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Considering In-House Therapy? The Good, the Bad, and the Ugly

As one of the first therapy companies to specialize in management services for in-house therapy programs, HealthPRO® Heritage was founded 20+ years ago and has since evolved into one of the most prominent, privately-owned therapy AND consulting firms in the country. This article offers SNF providers the benefit of our years’ experience and insight into how PDPM will certainly pressure-test delivery of rehab services – especially for in-house therapy programs.

Typically, a SNF operator might consider in-house therapy in order to: 1) achieve cost savings, and/or 2) have more control over how therapy is managed.

Under PDPM, reimbursement is shifted away from therapy to nursing and the prescribed minutes of therapy delivery as a reimbursement requirement are lifted in favor of a patient characteristic-determined treatment plan.  So, in truth, an opportunity to achieve some therapy cost savings over time exists, but is highly predicated on maintaining compliance standards and execution of several [new!] competencies, interdependencies, and program variables including:

  • Medicare Part A caseload size & current RUG mix;
  • The ability to compliantly leverage group and concurrent therapy;
  • Access to clinically-driven, compliant utilization pathways (that match therapy intensities to patient characteristics and assure good outcomes);
  • Therapist adoption of the pathways and proper case management in alignment with positive outcomes;
  • The presence of an EMR system designed for therapy delivery under PDPM;
  • The availability of -- and therapists’ adherence to -- PDPM-enabled scheduling/treatment planning technology features;
  • The ability to project, achieve, and maintain the optimal therapy staffing mix and patient care time in an ambiguous therapy utilization world; and
  • Creating and sustaining an appropriate therapist compensation structure and benefit package.

Also, consider that, in many cases, a significant revenue opportunity exists -- but only for operators who understand PDPM’s complicated dynamics and can execute on key success drivers such as early/accurate coding and scoring, effective interdisciplinary team function, and documentation of Nursing & NTA rate components to capture the acuity of Medicare Part A patients.  And while the MDS schedule is simpler under PDPM (requiring potentially fewer assessments), its rigidity means that providers must appropriately capture acuity on the Initial Medicare Assessment (formerly the 5 day), putting pressure on the IDT to execute flawlessly and adopt process changes (yesterday!) that are critical for success under PDPM. 

In contemplation of several PDPM dynamics, a question worth asking for those considering in-house therapy is whether the potential savings and inherent risks are worth the opportunity costs associated with executing  various PDPM “must haves” in other areas.  In other words, is the net opportunity really worth the risks of managing an in-house therapy program independently? Or – by outsourcing to the right therapy partner – could providers more effectively realize cost savings, transfer economic risk, and secure additional PDPM-specific therapy expertise? 

Consider this perspective from an administrator of a large not-for-profit hospital-owned SNF in a metro market in the southeast:  “In-house therapy made sense for us under RUGs because of the volume of our program.  However, PDPM introduces new complexities, risks, and financial considerations that make running our own therapy program much less desirable. Given the tight reimbursement constraints, our team just doesn’t feel comfortable managing a variable cost model.  And, with so much change to manage in other clinical areas, we believe that transitioning to an outsourced model would better position us for success. While the decision to outsource was clear, it was more challenging to find the ideal partner.  There are many companies saying the right things, but not many who actually have the demonstrable ability to deliver a program that supports our needs under PDPM.  We searched for a partner with a proven track record who could deliver results – not just in therapy – but who would support our IDT in terms of overall case management processes, compliance, etc."

Whether you’re a SNF operator that ultimately trusts in an outsourced therapy model -- or you decide to maintain/transition to in-house – HealthPRO® Heritage strongly urges all SNF providers to understand what it will take to operate a successful therapy program under PDPM & beyond:

#1: Caution Ahead!
With only seven weeks away from our industry’s biggest change in decades, HealthPRO® Heritage offers an important recommendation: Understand the financial and compliance risks inherent in the transition to PDPM. 

Specifically, operators must proactively prep for what HealthPRO® Heritage is calling a fiscal trough -- the predicted cost risk related to the time it will take to consistently execute on efficient/effective clinical pathways and appropriate levels of group/current therapy. Also, maintaining optimal therapy staffing mix and levels – especially as case mix and census fluctuate – is a real challenge in-house programs and can easily create higher fixed costs.

“We anticipate a steep learning curve and predict that – without strategic support and the right pricing mechanism for outsourced models – SNFs may struggle financially the first 6 months under PDPM,” says Crista Stark, Chief Strategy & Development Officer at HealthPRO® Heritage.  “Our pricing approaches align care management incentives and insulates our outsourced partners from Med A efficiency leakage, because we are bearing that cost risk entirely.  In contrast, in-house providers -- without perhaps even being fully aware it – will assume this risk.” 

Beyond economic risk is the question of compliance risk as well.  Because full indemnification is only available via outsourced therapy contracts, going it alone inherently increases an in-house provider’s risk profile.  These SNFs would be well-advised to invest in compliance mechanisms to avoid potential red flags, and make sure therapists deliver the appropriate care in order to optimize outcomes. Even the most robust in-house therapy program would benefit from having access to evidence-based, clinical utilization pathways and a PDPM-informed compliance oversight plan, for example. 

#2: A Big Toolbox
Great therapy operators – that drive exceptional outcomes – aren’t built overnight. Or even in just a few short years. On the contrary, significant investment is required to equip a therapy team with all the tools necessary to run a sophisticated, well-oiled machine.   

Hilary Forman, Chief Clinical Strategy Officer at HealthPRO® Heritage comments, “There’s an inherent responsibility for therapists and therapy companies to continue to innovate and raise the standards of care.  Under PDPM, CMS is challenging us to serve up progressive clinical solutions and pushing us to work at the top of our license.” 

SNF leaders should ask: Does my therapy team have access to these very necessary resources to succeed under PDPM and other healthcare reform mandates? 

  • A library of evidence-based clinical programs and utilization pathways?
  • PDPM-ready EMR system for documentation and outcomes tracking?
  • A strategic work plan (i.e.: clinical and operational) that proactively serves to balance cost and compliance with quality outcomes?
  • The ability to track and interpret outcomes data and market analytics to inform strategic decisions?
  • Progressive education that’s aligned with PDPM success drivers and the SNF’s goals/high standards?
  • A compliance program & related processes that review therapy treatment, documentation, and outcomes in combination with QMs, billing processes & submissions? 

If not, reach out to HealthPRO® Heritage today to take advantage of resources, clinical utilization pathways, and expert guidance. Ms. Forman explains, “Intensive education (including strategic analysis of predictive financial modelers) for both our outsourced and in-house partners has been ongoing since January.  After all, it’s critical for our partners to have the necessary tools and understanding of the clinical, economic and compliance dynamics in order to prepare, execute and succeed under PDPM.” 

#3: Expect More from a Flexible Therapy Partnership
If you’re currently operating your own in-house therapy, but interested in outsourcing to increase your speed to PDPM success – you’re not alone. Many operators -- who truly understand the inherent risks associated with the PDPM transition – have made the strategic decision to outsource.

The COO of a small, for-profit chain in the Midwest provides his perspective:  “We brought our therapy program in-house under RUGs, but the transition proved to be much more difficult than we anticipated.  Capturing the financial upside put much more pressure on our management team, taking their focus away from other key projects and adding incremental costs we didn’t fully appreciate at the outset. The recruitment and staffing component alone was a constant challenge.  And while many anticipate that it will be easy to recruit therapists under PDPM, the art and science of projecting and maintaining the optimal staffing mix and pattern will not be easy.   When I think about all the things we need to change to be successful in PDPM – in combination with the inherent reduction in therapy reimbursement and more aggressive MDS accuracy requirements – I can’t imagine maintaining an in-house therapy program.  Our leadership team agreed:  Why not find a partner who can take on that risk and whom I can hold accountable?”

On the other hand, if you’ve thoroughly weighed the risks and are determined to run an in-house program, leverage our extensive therapy management expertise to provide your teams with the ready-made tools and resources to best navigate the transition.  HealthPRO® Heritage welcomes SNFs with in-house therapy programs (or those interested in transitioning to in-house) to explore competitively priced and flexible partnership options.   In-house therapy programs are sure to benefit from some form of customized strategy or support from therapy management experts like HealthPRO® Heritage.  The benefits of collaborating with an experienced, well-resourced therapy consulting company will help avoid pitfalls and even fortify your competitive edge under PDPM and beyond!

#4: If it Sounds Too Good to be True…
Joint ventures (JVs) represent one “rehab investment” avenue that may initially pique curiosity.  But while this approach may sound sexy, ask yourself whether the same desired objectives might be achieved in a simpler, less risky arrangement as you consider all the pieces of such a puzzle:

  1. JVs must meet specific CMS Safe Harbor & Anti-Kickback guidelines to be compliant with Medicare regulations. Choose carefully, because the facility’s Provider Number is at risk if not properly constructed;
  2. An upfront investment by the facility operator is required, which may put pressure on cash flow;
  3. Vetting a provider with whom you are jointly owning or running any business should be a decision that is carefully deliberated.  Ask:  What is the company’s compliance track record?  How is ownership structured? How many years in business? What are the contract terms and exit options?  Does the company also own competing SNF assets that could pose a competitive threat in your market?   Does a JV structure present relationship complications if the facility wants to exit the contract or sell?  Or, if the therapy company sells to another organization? 
  4. JVs typically promise an economic benefit (i.e.: “the hook”) to the facility operator. Instead, HealthPRO® Heritage asks: Does it make better sense to avoid the complications of a JV by simply negotiating the best pricing with an experienced therapy provider?  The result: preserve downstream flexibility and achieve similar economic results without the headaches or inherent risks of a JV.

Our philosophy:  A true partner...

  • Has skin in the game – and is motivated to share both risk & profitability
  • Bases what they know and offer (quantifiable support) on tangible experience
  • Empowers clients to choose flexible customer service options

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Tags: Skilled Therapy, Patient-Driven Payment Model, PDPM, CMS Update 2019