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.
