The Weak Signals and Beyond

In the realm of strategic management, there is a concept known as weak signals. Weak signals are the early signs that significant changes are coming to an industry. There are important weak signals that are aimed at nursing homes. If such signals are an early warning of a trend, they indicate significant challenge to the size and structure of the industry: there will be a downsizing of the nursing home industry. If you consider the shifting of payment from NYS Medicaid to Managed Long Term Care, the Brooklyn Hospital Medicaid Redesign Team and then consider what is happening in Connecticut it is clear that downsizing is coming to the NY nursing home industry.

The shifting of payment responsibility from NYSDOH to Medicaid Managed Care entities is notable. Such plans, whether for profit or not for profit are incentivized to manage payments and reduce the overall expense so that they are profitable/show a surplus. Most nursing home executives have made this observation and are concerned about the impact. Not many have looked at the Brooklyn Medicaid Redesign Team Report, and nor have they connected the dots. If you haven’t you should. The conclusions and recommendation are a clear message to the entire health care industry in NY. The Report is available on-line and should be read by nursing home executives. (http://www.health.ny.gov/health_care/medicaid/redesign/brooklyn.htm)

The Report evaluates the performance of the hospitals in Brooklyn, particularly those that are on the brink of financial collapse. It lays responsibility for poor financial and clinical performance on the Board of Directors and the Chief Executive Officers. The Report also recommends that the NYS Department of Health be given new powers to appoint temporary management/operators for health care facilities (not just hospitals) that fail to meet both their clinical and financial obligations. While the report does not recommend closing any of the hospitals that it focuses on, it does recommend mergers that ultimately would reduce bed count and/or close facilities. The Brooklyn Medicaid Redesign Team is in essence the Berger Commission version 2.0. It is not surprising that Berger himself led this team given the recommendations that were in the original Berger Commission Report. The Berger Commission was all about closing facilities and reducing inpatient capacity.

In the short-term, closing facilities, whether they are hospitals or nursing homes is the quickest way to reduce overall Medicaid expenses. Nursing homes will not be spared in this budget driven process. If the NY industry looks at Connecticut, it would see a system that is further down this road as well as the potential direction that NY most likely will take. Connecticut Nursing Homes received their Medicaid payments for Managed Care plans. In 2012, the payments will be moved from Managed Care to Medical Homes. However, the State is committed to closing several thousand nursing homes beds (somewhere between 2000 – 7000 beds) based upon financial and clinical performance. After several years of either flat or declining Medicaid rates, Connecticut will have an easy time finding nursing homes to close based upon poor financial and clinical performance.

Nursing homes have to recreate themselves and find a more efficient operating model. Nursing homes don’t have to face this challenge alone; a strategic partner is available! Caretech has been a strategic partner to nursing homes for almost thirty years. During this period, Caretech has developed an array of solutions that help nursing homes lower costs, and become more efficient. Caretech continues to innovate and it continues to grow, serving close to 14,000 nursing home beds. Caretech can help your facility meet the challenges that are coming our way.

Preserving What’s Essential

Readers of this Blog know that the Rockefeller Institute, the research arm of the SUNY system (www.rockinst.org) is a website that I visit frequently. A recent visit led me to an article about manufacturing in NYS (“Twenty-First Century Manufacturing: A Foundation for NY’s Economy,” 9/2010). The article described how manufacturing in NY employs 450,000 people (down from 2.0 million in 1950) and explains the evolution of manufacturing in NY along with current trends. It also describes the efforts that the State is taking to attract new industries to the State and cautions that the State is not doing enough to support the existing industries and manufacturers. It seems to me that something similar can be said about the State and Nursing Homes.

Nursing homes generate significant economic activity. In fact according the Healthcare Finance News (2/23/2011), NYS state ranks first in nursing-home generated economic activity and employment. The data is striking: over 197,000 jobs generating over $21 billion in annual economic activity. Seems like a good deal; NYS spend roughly $6.0 billion in Medicaid and gets $21 billion in economic activity. Like manufacturing, nursing homes are downsizing and/or closing as a result of reduced reimbursement. Additionally the economic data alone are not able to quantify the full public benefit that comes from caring for senior and chronically ill individuals who are not able to remain independent in the community. Like manufacturing, NYS is investing time and resources to create new forms of long term care, while not doing enough to support existing providers. Perhaps the State needs to show caution and support for existing nursing homes.

The current Medicaid Budget and the new cap on Medicaid spending are taking an enormous toll on nursing home providers. According to the Citizens Budget Committee (10/14/11) sixty-six percent (66%) of the savings implemented in the current fiscal year have come from reductions in Medicaid reimbursement to providers. In the next fiscal year, it is anticipated that sixty-nine percent (69%) of the savings will come from additional Medicaid reimbursement reductions. Hospitals, clinics and other providers can increase volume and diversify its payers, vying for more private insurance and managed care payers. Nursing homes are not able to do the same. Thus the current political and economic posture places a significant portion of the nursing home industry at risk.

Losing nursing homes is not good public policy, particularly given the future needs that the baby boomers will require. Nursing home substitutes will have a role in caring for these individuals, but we in the industry know that they do not replace nursing homes and the need for care will be a significant problem if facilities close. There will be an economic void that will also have a deep impact on communities and the entire State. Innovation will be required; nursing homes will need to recreate themselves to survive this difficult period. Nursing homes don’t have to face this challenge alone; a strategic partner is available!

Caretech has been a strategic partner to nursing homes for almost thirty years. During this period, Caretech has developed an array of solutions that help nursing homes lower costs, and become more efficient. Caretech continues to innovate and it continues to grow, serving close to 14,000 nursing home beds. The need for innovation, creativity and solutions will continue until the powers that be realize how essential our industry is for economic and public policy reasons. Caretech can help your facility meet the challenges that are coming our way; don’t weather these alone; why we wait for the state to realize how important we are!.

In These Trying Time Try Something New!

In these trying economic times there is a dearth of good news; here is what little there is. Based upon the latest data released by the Department of Health, NYS spending for Medicaid is two and half percent (2.5%) below budget through August 2011. This was accomplished as a result of the efforts of the entire health care industry. Health Care Providers have done their part to meet the target established in this year’s Medicaid budget. This was a difficult task given the parameters of the Medicaid budget, which was capped at $15.3 billion, with no adjustment for the impact of increased Medicaid enrollment. The Department of Health also reported through August, a one and half percent (1.5%) increase in the number of Medicaid enrollees, or 73,000 new individuals covered by Medicaid. Such news, to be better than budget and caring for more individuals, is indeed positive news. Unfortunately, the good news is overshadowed by ongoing economic and political problems.

The news from Albany and Washington during November was extremely problematic, perhaps catastrophic. The NYS projected budget deficit for fiscal 2012-2013 was revised. An early projection of a $2.0 billion deficit was adjusted during the month; the new budget shortfall could be as high as $3.5 billion. The modification in the projected deficit was based upon shortfall in tax receipt; $404 million less than the estimates from earlier in the year. This news was soon overshadowed by reports from Washington and the so-called Super Committee.

The Super Committee was tasked with Budget Reduction alternative to those that were built into the Debt Ceiling legislation passed this summer. The legislated reductions were like a “poison pill’” designed to encourage more palatable reductions. Given the contentious relationships between the political parties, and the Congress and President, this seemed like an approach that could work. In November we learned that the Super Committee could not complete its task. If this Debt Ceiling related budget cuts are implemented, the impact on NY is enormous. According to the Governor, the loss of federal aid will lead to a loss of at least 155,000 jobs in the State and a loss of tax revenues.

The scenario planning related to the news from Albany and Washington is not pretty. For the health care industry it may mean an enormous increase in Medicaid enrollees, probably offset by drastic reductions in Medicaid reimbursement. This is likely for Fiscal 2013-14 when the Federal cuts will hit in earnest. It is equally likely that Medicaid will continue to be capped and growth in enrollment that exceeds the cap will be offset by reduced payments to providers. We could use all kinds of adjectives to describe to describe the dire situation that the industry is facing. Whatever word or word used, nursing homes need to come up with even more efficiencies than ever before. So Caretech steps up with yet another service to help nursing homes reduce expenses.

During 2011, as Caretech worked with its customers to find ways to continue to lower supply costs, we would often hear, “if only you could do something to help us with pharmacy expenses.” One administrator categorized the pharmacy expense as a black hole in space. The pharmacy expense is consuming more resources, just like a black hole that absorbs everything around it. In the past, The Pharmacy Consultant would have time to review the Pharmacy bill, assuring that the facility was being charged appropriately and generic drugs were maximized. Medicare Part D and Managed Care complicated the pharmacy bill. Changes in the Survey process, and new regulations forced facilities to focus the Pharmacy Consultant on clinical issues exclusively. With a thinner middle management core, facilities were not in a position to effectively monitor pharmacy expenses. Facility pharmacy bills grew significantly and so did the complexity of the bill. Too many administrators were uncomfortable with the validity and reliability of the bills. Yet they were unable to consistently and effectively review it and lower these costs. Caretech understands the challenges, concerns and has a response.

Caretech has entered into a strategic relationship with Accuscript, a service designed to review and lower pharmacy expenses. The benefit to a nursing home is as follows:
• Accuscript reviews your monthly invoice and assures that Medicare Part D, Managed Care and Medicaid are billed correctly and your facility is billed only when it should be
• Accuscript will work with your facility to minimize/eliminate Over The Counter Medications ordered from the pharmacy
• Accuscript will collaborate with the Medical Director and the Attending Physicians to assure generic and medication approved by the payer formularies are used as often as possible
• Accuscript fee is based upon shared savings – there is no financial risk to your facility!
Caretech and Accuscript are already helping facilities lower these expenses, generating significant savings.

In these trying times, try something new. As you strategic partner, Caretech can help your organization find innovative solutions. Let Caretech help you find new ways to weather these trying times

It’s Beyond Ouch!

I’ve been meeting with many Administrators and Chief Financial Officers, who are looking for ways to rationalize their 2012 budgets. One recent meeting sticks out as a result of a comment made by the Administrator. When I asked this individual how he was coping, his comment back to me was, “it’s beyond ouch! We are looking at some serious pain.” Given the current economic and political situation it looks like we are facing prolonged ouch!

Over the last eighteen months, this Blog has focused on the fiscal/economic trends and their impact on nursing homes. A quick review is warranted. NYS tax collections continue to improve, but are not back to prerecession levels. The impact of the recession has been less onerous in NY; NY fared better than most states during the recession, but still lost jobs, just not as many. Value Based Reimbursement is coming creating new pressures on expenses. When you add the new realities, Medicaid Managed Care putting more pressure by reducing payments, and the cap on the 2012-2013 overall Medicaid expense, it is clear that the fiscal pressures and realities are entering a prolonged painful phase. The question for nursing home executives is whether this will be the catalyst for changes in an organization’s mindset on expenses and operations.

Organizations are faced with threshold decisions as they wrestle with interventions that address the current painful realities. From Caretech’s perspective there are at least two crucial decisions that can address the need for significant expense reductions. These are: who and how products specification/selection decisions are made; how can a nursing home optimize its outsourcing options around purchasing and accounts payable? We continue to see organizations struggle with these potential expense reduction options.

Too often we see Administrators defer to their Director of Nursing, on product selection. The following scenario describes the recurring problem related to a Director of Nursing’s preference. Caretech recommends alternative products that could significantly reduce the cost of supply expenses. The Director of Nursing defends the use of particular products based upon his/her experience. Yet when the outcome data is reviewed, the result does not justify the expense related to the decision. In response we hear that there are a number of other factors that impact outcome, not just supplies! Caretech responds that one of the factors, staffing levels, is at risk. With the reduced reimbursement commitment to such products has led the organization to a difficult economic choice: continue using these products which will cause a reduction in staffing levels or take Caretech’s advice and try out the recommended substitutions. The potential supply expense savings can be striking in some instances. Caretech recently proposed to a client a projected annual savings of $40,000 based upon a decision to change the glucometer that it used. That is the potential impact of product selection. Outsourcing Purchasing and Accounts Payable functions have enormous potential as well.

Where does the organization want to invest its limited resources, direct care staff or back of the house support staff? Outsourcing these functions is very practical as a result of technology. Too often Caretech hears concerns about loss of control if Accounts Payable is outsourced. Yet facilities eliminated their in-house payroll functions in the past. Now technology creates the an effective option for Accounts Payable. Caretech’s Caretrak™ Purchasing and Spendanalyzer Analytics provides efficient Accounts Payable operation and the timely analytical data necessary for decision making. Outsourcing the Purchasing/Material Management function to Caretech can reduce expenses continuously since our professional staff is constantly looking for ways to lower overall expenses. Caretech does this by aggressively managing utilization along with constantly looking for opportunities to substitute new products that will reduce expenses while maintaining quality.

That Administrator that I mentioned at the beginning of this Blog gave me a synopsis of the potential pain his facility is facing. I told him that Caretech could help his facility reduce that pain. Perhaps we will undertake such a journey together. Pain has always been a great motivator for change. Caretech can help reduce the “ouch;” let Caretech be your strategic partner and show you how.

So Let’s Review! So Let’s Change Mindsets!

As the third quarter comes to a close, the stark fiscal reality faced by nursing homes has become very clear. The reduced revenue numbers which are a direct result of recent government budget cuts are very bleak. These cuts bring urgency to these facilities as they compel operators to make significant adjustments in their mindset, or place their overall viability in question.

Medicaid and Medicare reimbursement are the main factors contributing to the strain on facilities. The NYS Budget for 2011 and 2012 created a two year appropriation for Medicaid and a spending cap. The NYS contribution to Medicaid is approximately $15 B this fiscal year as well as the next. Health care organizations absorbed a $2.8 B reduction this year and will absorb another $3.3 B next year. Our industry then had to cope with the news that Medicare overpaid nursing homes and as a result Medicare payments will be reduced by eleven percent (11%) beginning October 1, 2011. These fiscal realities will not disappear in the near future. The economic recovery seems at an end and the reality of a double dip recession seems likely. The Federal and State Governments are committed to cutting spending and Medicaid and Medicare will not be spared. These realities require a change in approach, organization and management. In fact they require a new mindset.

Throughout this summer, the Caretech Blog presented various aspects of mindset and paradigm issues and challenges. Our industry is entering a prolonged period where Medicare and Medicaid reimbursement will be cut and/or capped. Many facilities have reached a point where additional reduction in labor will have a negative impact on clinical outcomes. With Pay for Performance on the horizon this is not the time to place outcomes at risk. Yet expenses have to be reduced; what choice does a facility have? There are choices if a facility is open to a new paradigm.

Caretech provides several choices that can generate significant reductions in both supply expenses as well as back of the house labor costs. The mindset needed is one where the facility is willing to outsource the management of supplies to a strategic partner – Caretech. In this configuration, expense reductions start with price; however the greater savings come from product selection/management and utilization management. This new mindset also means reconsidering the independence and authority that many managers have with product selection. Caretech’s ability to optimize materials management can mean significant savings, beyond lowering prices.

Lower prices are easy to come by when Caretech leverages its volume purchasing for over 13,000 nursing home beds. Lower prices are not controversial and are not a change in mindset. Rethinking product selection and limiting management’s autonomy is a significant change in mindset. While it can be controversial, it can create significant savings without compromising quality. For example, there are facilities where the Director of Nursing (DON) insists on the use of the most expensive wound care products for all wounds under all circumstances. There is little clinical proof that these products, across the board, improve care and clinical outcomes. Because we represent so many facilities, Caretech experience suggests that the judicious use of the most expensive wound care products for the most complex wound/patients makes a great deal of sense. In our experience, substituting less expensive wound care products has not compromised outcomes. Facilities that established protocols that limited wound care product options not only reduced the cost of care, but have outcomes that compared favorably with other facilities.

Change is hard however. Many DONs are not so willing to accept such structure to their buying authority. It is a conversation that we are having with several new and potential customers. The discussion becomes moot when Caretech demonstrates the impact supply expenses can have on CNA staffing. For example, a DON can be insistent on keeping all wound care products with the most expensive supplier; Caretech asks how many CNAs is the DON willing to give up based upon that decision? Caretech shows the analysis that the incremental cost of this name brand wound care product can be the equivalent of several full time CNA positions including benefits. The buying pattern is neither efficient nor effective, particularly if reductions in CNAs are the result. Fewer CNAs can lead to an increase in wounds. This analytical approach can be applied to other departments including Food Service and Housekeeping/Environmental Services. Caretech has helped facilities realize significant saving by exercising greater administrative control over product selection.

Caretech can also provide significant savings by helping facilities exercise greater controls over utilization. We can do this remotely by monitoring the volume of what’s been ordered, recent trends, relating the trends to census, and comparing utilization to other Caretech facilities. Caretech can also provide onsite surveillance to help assure utilization is appropriate. Controlling utilization has the potential for significant savings as well.

Meaningful expense reductions are available if a facility can change its mindset and outsource both purchasing and accounts payables to Caretech. In this option, the savings are immediately measurable and definitive. Caretech’s powerful Caretrak™ Purchasing and Caretrak™ Analytics are the electronic systems that support both operations, while giving Administration real time information about spending compared to budget. Mindset however can create hurdles; often Caretech hears CFOs express concern about the perceive loss of control over “their” fiscal data. CFOs soon realize that Caretech’s Caretrak™ gives them greater control and easy access to the data thanks to Caretech digitalized back-up.

There are no easy solutions to the challenges that our industry faces. Positive outcomes are possible when an organization decides to collaborate and work with a strategic partner. This choice usually involves a change in mindset/paradigm. There is no better time for such a change; there is no better time to making Caretech your strategic partner.

If GM Can Do It….

The most recent Blogs have been about paradigm shifts and how organizations must respond to them to survive. Whether the organization is a Swiss Watch manufacturer or a nursing home; when there are fundamental changes in a market, adaptation is not an option-it is a necessity. Getting ahead of the change or adapting in a unique fashion is part of the solution. That’s why GM’s decision to manufacture subcompact cars in America is a great example for nursing home administrators.

Perhaps you saw the article in the July 12, 2011 New York Times (“With Sonic, GM Stands Auto making on Its Head”). Up till now, it’s been the common mindset that cost efficient subcompact cars cannot be manufactured in the US. GM is set to produce a new subcompact, the Sonic very soon. Built in a suburban Detroit assembly plant and selling for $14,000, everything about this car changes the mindset related to automobile manufacturing. Although the labor agreement between GM and the UAW is notable (many workers at this plant will be paid $14 an hour), I will be focusing on other aspects of this plant. All of these attributes are ample evidence of a paradigm shift in response to the market.

The Sonic manufacturing plant is half the size of the traditional automobile plant. It cost less to heat, light, clean and maintain this plant. Other changes include things like a new rust proofing formula that was reformulated to be as effective, but cost less to produce and apply. Other engineering innovations make the car lighter and therefore more fuel efficient. The article describes other steps that were taken to rethink the way this car is manufactured to make it less costly, more fuel efficient and environmentally friendly. It remains to be seen if the consumer will ultimately purchase this vehicle. However, many engineers and experts in the field believe that this plant will serve as a catalyst and potentially redefine manufacturing in America.

Nursing homes too have to begin to redefine how they are organized and how they operate. The future requires the kind of mindset/paradigm shift. Nursing homes will see unprecedented cuts in reimbursement and significant changes in surveillance, with a healthy dose of pay for performance coming very soon. So if GM can find the means to reinvent small car manufacturing in the US, nursing homes can find the means to reinvent the way if delivers care, including how it uses supplies. GM did not innovate by itself – it had strategic partners. Nursing homes can emulate this as well and Caretech can be a significant strategic partner, making important contributions to expense reduction.

Caretech is an expert at reducing the cost of supply expenses. It begins with price and representing 13,000+ nursing home beds, Caretech uses its bargaining power to leverage better pricing for its customers. Price alone will not be enough to significantly reduce the cost of supplies. The next intervention is reviewing product selections and offering lower cost substitutes that also provide the same quality. This kind of product management requires a change in mindset for many department heads. Caretech is capable of working with these managers to move from those more expensive products to those that provide the same outcome in a less costly manner. Lastly, Caretech can help your organization manage the utilization of the products, assuring that inappropriate usage is minimized. Caretech does this as your strategic partner, helping your facility cope with an unforgiving environment.

It’s unforgiving when you learn that your facility’s per patient per day cost exceeds its competitors’. Caretech has observed many nursing homes asking its financial consultant to do that kind of comparative analysis. The analysis is based on 2009 cost report data available through a FOIL request, trended to 2011. For many nursing homes the results are compelling and often require a change in mindset. Caretech can be the catalyst for a change in its supply expense paradigm. Caretech can help an organization redesign its entire approach to supplies, thereby assuring greater efficiency and effectiveness.

GM was fortunate to receive government support allowing it to survive, while changing its paradigm. The manufacturing of subcompact cars in Detroit may be the harbinger of other innovations that bolster manufacturing in general. Nursing homes will not have government support and will have to change their paradigms under severe circumstances. This paradigm shift journey is a difficult one, but does not have to be one faced alone. Let Caretech help your organization conquer the supply expense reduction mindset shift.

The Power of the Paradigm Shift

I am old enough to remember a time when the wrist watch market was dominated by the Swiss. With over fifty percent (50%) of the world market, employing almost 100,000 people, the Swiss monopolized the watch making industry. In the last 30 years of the 20th century, technology brought swift changes to the world and subsequently the Swiss hold on the market was diminished to a large extent. This result was influenced by their outlook and view of the world, their paradigm.

According to Wikipedia, a paradigm is a mindset, a way of thinking or a view of the world. For the Swiss Watch Industry, the mindset was that the mechanical watch required the individual to wind the mechanism to assure that it kept accurate time. The Swiss Watch Industry was deeply entrenched with its approaches to all aspects of the watch market including engineering, manufacturing, sales, and marketing. Their mindset was stuck in the past and reluctant to adapt to the future. Paradigms are very powerful, they can prevent an executive or an entire industry from seeing significant changes that are occurring and that will have an enormous impact on the market.

The significant change that impacted the watch industry was Quartz Technology, which created the battery operated and digital watch, both introduced in 1970. The new technology was embraced by Japanese based manufacturers like Seiko and later enterprises based in Hong Kong. The Swiss were surprised by the consumer acceptance of the Quartz watch. The impact was startling; in 1970, the Swiss Watch Industry employed 98,000 people; by 1988, the industry employed only 28,000. How did this happen and what are the lessons for nursing home executives?

As mentioned in last month’s Blog, Wikipedia defines a paradigm shift as, “the notion of a major change in a certain thought-pattern — a radical change in personal beliefs, complex systems or organizations, replacing the former way of thinking or organizing with a radically different way of thinking or organizing.” The radical change in personal beliefs was with the consumers who were ready to embrace the new watch technology. The paradigm or mindset of the Swiss Watch Industry prevented them from seeing this market shift and this industry suffered immensely (note: the creation of the Swatch Watch saved the industry from total destruction). The lessons are powerful: does a nursing home executive’s mindset, prevent him or her from seeing a radical change in beliefs/ways of thinking or organizing?

What are the radical changes in beliefs that seem to be impacting the industry? Clearly it is the cost of nursing home care and the belief that the expense has to be controlled more than ever. Another radical change occurs when States cap reimbursement and the total cost of Medicaid. The federal government may also be reducing Medicare and its portion of Medicaid payments as part of a deal to raise the Debt Ceiling. Although the health care industry has dealt with cuts to reimbursement in the past, the ability of the providers and their allies to mitigate such reductions is now severely limited given the fiscal reality facing the federal and state governments. Statewide pricing in the Medicaid rate is NYS’ example of this change in mindset. The new belief from the payers seems to be: function efficiently or fold.

The final radical change in belief is the expected quality of care delivered and payments based upon actual outcomes. If a nursing homes’ outcomes are below the average that facility will be financially penalized; if it has better than average outcomes, that facility will receive a bonus. This approach is the core of Value Based Reimbursement, which defines this new mindset for both Medicare and Medicaid. This approach is ownership neutral. Although various sectors in the industry like to promote their outcomes compared to other sectors the government payers are not moved. Value Based Reimbursement will look at each individual nursing home and based upon their outcomes, adjusting their reimbursement accordingly. Ownership does not enter into the equation.

So the paradigm shift is twofold: substantive reduction in reimbursement and adjustment to government payments based upon care outcomes. This is not news to our industry. What may be news is the struggle nursing home executives are having on changing their mindset to be aligned with this different reality. As Caretech meets with nursing home executives, we see many who are struggling with a mindset that was very effective for them, which may no longer be valid. Those who are making changes in their organization and approach to management, building around the new paradigm have a greater chance of future success. Those that delay are risking the existence of their organization. Paradigm shifts are stressful for executives and for facilities. An organization does not have to face the new paradigm alone. Caretech can help you and your organization adjust and prosper. In next month’s Blog, I will explain how Caretech can be a valuable strategic partner.

Virtual Solutions to Achieve Your Goals

The successful enactment of the NYS Budget for this fiscal year and the Medicaid Redesign/Medicaid Redesign Teams (MRTs), create a new paradigm. Although every new state budget is laced with potential reductions in reimbursement, a cap on Medicaid spending along with MRTs is a new road map that shows a determination to deal with the cost of Medicaid in NYS. With a variety of MRTs looking for ways to reduce expenses, along with the 4% cap on Medicaid, 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 over sixty (60) nursing homes with 13,000 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.

The Improbable Maybe Possible – Are You Ready for It?

Several extraordinary things happened this budget year! The NYS Budget was implemented on time. It eliminated the $10 billion deficit, by reducing spending and without new taxes. The Budget also began the overhaul of Medicaid in NYS. Nationally, The Federal Government avoided a shutdown and agreed to reduce the Federal spending by $38 billion for the remaining six months of the fiscal year. The 2011-12 Federal Budget discussion is now framed around significant cuts to spending, including Medicaid and Medicare, in conjunction with efforts to reduce the Federal Deficit. Who would have “thunk it!” Fundamental questions about the structure and cost of Medicaid and Medicare are now on the table. As Improbable as it seems, Medicaid and Medicare revenues may be restructured, restricted and/or cut in ways that were never considered possible in previous years at both the State and Federal levels.

Unlikely as it seemed six months ago, The NYS Budget included a two year appropriation for Medicaid spending and across the board cuts to most services. State Medicaid expenditures are capped at $15.3 billion. The growth of Medicaid spending will be limited to the ten year rolling average of the Medicaid Consumer Price Index. The industry participated in the budget process as members of the Medicaid Redesign Team (MRT), which recommended $2.3 billion in spending reductions. The Budget was supported by the GNYHA/1199 public education initiative in stark contrast to previous years where radio and television commercials attacked previous Governor’s proposed budgets. The approved budget cut Medicaid reimbursement to nursing homes by over $200 million for this fiscal year.

The Federal Budget for the 2011-12 fiscal year promises to be another extraordinary process. Congressman Paul Ryan a Republican Party spokesperson for the House Budget Committee framed the debate around significant restructuring of the Medicaid and Medicare programs, reducing their projected costs by $5 Trillion over the next ten years. Medicaid would become a Block Grant funded program and Medicare would be privatized for people under the age of fifty-five (55), with Medicare paying for premiums at a fixed amount per person. The President seems prepared to work reducing Federal spending and the deficit as well. His plan to address the cost of Medicaid and Medicare may be tempered by some modest tax increases.

Clearly the unimaginable is now on the table. At the Federal and State level, we are looking at the potential to reinvent the major sources of revenue for most nursing homes. These changes could be far reaching and if enacted require nursing homes to reconsider how they operate. These financial challenges do not negate the regulations that impact quality. Revenue may change, but QIS is not going away. Value Based Reimbursement and State Pricing are coming and the Five Star Rating System will continue to be on the Medicare website. So the need to reconsider how to be more efficient and effective is more of an imperative than ever before.

Caretech provides a number of ways to respond to this new imperative. Although Caretech’s foundation is that of a Group Purchasing Organization, our services go beyond and offer opportunities for greater efficiencies. As your outsourced solution for Purchasing and Accounts Payable, Caretech can help your organization reduce these back of the house labor expenses. Because Caretech has sophisticated purchasing and reporting capabilities, your organization maintains the control. Using Caretrak™ Purchasing System and the Fiscal Analytic Dashboard provides real time data for real time decisions. Your facility will be able to control its expenses as they happen. Caretrak’s Benchmark Reporting puts your facility in the position to compare its efficiencies to other similar nursing homes. Caretech takes it to the next level – Caretech can capture the data from any supplier (i.e.: pharmacy, laundry and linen) and add it to the Dashboard for even more real time control.

Perhaps our nation is poised to enter an improbable state of mind and action – one of fiscal restraint and accountability. If that happens, is your facility prepared for the impact of this new road? Caretech offers innovative solutions; as your strategic partner, we let you focus on the care while we handle the back of the house. Let Caretech help your organization thrive in the brave new fiscal environment.

Finding Certainty in Uncertain Times

These are both remarkable and uncertain times. They are uncertain because of the tenuous nature of the economic recovery, the politics leading to the 2012 elections, and how the events around the word and here in America well impact the economy and this recovery. They are remarkable times because Governor Cuomo has key health care players supporting his approach to the Medicaid Budget. As a result there is more certainty around Medicaid, although there are still uncertain components. Confusing to some, incredibly challenging for those who have to lead nursing homes.

The trade associations and a variety of periodicals are writing about this year’s budget process. An editorial in the March 12, 2011 New York Times summarized the key components of the Governor’s accomplishment with Medicaid and the industry. Unlike his predecessors, this Governor will not face media commercials from 1199-SEIU and the GNYHA attacking proposed cuts to Medicaid. Instead these two powerful political forces have launched a media campaign supporting the Governor and the Medicaid Redesign Team (MRT). These commercials seem to be focused on the Legislature and have a positive message about the process and the future – a remarkable outcome.

The MRT agreed to cap the growth in Medicaid Spending, which creates a level of certainty. Medical inflation was four percent (4%) over the last five years and this creates the cap in the growth of this program for the next fiscal year. In dollars, Medicaid for fiscal 2011-2012 will be capped $15.1 Billion (NYS share) if this portion of the Governor’s Budget is enacted. Over the last five years the cost of Medicaid in NY grew by six percent (6%). The industry knows with certainty that it faces a potential reduction in Medicaid reimbursement of up to two percent (2%) because of the four percent (4%) cap. In dollars, The Governor’s Budget proposal reduces Medicaid by $2.85 Billion. The MRT came up with many recommendations and innovations to realize the Governor’s reductions. The efficiencies that the MRT developed did not meet this threshold. The difference may lead to across the board rate reduction. So there is uncertainty on the amount and kinds of reductions, although the worst case has been defined and quantified for every nursing home in the state on the NYAHSA Website.

Each House of the Legislature released their own Budget proposal for the next fiscal year. Although there are some areas of disagreement between each House of the Legislature and the Legislature and the Governor, such differences seem relative small in comparison to past years. These differences may create some uncertainty to the final Medicaid Budget agreement; however we can be certain that this year’s reduction and a framework for future years’ will be part of the Budget Deal that will be implemented.

The Federal Budget creates another level of uncertainty. The Congressional Budget Office (CBO) recently published 105 policy options to reduce the Federal Budget Deficit. Many of them impact Medicaid and Medicare and may be politically impossible to enact. One proposal is notable: it increases the State’s share of Medicaid, saving the Federal Budget $18 Billion a year, $181 Billion over ten years. Given the NYS Cap on Medicaid Spending, this change in the Federal/State Medicaid Match could create additional problems for nursing homes. While it is uncertain that this proposal will be enacted, it is certain that the contribution to Medicaid will not be at the same level it has been in recent years.

The uncertainty/certainty dichotomy is confusing, frustrating and cause for great concern. It seems clear that Medicaid funding will be capped at best and likely reduced. Nursing homes will have to consider new ways of operating, innovative efficiencies and develop new strategic relationships that will equip them to operate more effectively in this new environment.

Caretech is the innovative service provider bringing you certainty – we can reduce your operating expenses. Caretech provides services to over 12,000 nursing home beds in NY, NJ, CT and PA. We help facilities reduce their operating expenses in several ways:
• As a GPO we optimize bargaining power to get great pricing
• Caretech can manage usage and inventory, and can benchmark a facility compared to other similar homes
• Caretech provides timely data on actual expenses compared to budget, available to management through Caretrak™ Spendanalyzer Dashboards. Since this is web based, access is readily available
• Caretech’s electronic ordering (CaretrakTM) includes a home’s administrative policies and procedures, built into the system
o Approval can be via email, documentation (i.e.: POs, Invoices, etc.) can be digital
• Dashboard can accommodate data from other vendors (i.e.: Pharmacy, Laundry and Linen)
• Outsourcing options include Caretech serving as both the Purchasing and Accounts Payable Departments
o Opportunity to reduce back of the house labor costs
o Caretech pays vendors, nursing home issues one check to Caretech
 Caretech invoice set up consistent with nursing home’s General Ledger

Caretech is helping nursing homes adjust to the current economic realities, and we hope to have a chance to work with your facility. In these demanding times, and we know for certain that the demands will increase; it pays to have strategic partner who can help your organization deal with uncertainty. Consider a strategic relationship with Caretech, a partner bringing certainty in uncertain times.