Executive analysis.

Long-term care today and tomorrow

Everybody's talking about it--today's long-term care crisis, that is, in all of its manifestations. But, other than the facilities themselves, who better to go to for a grass-roots look at all this than the vendors who serve them, many of whom have been intimately connected with the industry for years, if not decades? Nursing Homes/Long Term Care Management asked several of them (whether regular advertisers or not) to comment on what they see happening, both in the near and the long term. Some choose to focus on this, of course, through the prism of their long-term care marketplace; their business, after all, is trying to develop and market specific solutions to the caregiving and business problems that facilities face. Others tend to take a more global view of the field. In any event, here are the responses these vendors would offer, were you to ask them, as we did:

1. What do you think long term care facilities need to do to improve their financial stability through the next year?

Roger M. Vartanian, Vice-President, Vartanian Industries, Inc.

"One of the important issues that needs to be addressed is the need for cost- effective resident and family transportation. Many facilities outsource their transportation needs to local ambulance or transportation providers and are often left with costly bills or insufficient service. Purchasing or leasing a properly designed vehicle to meet that facility's needs provides more flexibility and overall better resident/family services at a greatly reduced cost."

Gordon Cameron, President, QuickCARE, Inc.

"Improving financial stability starts with improving cash flows, including in the area of information technology (IT). These costs encompass hardware, software, employees, repairs, maintenance, supplies and consultants, to name a few direct costs. Add to this the many hidden costs: downtime, nonqualified technicians, the need for hardware upgrades, lack of backups, turnover of qualified operators, lack of internal safeguards and complications of networking, to name some. These expenses can run to more than 5% of the gross revenue. Furthermore, they are exacerbated by technology. Technology keeps doubling its capacity every 18 months or less. Software companies, to compete and maintain regulatory compliance, keep improving their products, requiring faster computers and newer operating systems, faster networks, more skilled operators, etc.... This is why IT costs continue to spiral out of control, and should be addressed."

Hirsch Wolf, President, Hirsch Wolf & Co., Inc.

"[Facilities need] to improve gross income and reduce costs. The best way to improve income is by continually improving on resident care and having a good census. The best and easiest way to achieve that is through caring for the wellness of the employees. Preventing occupational injuries, managing and controlling claims and working on a speedy return-to-work program will ensure higher morale for the employees and better caring for residents."

Sheldon Walle, Senior Vice-President, ElDorado National Company

"Between the increasing and unpredictable costs of care, the nursing home industry is going to continue to be challenged, at least for the near term. In its favor, the average age of the population continues to increase, so the basic need for these services will also continue to grow. Contributing to this growth is also a social environment change: Today's families are not directly involved in caring for older family members, but rather seek outside care. Meanwhile, though, government's role needs to change and! or decrease so there is a greater incentive for private business to realize some long-term profit potential. Let's face it: The government is not in the profit business, it is in the tax and spend business. I'm not suggesting complete deregulation, but rather a set of regulations based on capitalistic principles, not socialistic ones. Simply put, when a care home is profitable, the level of care improves because it has the financial ability to improve. 'Reduced' government regulations should include stiff penalties for noncompliance so that the committed, legitimate players can flourish and the uncommitted are eliminated."

Thomas Burns, Vice-President of Sales and Marketing, Horizon Healthcare Technologies, Inc.

"To improve their financial stability, long-term care facilities have to create a leadership willing to invest and adopt technology and processes that help master the quality triumvirate:

1. identifying quality staff;

2. benchmarking the productivity that delivers quality clinical outcomes;

3. measuring the item-specific cost in delivering quality care.

John Brasch, President, Senior Technologies, Inc.

"There is little that long-term care facilities can do on their own to improve their financial stability in the near term. More than 85% of funding for long-term care has its origin with the federal government. This puts the government effectively in a monopoly/buyer's position. With this much control over the financial well-being of the industry, the government calls the tune. The industry can only dance.

May God grant you the blessing of shalom--peace.

"As an industry, we can do our best to educate policymakers about the needs, capabilities and limitations involved in long-term care. While education can ultimately make a difference, it is challenging, to say the least.

"Consumers--who are also the electorate--will drive change. I believe that they will push long-term care operators to provide a more homelike setting. Just as hospitals now offer more single rooms with a private bath, long-term care will do the same.

Di Anne Kerrigan, Executive Vice-President, MDI Technologies

"There are two areas that are important to nursing home operators and their financial stability:

1. Use technology to increase efficiencies in running the business. In doing this, the business office staff must continuously be trained to understand the nursing home business. Nurses, administrators, even nurse aides are required to maintain ongoing education credits-this should be offered to business office staff members, too, on accounting procedures and use of technology to analyze their business.

2. Facilities should screen residents prior to admission and determine the best mix of residents for their particular organizations. Too many--or too few--high-acuity residents can be devastating to a facility's bottom line if the facility is not prepared to care for those residents cost-effectively."

Beth A. Klitch, President, Survey Solutions, Inc.

"There have been several causes of the recent spate of financial problems incurred by the nursing home industry, including mounting corporate debt due to earlier facility acquisitions, deep budget cuts in Medicare PPS payments and the failure of state Medicaid payments to keep pace with providers' actual costs. Chapter 11 filings have succeeded (painfully) in eliminating or restructuring much of the publicly traded multifacility companies' debt, often at the expense of large vendors and suppliers.

"Congress and HCFA have worked together to restore some of the Medicare PPS funding cuts. Several state Medicaid systems, including Louisiana and Wisconsin, have been spotlighted by provider organizations that seek to increase Medicaid payments to providers. President Clinton and Congress have proposed grants to nursing homes to improve staffing levels. All of these initiatives will alleviate much of the externally imposed financial pressures.

"To reap these benefits, however, facilities must accomplish additional internal cost-reduction and revenue enhancement goals, such as:

a. embracing automation solutions (beyond mere MDS, payroll and accounting systems) to reduce labor costs and to enhance data analysis that supports effective operations;

b. attending to employees' needs for respect, recognition and reward;

c. investing in state-of-the-art clinical systems and protocols that drive improved clinical outcomes, such as pressure ulcer reduction, physical restraint elimination, reduced incidence of incontinence, less unintended weight loss and avoidance of other expensive-to-treat clinical complications;

d. providing meaningful, ongoing and focused training to help employees deliver better resident care, to respond more effectively to residents' and families' needs, and to comply with important state and federal regulations."

2. What do you see as the biggest change (or changes) corning to long-term care over the next five years?

Vartanian

"With all of the changes occurring .n the Medicare reimbursement programs, we see a growing trend for long-term care facilities to provide or incorporate resident transportation needs and its billing into the residents' overall charges. Decreased reimbursement rates to ambulance providers has made their service to the industry less profitable for them and they will focus on other services. This will leave a void in meeting the transportation needs of long-term care facilities, which can be filled by providing their own nonemergency transportation by way of their own vehicles and incorporating the expense into the residents' overall charges."

Cameron

"The use of an application service provider (ASP) offers users the advantages of new technology without the risks of constant change required to maintain their own systems. Over and above the reduction of costs, an obvious advantage is giving employees more time to care for the residents and less time needed for 'fooling' with the computer. In my opinion, the ASP concept will be similar to a utility company and as widely accepted-one monthly fee for the services requested, customized to their specific needs. It is just a matter of time."

Wolf

"Competition for residents will get stronger and will force owners and operators to keep improving the services they are providing. Controlling worker's compensation, liability and other claims will be a major goal. A strong effort toward keeping claims down will keep the profits up. A good risk management program will help achieve all of the above."

Walle

"Privately owned, independent facilities will either continue to be acquired by larger companies or disappear through attrition. This will be primarily true in medium and major markets with a lesser occurrence in small markets. Through the normal process of improved technology, medicine and communication, the level and timeliness of care will improve dramatically. However, if some deregulation doesn't take place, such advancements will happen slower, and some, perhaps, not at all."

Burns

"In light of the demographics, political climate and public sense of entitlement, we might see in five years along-term care industry that looks, runs and is funded like today's public education system. I'm sure that, in the future, there will be a few stalwarts who still provide a 'private' choice but, more than likely, 90% of tomorrow s nursing homes will be nearly in distinguishable in overall appearance from today's public schools."

Brasch

"Nursing homes will continue to deal with higher-acuity patients and will face a continuing shortage of skilled workers to do the job. Nursing homes will be an increasingly more acceptable care option because they will use technologies that provide more measured and, thus, higher-quality individualized care. This will take pressure off workers, and reassure demanding families that quality care is being provided."

Kerrigan

"Two areas that will definitely see change will be:

1. TechnoLogy. Nursing homes are prime candidates for using Web-based software applications to improve their efficiencies and their bottom line. Being able to share data among caregivers (hospitals, home care, laboratories, doctors' offices, etc.) will improve the quality of care and reduce costs (e.g., duplication of tests and treatments would be avoided, needed information would be readily available, etc.).

2. Legal reform is inevitable over the next few years. Regulatory changes at the state and federal levels will alter methods of assessment, reimbursement and survey preparation. Other legal reforms are needed to address the expanding landscape of litigation that is now occurring in this field."

Klitch

"Nursing homes must be prepared for and adapt to a new culture of enlightened leadership strategies, Olympian operations management and crystallized clinical outcomes measurement. Nursing homes will face continuing challenges on at least three fronts, also known as 'the three Rs of LTC': reimbursement, regulation and resident care.

"While enhanced Medicare PPS reimbursement will improve the financial viability of nursing homes, continued reliance on publicly funded programs, such as Medicare and Medicaid, is not a sustainable funding model for the future. I believe that more consumers will seek and demand access to private insurance products that maximize their choices for future long-term-care needs, including home health, hospice, assisted living and nursing home care. The 'double-edged sword' of private payments is that consumers are also likely to seek access to information about and to demand high-quality performance from nursing home providers. Consumers might indeed, one day, be able to 'vote with their feet' when selecting long-term-care options.

"HCFA, the Department of Justice and Congress have made it clear that failure to comply with Medicare/Medicaid regulations will continue to result in ever-more-punitive enforcement sanctions, such as civil monetary penalties, false claims prosecutions and termination from the Medicare/Medicaid programs. The obvious 'catch' to accepting Medicare and Medicaid payments from state and federal governments is that providers must also agree to be subjected to public scrutiny of their performance. Judging from current trends, providers can expect to see detailed information about their compliance records posted in public forums, such as Web sites, care guides, report cards and other rating systems. With the increasing availability of objective data measures of facility performance, I believe that we will see less reliance upon frequent on-site inspections, which are both labor-intensive and expensive. On the other hand, providers must be prepared to 'live and die' by reported data outcomes.

"I believe that we will see dramatic medical advances in gerontologic resident care practices, including new medications, treatments, prevention protocols and care delivery methods that will virtually eliminate avoidable negative outcomes. Research under way by pharmaceutical and other healthcare product manufacturers will yield safe and efficacious alternatives to today's standard medical care approaches.

"Perhaps the most noteworthy change of all will be the abandonment of the acute care staffing and service delivery model, long poorly adapted to the long-term-care setting. We will be forced to forsake current notions of standard staffing shifts, repetitive duties, narrow assignments and other dysfunctional care delivery approaches in favor of more automated and more individualized (not mutually exclusive) and more quality-of-life-oriented models of care. Nursing homes will create staff work schedules that accommodate both residents' requests and staffs personal needs, and will also evolve more team-oriented, less fragmented models of service delivery. To attract and keep qualified staff, nursing homes will broaden and enrich job assignments, match preferences of staff and residents, build 'ladders' of skills and achievement, and compact current nursing home organizational hierarchies."