michigan nursing home in distress (P. 2)

Four tell-tale signs that skilled nursing home operations are going in the wrong direction…..

This is a four-part series in which Roger Mali explores specific major operational indicators that a skilled nursing facility is in financial and/or operational distress. In this series, he will explore the finer points and nuances associated with:
(1) low census and low referral rates,
(2) poor collection rates on revenue and aging on receivables,
(3) problems with employee turnover and mispositioning of employees, and
(4) delinquent and outstanding taxes relating to the Michigan Quality Assurance Assessment Program (i.e., Bed Tax).

II. Poor Collection Rates on Revenue and Aging on Receivables

Several years ago, I had a fascinating conversation with a financial consultant – sharp as they come, but completely outside the healthcare industry. We were catching up over coffee when the topic turned to medical billing in nursing homes. As I walked him through reimbursement rates, cost-based Michigan Medicaid, contractual allowances and the maze of payor requirements, his body language said it before he could: this is crazy.

And he’s right. Revenue looks simple – resident days times reimbursement rate equals total revenue. But in skilled nursing, the margins on government funded payor sources are razor thin, often under 1.5%. There’s almost no room for error. Poor collections aren’t just a billing headache; they’re a sign something deeper is wrong.

Here are three areas worth examining when collections are lagging:

a. Are there specific payor sources, or types of payors that are not paying?

All payor sources are different, and all have different requirements for receiving payment. Some will bill under straight per diems, some under a patient driven payment model (PDPM) using standard RUGs categories or customized categories, and some will have fixed maximum coverages. Prior authorization guidelines will vary considerably too. What I have found by digging into each payor separately is that patterns will arise — and when there are groupings of similarly situated payors that are not paying, paying slow, or paying at a lower-than-average rate, it signals operational issues at the facility.

For government-controlled payor sources, delays in payment from Medicaid and Medicare could be more significant than simple slow pay or a breakdown in coding. It could be a fundamental disconnect between the nursing and therapy departments and the billing and collections offices. It is also important to confirm that the nursing and therapy

departments are providing the services — and if they are, why are they not being captured on the MDS, billing, and time sheets?

If there is a particular group of private insurances or HMOs that are not being billed correctly, it is important to "ask the next question" of the billing office manager. Does he or she understand the billing requirements for that insurance? Not knowing how to submit the claim could be an indication of poorly trained or inadequate business office personnel.

The groupings and the trends will give an indication of underlying root causes. But it does not necessarily mean that it is just the biller not getting claims out. Look at the gap and be tuned into whether there is a clinical or business office breakdown causing the problems. It could be a sign of poorly trained, or wrong people, in the assigned positions.

b. Is the facility taking too much “risk” with payment to drive census?

While there is always a need to drive census, pushing census at the risk of taking non-payor residents can create extraordinary problems downstream. High occupancy with non-paying residents, is not sustainable. The issue that the facility is not getting paid for services provided is just one side of the coin. The issue is compounded because it further means that the facility is also going to have to pay for the resident’s out-of-pocket medical expenses relating to ancillary services such as pharmacy, physical therapy, x-ray, and laboratory.

Essentially, the skilled nursing facility not only loses the revenue for the nursing care, social services, room fees and food services it has provided, but in addition the facility will end up having to pay for the entire continuum of care of the resident.

If the skilled nursing facility has non-payors in the building or there is a trend of Medicaid authorization denials, it is a good indication that there are operational issues with the screening and intake of the residents. Either the Admissions Director or the Business Office Manager is not doing adequate spot checking to ensure that the payor sources and prior authorizations are in place. This could signal poorly trained or wrong people in assigned positions – or it could signal that the facility has a marketing and census issue in it cannot attract residents with adequate payor sources.

c. Are the guardians and responsible parties doing their jobs in ensuring that the facility is getting paid?

We have all seen it – there are the extremely communicative, friendly and helpful responsible parties, the family members who visit, assist with the Medicaid applications, respond to phone calls, pay their bills and PPAs on time. And there are the helpful

guardians who have good, qualified people who communicate with the facility and work to identify payor sources and ensure that the facility is getting paid. But then there are the cases of the estranged family member that is somehow responsible for his great-aunt’s affairs and does not answer his phone, check his email or return calls. Or the guardian who was once wonderful to work with but is seemingly too busy with too great of a caseload to communicate or help with their wards’ Medicaid applications.

It is frustrating all the way around. And, while the nursing facility cannot change the way the responsible parties behave, having a pattern of poor relationships with family members or guardians is another signal of operational deficiencies at the facility level. If the pattern is recurring, it is clear signal that one or more of the employees is not doing a proper job vetting admissions and background checking for adequate payor sources. Consistent problems with family members or repetitive problems with problem guardians could be sign of breakdown in admissions policies and procedures - or it could be simple laziness. Either way, it signals a problem with management.

Slow collections and poor revenue aging are obvious signs of distress. With skilled nursing, you must examine the groupings of payors sources and look to the causes of lagging collections. Only with a full view and analysis can you determine whether there is a systemic or cultural problem with the nursing facility’s operations.ces.coming.