patients and families to know how a provider stacks up as compared to state and national averages."
The pendulum is swinging back to distinct part units, said Mary Van de Kamp, vice president of clinical rehabilitation for PeopleFirst Rehabilitation, the rehab division of Kindred Healthcare Inc.
Distinct part units, which were a trend in nursing homes prior to the implementation of the Prospective Payment System, provide for a space designed specifically for short-term stay rehab residents. The whole team is focused on a rehab plan that speeds the resident's move to home.
"The focus on bringing back the distinct part unit is where I see many of us moving towards," Van de Kamp said. "You're attracting the patient that wants to think of coming to rehab other than a place where there are people in long-term care."
Kindred Healthcare is one provider that is moving in this direction, she said.
Still, some feel talk of a sea change toward short-term therapy is overblown. There is a lot of hype surrounding the trend in long-term care, said SYNERTX's Hatch.
"Everyone's hanging out these shingles saying they have a Part A specialty," Hatch said. "But have they changed anything on the back end to prepare for it, and will that pay off?"
Facilities don't necessarily have a lot of control over the quantity of Part A patients they receive, Hatch said. Hospital discharge planners play a big role in where patients go to receive therapy services. They often choose rehab settings based on their relationship with certain facilities.
While some facilities are creating short-stay units, the majority of nursing homes – those built 30 years ago – still have only three or four Medicare Part A patients a day, he notes.
"I think the [75%] Rule has increased – especially in the busier rehab programs – the number of Part A residents, but it's not as dramatic as everyone is predicting," Hatch believes.
Alan Sauber, senior vice president, government and regulatory affairs and chief compliance officer with RehabCare, said he also has not observed an overwhelming shift toward Part A therapy in long-term care. He said he has seen an increase only over the past year – and this is due to the displacement from other settings as a result of the 75% Rule.
Unlike PeopleFirst's Van de Kamp, he does not see facilities returning to the days of distinct part units.
"I think nursing homes are trying to capture these patients every day, but are they modifying their service offerings significantly? No. Those patients are coming, regardless."
While the trend toward short-term stays does not appear to be slowing down, certain challenges still loom on the horizon. Medicare provisions in the president's fiscal year 2008 budget would cut an estimated $10 billion from Medicare over five years.
Long-term care provider organizations have rallied against the proposed budget because it would hurt the upward trend for Part A therapy.
"These proposals are shortsighted and largely ignore the new realities of the Medicare post-acute marketplace," said Alan Rosenbloom, president of the Alliance for Quality Nursing Home Care.
Another persistent challenge is the national shortage of therapists, which is forcing up therapy prices at nursing homes.
Hospitals, which generally lose from the 75% Rule, also are nipping at providers' heels. In February, nine senators introduced a bill, S. 543, that would freeze the criteria for obtaining inpatient rehabilitation facility status at its current 60% level. The threshold is scheduled to rise to 65% July 1, and then to 75% next summer.
Despite these pressures, advocates believe the federal government will still endorse SNFs as the optimal setting for post-acute rehab services.
"The long-term care environment, as far as patients requiring short-term stay, is the best cost alternative to acute care hospitals," said Jim Hummer, senior vice president of operations for SunDance Rehabilitation, a division of Sun Healthcare Group Inc. "As long as Medicare is intent on shifting to the lowest cost possible, I would think there are opportunities there."
A post-acute assessment tool also might work in the favor of nursing homes. The tool, which would be part of a new therapy payment system, would help determine which post-acute rehab setting (home, long-term care, long-term care acute care or inpatient rehab facility) would be most appropriate for patients leaving the hospital.
The Centers for Medicare & Medicaid Services has set an implementation deadline of 2011 for this tool, said Peter Clendenin, executive vice president of the National Association for the Support of Long Term Care. The assessment would factor in the patient's medical condition, mental status, functional status and environment, and predict the amount of therapy that person would need. It then would link a specific payment to that. (See sidebar.)
So will the Part A therapy trend continue? The answer hinges on whether the government sides with nursing homes or hospitals, Clendenin says.
"Will the post-acute assessment and the 75% Rule have the desired effect, and keep the patients going to SNFs where appropriate? Or will the hospitals be able to essentially influence that process so they'll be able to keep patients in their facilities? That's the question," he said.
"I'm pretty optimistic the SNFs will see a relatively sharp gain in patient occupancies as a result of the post-acute assessment and full implementation of the 75% Rule."
Number of Outpatient Therapy Providers – 2000 to 2004
Outpatient therapy Providers Providers Percent Change
setting in 2000 in 2004 2000-2004
Hospital 5,601 5,326 (4.9)
*SNF 13,445 14,088 4.8
(Skilled Nursing Facility)
CORF 464 613 32.1
(Comprehensive Outpatient Rehabilitation Facility)
ORF 2,441 2,569 5.2
(Outpatient Rehabilitation Facility)
HHA N/A 272 N/A
(Home Health Agency)
PTPP 11,602 33,704 190.5
(Physical Therapist in Private Practice)
OTPP 1,040 3,790 264.4
(Occupational Therapist in Private Practice)
Physician 34,803 32,305 (7.5)
NPP 588 892 51.7
*The skilled nursing facility, at $1.2 billion total, remained the setting receiving the highest percentage of outpatient therapy payments.
Source: Outpatient Therapy Alternative Payment Study, May 17, 2006
Is a solution coming for Part B caps?
While the Part A therapy system seems relatively stable, the Part B therapy caps issue still remains unresolved.
The caps do not allow beneficiaries to receive Part B therapy above a threshold of about $1,740 for physical and speech therapy and $1,740 for occupational therapy. An exceptions process, allowing many beneficiaries to receive therapy above the caps, however, is in place through 2007.
Good news may be on the horizon for providers.
Government leaders and providers are working toward a permanent solution to the therapy caps, said Garry Pezzano, vice president of clinical operations with Genesis Rehabilitation Services. He also is the chair of a steering committee from the National Association for the Support of Long Term Care that is focused on finding an alternative to the therapy caps system.
A report, the "Outpatient Therapy Alternative Payment Study," provides data that will help the Centers for Medicare & Medicaid Services create a permanent solution to the caps, he said.
"That is potentially the basis of an alternative payment system – to understand the patient by patient type and understand the type of service they need," Pezzano says.
As part of the long-term solution, CMS would need to create a post-acute assessment tool to classify the patient appropriately for the most appropriate setting, he adds.
Pezzano said he is optimistic about a permanent solution. A recent meeting of some of the various stakeholders – CMS, NASL, the American Health Care Association and the Alliance for Quality Nursing Home Care – confirmed that the government is making progress, he said.
"It was clear that CMS has the same interest we do on behalf of our beneficiaries to resolve this so we are not finding ourselves in this annual scramble to find out what to do to avoid the cap again," he said.