CLTC study shows accreditation losing its value.

When he bought his physical rehabilitation business in 2002, Gary Collins, administrator of Garden City Healthcare Center in Modesto, Calif., never gave accreditation a thought. "I don't see any advantage to it in operating the business," he said.

"These days, the federal and state surveys are so thorough, I don't think accreditation is a plus. Now, it's your quality of care--based on the fact you don't have any complaints, don't have any citations and you have good surveys under the current survey process--that demonstrates that you're a good facility"

It seems that being an accredited LTC facility isn't as important as it used to be.

Results of Contemporary Long Term Care issues and trends study, conducted by Mountville, Pa.--based Holleran Consulting, revealed that fewer than 25 percent of survey respondents have some form of accreditation for their long term care facility, down from nearly 33 percent just five years ago.

Lisa Lehman, Holleran's director of research, said she had heard anecdotally that a shift was occurring with regard to the type of accreditation facilities were choosing. But the survey's findings were somewhat unexpected. "l thought they would have marketed their accreditation more;' she said. Nearly as many respondents indicated that accreditation was valuable to marketing the facility as those who indicated it wasn't. "I don't know how to take that.... (It seems) there's a bit of a dichotomy."

Looking at the facility breakouts, 21.7 percent of CCRCs indicated accreditation was extremely valuable in 2004, while that figure was 43.5 percent in 1999. Assisted living fell further, with 45.5 percent considering it extremely valuable in 1999 but only 14.3 percent in 2004. Skilled nursing and mufti-level facilities showed decreases of 0.9 percent and 2.7 percent respectively in the 2004 study.

At the other extreme, a higher percentage of CCRCs called accreditation not at all valuable in 2004 (17 percent) than they responded in 1999 (13 percent). While 22.7 percent of AL facilities trashed accreditation in 1999, only 14.3 percent did so in 2004.

Plus, more SNFs and multi-tiered facilities reported that they considered accreditation not at all valuable in 2004 than did so in 1999. Among SNFs the percentage rose from 15.4 percent in 1999 to 27.8 percent in 2004. Among multi-tiered facilities it rose from 10 percent in 1999 to 22.7 percent in 2004.

Though the findings were not originally broken out by bed sizes of facilities, directional data suggested that those with at least 300 beds were more likely to be accredited than those with fewer units. The directional data also suggested that facilities with 500 or more beds were more likely to consider accreditation extremely valuable.

Three out of four of the facilities that responded were not accredited by associations such as the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), the Commission on Accreditation of Rehabilitation Facilities and Continuing Care Accreditation Commission (CARF-CCAC), the Educational Assessment Guidelines Leading Toward Excellence (EAGLE) or another similar agency. The 1999 study by Holleran for CLTC found 674 percent were not accredited.

Lack of accreditation hasn't hurt Garden City Healthcare's ability to secure HMO contracts, despite the fact that providers do ask if his facility is accredited before awarding them, Collins said. "There's so much more accessibility to information about facilities than there used to be," he said. "Everybody knows what's going on with your patients just by pulling up a Web site. Before, your accreditation was the only way people could tell if you were a good place to bring mom or dad."

Furthermore, the nationwide survey of 426 long term care executives also noted decreases in the percentages of accredited assisted living, skilled nursing and "multi-level" facilities--those offering two types of long term care--during the past five years. The percentage of accredited Continuing Care Retirement Communities (CCRCs) remained virtually unchanged.

One major reason for the shift is a perceived lack of value from accredited status, according to survey responders. While associations like JCAHO or CARF-CCAC stress that accreditation improves public confidence in a facility's operating standards, aids staff training and can help fulfill Medicare certification and state licensing requirements, the survey indicated that just more than one in five of study participants considered the status "extremely valuable" in marketing of their community or facility--down from one in three in 1999.

Similarly, 20.2 percent of respondents now consider the status "not at all valuable" as a marketing tool, compared to 14 percent in 1999.

Still, the study's findings run contrary to what officials at associations such as CARF-CCAC said they've seen in recent years. "The marketing benefits that providers realize from accreditation are only a by-product of the real benefits of performance measurement and quality improvement," said CARF-CCAC Business Development Manager Sue Matthiesen.

Still, the group's own surveys "overwhelmingly indicate that accreditation does help them differentiate their programs from other providers," she said.

Five years ago, JCAHO was the accrediting body of choice for almost two-thirds of the industry, according to the Holleran study. But in five years that figure plummeted to 41.2 percent of facility owners reporting their facilities are accreditated through the Oakbrook Terrace, Ill.--based group.

Instead, more executives have taken up with Washington, D.C.-based CARF-CCAC--which accounted for more than one in three accreditations in the 2004 study, up from just under one in five in 1999--and other independent agencies.

According to the study, JCAHO saw its numbers shrink among all CCRCs, assisted living, skilled nursing and multi-level facilities from 1999 to 2004. CCRCs and assisted living facilities made double-digit switches to CARF-CCAC during the past five years.

Marianna Grachek, JCAHO's executive director of long term care and assisted living accreditation, confirmed that there has been a drop in accreditation membership in recent years. The organization's 2004 numbers show 1,650 accredited member facilities, down from 3,300 in 1997, according to Grachek.

The decline resulted from the 1997 change in reimbursement from a cost-based to prospective payment method--one that drove many facilities into debt reorganization or out of business, Grachek said. "It pulled the rug out from the industry," she said. "Some (facilities) have recovered, but many had to change the way they do business. One of the ways they changed was to identify activities--such as accreditation--that were considered discretionary. (Some facilities) dropped accreditation as a matter of survival because they were looking at their bottom line."

Grachek said the trend may have bottomed out following this year's increase in Medicare reimbursement rates. "There's a little more discretionary money available, so we are starting to see some customers coming back," she said.

Officials at CARF-CCAC noted that they've made some progress recently toward increasing the number of accredited facilities within its organization, leading to consistent, normal annual growth. "We typically see a 7 percent to 8 percent overall account growth annually across all of our programs," Matthiesen said. "We expect to see a continuation of this trend in the next five years."

The response rate for this study was 44.1 percent, split almost evenly by design between for-profit and nonprofit facilities. The largest segment of respondents was nursing facility/chain headquarters (30 percent). Next were assisted living facilities (27.2 percent) and CCRC/campus facilities (25.1 percent).

Just less than 10 percent were from hospitals with long term care. Health System headquarters responded at 4.2 percent, with the remaining 3.8 percent allocated as "other."

Nearly a quarter of respondents (23.8 percent) were facilities with 100-199 beds. The next largest group (17.3 percent) was those with 50-99 beds, and 500 or more beds (16.1 percent)

The states with the largest number of respondents were Pennsylvania (32), Ohio (30), California (28), New York (21) and Texas (19).

Playing it safe?

In a sign of shaky economic times, respondents in general indicated in this new study that they preferred going solo when protecting their companies against legal problems. Slightly less than one in seven executives noted that they have entered into risk-sharing agreements of some sort, down from one in four in 1999.

A risk-sharing agreement--an alternative to liability insurance--typically consists of several long term care facilities that contribute to a fund that is useable by any of them in case of liability issues.

The declined participation in such a fund was evident in all four survey facility categories.

Similarly, respondents indicated they will become less dependent on government as a revenue source in future years, according to the study. Most respondents expected long term care insurance to show the most revenue growth, followed by private pay and family pay. Revenue from Medicare and Medicaid is expected to increase at a slower rate. The 1999 study did not ask this question.

"Long term care insurance will be a source of increasing revenues," Lehman said adding that private pay is also increasing. "Clients are starting to have their own programs," added Holleran's Lehman. "People are concerned about Medicaid and Medicare."

Outsourcing continues to be a popular way for long term care executives to manage operational needs. More than eight in 10 respondents now use outsourcing for pharmaceutical products and services, up from seven in 10 in 1999.

More than half of survey respondents reported outsourcing other medical services, compared to one-third of respondents five years ago. And more than three in 10 facilities outsourced their building-and-grounds maintenance, up from two in 10 in 1999, according to the survey.

Certain traditional in-house areas saw a major shift in philosophy during the past five years. Rehabilitation services are favored by more than six in 10 executives, up from less than one in 11 five years ago.

Outsourcing of transportation services is now commonplace for nearly four in 10 survey participants, while only one in 50 embraced the idea a half decade ago.

Use of information technology skyrocketed as facilities entered the 21st century, with 30.4 percent of executives reporting outsourcing such services now, compared to 0.5 percent in 1999.

These findings make sense, according to Patrick Healey, vice president of sales and marketing at Summit Services Group, a Newton Lower Falls, Mass.-based provider of non-medical support services to the long term care industry. Outsourcing helps facilities control costs, an increasingly important effort as they attempt to remain price-competitive and profitable, Healey said.

"A lot of operators have realized that in order to survive in this (competitive) environment, they need to focus on their core competencies--filling beds and taking care of the residents--and let experts take care of their ancillary services such as housekeeping or laundry," Healy said. "They realize that they are in the business of caring for people. They are not in the housekeeping business or the food service business."

No growth here

Executives' attitudes toward industry growth haven't changed much in five years. Slightly more than four in 10 owners plan to expand their levels of care or services within the next 18 months, up slightly from 1999, while just more than half of respondents say they plan to keep things status quo, the same as five years ago.

If business growth is planned, nearly half of respondents said it would be through an acquisition or new development within the next three years. But almost as many said they had no plans in the foreseeable future to grow in this manner.

Two-thirds of respondents anticipated adding hospice care within the next two years, according to the study. The bulk of the places adding this service will be CCRCs and skilled nursing facilities.

Other types of services will remain rarities in the long term care spectrum. Almost eight in 10 respondents said they had no plans to offer affordable housing within the next two years; two-thirds said they did not plan to offer adult day care services during that time; and more than six in 10 said they would not offer any community-based services by 2006.

Facilities overall won't be making much of an effort to market themselves, either. According to the Holleran study, slightly more than six in 10 executives said they will increase promotions in 2005, about the same as in the 1999 study. In both surveys, little more than one in three respondents said they planned to keep marketing efforts the same as the current year.

"There is an amazing low interest, in the minds of executives, toward making marketing investments of any kind:' said Jeff Pepper, president and chief executive officer of Touchtown Inc., an Oakmont, Pa.--based provider of Web sites and senior-friendly software to the long term care industry.

"A common strategy in this industry is to raise a pile of money to build a facility, set up a simple lead-generation and selling system to fill the beds, and squeeze every dollar they can out of the expense budget. So, getting LTC execs to invest in anything is a hard sell, compared to other industries."

Assisted living facility operators in 1999 were the most enthusiastic about promoting their businesses, with 70 percent saying they planned to increase marketing in the next year, according to the study. But only 50 percent plan to do so this time around, Holleran noted.

In contrast, nearly 75 percent of the CCRC executives said they will increase promotions next year, compared to 66 percent in 1999, and 60 percent of skilled nursing facilities want to market more, up from nearly 50 percent during the 1999 survey, according to Holleran.

Background And Methodology

The "Issues and Trends" study of the aging services industry is a follow-up to a similar study conducted by Holleran Consulting in partnership with Contemporary Long Term Care in 1999.

The 2004 study included 426 respondents, whose names and contact information came from CLTC's subscriber list. Initially, a random sample of 1,200 subscribers were told of the survey and asked to participate if contacted.

The study results were reported for the entire sample of respondents and also by type of facility/organization. The figures reported reflect the percentage of respondents giving a particular response.

When possible, responses were compared to the 1999 study. Additional questions relating to technology, staffing and leadership, service offerings were added in the 2004 study.

The pre-communication letter was split evenly between for-profit and nonprofit facilities. The survey used a sampling strategy similar to the one used in 1999, with the largest Proportion of respondents representing skill nursing facilities, assisted living facilities, and continuing cam retirement communities.

Interviews took place May 3 and June 11,2004, conducted by trained interviewers from Holleran. The interviews lasted 12 to 15 minutes.

Holleran developed several quality checks to achieve minimal error rate. Completed surveys were reviewed daily to ensure data accuracy. And a final quality check was conducted after the findings were entered into the report.

About the Research

From the researcher's perspective, the latest Issues and Trends survey turned up many interesting findings.

Lisa Lehman, director of research at Mountville, Pa.-based Holleran Consulting, said that while the three chief issues for respondents were predictable (reimbursement, staffing and government regulation), one item raised more often in 2004 was that residents are living longer now. "Residents will joke that they didn't expect to live as long, she said. "There are additional medical costs," Lehman noted. "Particularly in the CCRC industry I don't think a lot of people predicted that years ago."

The survey showed that assist ed living facilities did not appear to be planning for much expansion in the near future. CCRCs, however, were planning for expansion. "Getting ready for the baby boomers," she said.

The idea of the "CCRC without walls," where residents receive services at their own homes, has become more popular, she said. Yet, more respondents did not see it as a bigger threat. "(The residents) get everything you'd get if you lived in a tiered community."

Lehman said that the survey showed that staff turnover has improved the past two years, while competent nurses have been in. short supply. "There are still issues," Lehman said.

What statement do you believe best describes your organization's
planned marketing and promotion activities for the coming year?

Frequency of Responses--All Respondents

                        2004    1999

Will increase          63.5%   61.7%
Will remain the same   35.1%   37.1%
Will decrease           1.4%    1.2%

Note: Table made from bar graph.

Which areas do you outsource?

Frequency of "Yes" responses--All Respondents

                                    2004    1999

Pharmacy                           82.1%   70.8%
Rehabilitation Services            62.6%    8.7%
Medical Services                   57.5%     34%
Transportation                     39.7%    2.1%
Building and Grounds Maintenance   31.8%   20.3%
Information Technology             30.4%    0.5%
Satisfaction Research *            28.1%
Other areas                        22.4%   13.7%
Security                           16.6%    7.8%
Dining Services                    13.9%    9.5%
Housekeeping                       11.8%    5.7%

* Note: This was not a category in 1999.

Note: Table made from bar graph.

What types of entities do you consider to be your competitors today?

Frequency of Responses by Type

Response              2004    1999   2004 Assisted   1999 Assisted
                      CCRC    CCRC     Living only     Living only

CCRCs                64.9%   11.5%           17.7%              0%
Skilled Nursing      52.3%   45.9%             19%           20.6%
  facilities
Assisted Living      65.5%   73.8%           85.9%           81.4%
  facilities
Hospital-based       24.3%   24.6%           10.3%            5.9%
  facilities
Home Health          43.2%   27.9%           26.6%           26.5%
  agencies
Adult Day programs   18.9%   26.2%           13.9%           12.7%

Response             2004 Skilled   1999 Skilled
                     Nursing only   Nursing only

CCRCs                       19.8%             0%
Skilled Nursing             67.3%          54.8%
  facilities
Assisted Living             46.8%            51%
  facilities
Hospital-based              34.8%          36.5%
  facilities
Home Health                 26.4%          37.5%
  agencies
Adult Day programs             9%          17.3%

Response              2004 Multi-level   1999 Multi-level

CCRCs                             43%                 4%
Skilled Nursing                 51.1%              38.4%
  facilities
Assisted Living                 84.8%              67.2%
  facilities
Hospital-based                  23.9%              28.2%
  facilities
Home Health                     36.6%                35%
  agencies
Adult Day programs              22.6%              19.2%