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!


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