The move toward subacute care: key considerations for any nursing home wanting to make a go of it.

Also known as "transitional care," subacute care is the fastest growing segment of the health care delivery system. Many consider it "the answer" to addressing both patient care gaps and shrinking profit margins.

Several changes during the last decade have caused subacute care to emerge. These include the extensive growth of managed care, the intensified need for all providers to create greater efficiencies under government reimbursement systems, and an increasingly competitive environment, along with the appearance of new provider entrepreneurs.

While experiencing meteoric growth, subacute care remains today's most ill-defined level of care. The reasons are lack of specific reimbursement criteria, agreed-upon standards of care and a common industry definition. Some long-term providers have even taken the erroneous position that subacute care is a minor variation of long-term care (and some acute care providers see it as a minor variation of acute care). The answer is somewhere in the middle: Subacute care involves providing care that is more intensive than traditional long-term skilled care, but less intensive than acute medical care and acute rehabilitation.

Long-term care providers today are well-positioned to enter the subacute market. Appropriately funded and organized, they can offer a higher level of care than traditionally provided in nursing homes, without incurring the high costs of hospital overhead. But entering the subacute arena can be confusing and challenging. Among special concerns, which this article addresses, are developing alliances with other providers, controlling the flow of patients and developing managed care contracts.

Developing Alliances with Hospitals

Subacute has emerged within three major segments of the industry: acute care hospitals, rehabilitation hospitals, and nursing homes. This overlapping indicates a gap in care at all inpatient levels. Subacute was developed because these providers could not find a suitable level of care to move patients into when their existing level was no longer deemed appropriate.

Alliances between nursing homes and acute care or rehabilitation providers benefit all providers. High-quality, market-sensitive programs can best be developed to meet the heterogeneous needs of subacute patients by melding each provider's respective skills, thereby developing a seamless continuum of care.

Hospitals benefit in several ways by affiliating with nursing homes to enter the subacute market. First, long-term licensure is now the predominant vehicle for entering the subacute arena. Second, for most hospitals, successfully operating skilled beds poses its own set of challenges, which many hospitals are experiencing in states where the regulatory climate impedes development of new long-term care beds.

Alliances are equally important to nursing homes because:

* Acute care and rehabilitation hospitals are the primary source of subacute patients. Almost all subacute patients originate from them and move along multiple levels of care before returning home. Therefore, alliances ensure a large enough patient base to minimize development risks, in that they provide a link to the front end flow of patients.

* Nursing homes usually are not tied to the traditional payment sources for acute care and rehabilitation providers. This is particularly important for the managed care arena, where competition for group or sole-source volume contracting exists.

* Since the requirements of subacute care delivery are equally foreign to the nursing home provider and to the acute care provider, both can benefit from each other's expertise.

* All in all, alliances can create a market-sensitive product which moves patients to the most effective and efficient level of care in a smooth and timely manner.

* Alliances, because they are organized systems, can attract managed care contracts and improve revenue streams.

The first step when developing an alliance with hospitals is to determine the market's need for subacute services. This should be done through market studies and discussions with area hospitals.

Next come operational issues, such as targeted marketing to populations, training staff, allocating space and developing a smooth system of patient flow.

Targeting Population

It is impossible to be all things to all people, so a starting point is determining which subacute services to offer. Long-term care providers should target the population based on their market research. Programs can be either predominantly medical (ventilator-dependent, pulmonary, cardiac, etc.) or rehabilitative (stroke, post-orthopedic, etc.).

Training Staff

A well-trained staff is critical for success once a long-term care provider determines the type of subacute program to offer. The staff must have more intense acute care skills than required for traditional long-term care. In fact, subacute care averages over four nursing hours per patient day. Rather than look to the existing staff for acute care skills, it is better to hire new, already skilled staff exclusively for subacute services. In addition, the ancillary staff such as physical therapists, should be experienced in treating patients with the specific diagnoses addressed in the subacute unit. When affiliating with acute care or rehabilitation hospitals, the sharing of educational programs, clinical protocols and standards of care can benefit both partners.

Space Planning

In addition to its own staff, the subacute unit should have its own dedicated space, including ancillary space and a separate entrance. This is because the subacute product varies greatly from traditional long-term skilled care. It requires different ways to manage patients and involves significantly different expectations from patients. Often the subacute patient is under age 65 and does not wish to be mixed with long-term care residents.

Controlling the Flow of Patients

Internal case management is a key to success when establishing alliances. The case manager will ensure the correct flow between the acute care or rehabilitation hospital and the skilled beds. But controlling the flow of subacute patients takes more than a case manager. It also involves several internal and external factors.

Internally, long-term care providers must first develop a distinct mission and clear understanding of their role in the continuum of health care.

Next, strict admission and discharge criteria must be established. Admission criteria should be based on the acuity levels of patients the facility can safely treat. Patients must always be discharged to the appropriate setting as soon as possible. When working with an affiliation arrangement, discharge criteria should be coordinated with each provider to eliminate gaps in the system. A strong affiliation should ensure that no targeted patients "fall through the cracks."

The unit's medical director, through strong medical management, has a major impact on the flow of patients. The director has responsibilities similar to a medical director at an acute care hospital and is equally involved in directing patient care. For example, a physician typically visits patients three times a week on a subacute unit, compared to monthly visits for skilled care.

Influence of Health Care Reform

Patient flow will be directly affected by national health care reform issues aimed to reduce the costs and ensure appropriate care levels. Nevertheless, even though health reform is still in the developmental stages, long-term care providers should consider developing subacute care now. Providers will then be best positioned for health reform's inevitable increased pressures to further control patient flow and costs.

The National Council on Aging has offered the Clinton Administration recommendations including long-term care in the early phase of health care reform. The Council wants managed long-term care services to be integrated with other acute and chronic medical services in any national reform initiative, and this would include:

* Establishing a national health care commission with the primary function of integrating acute and long-term care.

* Expanding Medicare coverage and development of a care management system.

Currently, patients are often transferred from one level of care setting to another without the necessary planning and follow through, thereby increasing acute care utilization. A more efficient, cost-effective approach is creating a continuum of care which facilitates improved continuity of health services.

Subacute care can provide such continuity, bridging the gap between hospital and nursing home services. Regardless of how long-term care reform evolves, managed competition and a per capita payment system are expected to be two major elements. Each would foster the development of subacute as a distinct service.

Under a managed competition model, individuals and small businesses would join health insurance purchasing cooperatives. These cooperatives would then contract with accountable health plans (AHPs) to provide services. Larger businesses would contract directly with the AHPs, similar to preferred provider arrangements. The AHPs will include hospitals, physicians and other providers who network together to cover a defined population group. While the AHP, as proposed, would not include long-term nursing home services initially, short-term subacute services of 30 days or less are included.

Developing Managed Care Contracts

No matter what form of health care reform plan is adopted, managed care promises to be a major component. It is also the primary market for subacute programs. Managed care arrangements for subacute care are the vehicle for nursing homes to attract new patient populations and payment streams.

Most medical insurance policies do not pay for long-term care. However, through "out of contract" programs, many will pay for subacute programs, even when provided in a long-term care facility, because they are less costly than acute and rehabilitation care.

Selling subacute care is not easy for long-term care providers. It involves dealing with new reimbursement systems, such as capitated contracts, as well as creating a new image. Traditionally, nursing homes are perceived as a place where patients do not go to improve medically. This image must be reversed so that managed care buyers feel confident that patients will receive a high quality product that generates functional outcomes.

On the positive side, however, nursing homes have the competitive marketing advantage of being able to offer a lower price than hospitals when providing subacute care. And lower cost is a primary goal of managed care.

Subacute services should be marketed to two types of managed care vehicles: HMOs and PPOs. Each requires a different approach when developing contracts. But in each situation, marketers should concentrate on selling the benefits of the program as a cost-savings measure which provides appropriate care levels. Meanwhile, education will continue to play a major role in selling contracts because the concept is relatively new.

PPOs are sold case-by-case directly through insurance case managers. Subacute marketers must know who the case managers are, what they are looking for, and offer a program to meet their needs.

However, sole-source contracts can be sold to HMOs. To do so, marketers must clearly differentiate their product from others available. They must provide thorough information about staffing, services, outcomes, competitive position and price. A sophisticated cost-accounting system is essential for success.

A word of caution is necessary for long-term care providers in a subacute alliance with a hospital: be sure not to compete for business with the hospital. Instead, target the hospital's "outlyer population." (Outlyer patients require a long length of stay and generate high costs).

Steps for Success When Entering Subacute

When managed competition and per capita payments begin to take hold, nursing homes which wish to offer high-quality subacute care need ultimately to become part of an AHP. A clearly defined plan for developing subacute care is the key. To accomplish this successfully, they should implement the following steps:

* Determine the specific subacute needs of area hospitals and other referral sources.

* Initiate discussions with the area's acute and rehabilitation hospital administrators and discharge planners.

* Determine the potential for physician support in the area. Physicians must believe that quality care will be delivered.

* Identify what facilities may be providing similar subacute services within the market and be sure the market will support additional new services.

* Evaluate the potential of giving subacute care its own identity. This includes separating the geriatric and nongeriatric populations. Older, chronic long term patients must be distinct from the younger, subacute patients to have effective level of care coordination and attractiveness to customers.

* Form strong working relationships with area hospitals. This could include collaborative working relationships in the development and operation of the subacute unit. In some cases, the hospital may be able to assist directly by providing higher-acuity nursing and other professional staffing. The hospital and nursing home could also work toward establishing joint admission, discharge and treatment protocols.

* Consider moving beds into the hospital and/or onto the hospital campus to create a "seamless level of care" system (although, of course, in some states, CON regulations prohibit this).

* Identify managed care providers to determine their current and future needs for subacute care. If a viable unit can be developed, market it directly to existing managed care providers.

* Keep abreast of industry developments for subacute care. In addition to the American Health Care Association, the American Subacute Care Association (Surfside, FL), and the International Subacute Healthcare Association (Minneapolis, MN), various national associations for acute care, for-profit and rehabilitation hospitals are currently developing and defining subacute care.

In conclusion, building hospital and managed care relationships today will position nursing homes to be tomorrow's alternative to more expensive inpatient hospital care. Remember the primary goal of today's health care initiatives: reducing health care delivery costs while providing the most appropriate care. This is the rationale for positioning skilled nursing homes in the subacute care market.

Harriet S. Gill is managing partner of Fowler Healthcare Affiliates, Inc., an Atlanta-based healthcare consulting firm. She has a master's degree from Wright State University Graduate Business School and a bachelor's degree from the University of Connecticut.

Armand E. Balsano is partner, Fowler Healthcare Affiliates, Inc. He has a bachelor's degree cum laude from California State University and a master's degree in health administration from The George Washington University.