Managed care penetration of the Medicare population is as high 90% and more in many areas of the country, and its growth is certain to accelerate and expand. Post-acute care (PAC) also now has entered the new fee-for-service Medicare reality of the Centers for Medicare and Medicaid Services Patient Driven Payment Model (PDPM).
This evolutionary landscape means providers absolutely must focus on keeping costs under control. Their challenge is to do that while providing a high level of care to a sicker patient population. CMS is paying closer attention than ever to patient outcomes, so providers have to be prepared to make sure both their patients and their organizations thrive.
Many providers are taking a close look at realigning their approach to managing physical (PT) and occupational (OT) therapies. Existing contracts with therapy vendors — agreements based on accurately assessing the need for the highest appropriate level of therapy and billing for minutes of therapy provided — no longer sync with the PDPM or managed care contracts.
PDPM, instead of focusing largely on PT and OT as payment drivers, aligns with confirmed trends in post-acute care, such as the higher patient acuity that is requiring greater nursing capacity and skill, as well as the cost and growing need for other services, like speech-language therapy (SLT), expensive medications and diagnosis-driven support, such as dialysis.
Managed care contracts generally avoid dictating provider management details, requiring excellent patient outcomes in exchange for broader-based payment arrangements. So providers must evaluate contracts closely to assess whether they offer the opportunity to cover costs. At the same time, providers should be asking: Are we being strategic about day-to-day care management and resource allocation?
Jill Krueger, president and CEO of Symbria Inc., shared her take on the changes in post-acute care and how she sees providers responding to therapy challenges.
Q: With PDPM now in effect and growing demands from managed care, how are PAC providers reacting generally?
Krueger: Providers are faced with some tough decisions. They really don’t know yet what the PDPM’s impact will be on their staffs, their processes and their bottom lines, but they do know what it takes to successfully work under a managed care contract. Some providers are making significant changes to the way they are doing business in order to substantially reduce costs. For a few, one of those changes is to terminate their therapy contracts and bring PT, OT and SLT in house. But most others are taking a wait-and-see position. In fact, some providers who’d been managing therapies in-house are now contracting with an outside provider because they recognize the complexities of implementing group and concurrent therapies as well as the complicated management issues presented by an in-house therapy program.
Q: In your opinion, are those providers looking at the right factors, e.g., those that will effectively drive great outcomes and good financial results?
Krueger: I believe that each PAC provider needs to make the right decision for their own organization. Changing over to in-house therapy may be the right decision for some. However, leaders should look beyond the apparent savings represented by switching from an outsourced contract to an internal team. There is a middle ground between these two alternatives. It may be prudent to consider a management or consulting contract with an experienced therapy company. Or retain their outsourced provider and work with them to reconceive their agreement.
Q: Why shouldn’t a PAC provider just establish a therapy operation in-house?
Krueger: Therapy programming is so highly specialized. Therapy program management has a huge scope. It’s incredibly complex in terms of regulation, billing, programming, staffing, compliance, training and other required support.
For example, hiring is one facet of staffing that is rarely considered, but it takes considerable resources to recruit, hire and onboard new staff effectively. Beyond hiring, therapists need to be supervised by leaders who understand this business. The best solution may be a management contract under which therapists are employees of the provider, but the management of therapy programs, including that broad scope of critical factors, is the responsibility of the management company.
Q. What can a management company or consultant bring to the table?
Krueger: Providers need to balance care with financial prudence, and that’s hard. The decision-making requires deep expertise: When are concurrent and group therapy clinically appropriate? Who will remain up-to-date on regulatory and compliance issues? Who will provide reliable, experienced clinical expertise? How do you keep therapists current on new modalities? How do we know if our therapist compensation is competitive? A management partner can provide answers to all of these.
Resources and productivity are also areas that a management contract can cover. Most single-site or smaller multisite organizations don’t have the means to develop critical capabilities like analytics, benchmarking and the ability to truly manage prudently but still achieve and exceed against metrics like staffing, length of stay and rehospitalization.
Our research shows that in-house programs basically run at a productivity rate of 50%–55%. That means many of the therapists in those programs produce minimal revenue for half the day. One provider we’re working with now has an active in-house therapy department that is costing $900,000 annually. Our in-depth analysis of their therapy operation indicates that a management contract could save them as much as two-thirds of that outlay. And there are a lot of places where that single-site provider can use an extra $600,000.
Q. What other benefits can come with a management contract or fully outsourced provider?
Krueger: A management company — or an outsourced program — can deliver great benefits when it comes to human resources. A PAC provider with in-house therapy can offer therapist professionals little opportunity to learn, grow and advance in their careers. If great employees don’t have a career path, they will look for an employer that offers one.
There are many other hidden people costs to an in-house program. Providers are competing for the best clinicians against hospitals whose benefit load is 28%–35%, so they need to try to meet or beat that. It’s difficult to overcome that kind of benefit investment in a smaller organization; an outsourced provider typically does not carry that benefit load.
Therapist compensation requires a universe of data and the knowledge to apply it. For example, a provider must offer an equitable compensation and benefits matrix to all employees. That means that if some employees are paid a premium for overtime or working on holidays, all employees must be. If therapy is outsourced, the approach can be the same, equitable treatment for all therapy employees, but the issue of matching comp and benefits of other organization employees is no longer relevant.
The ability to benchmark salaries is also critical. Not many smaller organizations are able to access the resources needed to develop a competitive compensation matrix. Compensation control alone can make the case for partnering with a management organization or therapy provider.
But there are additional significant human resources challenges: recruiting, onboarding, training and retention require expertise and daily management — and a budget. These expenses can be difficult to control without dedicated HR management. For example, training is a continuing need. Therapists must be current on care trends and modalities, process and procedure requirements, documentation rules and regulatory changes. Providers may end up taking a piecemeal approach to therapy management, hiring expensive consultants to help them address issues one at a time.
It’s also difficult to staff for daily fluctuations in occupancy and acuity in single-site organizations or even small multi-site companies. Working with a therapy outsourcing company efficiently uses therapist resources across a greater number of sites, reducing costs and boosting productivity.
Q: Aren’t claim denials an issue for providers?
Krueger: They are. Efficient management of denials actually begins with proper documentation of services provided, and that goes back to the importance of training that I talked about earlier. Therapists need to know how to appropriately document the therapy they give to their patients.
The way payers are looking at claims is changing, making that training even more important. For example, CMS Recovery Audit Contractors (RACs) are isolating claims for particular codes, and if they believe they see irregular billing patterns, they’ll conduct a probe on that code. Managed care organizations are similar in casting a sharp eye on billing. But they are not always forthcoming about their rules and sometimes their denials may not align with the intent of a Medicare regulation.
The point is that providers need to develop an understanding of — and be able to access expertise in —defensible documentation. Some smaller providers are not likely to have the depth of resources needed to defend their claims. They can hire consultants to support them, but again, in-house program savings tend to dissipate when providers are paying a variety of consultant fees.
I’ll just mention Symbria’s outsourced program capability to make a point here. We do have the deep knowledge and experience to educate our clients about defensible documentation, and we provide the expertise providers need to provide the appropriate clinical rationale for services and help them reverse denials. Some providers simply write these off; our clients — with our support — appeal every denial. Our results have been very good, with a high payment rate for reviewed and appealed claims.
Q: How would you advise PAC providers as they adjust to this increasing cost-driven environment?
Krueger: I would suggest they make sure their leadership fully understands the impact of the new PDPM model. They need to appreciate the PDPM not just on a conceptual, strategic level, but also address the day-to-day management issues that will ultimately determine their success. Similarly, they need to keep a close eye on managed care growth and demands.
And while the PDPM changes the way regular Medicare manages reimbursement, Medicare regulations and requirements remain the same. The PAC stay must still relate to a qualifying hospital stay. Providers also should consider how any PDPM-related changes they make will affect their CMS star ratings.
Providers should work to identify and act on opportunities driven by the PDPM: wellness, restorative care, home health and more.
Finally, they shouldn’t overlook the benefits and opportunities that come with working with a proven management partner or therapy provider. Providing cost-effective options is something Symbria has always taken pride in.
In the end, the choice among outsourcing therapy, taking it in-house, leveraging a management partner, or using the expertise of a consultant, is an individual decision, and providers should weigh the benefits of each option. And keep in mind that if taking therapy in-house is their best option, they don’t have to do it alone!
Jill Krueger is president and CEO of Symbria Inc.