There are signs that a tight labor market may be leading more providers back to contract therapy services

As Bob Heminway puts it, therapists in his part of New Hampshire aren’t just falling out of trees.
And a few years ago, he could have really used a few to do so. Now, he believes, his labor problems might have been a blessing in disguise.
“It was just a revolving door there,” said Heminway, 13-year administrator at Sullivan County Nursing Home in Unity, NH.
So he basically stopped looking for therapists and started looking for a therapy services provider. Although he didn’t come to that decision lightly, he now says transferring the human resources, regulatory and clinical headaches to an outside company made great business sense for him.
“We had a good therapy department before,” he recalled, “but we had turnover on the staff and had to start looking for people. I began thinking, ‘Is there a better way for this service?’ I’m not advocating it for everybody. I think it depends on volume and the size of your facility and what you’re doing.”
What Heminway is doing right now, he says, is paying $300,000 less in salaries. He provides therapy workspace and equipment, and buys all the related sundry items. Three full-time therapists work onsite, while one floats in as needed at his 156-bed facility.
It is a heady time for providers to consider therapy options. Therapist supply has tightened, and the battle over whether to retain or put off the government’s therapy caps is on hiatus thanks to a two-year moratorium.
Providers may want to pursue an in-house therapy program if they will be servicing 10 or more Medicare A residents daily, says Patricia Boyer, an operations consultant at BDO Seidman, Milwaukee. Other factors, such as therapist supply and infrastructure to administer a therapy program also must be taken into account, she and many others stress.
According to Boyer, provider costs should decrease if a sufficient proper patient volume can be maintained. Typical in-house program costs range from $0.65 to $0.85 per minute, she said. If contact therapy services range much above $1 per minute, on the other hand, she advises contract renegotiation.
Shirley Weaver, a vice president of operations for Genesis Rehabilitation Services, Kennett Square, PA, cautioned that providers need to “understand their geography” when contemplating whether to run their own therapy service because labor costs differ by location. Costs in various parts of her Pennsylvania and New Jersey region, for example, may range from 86 to 94 cents per minute, she said.

Provider misperceptions?

Officials with contract therapy companies were unanimous in saying that contract therapy is not necessarily more expensive than doing it in-house. And they also agreed that buyers unnecessarily fear losing control of their operations if they contract out.
“Therapy services could be the last revenue center for skilled nursing care,” said Rob Watts, vice president for EnduraCare, a Las Vegas-based therapy firm that began three years ago and now services more than 200 facilities in 24 states.
He said the “true” cost of in-house therapy may be $1.20 or more per minute, while contract work at $1 per minute for Medicare Part A and 70% to 75% of a CPT code sounded “reasonable.”
Alan Sauber, the president of the National Association for the Support of Long Term Care, optimistically pointed out that the administration’s pursuit of the so-called “65 percent rule” could soon send patients excluded from acute-care treatment to rehabilitation centers.
Also a senior vice president at Rehab Care Group, St. Louis, Sauber was confident that regulators, providers and vendors could come up with a compromise to the caps by the time the moratorium expires at the end of 2005.
While naturally bullish on contract therapy, he also said that providers could make a case for trying to operate therapy departments themselves – if they build and maintain a certain infrastructure and keep patient volume of about 20 Part A patients and about 20 to 25 Part B patients per day. But, he added, such a venture must be ambitious as a reve