Higher wages, lower census, lower reimbursement rates are all among the factors creating financial pressure on skilled nursing organizations. There are no single solutions to these pressures which is why it is so important that operators look for cost savings throughout their organization.
One opportunity for cost savings exists within the therapy department of many skilled nursing facilities. The potential for cost savings exists for organizations using contract therapy services as well as those with in-house therapy programs. Unlocking these cost savings can often happen quickly while others require more time but each is worth pursuing.
For organizations using contract therapy providers the best opportunity to unlock savings can come through understanding how therapy companies price their services and how this impacts the delivery of care. The shift from RUGS to PDPM resulted in new pricing models from contract therapy providers. In our research, Axis Healthcare Consulting found that the price per minute of therapy often increased by as much as 20% and higher under these new contracts. This could be due to either better than anticipated PDPM rates or it could be due to less care being delivered to your residents. Understanding the nuances of how a therapy company sets their prices and how it impacts the delivery of care allows one to negotiate much more favorable contract pricing. Negotiating more favorable contract pricing can result in annual savings of 10% or more on your contract therapy invoices.
Organizations that select an in-house therapy model, where they employ the therapists, do so for a variety of reasons. In some cases, it is due to multiple poor experiences with contract therapy companies, others it is due to a corporate philosophy of not outsourcing clinical care and for others it is a strategy to reduce costs related to the delivery of care. The challenge in moving therapy in house is having the right management structure in place to oversee all aspects of therapy. One area that is often overlooked in an in-house program is therapist productivity. Therapist productivity is the percentage of their day in which a therapist is involved in billable patient care. A reasonable productivity standard for therapists is somewhere between 80-88% depending upon the nuances of the facility and therapy department. Our team has seen many in-house programs where the average therapist productivity is in the 60-70% range. This can lead to unnecessary labor costs in the tens of thousands of dollars each month. Our experienced team can assess staff productivity, identify barriers to meeting industry standards and implement a strategy to improve productivity to a more reasonable industry standard and in turn generate significant cost savings each month without compromising clinical care/outcomes.
The final opportunity to generate cost savings is by exploring a move from a contract therapy provider to an in-house model with a Therapy Management Company to assist with management of their therapy program. For those organizations concerned about their lack of regulatory and clinical therapy expertise they can consider a management model in which they employ therapists but hire a third-party manager to provide the necessary clinical, regulatory, and operational therapy expertise.
The cost savings of moving therapy in-house can potentially save hundreds of thousands of dollars a year depending on a variety of factors. Our team at Axis Healthcare can conduct an analysis of the potential cost savings along with the operational considerations of moving therapy in-house and can help you determine based on these operational considerations if a third-party Therapy Management Company makes sense for your organization. If your organization opts to remain with a contract therapy provider, Axis Healthcare Consulting can assist you with conducting an RFP to find the optimal contract therapy partnership or in renegotiating your current contract to ensure that your are receiving the most favorable contract terms and pricing along with receiving all the benefits promised as a part of this contract therapy service.
Contact Tom MacDonald at tmacdonald@axishealthconsult.com to explore each of these cost savings strategies.