John O'Connor, VP, Associate Publisher, Editorial Director

My Uncle Mike never threw out his old neck ties.

When asked about the practice, he had a simple explanation: They might come back in style.

I thought of Uncle Mike while reading a McKnight’s story about hospitals acquiring skilled care facilities. Researchers at the University of Alabama are suggesting the practice is just what acute-care settings need to generate new revenues.

An interesting new concept? Well, not exactly. In fact, this is exactly what quite a few hospitals started to do in the early 1990s. This was right about the time many insurers decided that offering policies for long-term care services was a splendid idea.

Both experiments blew up big time, albeit for different reasons.

Insurers grossly underestimated how much service their policies would actually need to cover. For their part, hospitals discovered that adding skilled care to their portfolios also brought unanticipated challenges.

For example, hospitals soon learned the hard way that staffing levels and competencies at their newly acquired skilled care properties was generally far less than anticipated.

Moreover, hospitals tended to be big spenders by comparison. Put another way, their capital, labor, administrative and other costs were much higher, which hardly helped the bottom line in a business where razor-thin margins were the norm.

Then there was what might be called the snob factor. Many hospital employees simply did not want to be exiled to the far less prestigious skilled care components of the enterprise.

Put these and a few other factors together, and many hospitals were soon backtracking from this new investment as quickly as possible.

Does that mean it’s now a bad idea for hospitals and health systems to gobble up skilled care settings? Hardly. Let’s face it, times have changed.

Many skilled care settings now look a lot like hospitals. Moreover, they are providing care to medically complex patients in ways that would have been unthinkable two decades ago. Staffing levels at many skilled settings have also made a huge upgrade.

Given these changes and new payment incentives from Uncle Sam emphasizing shared risk, gobbling up nursing facilities might soon be fashionable again.

Let’s just hope it’s a better fit this time.

John O’Connor is McKnight’s Editorial Director.