Important Strategic Planning Measures for Nursing Homes
As a nursing home administrator, you are no stranger to planning. After all, the medical care your nursing home provides to residents is based on care plans you help your direct care employees maintain. In addition, you are charged with strategic planning to prevent or cure what ails your facility. However, that task has become increasingly challenging over the last few years.
In Massachusetts, eight private nursing homes have voluntarily closed their doors since July 2021. In their Notices of Intent to Close, all eight nursing homes cited financial difficulty, a poor labor market, low occupancy, or a combination thereof as their reason for closing. Three of them were battling regulatory issues ahead of their closure.
It is a critical hour for the industry. Administrators need to examine and resuscitate existing strategic plans and create new risk management strategies to ensure their nursing home's financial viability, operational efficiency, staffing & supply chain stability, and regulatory compliance.
Financial Viability
Nursing home administrators are managing operations on impossibly thin (or, in some cases, negative) margins. On average, nursing homes in the US receive around $255 a day for care provided to a private payer; however, if Medicaid is the payer, that drops to about $206 a day. As the private-pay population continues to decline, nursing homes must rely more on Medicaid reimbursements. Since low occupancy is a concern, and the cost of patient care is on the rise, the disparity between the cost of operations and reimbursements is widening.
Maximizing your nursing home's Centers for Medicare and Medicaid Services (CMS) Medicare and Medicaid reimbursements is key. Since the Patient-Driven Payment Model has shifted the focus from rehabilitation to complex conditions, your ability to maximize your reimbursements may require you to improve specific clinical capabilities, such as the treatment of infections.
Administrators should focus on strategic planning to maintain a broad mix of patients to find the right balance of higher and lower rates. For example, Medicare Advantage revenue is generally much lower than fee-for-service reimbursements. Since Medicare Advantage is a popular choice for Baby Boomers, nursing homes will likely see increased Medicare Advantage patient transfers as the generation ages. Ultimately, financial viability is often dependent on cross-subsidizing the care of your residents on Medicaid by strategic admission of short-stay patients on Medicare.
Operational Efficiency
Some of your existing technology and resources may be more useful in improving your facility's operational efficiency. For example, many nursing homes were required by state law to acquire new telehealth or "virtual" visitation technology to enable residents to conduct virtual visits with healthcare providers and family members. Not only does this technology improve mental health and social connectedness for your patients, but it also facilitates ease of access to outside providers and takes some stress off of your staff by providing remote monitoring capabilities.
Currently, competition among nursing homes is fierce. When it comes to your strategic plan for marketing, never underestimate the power of your website and social media based on assumptions. You may think seniors are not as taken with technology as younger generations, but you have to consider your true audience, which often includes a prospect's family members. In fact, Senior Living SMART President, Andrea Catizone, found that 96% of searches for a senior living community start online.
Automated solutions can also increase operational efficiency and financial health. When the majority of a nursing home's payments are received from third parties, it generally takes the facility longer than is desired to convert receivables into cash because third-party payers typically pay after the month of service. Automated solutions can improve your ability to collect outstanding balances, decrease the time and resources involved in your billing and collection efforts, and can help you free up cash flow in the process.
Staffing & Supply Chain Stability
Staffing shortages and supply chain issues continue to abound. According to the AARP COVID-19 Nursing Home Dashboard, for the 4-week period ending December 19, 2021, on average, 30.1% of nursing homes in the US had a shortage of direct care workers. This is due to several phenomena, including COVID-19, changes in employee mentality, pandemic fatigue and burnout, and the Great Resignation.
To fight off these trends, administrators have to take their strategic planning efforts related to recruiting and retention to the next level. Keeping your facility's mission, values, and culture at the forefront of your strategy can help you maintain an environment that invites new talent and keeps your current staff happy and productive.
Staff shortages can also be attributed to illness. During the same 4-week period above, nursing homes in the US averaged 1.8 staff cases of COVID-19 for every 100 residents. In addition to following CDC and federal guidelines, administrators need to understand and comply with state mandates to ensure the health and safety of their communities and staff.
As part of the Commonwealth's COVID Vaccine campaign, Massachusetts has provided free, creative digital tools nursing homes may use to educate residents, their families, and visitors. While nursing homes can not make vaccinations mandatory for these groups, they can use these resources to inform them about the safety and importance of getting vaccinated.
The rise in cases has been further exacerbated by the fact that supply chain issues have left some nursing homes still in dire need of personal protective equipment (PPE). However, additional assistance with testing and PPE is not far away. In February, Massachusetts Gov. Charlie Baker signed a spending bill into law to bolster the state's coronavirus response. The bill allocates $50 million for COVID-19 testing and $25 million for masks for certain entities and individuals, including nursing home staff and residents.
Regulatory Compliance
Administrators must submit timely and accurate compliance filings, such as Medicare and Medicaid cost reports. It is best practice to seek professional guidance to ensure you meet all existing, updated, and new regulatory requirements.
In August, CMS released its annual rule outlining Medicare policy updates, including payment policies and rates. The rule became effective on October 1, 2021, and increased the baseline Medicare payment rate by 1.2% (2.7% market basket, less 0.8 percentage point to account for forecast error, and less 0.7 percentage point to account for the productivity adjustment).
The rule also updated specific ICD-10 code reimbursement category mapping under the Patient-Driven Payment Model (PDPM). A browser tool for the ICD-10-CM is available on the CDC's website. Regarding consolidated billing, CMS added a Part A billing exemption, per the Consolidated Appropriations Act of 2021, for blood clotting factors for treatment, related items, and services for patients with hemophilia and other bleeding disorders. To maximize and accelerate your reimbursements, you need to understand updated codes, coding guidelines, and consolidated billing exemptions.
Initially, CMS did not anticipate any costs associated with implementing the PDPM; however, after analyzing the data, they reported an unintended increase in payments of approximately $1.7 billion compared to expected total payments under RUG-IV for fiscal year 2020. CMS admits this data may not account for the effects of COVID-19. While CMS's final rule for fiscal year 2022 includes a proposed PDPM parity adjustment, they admit their initial data may not account for the effects of COVID-19; therefore, they have not yet chosen the recalibration method. Still, there is a cloud on the horizon, as nursing homes can likely expect to see at least some level of repayment starting in fiscal year 2023.
CMS also recognizes the pandemic's significant effect on the ability of Skilled Nursing Facilities to control performance for the SNF Value-based Purchasing program; therefore, the agency suppressed the all-cause hospital readmissions measure related to scoring and payment adjustments under the program for fiscal year 2022.
CMS's annual rule for 2022 adopted measures to address COVID-19 vaccination among health care personnel and healthcare-acquired infections. As of October 2021, nursing homes have been required to report the COVID-19 vaccination status of all residents and staff, and the COVID-19 therapeutic treatment administered to residents weekly through the National Healthcare Safety Network Weekly Healthcare Personnel COVID-19 Vaccination Module.
Administrators must also track and comply with state-level guidance. To mitigate the rise in cases, more than 20 states have mandated some level of vaccination requirement for specific groups in the healthcare field. Some of these states require regular testing for unvaccinated individuals, while others have taken a "vaccinate or terminate" approach.
With the exception of those who qualify for an exemption, all nursing home personnel in Massachusetts should already be fully vaccinated, including the booster. Nursing homes in Massachusetts should reference the applicable sections on the Commonwealth's COVID-19 Public Health Guidance & Directives webpage for additional information.
Contact Livingston & Haynes
My team at L&H is made of healthcare industry leaders. We are industry-savvy and help nursing homes develop strategies that focus on every aspect of their facility, from finances, CMS reimbursements, and operations to Medicare & Medicaid cost reports and other compliance needs. If you have any questions or would like to talk about your facility's strategic planning needs, contact me today!
by Maria Bunker, CPA
Maria Bunker, CPA, became a partner at Livingston & Haynes in 2017. She specializes in audits and tax planning and has worked with clients across a wide range of industries.