Skilled nursing facilities find new opportunities, new challenges with 60% rule

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Skilled nursing facilities find new opportunities, new challenges with 60% rule
Skilled nursing facilities find new opportunities, new challenges with 60% rule
Now that the acute care sector has gained a legislative victory in shaving 15 percentage points off the old 75% Rule for Medicare Part A rehabilitation services, observers say skilled nursing facilities need to take a hard look at how they provide rehab services. That includes determining which patients represent the most suitable clientele and where skilled nursing fits in the rehab picture.

In general, it means SNFs need to sharpen their pencils, their focus and their marketing efforts, says Martha Schram, president of Fort Smith, AR-based Aegis Therapies.

“With the ‘75% Rule' becoming the ‘60% Rule', it very much defines the type of patient that can use skilled nursing rehab,” she says. “This new policy opens a door. If you consider the patients we're talking about, they are patients who previously needed a certain level of services from an inpatient stay, but whose needs haven't changed along with the policy. Are SNFs prepared to deliver the level of service and outcomes this population needs? It's actually a big opportunity for them.”

Inpatient rehabilitation facilities – or IRFs – are located within hospitals and Medicare Part A rehab services comprise a significant revenue stream for the acute care sector. Intensive congressional lobbying efforts by hospital groups, most notably the highly influential American Hospital Association, were instrumental in getting the Centers for Medicare and Medicaid Services to lower the 75% Rule used to characterize IRFs down to 60%. 

Finalized as part of the Medicare, Medicaid and State Children's Health Insurance Program (SCHIP), President Bush signed the act into law in December. Basically, the 60% level is the compliance percentage threshold IRFs must meet to be excluded from the acute care inpatient hospital prospective payment system and paid under a separate, lucrative IRF payment system.

Although this revision has raised questions in long-term care circles about the potential negative impact on SNF rehab revenues, there are plenty of optimistic voices out there.

“I don't think anything will change,” says Pat Henry, executive vice president for St. Louis-based RehabCare Group, which provides rehab services in both the skilled nursing and acute-care settings.

“This has been going on for a long time and though the 75% Rule is now a 60% Rule, IRFs still have to maintain a 60-40 balance. It's about getting the patient into the right setting, whether it's an IRF or SNF, and that is what will determine what happens in skilled nursing rehab.”

Relationships vital

SNFs are actually in a position to see potential increases in Part A rehab clients, Henry maintains, because they can control their own destinies.

“This is an issue of case management and discharge planning because they are the people who influence where the patient goes,” she says. “That means building relationships with these people so that they send patients your way.”

Vince Smith, president of Pinellas Park, FL-based Endorphin, agrees that the onus is on the SNF to prove its effectiveness and that its overall financial risk is low when compared to potential revenues from rehab.

“Being in a very competitive business, the ability to offer whatever a patient needs obviously gives the SNF a competitive advantage,” Smith believes. “It is really the quality of the rehabilitation that is most important as the facility wants patients to be as independent as possible upon completion of their therapy. Because this market segment continues to grow, it leads us to believe that the revenues are worth the investment.”

Quantifying value

In order to maintain an advantage in what is becoming a highly competitive market, SNF management teams need to conduct thorough assessments of their rehab operations and develop an effective marketing strategy, industry analysts say. At the heart of these processes is data – to be used primarily for determining paths of care and outcomes measurements.

Data is what will help define a SNF rehab operation in terms of clinical quality and cost effectiveness, Henry says.

“The key is to be a short-stay provider so that a patient's length of stay is less than 30 days,” she says. “Short-stay facilities are lower-cost providers, which is what makes them attractive.”

To compete effectively, SNFs must demonstrate clinical and patient satisfaction outcomes that are equal to those generated by inpatient facilities, according to Mark Besch, Aegis vice president of clinical services.

 “Outcomes are designed to measure clinical effectiveness – a functional independent measuring tool that is accepted in acute care and acute rehab,” he says. “There are other outcomes instruments available and the astute SNF will find an industry-accepted outcomes tool to track and report clinical outcomes.”

Acute-care players maintain that long-term care facilities might be cheaper per day, but ultimately, lengths of stay are longer and recoveries aren't as thorough.

By tracking the outcomes of patients, Besch and Schram say, SNFs can determine how much function patients regain during their stay, the approximate cost of therapy and the time it takes for patients to achieve a level of independence.

“The success metric is length of stay,” Schram said. “This new group of potential rehab patients needs to be turned around in seven, 12 or 14 days – less time than most nursing homes are used to doing. The implications are that these are not traditional nursing home patients. That requires some strategic thinking and modifications.”

Patient profile

At the heart of the SNF's competitive analysis is a profile of the “ideal” short-stay patient – a patient that fits the facility's rehab protocols and cost structures perfectly. 

Where under the old rules the long-term care facility may have sought the highest volume of patients, the new rules may dictate a different approach – identifying the most applicable, or “ideal” patient. 
Besch maintains that the candidate best fitting this mold is a patient who has undergone a single, unilateral total knee replacement.

“This is a straightforward, uncomplicated case because it is typically a patient who doesn't qualify anymore for an IRF,” he says.

Henry agrees that knee replacement patients usually are a good fit with SNF services, along with higher functioning stroke patients. Still, she said drawing absolute distinctions for what constitutes the perfect patient isn't automatic.

If anything, Henry said stroke patients typify the challenging array of nuances and subtleties that separate SNFs and IRFs. 

“Strokes with co-morbidities are more serious and IRFs have more intense medical oversight, so those patients belong in the acute care setting,” she said. “But the more stable stroke patients can go to a SNF.”

Taking initiative

Being a serious competitor in the rehabilitation sector takes more than lip service: It entails a clinical, financial and administrative commitment.

Henry points to one SNF's efforts: “They made pre-operational visits with patients, their therapists observed the surgery and were there at discharge. They made a visible commitment.”

Exactly where the rest of the long-term care industry stands, is a mystery, Schram and Besch believe.
“Out of some 14,000 SNFs across the country, it's most likely all over the board,” Besch says. “There is a certain percentage that has been recognized and capitalized, but that doesn't mean they are all there. Some may choose not to compete.”

Those who do intend to compete, however, should be prepared to invest in medical and information technology, structural upgrades and appropriate clinical staffing levels.

“It requires a paradigm shift to be successful, which means doing things differently in terms of information systems, technology and data management,” Schram says. “You can't just open your door and expect to pull patients in.” 
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