Surviving the Triple “Whammy”

              Long term budget problems at the national and state levels are creating a state of dread for nursing home providers.  The Fiscal Cliff is looming and there are potential cuts to Medicare regardless of whether Washington avoids the Cliff.  The NY State Budget Crisis Task Force released a report on December 17, with a somber evaluation of the state’s finances.  It particular it highlighted the unsustainable Medicaid budget.  Finally, there is the fast approaching outsourcing of nursing home reimbursement by the State to Medicaid Managed Long Term Care plans.  These three currents are converging and will have a significant impact on an already battered industry.  The question is how to survive this triple “whammy.”

                Regardless of Fiscal Cliff negotiations, nursing homes will face significant reductions in Federal funds for both Medicare and Medicaid.  MedPAC calls for a four percent (4%) reduction in Medicare rates for nursing homes.  The National Association of State Budget Officers and The National Governors Association issued a joint report that reviewed the reduction in the Federal contribution to Medicaid.  States will either cut Medicaid or raise taxes.  Lastly, the Federal Government is looking to cap the Provider Assessment (Tax) process, used by states to optimize the Federal share of Medicaid.  These potential hits will be intensified by the realities of long term budget problems in NY.

                The State Budget Crisis Task Force, chaired by Richard Ravitch and Paul Volker reported that the NYS budget is unsustainable since expenditures are growing faster than revenues.  Medicaid is a significant problem; its budget is larger than the combined budgets of Florida, Pennsylvania and Texas.  The report recognizes that the cap enacted in the first year of the Governor’s tenure has reduced the annual increase in Medicaid spending. I It is not certain that it will reduce this budget item.  Under these circumstances, it is likely that the reduction to Medicaid reimbursement to nursing homes will be embraced by Managed Long Term Care plans.

                NYS has removed itself from the reimbursement “hot potato,” assigning this responsibility to Managed Care plans.  Cost will be an absolute priority for the plans; Plans will reduce reimbursement to nursing homes to absorb cuts from the State.  Plans we be driven to maximize their profits.  There are currently thirty-six (36) plans, twenty-six (26) in the NY metropolitan area, and many more in the queue waiting for approval to operate.  It is likely that many of these plans exist so that their owners can sell them to larger other Plans after they demonstrate significant profits.  There will ultimately be fewer plans once consolidation takes place.  The impact of this will place extreme pressure on nursing homes to reduce their costs.

                This quick description of the triple “whammy” is not an exaggeration of the potential forces that will require nursing homes to examine how they do business.  Nursing homes must find ways to become more efficient and effective.  Quality is still in the equation, even if it is limited for the data presented on Nursing Home Compare (since more and more consumers are using this site in their selection process).  Self-examination is hard, painful and perhaps too time consuming in this volatile environment; nursing homes don’t have to do this alone.  With Caretech as a strategic partner, a nursing home can find significant savings necessary to survive the pain coming from this “whammy.”

                Caretech offers many approaches to reduce expenses: 

• Better pricing on supplies
• Product substitutions that provide the same quality at a lower price
• Utilization management
• Outsourcing the purchasing and accounts payable function
• Pharmacy benefit management (assuring the Part D and managed care plan appropriately pay the pharmacy instead of shifting it to the nursing home)
• Lean thinking.

                The impact or all or some of these interventions can be significant and ongoing.  In a time when nursing homes may struggle to survive these forces, a strategic partner can help an organization survive and perhaps even thrive.  Make Caretech your strategic partner.

 

               On behalf of Caretech, wishing you a happy, healthy and successful 2013!

Outsourcing Cost Control for Nursing Homes – Medicaid Managed Long Term Care

New York State has the most expensive Medicaid program in the United States.  This fact is no surprise to anyone in our industry; New York spends $54 billion dollars on Medicaid.  According to the Kaiser Family Foundation approximately forty-one percent (41%) of its Medicaid dollars are spent on nursing homes.  As part of its new initiative to reduce the cost of Medicaid, New York will change the way nursing homes are reimbursed. By 2015 it will require all Medicaid recipients living in a nursing home to be enrolled in managed care.  The new payer will be Medicaid Managed Long Term Care Organizations. They have the ability to do something that the State could not – control Medicaid related nursing home expenses.

                It should come as no surprise that the State has outsourced cost control responsibility to outside organizations.  The political process that is the NYS Budget process demonstrates that the State cannot change the fundamental economics of its Medicaid program.  The dynamics of factors like the political pull of downstate Labor/Management coalitions, or upstate Legislators looking to protect nursing homes because they are large employers, have prevented substantive changes to Medicaid.  So the State has gone to “Plan B”, outsourcing to Managed Long Term Care.

                State officials use all of the right words to highlight the potential positives from Managed Long Term Care (MLTC).  MLTC will focus on prevention and early intervention, thereby delaying the use of nursing homes.  MLTC will select the least restrictive option, which will promote better quality of life for the Medicaid recipient.  Lastly, MLTC will help slow the rate of growth for Medicaid/nursing home care.  This new reality will create the greatest challenge for nursing homes.

                MLTC will have quite an impact on Medicaid expenses and how Medicaid dollars are spent. MLTC will certainly recover their administrative costs from the fee that they receive from New York.  This will likely reduce the amount of Medicaid dollars going to facilities since we can be assured that they will take their cut first.  The larger, looming problem will be the rate negotiation process.  We can expect MLTC to negotiate aggressively with nursing homes, looking for discounts that will enhance their bottom-line results.  We can expect increased pressure to become more efficient and/or effective.  Yet even with these difficult challenges, there are ways to adapt, survive and flourish!

                Since the inception of this Blog, Caretech has looked at innovative approaches to supply chain management and related expenses, presenting them for the reader’s consideration.  With a paradigm shift in process, the imperative for nursing homes is to implement them now.  These include:

• Lean Supply Chain Management
• Outsourcing Supply Chain Management and Accounts Payable
• Become part of a Virtual Chain.

Caretech is the link in these innovative approaches.  With our expertise in supply chain management, we can help your organization implement Lean Supply Chain Management approaches.  Our digital management support systems, Caretrak ™ Purchasing and Analytics, support effective outsourcing of both the supply chain management and accounts payable functions. And it also provides timely expense versus budget data for real time management decision making.  Representing over 14,000 long term care beds, Caretech gives your organization a chance to lower back of the house operating expenses as if it was part of a publicly traded for-profit chain.  In sum, Caretech provides solutions to the significant challenges ahead.

                In the near future, MLTC will initiate rate negotiations, that will ultimately require a nursing home agree to some discount on its existing Medicaid rate.  Nursing homes have a chance to plan for this now.  They can become a strategic partner with Caretech and lower their operating costs.  They can change their paradigm and operating model.  By making the decision to become Caretech’s strategic partner, nursing homes will have an opportunity not only to survive, but to flourish!

Lean Incontinence Care

The June issue of Provider has an interesting article entitled, “How to do it…Incontinence Management.”  In the upper right hand corner there was a highlighted quote that summarized the essence of this article:  “As far as costs are concerned, there are undoubtedly many exotic and expensive therapies available for incontinence, but the best treatment is simply to pay attention.”  This statement can be viewed as a foundation for Lean Thinking, an approach to management that is essential given the realities of reimbursement, regulations and the growing consumer awareness.

                Over the last few months, this blog has focused on Lean Thinking.  Lean Thinking is based on concept of maximizing consumer value while minimizing waste.  This approach requires organizations to create products/services that maximize customer value with fewer resources.  Lean Thinking was developed and is used in manufacturing and there are still many who believe it only works in manufacturing.  Lean Thinking works in any organization that has process and system including long term care.  It can be effective because Lean Thinking is a mindset and a culture that can lead to quality outcomes and efficiencies that reduce the cost of operation.  This relatively simple description is not so easy to implement since it is based upon the organization’s mindset and culture. However, the impact of this approach can be enormous.  We can see the power of Lean Thinking when we look at Incontinence Care.

                A Lean Thinking approach to Incontinence Care would begin with a culture that promotes incontinence, as stated in the Provider article.  What better way to maximize customer value! Residents hate incontinence briefs and families/visitors loathe the smell of urine (there is no better way to change the public’s negative view of nursing homes then to minimize diapers and eliminate the smell of urine)!  Consider the waste and cost implications of an environment that is committed to continence.  The best incontinence briefs, when used properly, are still a significant cost.  Some of the best facilities are able to minimize this cost (less than $1.00 per patient per day).  These are facilities that make sure that their residents who are incontinent are in the proper sized brief and are being changed as specified by the manufacturer (no longer six (6) times a day, now under four (4) times a day).  However, these facilities could reduce this expense further if they had a mindset/culture of continence.  A $.25 per patient per day reduction in incontinence brief expenses for a 200 bed nursing home is $18,250 reduction in this supply expense on an annual basis.      There are many facilities that are spending more than $1.50 per patient per day on incontinence briefs.  There are several reasons, which can be summarized by the article’s main point – paying attention. 

Waste occurs because facilities are not paying attention to the proper sized brief for their residents.  Too many staff members think that a bigger diaper is better for their residents.  The new incontinence brief technology does not work that way; proper fit is crucial.  If the brief is too big, the resident is not kept dry.  As a result, staff members use too many improperly sized briefs in their attempt to keep their resident dry.  Not only are the costs of the briefs higher than they should be, but other related supply costs are higher too as wounds become a clinical problem.  As a result a facility may end up with several problems:  supply expenses for incontinence and wounds are higher than they should be, the facility has negative clinical outcomes that are evident in the Nursing Home Compare Portal and the Annual State Survey, and the facility has a distinct urine aroma.  These are avoidable problems and Caretech can assist a facility eliminate them and/or prevent them.

Caretech can help a facility monitor and control the use of supplies.  In this case, Caretech can pay attention for the facility, assuring that the right incontinence brief is being used.  Since Caretech is well aware that a facility’s resident population is dynamic, it can assure that the proper sizing changes along with the population.  This action will help control and reduce the cost of incontinence supplies, thereby eliminating waste.  With Caretech monitoring this facet of the operations, the nursing home staff can focus on changing the mindset/culture of the organization to one that is committed to continence and more globally, creating a mindset/culture that is committed to creating value for our residents and eliminating waste.

How Do We Get It Done – We go Lean

 

This Blog was originally uploaded in January 2010.  Given the recent postings related to Lean Thinking, this Blog has new meaning.  So with some minor modification, I am recycling this Blog.

There are unique rewards when teaching at the collegiate level. One never knows when a question or series of questions will inspire the instructor to look at a concept and approach to management or an issue from a different perspective.  In recent months it is logical to assume that instructors have been bombarded by the same question asked over and over again.  Given the responsibility, the reductions in reimbursement, the requirements and the transparencies created by Medicare.gov portal (i.e.:  Nursing Home Compare), how does a health care executive or more specifically, a nursing home executive get it all done?  Indeed that is the question.

                Teaching health care management and nursing home administration requires an instructor to link the core tenets of financial management, with the realities of what executives do, identified in a classic Harvard Business Review article (the article appeared in the July-August 1975 HBR and reappears periodically), written by Henry Mintzberg.  So for a quick review, not that the reader needs one, the core elements of financial management are: planning, controlling, organizing & directing, and decision.   Mintzberg identified ten roles that leaders (specifically CEOs) play and aspects of these roles:  interpersonal (figurehead, leader and liaison), informational (monitor, disseminator and spokesperson) and decisional (entrepreneur, disturbance handler, resource allocator and negotiator). These roles have an impact on managers at all ranks at various levels of intensity and responsibility.  At the conclusion this portion of the lecture, many students have “deer in the headlight look on their faces,” often asking, how do we do it all.  When the instructor adds the impact of the regulations and another role – the fiduciary, the rest of the students have that expression.  After the shock wears off the question is asked:  how does a nursing home executive get it all done?

                Nursing home leadership followed a logical course to all assure that it all gets done.  When funding was better, we had levels of management who took on a variety of responsibilities. Organizations were able to absorb these expenses as we grew them, often with innovative programs that vertically expanded our capability to serve chronically ill seniors.  As funding was cut, organizations ultimately had to reduce these ranks and this solution wasn’t as available as it once was.

                Another solution was the limited but important role of contracted services for: legal issues, labor relations, marketing, public relations, reimbursement, planning and others.  The scope of the role varied based upon the facility and issues it faced.  The rolls could be narrowly defined as well.  Many of the contractors developed close working relationship with the facilities even though they were a contractor, billing an hourly rate plus expenses.  These contractors remind the nursing home executive that their services pay for themselves, although organizations may have to wait a bit to fully recover these expenses.  Given reimbursement cuts and cash flow challenges, even these relationships are changing as the nursing home leadership balanced the need for these important services versus reduction in reimbursement.  The long term solution that hospitals seem to select and nursing homes should consider is Lean Thinking.

                Lean Thinking is based on concept of maximizing consumer value while minimizing waste.  This approach requires organizations to create products/services that maximize customer value with fewer resources.  Lean Thinking was developed and is used in manufacturing and there are still many who believe it only works in manufacturing.  Lean Thinking works in any organization that has process and system including long term care.  It can be effective because Lean Thinking is a mindset and a culture that can lead to quality outcomes and efficiencies that reduce the cost of operation.

                Lean Thinking can be applied to day to day operational issues, including controlling supplies expenses and eliminating waste.  As students learn, these are the variable costs that should change as occupancy and/or intensity changes.  Often this does not happen, mostly because management is focused on other issues that are deemed a higher priority (of course the nursing home executive is deciding on priorities).  Yet we need to monitor those expenses somehow because we do indeed have to get it all done.  In today’s environment organizations need to consider an innovative approach so that this task is handled consistently and properly.  Caretech has the solution.

                Working in collaboration with your management team, Caretech will help your organization reduce supply expenses, while providing timely information that assures your organization is moving towards its goal of becoming a Lean organization.  Caretech acts on the behalf of the organization based upon a defined framework.  As your strategic partner, we will benchmark, identify trends and provide information to help manage these issues.  Additionally, Caretech can enter into a unique financial relationship built around shared risk and benefit that underscores our ability to be your strategic partner.  The strategic partner is part of the Lean Thinking approach.  The creation of a Lean organization (including mindset and culture) is an effective answer to the question, no matter who is asking, on how to get it all done.

Quintiles Count!

If you haven’t received your copy of the July 24, 2012, “Dear Nursing Home Quality Pool Work Group Member, “ from the Department of Health, go to your trade association website and download it.  This correspondence lays out the Quality Pool for 2012 and the methodology for the Pool in 2013. The Pay for Performance payment process arrives this fall for NYS Medicaid.  In 2013 your facilities quintiles will count.

Pay for Performance in 2012 is straight forward.  No facility will receive a bonus; facilities will be penalized for the following negative outcomes from 2011:  late submission of 2011 Cost Reports (late is received after August 17, 2012), late submission of the Nursing Home Flu Immunization Data for the period September 1 2011 to March 30, 2012 (due April 2012), survey deficiency level IJ and higher for 2011 inspections.  The formula for the penalty is based upon creating a pool of $50 million (the bonus for top performers in 2013).  The Quality Pool for 2013 is more complex, and gets to the heart of the intent in the Pay for Performance System.

                Pay for Performance is all about financial incentives:  if your facility is a top performer it receives a bonus in its Medicaid rate; if it is the lowest performer it will be penalized with a negative Medicaid per diem adjustment. Defining a facility’s performance will be based upon several factors.   The system will incorporate MDS 3.0 data – Quality measures, the NYS Employee Flu Vaccination Data, Five Star Staffing data, Resident Satisfaction and Avoidable Hospitalization.  Points will be derived from these categories, placing a facility in one of five groups or quintiles.  The better the quintile the more points a nursing home will receive (Quintile 1 is the best and Quintile 5 is the worst).

Point will be awarded to all nursing homes based upon the categories and a nursing home’s result.  The worst performers will not receive points for the measures used in a category.  The Department of Health developed a grid that will incorporate 2011 and 2012 data.  The grid includes additional points for improvement in quality if improvement in a category changes the ranking of a facility from a lower quintile to a higher one.  The Department of Health will use the total points to determine which facilities receive a bonus, which facilities have rates that are not affected and those facilities that are penalized.

The system is very unforgiving yet it creates a real incentive to improve all facets of the operation.  However it will be hard to improve quality with the inadequate Medicaid rates plus a penalty.  So how does a facility prevent this from happening and/or limit the amount of time that it is considered a poor performer?  The answer is Lean Thinking!  Lean Thinking/Six Sigma is all about creating value for and addressing issues that lower value.  When you consider the quality measure and resident satisfaction component of the Quality Pools, it’s apparent the lean approach offers a road map to tackle this new system.  Lean Thinking has been a crucial component of successful manufacturers (Toyota, Boeing, and GE).  Hospitals are now aggressively adopting the Lean approach as they too cope with the new Pay for Performance realities that they face.

 Lean Thinking also focuses on waste, since waste dilutes customer value.  Waste can be inappropriate use of staff time or it can be needless supply inventory.  Research at Lean organization calculated up to thirty (30%) of supply inventory is waste and unnecessary.  How would your facility use such resources given this new fiscal/quality framework?

Inappropriate use of supplies comes from a collective mindset that is inherent in the culture of many facilities.  Organizations can wrestle with how the culture came to include this, or they can begin the culture change process and take steps to reallocate resources from supply utilization to maintaining and/or adding staff FTEs.  This is not an easy journey to take alone.  As your strategic partner, Caretech can lessen the burden.  As your supply chain manager, Caretech can help you identify the “low hanging fruit’” by finding lower prices, suggesting alternative products that cost less and are of equal or greater quality.  Caretech can actively help you manage utilization of supplies and provide your facility with a road map and a compass for the supply chain culture chain journey.  We know your quintiles matter and we will help you find the resources to help your organization improve its position, thereby maximizing Pay for Performance.

 

New Innovations Needed!

                An editorial in the June 2, 2012 New York Times, featured some good news, “about the overly costly, underperforming American health care system.”  Of course they were describing an innovative approach to care by hospitals, physicians and insurers.  Examples of cost reduction initiatives that either maintain or improve the quality of care were enumerated.  It is unfortunate that this list did not include nursing homes or other long term care providers.  Perhaps it’s time for us to consider an approach that is embedded in these programs.

                As you read the editorial, important themes become evident:  innovative hospitals are finding ways to improve value for the patient and the payer because they are reducing expenses, while improving outcomes.  There is much written about the relationship between value, cost and quality.  Professors Michael Porter and Elizabeth Olmstead Teisberg wrote in their book, Redefining Health Care (Harvard Business School Press, 2006) discussed this in great detail.  They demonstrate how health care has not controlled costs even with all its efforts to do so.  Health care has not improved quality even though it has worked relentlessly to upgrade it.  According to Porter and Teisberg, appropriate reduction of cost and improvement in quality occur when an enterprise focuses on maximizing value for its customers, whether it is the patient, the payer or the physician. One vignette in the editorial was of particular interest to me.

                The Virginia Mason Medical Center in Seattle was, “once deemed a high-cost provider, has

conducted rigorous reviews to eliminate waste and inefficiency…….  In a tough environment for hospitals, Virginia Mason has been reporting margins of 4 to 5 percent.”   Some of its underlying rationale is to bring value to the patient’s bedside by finding ways to increase the time that nurses spend on direct patient care.  Wouldn’t this overall outcome be desirable for a nursing home as well?

                As nursing homes consider how they evolve to cope with a difficult future, redefining the philosophy of care around value may be the best approach.  A fundamental question for consideration and resolution is how do we create value for the patient, payer, regulator and family member?  We know that value is created at the bedside; residents want their C.N.A. when they have a need.  Asking a resident to wait creates regulatory and marketing problems.  We waste a great deal of time finding excuses instead of finding ways to increase staffing levels.  Looking at supplies from all aspects is one way to find some of the resources needed to increase staffing levels.

                Nursing homes could reconsider its supply decisions and/or decision making.  Price is always one consideration and in most cases is the easiest and usually the only decision made.  Nursing homes work with Group Purchasing Organizations to get the best possible price on a particular product.  However, does that particular product help create overall value?  Can we justify the cost of the item based upon the potential value for the resident?  What is the trade-off for the item in question?  Often we hear justifications based on experience or comfort with a vendor that has value added programs to justify the expense (and the justification never gets to creating value at the bedside).  What if we ask a clinician to justify an expensive item, with a focus on how it creates value at the bedside?  Perhaps a new approach would be to find supplies that meet the clinical needs of the residents and supports more staff at the bed side.  Such an approach may be revolutionary to some, but right on point if our imperative is to create value.

                Caretech is right on point when it comes to helping an organization improve the value at a facility.  As your strategic partner, we can help you find the right mix of supplies that will meet the clinical needs while freeing up resources to create value.  Let us meet with you and demonstrate how we can assist you to be like Seattle’s Virginia Mason Medical Center, an organization that creates value and as a result, generates desirable operating margins.

 

Time for Lean Thinking

How does a 200 bed nursing home lower its medical/surgical/nursing supply expenses to $2.51 per patient per day (PPD) and maximize nursing care hours so that on average patients received four (4) hours of combined nursing care per day?  Perhaps the answer is the application of the principles and actions that are characteristics of Lean Thinking.  With the ongoing reductions in revenue and additional pressure to be more efficient, Lean Thinking is one possible path for nursing homes.

                Lean Thinking is a very advanced approach to management designed to improve efficiency, effectiveness, quality and value for an organizations’ customers.  Manufacturing leaders like Toyota and Boeing are the best examples of enterprises that are disciples of Lean Thinking.  More and more hospitals are becoming converts to this approach; it’s time for nursing homes to look at this approach too.  The core concept of Lean Thinking is elimination of waste.

                Lean Thinking is focused on the elimination of waste, since waste dilutes the value that our customers experience from our services.  The organizations’ customers are the final judge as to whether they receive services that they value.  The Lean approach leads the organization to eliminate waste so that the resources that were consumed by waste are now applied to create value.  This approach is tied into quantitative quality improvement techniques like Total Quality Management (TQM) and Root Cause analysis.  It creates a framework for TQM and Root Cause projects, assuring that they are focused on waste elimination that improves outcomes and value for the customer.  The potential impact on a nursing home could be stunning.

                An organization that successfully incorporates Lean Thinking into its culture has to create a particular mindset.  It is a way thinking and managing, and a culture creates a waste free operation that is linked to outcomes that a customer values.  As a result expense, quality/outcome and customer satisfaction are clearly linked and understood by all members of the organization.  The potential benefit is evident when you consider the nursing home mentioned at the beginning of this blog. 

When a facility lowers it medical/surgical/nursing supply PPD by eliminating waste it creates and to reallocate those resources.  In the case of the facility mentioned earlier, they were able to reallocate resources to increase staffing.  Lowering supply expenses is not the only intervention that funded this enviable amount of nursing care hours.  But it was an important component.  We are all aware that for our residents and short term patients, value begins at the bedside, with timely responses to call bells.  These outcomes lead to other positive outcomes as well, including high census and optimal payer mix.  Whether this facility realized they were implementing Lean Thinking is not important.  What is important is there commitment to address supplies and tackle not only price, but:

• Product substitution, find less expensive alternatives that support positive clinical outcomes
• Promote appropriate utilization of supplies and change mindset to end wasteful practices.

They did not have to do this alone.  Caretech is their strategic partner and assisted them as they made this journey.  Caretech can do this with you; the Lean Thinking journey is supported by strategic partnerships.  Let Caretech help you change a mindset based upon zero waste and optimum value for your residents/patients and their families.

Virtual Solutions to Achieve Your Goals

It is year two of Governor Cuomo’s Global Medicaid Budget, the Medicaid Redesign Teams (MRTs) and the transition to Medicaid payment from Managed Long Term Care Agencies (MLTCA).  Together they are creating a new fiscal paradigm for nursing homes. Although every new state budget is laced with potential reductions in reimbursement, a cap on Medicaid spending along with MRTs and the transition to Medicaid payments from MLTCA requires a new road map and determination to reduce the cost of operations. The imperative to drive down the cost of an organization’s operation has never been greater.

An individual nursing home has the economic disadvantage of supporting a back of the house administrative structure. The free-standing nursing home has very limited options to reduce the unit cost of back of the house functions. Their size makes these functions more costly since they are applied to a small scale operation. Chains, whether they are not for profit or privately held/publically held for-profits, have an advantage. Their size and volume allows them to reduce the impact since they are able to allocate it over a greater number of units served, whether it’s occupied beds, adult day care and/or home care visits or all or some of these units. Nursing homes are now operating in an environment that insists on efficiencies and an innovative approach to creating them. Technology provides a platform that would allow groups of nursing homes to collaborate and act as the virtual chain. Given the revenue challenges, it is an imperative for the industry to apply creative approaches to reduce back of the house costs while maintaining all the functions heretofore supported. The Caretech Group has the technology and the experience to provide you with a virtual solution that addresses these overhead issues neatly providing cost savings to the facility.

The back of the house includes the following functions: Human Resources/Personnel, Subset of Corporate Compliance (exclusion lists), Purchasing and Accounts Payable. Facilities have implemented a variety of systems to reduce the expense of these systems, but on their own, individual facilities are limited in their options to reduce such expenses. These structures require individuals to perform the work. Automated systems have reduced the number of individuals involved, but not eliminated them. Chains have the advantage of linking facilities and have a minimum number of individuals handling a large number of facilities. Caretech can create this simulated chain through its Caretrak™ and Caretrak™ SpendAnalyzer systems.

Caretrak™ creates a unique architecture that leads to back of the house efficiencies. It is currently being used successfully by a nursing home system with sixteen (16) units. The possibilities set forth below are not conjecture, but reality. Caretech can offer the following back of the house solutions:
• Purchasing – either the software exclusive or software + purchasing/inventory management
• Accounts Payable – handling all the related paper work, generating checks matched to Purchase Order-Receiving Tickets – Invoices, coding all purchases by an organization’s GL codes
• Human Resources – through our strategic partnership with Smart Linx™
• Corporate Compliance – through our strategic relationship with KCheck ™
• Integrating all Information onto On-line Dashboards with the ability to present data from any 3rd party supplier (i.e.: pharmacy, laundry and linen).

Representing 15,000 long term care beds in four states, Caretech has a unique perspective. Our approach is flexible, with room for different features and services.

The pressure to be efficient and to find ongoing ways to reduce operating expenses will not diminish. Even when tax revenues in NYS recover to pre-recession levels, the State is looking to reduce its overall costs to tackle its corporate and personal tax structure. When you consider the impact that reductions to Medicare will bring, it is clear that the journey to reduce long term care expense has become more intense and difficult. Strategic partners are necessary for this new journey. It is no longer viable to navigate this road alone; let Caretech be your strategic partner.

 

Health Care Reform V 2.0 world

Whether you are a loyal NPR listener, a Fox News watcher, or somewhere in between, you are paying some attention to the three day testimony before the Supreme Court on Health Care Reform (otherwise known as “Obamacare”). It is interesting to hear the conclusion from all sides of the political spectrum that it could be a 5-4 decision either way. Whatever decision the Court makes, it will be difficult, and it will create great controversy. Nursing homes may not be directly impacted by whatever decision is made; however the financial impact of Health Care Reform could affect what we do and how we are paid.

Health Care Reform or the Health Care Reform V 2.0, should the Court declare it unconstitutional, will impact Medicaid and Medicare. It will drive resources from nursing homes to other health care sectors. Potential reductions to Medicare and Medicaid over the next ten years will have a severe impact on nursing homes. The volatility that we see currently in our industry will increase and too many nursing homes will not survive. In the past Administrators focused on tried and true –business as usual interventions to weather the fiscal storm. However, given our current reality, business as usual is no longer a valid idiom given the challenges facing our industry. This hurdle is overwhelming to many causing them great despair as they look to the future.

It is notable how dispirited many of our colleagues are today. They are facing unprecedented challenges, and many are out of ideas, angry or just exhausted. There is also a subset of administrators who understands that there is a need for profound and fundamental change to the nursing home’s business model and the way they are managed. The nursing homes that prevail are those that employ a business model that is nimble. Reducing or limiting product options to the purchasing staff may be one effective intervention. Consider the nursing home that looks at reducing the supply alternatives that its department directors can select has when purchasing supplies. Executive staff defines expense reduction and adjust the permitted items purchased accordingly. Such an approach can be significant.

A hypothetical 200 bed nursing home makes such decisions looks to reduce its supply expenses on a Per Patient per Day (PPD) basis. The following table summarizes reduction and impact:

Category	PPD Reduction	$ Impact
Food Service	$1.00	$73,000
Medical/Surgical	$0.75	$54,750
Disposable Diapers	$0.50	$36,500
Housekeeping	$0.25	$18,250
Office Supplies	$0.25	$18,250
Total		>$200,000

Such savings are possible if a facility is willing to make difficult decisions that limit the possible supply choices, creating a “formulary” for supplies much like a formulary for medications. Such an approach is a profund change for many organizations, yet the potential impact on expenses is significant.

There are other innovative approaches available that can positively impact expenses. Consider the pharmacy expense. The prospect of managing Part D Plans, Managed Care and the prescribing physicians (either for Part D/Managed Care formularies or generics instead of named brands for Part A patients) is seemingly a black hole. Managing it alone does not consistently optimize the possibility of the correct payer covering the expense. Too often when all efforts fail, the expense gets passed on to the nursing home. The reason for this outcome is not enough staff resources available to effectively manage this process consistently. Yet another approach, outsourcing, could make this liability disappear with the expenses covered by the appropriate payer. This possibility exists, and is readily available with the right strategic partner.

Caretech is the right strategic partner for the Health Care Reform or health Care Reform V 2.0 world that we will face. Our strategic partner Accuscript can become your facilities’ pharmacy benefit manager. Caretech can help your organization redesign it approved list of supply alternatives, creating significant savings. As our industry continues to search for innovative expense reduction opportunity, consider the potential positive impact that a strategic partner can provide. Consider Caretech.

The Value of the Not for Profit Nursing Home

Larry Minnix, CEO of Leading Age, the not for profit national trade association, recently commented on a study published by Johns Hopkins University. The study reviewed the not for profit sector of the economy, including nursing homes. Mr. Minnix noted the loss of market share by the not for profit nursing homes. From a national perspective the not for profit nursing home sector lost 2% of the nursing home market. We see this in NY as more and more not for profits are put up for sale because of financial distress. The not for profit nursing home does brings value to the community, the questions is whether it can find the way to survive the vagaries of revenue challenges and avoid misfortune.

Leading Age NY conducted its own study that examined the impact of sponsorship on outcomes. Based upon factors like hospitalization rates, survey history, staffing levels and tenure, quality measures, and resident/family satisfaction, the study provides compelling data that not for profits on average have better outcomes than their competitors. The problem for this sector is that better outcomes have a price differential. The new realities of Medicare cuts, Medicaid Managed Care and Managed Long Term Care Plans, make this price differential a significant problem. Innovation and a new mindset leading to more efficient and effective management will be the key to survival.

An individual not for profit nursing home has the economic disadvantage of supporting a back of the house administrative structure. They have very limited options to reduce the unit cost of back of the house functions. Chains, whether they are not for profit or privately/publically held for-profits, have an advantage. Their size and volume allows them to reduce the impact since they are able to allocate it over a greater number of units served, whether it’s occupied beds, adult day care and/or home care visits or all or some of these units. Nursing homes are now operating in an environment that insists on efficiencies and an innovative approach to creating them. Technology provides a platform that would allow groups of nursing homes to collaborate and act as the virtual chain. Given the revenue challenges, it is an imperative for the industry to consider new innovations and mindset for its back of the house operations.

Innovation has been at the heart of many not for profit organizations. Whether it has been innovative approaches to resident care, early leadership in resident centered care and/or the leadership in community based care building an integrated continuum, the not for profits have been leaders in the evolution of nursing homes and long term care in general. Reducing back of the house expense is an important way to innovate and change the mindset. Technology makes this possible and reasonable. Purchasing and Accounts Payable expenses can be reduced. Caretech creates the opportunity for efficient and effective, lower cost operations. With our Caretrak ™ and Spendanalyzer Software, we can offer the following back of the house solutions:

• Purchasing – either the software exclusive or software + purchasing/inventory management
• Accounts Payable – handling all the related paper work, generating checks matched to Purchase Order-Receiving Tickets – Invoices, coding all purchases by an organization’s GL codes

Through our Strategic co-ventures we offer additional efficiencies and opportunities for expense reductions:
• Managing Labor expenses with Smart Linx™
• Managing Corporate Compliance efficiently with KCheck™
• Controlling Pharmacy Expense with Accuscript – a Pharmacy Benefit Manager for Nursing Home Residents

Caretech can integrate all this information onto our On-line Dashboard and has the ability to present data from any entity that a facility uses for supplies (i.e.: laundry and linen).

Quality does matter in nursing homes and Pay for Performance will reward those facilities with the best outcomes. Imagine the positive impact for a facility that lowers its expenses by taking advantage of a strategic relationship with Caretech.