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.
