McKnight’s Guest Column: Bundled Payments

McKnight’s is a leading skilled nursing industry news source that I’ve written for in the past.  This is my first guest column since moving to the REIT side of the business.  We meet with investors and analysts a lot and one of their most pressing questions lately is around bundled payments/comprehensive care for joint replacements (CJR) so I wrote about my take on it for McKnight’s.  Click on the article below to read the full text.

Dave Sedgwick McKnight's CJR Skilled Nursing article

 

Or read it below …

“What’s your take on bundled payments?”

About a year ago, investors and analysts would occasionally ask us some form of that question. Now, virtually every time we talk with investors, analysts, and bankers, they ask. At the end of answering questions on the topic for 45 minutes during one of these recent meetings, the investor laughed and incredulously said, “So, basically you’re the only ones saying, ‘No big deal. Nothing to see here. Business as usual.” Well, yes. And, no.

There’s a lot of hand-wringing in the post-acute world these days as observers try to predict just how material the constant changes to reimbursement will be for the operators. It seems generally believed that bundled payments expansion is a net-negative for the industry since it partly exists to lower Medicare payments. There will be “losers” who don’t adapt to the changes. But, there will also be “winners.” There always have been. As a former operator and current investor in the space, I have a positive view on what these changes mean for the profession.

Context Is Key

Viva-La-Evolution

I entered the skilled nursing profession as an administrator-in-training at The Ensign Group in California in 2001. Back then, one of the first themes I picked up on from the seasoned ED/DNS/DORs around me was that, “this isn’t your grandmother’s nursing home anymore.” “No, you see, while we still provide long-term custodial (I will always hate that term) care, we now specialize in providing short-term rehabilitation for Medicare and HMO patients.”

For the last 15 years, the best operators have been adapting to the demands of the hospitals (higher acuity, readmission rates), CMS (MDS/RUGS changes, 5 star ratings, compliance), and HMOs (shorter length of stay, case management, collaboration).

“So are you worried about this Joint Replacement thing?

On April 1, 2016, the Comprehensive Care for Joint Replacement (CJR) went into effect in 67 markets. Briefly, the CJR holds the participating hospitals financially responsible for the episode of care from the day of admission until 90 days later for major joint replacement or reattachment of lower extremity joint replacements (LEJR), hips and knees. If a hospital can lower the cost of that 90 day episode of care below targets set by CMS, they will reap the financial rewards with a bonus. The opposite is also true. Some warn that allowing hospitals to waive the required three night hospitalization before discharging CJR patients to SNFs rated 3 star or better will crush the 1-2 rated facilities. Others warn that hospitals will be incentivized to send CJR patients directly home with Home Health, bypassing SNFs altogether, because of the cost savings. In my opinion, these predictions have been overblown. The sky is not falling.

Now sing it with me … “You Tell Me That’s It’s Evolution”

evolution-darth-vader

I understand why outside observers worry that this as a seismic shift for skilled nursing (and HH for that matter). How, then is CJR not the end of the world for post-acute facility providers? Again, I see CJR as a positive step for post-acute care because it advances trends that level the playing field for stronger operators, ultimately benefiting the patients. Here’s what I mean.

  • Length of stay: HMOs have been pressuring SNFs to shorten length of stay for many years. The last facility I personally ran was 100% short-term rehab. Our combined Medicare/HMO average length of stay was in the mid-teens. Strong providers have been equipping themselves to shorten length of stay for years. They will employ similar practices on these LEJR Medicare patients that they have been using on HMO patients, thus gaining CJR market share from those who don’t.
  • Case Management/Data Reporting: Try competing in a market where your competitors employ the hospital Discharge Planners as part-time Social Workers on the weekend or pay kickbacks for referrals. What? It happens. Today. I’ve competed against it. The only way we could “level the playing field” was to be BETTER. We had to build strong, data-driven (readmission rates, satisfaction scores, survey results, clinical outcomes) relationships with the hospitals that earned our admissions. We had to reach out to hospitals years before ACOs or BPCI to “show them the data!” How does CJR impact this? It should put a vice on the unethically influenced placement of patients and make the market for post-acute patients more merit based. For the many hospitals that didn’t care about their post-acute discharge system, now they will. Stronger operators are poised to gain CJR market share because of it.
  • CMS Star Rating: As soon as the star ratings came out years ago, we complained because the system doesn’t necessarily reflect quality care. In the short-run, hospital may use star ratings in their discharge calculus. But, they’ll evolve as well. SNFs who are 1 or 2 stars can still receive joint-replacmenet patients. And, here’s the thing, patients who are ready to be DC’d from the hospital after a night or two have already been heading home with HH for years. Patients that have to go to the SNF have an initial hospital stay past 3 days anyway.
  • Readmission Rates: At the end of the day, the cost of caring for that patient for 90 days depends greatly on whether or not the patient is readmitted to the hospital. Hospitals are going to be very sensitive to which post-acute location gives them better odds of not having a re-hospitilization. Where would you send them? To the strong SNF provider with 24-hour RN coverage, a medical director, in-house therapists, wound care professionals, etc. or the patient’s home with her elderly husband to care for her in between the hour or so/day she gets from HH. Both graphics below from Avalere, show hospitals the need to partner with SNFs with the lowest readmission rates. It’s no wonder CMS is adding readmission rates to the star rating system this summer.

Screen Shot 2016-03-27 at 3.09.39 PM Screen Shot 2016-03-31 at 3.49.54 PMWhile there may be a slight tightening on the flow of LEJR patients for the general industry (only for 67 markets for now), the strong providers will be able to capture greater share of that theoretical smaller piece. But, let’s not forget the rest of the pie! Sometimes it seems that outside observers focus so much on the joint-replacement piece of the patient pie that they forget a few key points:

  • SNFs are taking care of sicker and sicker patients every year (the kind that absolutely require 24-hour nursing care)
  • Seniors demographics haven’t changed. The numbers of SNF-age patients is growing and will continue to grow for many years to come. While a piece of the pie might shrink, the overall pie will be expanding for years to come.
  • As a general rule, the highest Medicare reimbursement occurs at the start of the SNF stay, sometimes “stepping down” towards the end. So, as providers shorten length of stay, they may see a slight increase to their average medicare reimbursement rate.

So, What?

So, what does this all mean for investing in skilled nursing real estate? It has always been true that in healthcare real estate, the operator matters most. The playing field has been changing for the last 15 years. BPCI/CJR actually has the potential of slightly leveling the playing field in behalf of stronger operators. BPCI/CJR can’t be ignored and should be a factor in underwriting acquisitions. Higher lease coverages and cap rates are in order for facilities with lower star ratings and higher readmission rates as those metrics become more and more impactful on a provider’s ability to shift patient mix and capture short-term rehab market share.

Today (and tomorrow), more than ever before, your SNF real estate investment will hinge on the quality, sophistication, and culture of the operator running it.

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Love, Part 3: “This isn’t for you”

I’ve written about Pat Lencioni’s books before.  Really good stuff.  Weighted heavily towards the so-called soft stuff.  The same stuff, I believe, that creates separation from the pack and great companies.  I bring him up because the last two posts about “love” in the workplace or “love” as a leader remind me of a story he tells.  I think its a good illustration of what I tried to convey in Part 2

Pat’s POV — January 2014
When Meg Whitman Loved Me

No, this is not a tabloid headline. It’s a true story, and not a steamy one.

It was more than twenty years ago, long before Meg Whitman became the CEO of Hewlett–Packard, or candidate for governor of California, or CEO of eBay. I was just out of college in my first job as a research analyst for the management consulting firm, Bain & Company, and she was the lead partner on one of the projects I was working on, which made her something of my boss.
As a senior in college, I had decided that management consulting sounded really interesting. Management had always fascinated me, and being a consultant seemed like a wonderful way to help people. It was a perfect fit. So I applied for one of the most coveted jobs available to me and my classmates, and somehow was hired.

After about eighteen months on the job, Meg invited me to her office for a meeting. She said something pretty close to this: “Pat, I think you’d be a really good partner some day, but I don’t think you’re a great analyst.” Meg wasn’t one for fluffy conversation or saying things she didn’t mean. I knew that she was being sincere about both of her comments, and while I was simultaneously flattered and wounded, I was a lot more wounded. But I had to confront the fact that in the competitive world of big consulting firms, I was not on the fast track, and needed to find a new track.

Looking back and understanding my Myers–Briggs and DiSC profiles, I can see that I was never cut out to be a research analyst (I’m an ENFP and a high I and high D). My attraction to management consulting had to do with the work that partners did, but the only way to rise to that level in a big firm was to be better at quantitative analysis and number crunching than my peers. Meg made clear what I already knew, even if I didn’t want to admit it: I wasn’t ever going to love or be good at that kind of work.

I won’t say that I took the news easily. I certainly didn’t stand up and hug Meg (I don’t remember her being a big hugger). I probably agreed with her assessment a little sheepishly, and slinked back to my cube to begin pondering the future of my career (which would eventually take a new turn that has been a great blessing in my life). As I look back at that moment today, I realize it may have been the kindest thing anyone did for me in my career.

Let me be clear. I’m sure that Meg didn’t particularly enjoy having that conversation with me. But she did it anyway. She was gracious enough, direct, and most important of all, honest. And that’s a form of love. Love is not an emotion; it is a verb. What Meg did is take responsibility for helping me, regardless of whether she felt like it or how it would make me feel about her.

More leaders need to understand the power of honest feedback, because they would better serve their organizations and the people who work there. Keeping people in jobs or situations that are not suited to them is almost never an act of kindness, even when intentions are good. In most cases, it only prolongs suffering and prevents the pursuit of a better life. That’s not an argument for abruptly dismissing people who need to move on, but rather an invitation to have difficult conversations that give them clarity early and help them begin to take responsibility for their own success.

Ultimately, kind but direct feedback reduces the number of painful and expensive surprises that too often result in lawsuits for companies and personal scars for employees. If this seems like a simple message, that’s because it is. Unfortunately, this kind of love is all too rare.

So here’s to loving our people enough not just to hug them, but to tell them the kind truth. And here’s to Meg (I promise not to hug you).

Yours,
Pat Lencioni

You can read/follow Pat on his website here: https://www.tablegroup.com/pat/povs/

Love, Part 2: Wuv, Twooo Wuv

princess bride marriage love

In my last post, I talked about how important it is for leaders to not allow a void of communication to be created.  I want to drill down a bit on this with what and how we fill that void. I certainly didn’t intend to say in part 1 that we should only praise or shower people with love. What I believe is that we, as leaders, need to communicate honestly, clearly, directly, and … kindly. Depending on the employee’s performance, those conversations can be threatening, rewarding, or stabilizing.

“Tough Love” is really a misnomer.

If you really care about the individual as a person and you see him/her as a human being with hopes, dreams, fears, and responsibilities every bit as important as your own, you see beyond the job or task they may be failing at.  You see them and their happiness.  Nobody is going to thrive, over time, if they’re in a job that’s a poor fit with their strengths, values, and/or desires.

Here’s a real-life example (some details have been ‘vagued’ out to protect the innocent) …

“It’s evident to me that you’re unhappy here.  I say that because I’ve observed that in your demeanor but I also have some new concerns about the work you’re doing (Here’s what I’ve observed: X, Y, and Z).  Job satisfaction and job performance are usually pretty connected so I’m not surprised to see things that concern me on both fronts at the same time.  Life’s too short to spend most of your waking hours doing something you’re unhappy about or find unfulfilling.  If this is something you really want to do, then I will do everything within my power to help you be successful at it.  What are your thoughts?

[Whoa.  Do I answer him honestly?  He’s not attacking me, but he’s also forcing me to deal with the issues that I’ve been trying to avoid.  Do I answer him honestly?]  

I think the answer to that question, Do I answer him honestly?, depends a lot on your intent as a leader.  If your intent is to “performance manage out” this problem child, that will come across.  You may not think so, but sincerity is something that is really hard to fake.  If someone is being genuine with us we can generally tell, can’t we?  It’s a feeling we get.  Let’s continue with the feedback conversation:

In order for you to really be successful here, though, I’ve got to see the following changes (1, 2, 3).  Here’s the thing, I want two things.  I want you to be happy and I want you to be happy here.  And, because that’s what I want, I’ll do everything I can to help you be successful.  I’ll be more clear about my expectations.  I’ll follow up with you about your progress and I’ll listen to your concerns.  I won’t hold back my opinions.  IF, however, you disagree with my concerns and counsel and therefore disregard it, I can pretty much guarantee we’ll be having a difficult discussion like this again very soon.

The choice is completely yours.

To me, that conversation shows true love (twooo wuv as he says in Princess Bride).  We’re deceiving ourselves when we avoid the honest and direct conversations with employees.  We’re not being more kind.  We’re not doing them any favors.  We’re actually doing more harm than good.

The longer you wait, the harder the conversation becomes.

Don’t wait.  If you make it a common practice to give direct, corrective feedback as close to the issue as you can, you bring clarity to your team and you avoid mole hills turning into mountains.  Show the love.  Don’t wait.  Tweasure your wuv.

Love, Part 1: “Have I told you lately that I love you?”

 

 

Who knew that Rod Stewart was such a management guru?  He doesn’t look like one.  But let’s judge the man by his words not his appearance, huh?

Rod_Stewart_and_Ron_Wood_-_Faces_-_1975

 

“Have I told you lately that I love you?”

And with that simple question, Rod does more good in the world of “performance management” consulting than most consultants ever could.

Have you ever wondered what you’re boss was thinking about you and/or your performance?  I have.  I’ll get to that in a second.  I was speaking with a colleague the other day whose performance over the course of the last 24 months has been staggering.  As a new leader in the industry he has assembled a team, collaboratively defined its vision, elevated care and customer service, and has achieved fantastic financial, clinical, compliance, and regulatory results.  Can I paint a more successful picture?

And yet, after another record breaking month of results were posted, he was concerned that his boss wasn’t happy with him.  Why?  Because he hadn’t emailed him or called him to comment on his performance.  It had been a few months now.  No thank you.  No Attaboy.  Silence.  So, instead of appropriately celebrating or feeling satisfaction, this top performer’s strongest emotions were concern and doubt.

I experienced something similar several years ago.  My boss was on the road almost all the time.  Not only that but he had the weight of the organization on his shoulders and hundreds of people wanting a piece of his time.  As the weeks, then months went by I tried to just give him (AND MYSELF) the benefit of the doubt …

I’m sure he would call or email me about my performance if he had any concerns.

I know he’s just really busy.

He hired me because I don’t need the supervision or direction.

But, given enough time, its natural to FILL THE VOID with the worst case scenario.

I began to do what my colleague was doing.  I began to not only doubt my boss’ appreciation of my work but I began to doubt if he thought my role was even important to the organization.  After all, if nobody’s talking to you about your work (good or bad), your work must not be that important to people.

The benefit of the doubt turns into the TYRANNY OF THE DOUBT.

Maybe its just me and my colleague, but I don’t think so.  I’ve had people I’ve managed express similar feelings during overdue conversations with me as well.

A few months ago, I kept missing a 1:1 with one of my department heads.  Things kept getting in the way.  One postponement after another.  Sure, we’d talk briefly in our daily department head meeting or in the hallway but we missed quality 1:1, focused time to talk about her department (employees, goals, challenges, etc.)  When we finally met, I told her how impressed I had been by her improvements and resident/patient satisfaction I was seeing.  She was stunned.  She fought back the tears.  You see, she thought I was avoiding her because I was unhappy with her.  I had inadvertently created a void and she filled it with the worst case scenario.  Shame on me.

As leaders, we can way too easily fall victim to the illusion that silence creates.  “All is well.”  We can forget that even (especially) our top performers need regular feedback. Ironically, too often we spend an inordinate amount of time with under-performers at the expense of quality time grooming, coaching, rewarding, and recognizing those whose work we rely on so very much.

Let’s make the time.

–> Let’s set reoccurring appointment reminders on our calendars to reach out and fill the void with true conversation that builds loyalty and reaffirms mission.

McKnight’s Guest Column: Show Me The Money!

Happy Thanksgiving!  I just realized that another guest column was posted to McKnight’s.  This topic of whether or not staff should EXPECT a raise with their review came up when a friend of mine, Josh (new administrator) asked my opinion about it.  His question reminded me of when a CNA taught me a valuable lesson years ago at my first facility … You can read the entire article by clicking HERE or on the article image below.

Guest Column for McKnight's regarding annual reviews and raises
Guest Column for McKnight’s regarding annual reviews and raises

McKnight’s Guest Column & Attack of the Killer Email Monkeys

I recently wrote a guest column for McKnight’s that was apparently really well received according to their editorial staff.  You can read the article here:

McKnight’s Guest Column: The “Leading Cause of Death” of LTC Leaders

There are several really good comments at the bottom.  One comment, along with my reply, I’ll post here below.  I literally had this very same Q&A yesterday with a colleague who is fighting to get a handle on his workload/monkeys and establish a stronger method of follow-through.  Here’s the back and forth for the comment and I’ll include a little more from my email exchange with my colleague …

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Avatar
TryHaggis
2 days ago
Dave, nice job. Speaking as a casualty (or fatality) of this very issue, I can attest to the principles here 100%. I’m always curious about what people use to “know” their monkeys, tasks, etc. Given the close relationship between time management & monkey management, have you discovered a great time management tool / system that effectively discharges monkeys?

Avatar

A colleague of mine shared with me his secret for seeing his EMAIL MONKEYS a few years back. And this usually takes a bigger leap of faith, but it is HUGE for my ability to SEE my monkeys and act quickly on them. “A monkey is whatever the next move is when dialogue between two parties ends,” right? Therefore, emails become a massive collection of monkeys.
So, here’s what I do … I delete EVERYTHING that doesn’t REQUIRE a response. My Trash folder becomes my massive archive if I ever need to review an email from before. I TRY to keep my inbox below 10. I have 8 in there right now (I have 24,985 in my Trash Folder). Again, I delete everything that doesn’t require a response, a next move. So my inbox are only monkeys that need my attention. I’ll sometimes put on my calendar an email/monkey to address if it can’t be done immediately or if I’m in the middle of other more important things. It gives me a tremendous sense of control and organization.
I breathe/sleep easy knowing that I don’t have monkeys hidden in an inbox of 10,000 emails (those hidden/forgotten monkeys are the ones that undermine my credibility with people who are WAITING forever for me to respond). I do not use folders to organize emails from So-And-So or emails on a certain topic. I’ll use Evernote to record emails on a certain topic of a project I’m working on. Folders are just more hiding places for monkeys. It could take a weekend to thin out your inbox depending on the size. So, you may just want to rip off the bandaid and delete everything older than two months and thin from there.
I go into more depth here (caution: don’t click unless you’re really interested in the “nitty gritty” of handling monkeys AND I’m fully aware what works for me won’t necessarily fit you): Monkey Nitty Gritty or “It’s About Time”

Stooping To Greatness, Part 2

Yesterday, I ran into an “old” former colleague.  It had been years.  First thing he said: “How is that we look so old now?”  I never liked him.  Ha!  🙂

The truth is that it was great to reconnect.  Coincidentally, he’s in the midst of solving some of these same cultural puzzles for his new organization.  We talked about Part 1 over lunch.

A couple key points when beginning this new culture adventure …

  • There’s a huge difference between the sugar-rush, Diet Dr. Culture & Built-To-Last Cultures.

    Most staff have seen the Mission/Vision/Whatever that comes down from the Ivory Corporate Tower.  They are forced to attend the meetings and trainings, often delivered by corporate types or half-heartedly by facility leaders.  During those meetings, they are very quietly grabbing each others hands with a knowing nod: “This too shall pass.”  And, they’re right.  It won’t last because they (the staff) didn’t give birth to it.

No longer collecting dust on the wall.
No longer collecting dust on the wall.  You can’t make this up.  In the basement of my facility, I was looking around for some equipment.  I turned on the light and saw these artifacts from the prior facility occupants.  I don’t know what caused them to fail.  But they did.  Anecdotally, I’ve seen this play out time and again.  Where there is no vision, the people perish.  Without a vision/culture that actually inspires (or at least captures their hearts and minds), you’re programs become artifacts.
  • The GIVING BIRTH metaphor.

    I’m a guy.  I’m no expert.  I know.  But, I’m a father of 5, does that count for anything?!  Here’s the metaphor that fits so well here: Establishing your company/facility’s culture should be like giving birth.  There’s power in the creative process.  There’s a massive difference psychologically (for buy-in/commitment) if I’m able to participate in defining the culture (expectations, standards, rewards, etc.) as opposed to having Know-It-Alls present it to me.  If I go through the labor of wrestling with the words, values, mottos, standards, and behaviors that we want for our workplace, and then the delivery of agreeing to and training new hires in it, then I will be committed to the final product in a way that I simply can’t if it’s presented to me … let me illustrate:

    • Several years ago I went through this creative process for the first time at a building I ran in Orange County, CA.  Our before and after scoreboard made many in the organization take note and ask me to share our “secret sauce” as we went from worst to first in some key metrics like EBITDAR PPD.  I was more than happy to share.  It felt like I was on tour as I presented to more than 1/2 of our facilities.  I would spend an entire day with a facility’s leadership team – presenting to them the what, how, why, and when of World Class Service, which is what we labeled the culture we gave birth to.  The immediate response from those many facility teams was, by-and-large, enthusiastic.  They wanted to do the same thing at their buildings.  They wanted to do it right away.  I gave them our Mission & Standards documents.  I gave them our Orientation packet.  I gave them our Daily, Weekly, Monthly system for making the culture take root.Poster-BWC-[Converted]-Outline
    • Poster-BWC-Standards-[Converted]-OutlineAnd, then I left to the next facility.  I hit rewind and repeat.  Over and over again.  I personally felt tremendous excitement about making a difference beyond my facility.  I felt appreciation from ED/DNS partnerships who were looking for that missing thing to take them to the next level.  They found it.  They believed.  And, except for a handful of facilities, most of their efforts fizzed out within 3 to 6 months.Why?  I’ve thought a lot about that.  Ultimately, I believe two things are absolutely required in order to transform your culture into a transformative force:
      1. The Executive Director must be a “true believer(not the regional or the divisional or the owner at the home office)

      2. S/he must lead her/his facility through their own creative process.  They must reinvent the wheel instead of adopting someone else’s wheel (no matter how successful that wheel made that someone else).

If this is true, then the questions become what, why, how, and when to recreate the wheel.  The Birds And The Bees, if you will, of how cultures are made (I couldn’t resist).  Culture Birds & Bees.  That’ll be part 3 next.