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Gearing up for rehab services under PPS.

Administrators of skilled nursing facilities (SNFs) have many decisions to make as they prepare for the implementation of Medicare's Prospective Payment System (PPS). Not the least of these is whether to rely on a vendor of rehabilitative services or to hire in-house physical, occupational or speech therapists to attend to the therapy needs of residents. Nursing Homes Magazine's associate editor Linda Zinn asked Stephen Durnin, vice-president of operations for the Polaris Group, to discuss the pros and cons of each of these two approaches and what rehab vendors can do to help SNFs prepare for the upcoming changes. His insight - based upon experience gained while working with clients in New York, a demonstration state for PPS-follows.

What can rehab providers do to help SNFs prepare for the advent of the PPS?

Durnin: One of the biggest challenges we identified during the PPS demonstration in New York - and in other states where managed care has become prevalent - was convincing therapists to accept what is essentially a managed care model for the delivery of rehabilitative services. Under PPS, therapy provision will involve increasing use of groups and group treatment; also, assistants, technicians and aides will be involved in delivering that therapy. This model runs contrary to the way most SNF-based therapists have been trained to practice, so they tend to resist it. Overcoming this resistance will require a great deal of education, and an important component of the educational effort will be having a system in place for measuring outcomes. During the demonstration, and in managed care markets, we found that when we could show therapists that the outcomes achieved with the new model for therapy delivery were as good as or better than those achieved with the traditional Medicare model they were accustomed to, they were more willing to adapt. Those rehab vendors that prepare their therapists to adapt to the new therapy delivery model will be of the most help to the SNFs they serve.

Some administrators whose facilities have relied upon rehab vendors in the past are talking about hiring in-house therapists in an effort to cut costs under PPS. What words of advice do you have for them?

Durnin: That's a reasonable approach to consider, but they must remember that there's more involved than simply comparing therapists' salaries to the cost of a vendor's therapy services. The demand for therapists, I believe, remains greater than the supply and, as a result, there can be a lot of turnover. This - and other employee-related expenses - can be costly. The question, on a total cost basis, is are the facility's administrator and supervisors prepared to deal with the staffing and scheduling problems and expenses the vendor has handled in the past?

There are other considerations, as well. On the positive side, a facility that hires its own therapists does have more control over personnel than one that relies on a vendor for rehab services, because the therapists are employees. But on the downside, employing in-house therapists eliminates risk-sharing opportunities that are available with the use of vendors. From a business perspective, another consideration is that in-house employees represent a relatively fixed cost, while contract labor is more variable.

These are all factors that must be weighed for each facility.

What qualities should facilities look for in a vendor of rehab services, especially in light of PPS?

Durnin: First and foremost, they should look for a vendor that is willing to share risk. If a vendor insists upon charging the same per-unit prices under PPS as it has charged in the past, that vendor obviously doesn't understand the new system. What will be needed is someone who is willing to "partner," and the time to be talking about that is now. Even though PPS won't become a fact of life for most SNFs until January 1999, if I were an administrator I'd be pleased if I had a therapy vendor who was starting this conversation today. Failure to do so will likely lead to confusion when PPS goes into effect. The second thing to look at is whether a vendor has sufficient staff to be able to provide the flexibility needed to meet the requirements of the PPS overall, and of the various RUGs categories specifically. For example, if a resident is in a category that requires 720 minutes per week of therapy and if that requirement isn't met by the PPS-required day, say Sunday, then the vendor has to be able to have a therapist at the facility on Sunday. Not all companies can do that. Conversely, if there is a "dip" in the caseload, the vendor must be large enough to be able to have other clients so therapists can be reassigned, in order to maintain the viability of its own business.

A third factor that will be extremely helpful to SNFs is if vendors have experience either in a demonstration state or with managed care. If a facility can find a company that is already used to groups and has already used technicians and aides to provide therapy, that vendor will be much better prepared to provide the needed services. PPS represents a significant change for rehab vendors, so I want to reemphasize that their personnel's preparedness (or lack of it) will have a major impact on the facilities they serve.

Does it seem to you that vendors are willing to renegotiate their pricing structures to enable SNFs to continue using their services under PPS?

Durnin: From what I gather, the larger vendors are already in discussions with their clients and understand the requirements of PPS. These larger companies appear willing to negotiate prices and, in my opinion, that's the only way they will be able to maintain their businesses. This willingness to negotiate seems to be a function not only of size but also of location. For instance, on the West Coast - where managed care is prevalent - and in the demonstration states, our company has already had to negotiate new pricing. PPS is a fixed-rate system, and SNFs don't have a huge margin of profit to work with, so vendors will have to be willing to negotiate. After all, the SNF in essence is providing them with a place to conduct their business and earn revenue; so an administrator faced with a vendor that is unwilling to absorb its share of the financial risk under PPS should be looking for a new vendor.

What about the smaller companies? Does PPS represent a major problem for them?

Durnin: Vendors - regardless of their size - will have to require their therapists to account for their time almost down to the minute. This implies the need for an extremely sophisticated management system. Under the old system, therapists have been able, and often willing, to assist nursing staff in caring for residents in ways that were not always 100% hands-on therapy-related. That will change, and both the therapists and nursing staffs will have to understand and adapt. This, too, will require education and communication. Back to the issue of tight management - one thing I noticed when touring facilities in New York during the demonstration was that it appeared the director of nursing, the MDS coordinator and the head of the therapy department were always together. It was as if they were joined at the hip. This is no surprise, because the PPS requires detail-oriented, daily case management.

Do you have any words of encouragement for administrators and supervisors of SNFs who are gearing up for PPS?

Durnin: There is much said about the negative impact the new system will have, but I see some pluses. For example, the existing cost-based system has some unusual incentives - reimbursement demands that invite unnecessary or misplaced costs. A flat-fee system, such as the PPS, forces a more natural order in terms of the responsibilities of nursing staff and therapists and how they're supposed to work together.

The existing system has driven some services to the ancillary side of the business, often not because of residents' needs but as a byproduct of the reimbursement system. But skilled nursing facilities are called "nursing facilities" for a reason. One feature I like is that PPS recognizes the value of restorative nursing services and encourages their use by paying for them. So all in all, although adapting to PPS will be a complicated process, I think everyone needs to recognize that PPS is not all bad news. If nursing home administrators feel discouraged, they should ask their hospital counterparts about their pre- and post-DRG experiences. I am sure the transition to the DRG system was difficult, but many consider hospitals today to be more efficient, profitable and successful as a result.

Stephen Durnin, MBA, MSPH, NHA, a former nursing home administrator who has been involved in healthcare-related activities for more than 20 years, is vice-president of operations for the Polaris Group, a subsidiary of NovaCare, Inc., that provides management consulting services to the long-term care industry.
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Title Annotation:Medicare's Prospective Payment System; interview with Stephen Durnin, Polaris Group's Vice-President of Operations
Author:Zinn, Linda
Publication:Nursing Homes
Article Type:Interview
Date:May 1, 1998
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