Skilled nursing facilities are facing a barrage of challenges to their business. Falling occupancy rates, wage pressures, and growing competition are all putting the industry under strain.
Now comes a new challenge. Which, viewed through the right lens, could also be an opportunity.
Providers are bracing for the biggest overhaul to their reimbursement funding in two decades. The new Medicare Patient-Driven Payment Model (PDPM), which takes effect on October 1, presents a major change to the industry’s Medicare revenue model, removing therapy minutes as a determinant of payment and instead tying funding more closely to clinical factors.
The threat of reimbursement changes has loomed over the industry for most of the past two decades. Now that it’s unavoidable, facility operators should embrace the change and use it to prepare for even more.
Certainly, there are plenty of specific steps that facilities can take to get ready for PDPM. But there is a bigger picture that operators should consider as they grapple with an industry under strain. Although PDPM is undeniably a momentous shift, it is in some ways just the latest in a never-ending set of challenges for the sector.
For years now, skilled nursing providers have had to navigate an ever more complex funding stream and lower margins as large insurance carriers have enticed customers to join managed-care plans.
Rather than going into crisis mode over their response to PDPM, providers might do better to use the change as an opportunity to reassess their long-term strategy. It presents a chance for them to ask some of the tough questions they may have been putting off for too long. That way, when the next big challenge comes along in a year or two, they’ll be in a much better position to weather the storm.
Facility operators should start by asking themselves where they want to be not just later this year, but 10 years from now. Once they have that big vision, they can narrow down what their hurdle rate, or return on investment, needs to be and start focusing on what constraints in their operations are keeping them from achieving that.
One big — and often tough — question to ask is how to reduce management layers and costs while maintaining the quality of patient care.
Do you really need that scheduling manager or nurse manager? It may seem unthinkable to live without them, but why not just empower nurses to make more decisions and find ways to use software more intelligently?
On a similar note, have you properly defined and are you tracking key performance indicators that go beyond budget benchmarks? Keeping a close record is the first step towards identifying the root causes of recurring problems. A nurse, for instance, that can’t complete documentation during her shift may be indicative of an issue with software competency. But if you’re not measuring for it, you’ll never know it exists.
That same nose for process can extend to other parts of the business. Gaming out the workflow in every department can give you an accurate map of where things break down, causing the sort of delays that negatively impact the bottom line.
Taking a step back to continually reevaluate the processes through care delivery can yield increased efficiency, reduce employee frustrations and, most importantly, provide better overall patient outcomes.
As you implement your long-term vision, it’s also important to think about whether you can do it alone. Strategic partnerships or mergers can be a smart step to increase efficiency and gain the resources needed to invest in areas like technology. The potential for a partnership or merger may be a moot point if your leadership is young and uninterested in sharing responsibilities, or fearful of the very real possibility of losing some measure of control over the business. The equation can be adjusted, however, when management is focused more on their company’s long-term health, rather than their own careers.
Sometimes, it’s just a case of letting go. In order to optimize and expand a more profitable part of the business, it may be necessary to cut back on an under-performing area. That can be tough, especially if it’s a specialty that has made up a big part of a facility’s identity. For example, many providers might instinctively reject the idea of making big cuts to their skilled nursing operations. But that could enable them to shift from semi-private rooms to more profitable private rooms, in turn freeing up resources to invest in faster growing service areas.
Making the tough decisions on which services to focus on also helps address another big challenge for the industry: a shortage of talent. Given how hard it is to find good staff, it would seem like a good strategy to make use of them in a company that’s built for the long haul, rather than one merely focused on the short term.
Patrick McCormick, CPA, is a partner in Plante Moran’s senior care and living practice.
