5 Question to Ask When Considering a Change from Contract Therapy to In House Program

The introduction of the Patient Driven Payment Model (PDPM) prompted a number of skilled nursing operators to question whether this might be the catalyst to move from a contract therapy provider to an in-house model. Eliminating therapy minutes as a driver for reimbursement prompted some to question whether it might be more cost effective to employ therapists rather than outsourcing services to a third-party provider. Ultimately it appeared that most organizations decided to delay any changes, preferring to evaluate the impact of PDPM and how it might impact a change. 

It is safe to say that the focus of all skilled nursing operators shifted from evaluation mode to survival mode when the Coronavirus struck in early 2020. The past ten months have shown the resilience and dedication of those who work in the skilled nursing industry. While there are still many challenges facing the industry there is some hope for a return to normalcy with the introduction of a vaccine.  This optimism may provide skilled nursing operators the opportunity to take a proactive approach to evaluating and managing their business.  This may include the conversation about contract therapy vs in house therapy.

For those operators who want to revisit the possibility of bringing therapy in house here are five questions to consider:

1. What is the organizations reasons for considering the move to in-house therapy?

An organization should be clear on why they would consider moving from contract therapy to an in-house program. Is the decision being driven by potential costs savings? Is it more about having control over the therapy program and the therapy team? Is it driven by one or more bad experiences with a contract therapy company? It is important for an organization’s leaders to be clear about why they are considering the move and ensure they have clear measures for comparing the two options before moving forward with an evaluation.

The therapy vendor relationship is the most significant vendor relationship of a skilled nursing facility because it involves actual hands-on care of residents, as opposed to a product or service. Changing the model generally involves changing the staff (most contract providers have a clause preventing you from hiring their staff) and this will be quite noticeable to residents.  Given the significance of a change in the therapy program (whether it be contract providers or moving in house) it is important that leaders are clear on exactly why they are considering the move and the benefits they hope to gain.

2. How will we accurately evaluate the financial impact of moving in house?

This is an especially important consideration, as cost savings is a major reason for moving the program in house. Organizations need to evaluate what costs they will incur, beyond obviously payroll, to evaluate the potential savings. There are several variables that will impact this calculation including the number of facilities, proximity to each other, technology costs, and required support staff.  It is important to get an accurate assessment based upon the unique needs of the organization.

3. How will we replicate the expertise provided by our contract therapy provider?

Many organizations originally decided to outsource the therapy program to a third party for the clinical and regulatory expertise they provided. Bringing a program in house will require an organization to find a way to replicate the expertise provided by the contract therapy provider. How much of this expertise can be provided by the therapy team, particularly the Rehab Director? Will this require hiring additional staff? How will this impact the potential cost savings of going in house? These are some of the questions to consider when evaluating this consideration.

4. What type of staffing levels will our average census require and how will we manage the fluctuation in census?

The potential costs savings of moving the therapy program in house is impacted by how efficiently the therapy department is managed.  Therapist productivity, or the percentage of their paid time involved in a billable activity, is critical in managing a profitable therapy department.  If cost savings is one of the primary reasons for bringing the program in house this is a critical question to be answered.  The right mix of therapists versus therapy assistants is also an important factor when evaluating this consideration. For organizations with multiple facilities in relatively proximity there is the added question of how best to share staff to meet patient care needs while managing costs.

5. How will our organization meet the additional responsibility of recruiting and hiring qualified therapists?

Staffing is a challenge for most organizations for a variety of reasons. Recruiting and hiring therapists may present additional challenges as the labor pool of qualified therapists is even smaller than for a position like nursing. As such many contract therapy companies employ full time recruiters to identify and hire therapists. Does your organization employ recruiters or is that function the responsibility of human resource personnel? What is the organization’s track record in hiring and retaining employees? What is the therapy labor pool like in your markets? Are your company’s benefits attractive enough to the therapy population?

These questions will begin to provide an organization the insights necessary to determine whether moving from contract therapy to an in-house therapy model is the right move. The decision often comes down to comparing the potential cost savings and benefits of control versus the added responsibility and competency that is required to manage the therapy program. There are both large and small organizations that successfully utilize the in-house model, although it appears that more organizations opt for the contract therapy model.  So, which is the right option for your organization?  

To learn how Axis Healthcare can help you evaluate the options and make a successful transition if appropriate, contact Tom MacDonald at tmacdonald@axishealthconsult.com or 513-225-2620