What separates the winners from the losers?
The question took center stage at a panel discussion on skilled nursing at the recent 2019 NIC Fall Conference in Chicago. The panel included three industry experts and was moderated by NIC Senior Principal Bill Kauffman.
Though the skilled nursing sector has been through a rough patch, the panelists agreed that winning in today’s complex environment depends on close collaboration with insurers and healthcare partners.
“Skilled nursing providers must be able to partner with the local hospital system and health plans,” said panelist Dava Ashley, president at Covenant Care.
Providing context for the discussion, panelist Mark Parkinson, president & CEO at AHCA/NCAL, gave an overview of the sector.
Operating margins have declined because of dramatic changes in Medicare and the growth of managed care. This has resulted in a shorter length of stay which has had a big impact on the bottom line of skilled operators.
The promise of a quickly aging population hasn’t helped yet, said Parkinson. The oldest baby boomers won’t turn age 80 until 2025. But demographics are starting to shift in the industry’s favor with a growing population of those ages 82-86.
Occupancy has started to improve in U.S. skilled nursing facilities which reached 83.7 percent in the first quarter of 2019, representing the first year-over-year increase since January 2015, according to NIC. “Hopefully margins will show an uptick,” said Parkinson.
Despite the slowdown in the sector, every local market, no matter how challenging, has its winners, the panelists said. “It starts and stops with the operators,” noted Dave Sedgwick, COO at CareTrust REIT. “Sophisticated operators figure out a way to succeed.”
The winning operators have strong local leaders. The most important positions are that of executive director and director of nursing. Effective managers know the market and understand the needs of the local hospital system and health insurance plans. An effective leadership team also results in less staff turnover, said Ashley. “That’s critical.”
NIC’s Kauffmann asked the panelists how skilled nursing operators can successfully collaborate with managed care organizations and health systems. Here are their top recommendations:
- Focus on the relationship. Develop a partnership with managed care companies and health systems. “The most successful strategy is to understand what managed care companies want,” said Ashley. Skilled nursing operators need to provide clinical metrics and demonstrate how managed care patients are handled. Ask the health system or plan what new clinical capabilities could be provided that might help their operations.
- Tell your story. How will your facility deliver high-quality outcomes in the managed care organization’s timeframe?
- Transparency. Provide clinical metrics. Transparency helps to build trust which is essential to a solid working relationship.
- Embrace managed care. It’s not going away. Connect with local managed care organizations, said Sedgwick. “Work with them.” Aim to capture more of their patients. Skilled operators can become very valuable to managed care partners, resulting in leverage for future contract negotiations on payment rates.
- Expand types of managed care patients. Hospitals prefer skilled partners with the flexibility to take patients from different health plans.
- Cluster. Skilled operators with a cluster of projects can leverage those facilities to take more patients from local managed care organizations and hospitals. “It can result in better volume, better pricing and a better relationship,” said Sedgwick.
- Cost out the patient. Analyze patient needs prior to admission. A fee-for-service patient might be more expensive to treat than one in a managed care plan. For example, a savvy administrator with a good relationship with the managed care company may be able to carve out a patient’s expensive medication.
- Consider becoming an insurance company. One of the most innovative developments in skilled nursing is the ability of operators to become their own insurer, said panelist Parkinson. “It’s incredibly exciting.” A skilled nursing or assisted living facility can introduce an institutional special needs plan, what’s known as an I-SNP. The facility takes on the risk of their patients or residents, but also can enjoy the savings realized for efficiently managing their population. There are already 62 I-SNPs owned by skilled nursing providers, noted Parkinson. “Every provider should look at this opportunity,” he said. “This aligns the interests of the residents and the facility, and the clinical outcomes are amazing.” Panelist Ashley noted that other hybrid-type arrangements are emerging that partner insurance companies and post-acute nursing facilities. “Skilled providers have the ability to control premium dollars,” she said.
