Whether a skilled nursing facility is publicly or
privately owned — or part of a large multi-facility, small regional
for-profit operation, or one of the array of not-for-profits — the
fundamental role of skilled nursing needs to change, according to Dale M.
Thompson, president and CEO of Benedictine Health System (BHS). "We
recognize the need to downsize and upgrade," he says, "which means,
essentially, taking care of higher acuity patients for a shorter period of
time." BHS has trimmed the average length of stay in many of its skilled
nursing facilities to 14 to 24 days.
Nursing home operators who can envision a facility
that is half its size, with private rooms, will be capable of offering a
high-quality care setting for higher acuity patients and, thereby, become
good partners in the whole health care system, suggests Thompson. And
because reimbursements for skilled nursing patients through Medicare are
typically much better than those through Medicaid, the nursing home
operation is much more likely to be financially viable.
BHS has been "downsizing and upgrading" through
its Benedictine Living Community model — a continuum campus that includes
skilled nursing, assisted living, and senior living components — along
with hospital-aligned skilled nursing operations that are often physically
attached to hospital campuses. BHS owns several hospitals, but most of its
partnerships are co-sponsored relationships with outside hospitals, where
BHS provides the discharge destination on the hospital campus.
Having a successful partnership requires working
out care protocols with the medical directors, the physicians (who are
usually part of an integrated physician health system), and the lead
clinical people involved in the skilled nursing setting in the hospitals.
"The nursing expectations and clinical pathways that lead to an
appropriate care setting are an important part of having a really good
model in place — and are often more complicated than building a new
building," Thompson says. Those hospital relationships have become the
cornerstone of success for BHS in the skilled nursing arena.
"Not-for-profits often underestimate the power of
their culture, mission, and values," Thompson adds. "They need to harness
that energy. They need to be more entrepreneurial. Not-for-profits are
often single-site facilities, but they have both a natural ability to
affiliate or align with other not-for-profits and tremendous opportunities
to co-sponsor care with other entities."
The impact of Medicaid
Two-thirds of the people who are admitted to
nursing homes typically have some part of their care paid for by Medicaid,
and that has been the case since the program came into being in the late
1960s, according to Thompson. "Even though part of the care for some of
those patients is paid for privately, Medicaid clearly represents more
than 50 percent of nursing home revenue," he says, "and everybody will
agree that the Medicaid system is in shambles. Depending on whose
statistics you believe, per-patient-day reimbursement from Medicaid is $13
to $20 less than actual costs."
Although dependence on Medicaid reimbursement is a
fundamental problem for nursing home providers, the increase in
dual-eligible payment opportunities represents the bright spot on the
horizon. In Minnesota and five other states (so far), Medicare and
Medicaid have come together as a single benefit package under a health
plan.
"In some of those locations, we have become the
care coordinator of this dual-eligible benefit," says Thompson. "In one of
our living community campuses, for example, we coordinate the care — 24
hours a day and 7 days a week — of 1,100 people who are part of a health
plan that combines Medicare and Medicaid benefits. If long-term care
financing were to move in a direction where private sector health plans
pick up on capitated risk – particularly through the integration of
Medicare and Medicaid – then care providers will see a whole new day.
We’ll no longer be preoccupied with setting rates and building new
buildings. Rather, we’ll be able to focus on the patient, on delivering
the services that they need and on being responsible for their care."
That, in itself, is certainly a breath of fresh air.
The Opportunity in Medicare
Medicare continues to provide the most appropriate
reimbursement of any government payer program and, therefore, is at the
heart of the opportunity for skilled nursing providers. Unfortunately, for
whatever reason, some nursing homes either didn’t catch on to that
opportunity in the first place or have gotten behind the times in terms of
being geared up for Medicare.
Traditionally, not-for-profit nursing homes were
the preferred provider in a community. "They had strong support and were
often 99 to 100 percent full," says Thompson. "They weren’t concerned
about admitting Medicare patients, because they didn’t have the available
beds. Facilities that put themselves in that spot have a lot of catching
up to do or will find themselves out of business. In Minnesota, 60 nursing
facilities have closed in the last five to eight years – locked the door
and thrown away the key. And much of that has had to do with their not
being progressive enough."
On the other hand, long-term care is shifting to
other settings and styles that are geared, in particular, to keeping
elderly people healthy and independent in their own homes. It makes sense,
then, to shrink the number of skilled beds and reshape them into a higher
acuity, Medicare-supported setting while also pursuing opportunities that
provide people with the lifestyle and support they need for independent
living.
The view from both sides
Prior to heading up BHS, Thompson co-founded a
for-profit, regional, multi-facility organization. "We started it from
scratch and ended up with 25 facilities," he notes. "BHS had also grown
over the years and was looking to put in place a long-term management
group. BHS first acquired our management company and then, over time,
purchased our facilities and converted them to Catholic-sponsored,
long-term care facilities. I came along with the store. And strange as it
may seem, we felt an alignment of culture on both sides, despite the
not-for-profit/for-profit difference in our business models."
The Sisters of St. Scholastica Monastery in
Duluth, Minnesota, created BHS in 1985 to further their health care
ministry. The Benedictine organization had successfully — from both a
fiscal and service perspective — delivered health care services in the
region since opening its first hospital in Duluth in 1888.
Today, BHS operates 10 acute care hospitals and
about 50 long-term care campuses in Minnesota, North Dakota, South Dakota,
Idaho, Wisconsin, Illinois, Missouri, and Kansas. On nearly all of the
long-term care campuses, the skilled nursing facility is the key
component. "One or two CCRCs don’t have skilled nursing on the campus,"
says Thompson, "although we wish they did and will try to get them there."
Having experienced both sides of the business,
Thompson recognizes the advantages that not-for-profits have over their
for-profit counterparts. "Some of the most creative things in senior
housing were originated, and continue to happen today, in the
not-for-profit sector," he says, "but not-for-profits can be a bit
independent — to their own detriment. Not-for-profits must be aggressive
and entrepreneurial with regard to the transformation of long-term care,
and there’s clearly enough leadership to accomplish that."
In Minnesota, a big chunk of the industry actually
seems to be migrating to the not-for-profit side. Not-for-profit groups
have sponsored or reshaped some for-profit facilities that were having
difficulties. At one time, the Minnesota nursing home industry was about
50 percent not-for-profit, according to Thompson. While that’s an anomaly
— in most states, the industry has been 10 to 20 percent not-for-profit —
Minnesota has now migrated to about 75 percent not-for-profit. And in
North Dakota, while a small state in terms of census, 77 of the 83 nursing
homes are not-for-profit operations.
"Not-for-profits have access to tax-exempt debt,
community support, and philanthropy," Thompson points out. "The
philanthropic response from the communities that we serve has increased
four-fold in the last two years, so that’s a huge benefit. And while
mission and values are particularly strong in not-for-profit
organizations, it’s certainly not tax status that determines good care.
It’s the commitment and passion of good people — and really good people
work in both camps."
Thompson expects to see more consolidation,
collaborations, and co-sponsorships in the not-for-profit world. "At BHS,
we find that one of our greatest opportunities going forward is to
collaborate with other Catholic-sponsoring organizations," he says. Of the
800 Catholic long-term care facilities across America, about half are part
of large systems and the rest are single, freestanding units. BHS has had
a lot of inquiries from organizations that want to align their long-term
care facilities with its system, particularly its hospitals. "We see lots
of opportunity in the not-for-profit world," he adds.
Going forward, then, BHS is banking on changing
the role of its nursing homes by providing higher acuity care in
partnership with physicians and hospitals. "We’ve found that that scenario
provides us with adequate resources to do a good job," says Thompson, "and
have a little bit left over at the end of the day. If we, as an industry,
can get beyond the real estate and become the community’s go-to long-term
care facility — one that combines health-plan benefits with a
care-coordination program that focuses on what people need and want — then
we’ll find success in this business. There’s certainly demand for what we
do, and we’re barely seeing the tip of the iceberg. The long-term care
business is the right place to be today."