There are a variety of reasons that skilled nursing organizations opt for an in-house therapy program rather than using a contract therapy provider. Chief among those reasons is a desire to reduce the costs of therapy, particularly after the change from RUGS to PDPM. The potential to reduce therapy costs by as much as 20% offers a compelling reason for organizations paying millions to their contract therapy provider.
While moving therapy to an in-house model can generate significant cost savings, it can also end up being more costly than contract therapy if not managed carefully. These are some of the pitfalls that can end up wiping out the projected cost savings of an in-house therapy program.
- Staff Productivity – therapist productivity, their percentage of paid hours engaged in billable activity, is the single biggest pitfall driving higher department costs. Failure of management to establish productivity expectations and to hold staff accountable, will eliminate much of the potential cost savings.
- Inefficient Staffing Management – This involves utilizing current full-time staff effectively and efficiently across your organization. The wrong mix of evaluators vs assistants, poor scheduling practices and real time staffing adjustments can drive up staffing costs and impact patient care.
- Excessive PRN usage – Utilization of PRN staff is an important tool to ensure patient care needs are being met. However, PRN should be used judiciously as hourly wages from PRN staff can be 20% higher than full time staff. Management should set a target for PRN utilization and monitor usage to manage staffing efficiency. If consistently over this target, you would need to consider adding additional full-time staff.
- Staff Salaries – there is a tendency for in-house programs to pay above market wages, in part due to a lack of a full-time recruiting staff. HR departments are focused on filling open positions, often times using above market wages to do so. Paying above market wages can add thousands of dollars a year per therapist to labor costs.
- Management oversight – often times in house programs leave all aspects of department performance to the Therapy Director with very little oversight on the above metrics. Even the most competent and accountable Therapy Director requires management oversight.
Each of these pitfalls can be addressed by establishing specific metrics, monitoring these metrics, and having a plan to address underperformance. While this is easy to say, it is more challenging to put into practice. Employing a Therapy Director who can hold staff accountable and provide impactful coaching is a key to a clinically and financially successful in-house therapy department. Development and implementation of policies and procedures to support the management of the therapy department is also a critical component to success. A financially successful therapy department is attainable for any in house program provided that management shows a commitment to managing the pitfall stated above.