Melissa Brown

SNF providers are reconsidering everything after PDPM and COVID-19. These two tremendous catalysts have turned skilled nursing upside down in many communities, and have left providers wondering which route will lead to a win for the residents and a win for their operations.

As providers scratch their heads over the tragic shortcomings of the federal and state governments to support their needs during the pandemic, they are left with the bill and have to find other ways to cut costs.

The big question is — can a provider save money by transitioning away from contract rehab? An independent research study recently conducted by Gravity Healthcare Consulting and sponsored by Reliant Rehabilitation sought to determine the actual operational costs associated with contract rehab versus management agreement models and true in-house therapy. 

The study compared three actual life plan communities in the same geographical locations with approximately the same census and case mix. The results were surprising, and the data reveals the truth – contract rehab gets the win with the lowest cost and the highest therapy margin to the SNF provider. The study looked at Q1 of 2020 and compared real therapy department statistics. Let’s break down the numbers:

  • Labor costs: Increased with management models and in-house agreements. Contract therapy companies usually pay only about the median salary. The other two models were shown to pay significantly more for the same positions in the same geographical location (60-75th percentile). Providers with management model programs spend an extra 9.9% for labor on average (including the management agreement basic fee), and in-house programs pay at least 4.7% increased labor costs, and often more. 

The surprise: The cost for contract rehab was actually only $1,557 more than the actual staffing costs for the therapy associates under a management agreement (not including the cost for the actual management agreement) and was less than the salary costs for in-house programs.

Providers who partner with an exceptional contract rehab vendor can potentially reap all the included benefits that the therapy company offers for virtually no additional expense, and in some cases, even cost savings! 

  • Minutes: Some providers have begun to consider taking their therapy programs in-house, or with the oversight of a management agreement, because therapy minutes are not prescribed under PDPM as they were under RUGs-IV. 

Providers want to make sure that residents’ needs are still served through clinically appropriate levels of therapy services. They fear that therapy companies will slash minutes to target margins rather than focusing on residents’ goals and outcomes. 

There were projections everywhere in the pre-PDPM era that therapy companies would excessively cut minutes under PDPM, but the data just doesn’t bear that out. 

The surprise: Most companies studied by Gravity were found to have made only a 10% to 20% cut in minutes overall. More residents are provided with 450-550 minutes (RV) of therapy per week, which is correlated with the same outcomes as those in the Ultra (RU) category according to research conducted by Hye-Young Jung about therapy dosing. Additionally, residents in this therapy range are 3.1% more likely to return to home versus those who received fewer minutes. 

Managed Medicare companies have been pushing this evidence-based range of therapy treatment for over five years which has proven therapists can do more with less. Shorter lengths of stay with moderately reduced therapy minutes yield the same functional outcomes and discharges to home when governed by a clinically strong therapy team.

  • Margins: Providers who want to go in-house or with a management agreement to increase margins may want to run the analysis again, including all costs. Because actual expenses for these models are likely to deplete any potential gains, and leave you holding the bill. 

The study showed that SNF margins for in-house programs were on average 71% less than with contract rehab. Management agreements didn’t fare much better with an average SNF margin of 61% less than contract rehab. This is both due to cost, as well as reduced revenue consistently seen with both the in-house and management agreements. 

The surprise: It is generally known that contract rehab providers tend to have an increased focus on productivity and hold therapists accountable to these expectations. There is nothing wrong with a productivity expectation, as long as it is reasonable and allows the therapist the time they need to meet the individual needs of each resident. Even your job may have “productivity” requirements in some form or another – a certain number of widgets, or reports, or sales that are due each week. 

But the surprise was how contract rehab companies achieved increased reimbursement for the SNFs. Armed with clinical expertise and research, the therapy champions from a contract rehab management team empower the therapists to function at the top of their game. 

Contract rehab achieved an increased number of residents who were evaluated and appropriately treated in long term care. On top of that, they tended to provide increased amounts of therapy per treatment day and followed prescribed clinical pathways. 

And with the growing pressures to prove the medical necessity of the therapy services provided, only the best therapists can shift toward more functional treatments and achieve these appropriate LTC therapy minute prescriptions. 

  • Compliance: One of the key reasons SNF providers are motivated to switch away from contract rehab is they want to protect themselves from potential audits and denials related to the delivery of therapy services. They aren’t sure they can trust that the contract rehab provider has the SNF provider’s best interests at heart. But, when collaborating with the right therapy partner, the interests of both parties are closely aligned, and drive compliance upward.

The surprise: Contract therapy partners achieved the best compliance scores when independent therapy department studies were completed at multiple locations. Contract therapy generally yielded a compliance score of 95% or greater, while management agreements usually only achieve 75-85%, and in-house programs are often near 50% or less compliance. 

Stephanie Sparks, MBA, MS, CCC-SLP Chief Development Officer with Reliant Rehabilitation sums it up well saying, “Clinical and documentation quality assurance and performance improvement is best achieved when the reviewers are reputationally and financially accountable for potential claim losses and litigation risks related to poor performance, as is the case with full-service therapy Partners.”

While it may be tempting to consider taking over a contract rehab department and bringing it in-house, beware of the risks, potential losses and reduced outcomes for the residents in your care. Make sure you have analyzed ALL the actual costs associated with going in-house, including the cost of a management agreement, the cost of the therapy EMR, the HR costs (which include some additional costs unique to therapy), and the compliance and denials management costs. 

While it may appear at first glance that switching to in-house will lower costs and maintain revenue, the research proves otherwise. Even if the first few months or weeks of in-house appear to be beneficial, research shows that the quality and revenue start to decline shortly thereafter and huge changes are usually notable six months after the transition. 

If you still chose to go in-house without any oversight, don’t say I didn’t warn you.

Melissa (Sabo) Brown, OTR/L, CSRS, CDP,  is the Chief Operating Officer of Gravity Healthcare Consulting. She is an Occupational Therapist with almost 20 years of experience in skilled nursing, CCRCs and home health.

The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.