The numbers are staggering.
Ninety-seven percent of nursing homes have lost revenue during the COVID-19 pandemic. Seventy-two percent report they will not be able to sustain operations for more than one year at the current pace of revenue loss.
Ninety-four percent face the compounding effects of massive staffing shortages. And with a potential federal mandate for COVID-19 vaccination looming, staffing shortages are projected to intensify.
Loss of revenue, profound staffing shortages, and increasingly frequent nursing home closures are creating catastrophic turmoil in the long-term care industry.
To provide stability, long-term care providers need to partner with a management services organization (MSO) to assist with these challenges, so nursing home leadership can focus on supporting residents rather than these financial, staffing and regulatory tasks that so often pull them from direct resident services.
As someone with over 15 years of experience in long-term care financial management, I have seen the increasing demands on nursing home administrators who are, in essence, running two different businesses within their nursing home: a clinical operation to serve residents and a billing/collections practice.
The challenge is that managing the back-office function is a completely different skill set than what the majority of nursing home administrators have trained for. And when attention is pulled between these two dissimilar businesses, the result is that both suffer.
As recent research finds, administrators are “managing but not thriving” due to limited resources, external pressures, and the pandemic. MSO partnership helps administrators focus on operating facilities versus running the back-office business.
In my experience, I’ve seen these partnerships allow administrators and facilities to move from managing to thriving. I have witnessed one long-term care company grow from three to over 20 facilities because the MSO partnership provided accurate and real-time data and up-to-date books so they could focus on patient care and growing their business.
MSO services can be bundled together in a number of ways to increase collections, improve compliance, and achieve operational excellence. For example, bundling billing, payroll and financial services provides the entire suite of healthcare back-office services.
Specifically, skilled nursing facilities may utilize the revenue cycle management services of an MSO, including tracking payer eligibility, claims submissions, payment posting and collections to improve cash flows. With the current liquidity crisis, improved cash flows will be key for long-term care providers to remain in business post-pandemic.
It can be difficult to relinquish control of parts of nursing home operations to a third-party vendor. Nursing home operators may also feel that partnering with an MSO will cost more than the financial benefit they will receive.
However, one example I’ve seen for a long-term care facility chain was a 10.9% increase in net collection and an 85.1% decrease in uncollectible revenue leading to a 3.5x return on investment on the fee for outsourcing. At a time when industry profit margins are declining or even negative, gains in net collections can mean the difference between keeping a facility open or closing its doors.
Knowledge is power, but the vast amount of documentation and assessments required for billing can be overwhelming, particularly in the current short-staffed long-term care environment. MSOs can be critical partners to verify Medicare eligibility and available days and collaborate with the facility staff to ensure a payer after Medicare benefits are exhausted.
With over 10% occupancy declines since 2019 that are projected to take at least 18 months to rebound, it is critical that nursing home operators closely monitor cash burn as these occupancy struggles will worsen financial challenges in long-term care.
This is where the power of an MSO partnership can truly be felt. By outsourcing financial oversight, operators can focus on the clinical aspects of building and maintaining census while the MSO partner manages the cash flows needed to operate in these low-census times.
The current nursing home market is one of acquisition and consolidation, with a 22% transaction increase since 2018. For health systems interested in expanding their provider network, an MSO can be an incentive to attract potential partners. A robust MSO is attractive as it enables the provider to focus on providing quality clinical care without the burden of administrative and management functions to realize cost savings and revenue generation.
The pandemic exposed how low amounts of facility cash-on-hand and financial instability put residents at risk. Research from Georgia Tech showed that nursing homes with lower pre-pandemic cash and those with more adverse cash flows during the pandemic were more likely to have both residents and staff contract COVID-19.
Financial health impacts resident health, and MSO partnerships may be key to keeping residents safe. MSOs can help facilities project bi-weekly cash flow and future cash requirements helping them with payment timing to aid in liquidity and cash flow generation to ensure that they can pay for the payroll, staffing and equipment required for safe resident care.
The COVID-19 pandemic exposed long-standing issues plaguing the long-term care industry. While the immediate focus in COVID-19 recovery is ensuring the safety and health of residents, providers must also consider partnering with an MSO partnership to ensure the financial health of their practice so that they can take care of patients while MSOs support the rest.
Aaron Hellman is the founding partner and CEO of Quality Healthcare Resources, a complete business office solution for long-term care facilities. He has over 15 years in long-term care facilities management and purchasing with expertise in all aspects of long-term care management and efficiency.
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.