Guest Columns

The tie between revenue and risk managment

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Tim Goux
Tim Goux

Long-term-care providers in America care for more than two million people in nursing homes, assisted living facilities and residential care communities, according to the National Center for Health Statistics.

Over the years, improvements in nursing home quality have been tied to developments from state and federal oversight of facility licensure and certification requirements along with control over reimbursement payments from Medicare and Medicaid. A pivotal moment for the LTC industry came over a half century ago when the U.S. Public Health Service issued the Nursing Home Standards Guide, which included 77 health and safety standards — 55 of which were quality measures.

In terms of relating it to the bottom line, a savvy provider should cultivate a culture of customer service for a positive cause and effect. By providing the best level of care, a provider will help ensure resident satisfaction as well as foster a positive work environment for employees. Better care means fewer errors in health service delivery, which leads to fewer complaints, less turnover, fewer lawsuits, lower liability insurance premiums and increased access to capital.

Poor quality will affect a provider's revenue stream. Negative online reviews or comments about a facility will adversely impact its marketability and patient volume. Even worse, Medicare and Medicaid could withhold reimbursement payments or prevent a facility from admitting any new residents. Although infrequent, a facility could lose its license and certification.

Looming on the horizon is the Affordable Care Act's three national initiatives for quality incentives payments: Accountable care organizations, bundled payments and Medicare-Medicaid integration efforts. The ACO Medicare Shared Savings Program will allow ACO member providers that meet certain quality standards to share in savings they achieve for the Medicare program. The Bundled Payments for Care Improvement Initiative also will incentivize participating providers on achieving savings and quality goals for patient care. Currently, two-thirds of states have integrated or plan to integrate Medicare and Medicaid to better coordinate care for dual eligibles. The vast majority are pursuing capitated, risk-based approaches. All three of these initiatives are still evolving and exactly how they will impact revenue for LTC providers is uncertain.

Expenses can also be affected by quality improvements. Proactively hiring a risk management firm to develop and implement a risk management program can result in fewer claims, which could offset the cost immediately. However, if a facility has a poor track record with the state health surveys (inspections) or has pending liability litigation, oversight agencies or lenders could require it to hire a risk management consultant and additional staff to help rectify issues. This situation can be costly. Other expenses resulting from poor risk management may include increased liability premiums, potential legal fees for lawsuits and expenses due to employee turnover.

In 2013, the U.S. Department of Housing and Urban Development (HUD) made changes to its Operator Regulatory Agreement, which now requires that providers with insured loans have a RMP in place that incorporates a real-time incident reporting and tracking system, incident review and follow-up, and staff training. The lender and HUD must review and approve the RMP prior to closing. The RMP must last for the life of the loan and any requests for changes must be approved by HUD. Lastly, an operator must notify its lender and HUD within two business days of any negative notices from a government authority, such as a G-level or higher survey deficiency or civil money penalty.

The cornerstone of a risk management program is a plan that details and prioritizes foreseeable risks, estimates the impacts of those risks and defines responses to the various incidents that may arise. An effective RMP should include the following:

  • Developing a risk management philosophy and cultivating a culture of quality care throughout the organization.
  • Securing the support of senior management, particularly at the facility level.
  • Obtaining the necessary resources for implementation from ownership/management.
  • Knowing a facility's “historical and current risk”—both environmental and medical/clinical.
  • Having systems and people in place to routinely measure and monitor all known risk factors—environmental and medical/clinical.
  • Grading outcomes of the RMP throughout the year.

However, a plan is meaningless if it isn't put into action. Often cited as key quality measures, staffing turnover and retention can be critical barriers to launching a risk management program. High rates of turnover are associated with poorer quality of care and are also linked to increased costs. If staff retention is low, then resident and employee satisfaction are more likely to be correspondingly low.

The final challenge to setting up a RMP is to establish a culture of quality improvement in a facility, which involves:

  • Providing leadership support.
  • Supporting facility team development.
  • Setting goals and putting measurement systems in place.
  • Offering adequate training for employees to understand and implement various technologies, such as universal risk monitoring systems.

Current drivers for total quality management include federal and state regulatory measures as well as a variety of quality assurance programs from industry associations and government agencies. The most well-known programs have been created by the Centers for Medicare & Medicaid Services: Five-Star Quality Rating System, Nursing Home Quality Initiative, Quality Improvement Organizations and the Quality Assurance/Performance Improvement (QAPI) requirements.

As healthcare reform takes effect, providers will move from fee for service to value-based care, the goals of which are to lower health care costs and improve quality and outcomes. Individuals who receive care from LTC providers and their families will have increasingly higher expectations for the quality of services provided. ACA payment initiatives, when they become more fully defined, will more than likely provide additional impetus for providers to make further improvements in providing quality health care and reducing costs.

Tim Goux is the founder and CEO of CareRise, a patented risk management company based in New Orleans, LA, that provides services to skilled nursing and post-acute facilities, assisted and independent living facilities, specialty hospitals and insurers. He may be contacted at, and for additional information. Scott Blount, CFA, is a vice president with Lancaster Pollard in Austin, Texas. He may be contacted at

Guest Columns

Guest columns are written by long-term care industry experts, ranging from academics and thought leaders to administrators and CEOs.