Sink or Swim: What Senior Care Providers Need to Do Now to Stay Afloat

The post-acute, skilled nursing facility (SNF) sector is currently in a significant state of uncertainty, with the main problem being the lack of predictability in reimbursement when budgets are already tight. Here’s what you need to know about skilled nursing right now:

• MedPAC has once again recommended no market basket increase for SNFs for 2018 or 2019 because the 2015 Medicare margin for skilled nursing facilities was 12.6%
• The overall SNF margin (which accounts for all payor sources, including Medicaid) is a meager 1.6%
• CMS’ Proposed Rule is a 1% increase in Medicare payments, which is insufficient to cover increasing expenses such as wages, benefits, food, utilities, etc.
• The bill to repeal and replace the Affordable Care Act’s per capita caps will further reduce Medicaid reimbursement causing uncertainty for the SNF sector
• The average per diem CMP (Civil Money Penalty) assessed by CMS Regions has increased overall with a decline in citations of less than $50k and an increase in those greater than $50k, even though the national average number of survey deficiencies cited per month has been decreasing
• The new SNF Requirements of Participation announced last year include many provisions that are going to cost providers more to comply

These financial pressures—coupled with the current labor shortages and predictions that 2.5 million more workers will be needed by 2025—put senior care in critical spot. The economy is improving and unemployment is down, which means employees have more choices for work. With that, comes more competition and increasing pressure to raise wages at a time when the skilled nursing sector can hardly afford to be taking on more cost.  As a result, senior care providers have to look to ways to maximize labor productivity and avoid unnecessary costs.

Successful providers will evaluate and make improvements in these four areas:

• Cost Management: Take control of your largest expense, labor, by focusing on unnecessary overtime, which can very easily count for 10-15% of payroll costs. Monitor and manage scheduled overtime (overtime that’s built right into your staff schedule), incremental overtime (overtime incurred from employees punching in early or punching out late) and frictional overtime (overtime that results from last-minute call-offs) by setting a goal and then using a proactive scheduling system that monitors staffing levels on a daily basis.
• Retention: Just think of it like this: close the back door and leave the front door open. It’s equally as important to focus on retaining employees as it is attracting them. In fact, it may even be more important given today’s workforce shortage and high employee turnover rates. Engagement drives retention, so create open lines of communication and regularly reward good performance.
• Staffing to Budget: Meet, and possibly even surpass, your Five-Star Rating goal and position yourself to outperform the competition. Make sure you’re staffing to budget and adhering to HPPD. Running under budget can impact your star staffing rating and reputation while running over budget costs you excess labor dollars.
• Operational Efficiencies: Technology is the key ingredient for success in the fast-paced senior care space. Use scheduling and labor management software that tracks overtime, allows you to communicate and fill open shifts and ensures you’re staffed to provide consistent quality care.

Act Now or Risk Sinking

Do you have what it takes to weather the storm? Or will you stay stagnant and eventually go under? Senior Housing News states, “The vulnerabilities of SNFs (skilled nursing facilities) in this squeeze are separating the strongest operators from those that are not able to adapt to the new demands of the business.”¹  Your willingness to evolve is crucial, as is putting the right strategies, processes and technology in place.

If we learned anything from the early 2000s, it’s that the labor market is cyclical. Those organizations that make the right adjustments before it’s too late will be the success stories that are told the next time the industry needs a pep talk.