Monkeys: LIBERATING Time Management Concept [Video]

Monkeys are the “leading cause of death” of new leaders.

Recent conversations with a few new(er) leaders about this common pitfall, prompted me to post this here. If you don’t have time (28 min) to watch this, then you probably really need to watch this. ūüėČ

This time management concept saved my professional life.

After about 7 years in operations of skilled nursing facilities at The Ensign Group, a skilled nursing, seniors housing, home health & hospice, and radiology company, I spent 5 years there as the Chief Human Capital Officer. What an exciting time. Ensign’s “First Who, Then What” approach to growth meant we had to attract and train a lot of AITs into facility-level CEOs fast. ¬†Over those 5 years, I personally participated in the training of about 100 new leaders. Week long boot camps, case studies, online tests, conference calls, assignments, analysis, etc. ¬†I saw, up close and personal, what helped new leaders succeed … and fail. ¬†

Monkeys has a lot to do with both.

I’ve trained the topic to groups in the hundreds at association conferences to 1:1. And, I wrote about monkeys years ago here:

But, this is the video that gives a thorough explanation of Monkeys and that my colleagues and friends have found most useful to understand the time management concept from theory to practical application.  While there are several healthcare operations and Ensign references, the principles are universal.

I hope it helps you or someone you know:

 

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Wind of Change

Over 440,000,000 views on Youtube?! ¬†The Scorpions’ Wind of Change music video (below) has been viewed a lot. It’s probably not the best anthem for the post-acute world, but the title sure seems to fit. ¬†If there’s anything that’s constant for skilled nursing providers, it’s that things are always changing.


BPCI/CJR Loses Steam

Last year, I wrote about how the best operators are able to adjust or “change tack” to shifting winds/regulations. (mixing boating metaphors)

I also wrote specifically about one such shift that was causing a lot of concern for providers (and investors), Bundled Payments.

In recent days, we’ve seen the wind change direction again. ¬†And, while nobody should be surprised, I think most of us are surprised.

  1. CMS is Overhauling the Medicare Fraud Audit Process
  2. CMS is canceling the expansion of CJR
  3. CMS is eliminating the Mandatory nature of CJR
  4. CMS is reducing the number of CJR markets from 67 to 34

It’s critical that operators who are currently being affected by the CJR program to get in touch with their hospitals to discuss what, if any, impact this will have on how the hospital is operating or is preparing to operate vis-a-vis these patients.

Skilled Nursing groups are applauding the news. ¬†IF this gives providers more time to get their BPCI act together, then that’s great. ¬†But, the point is … they still need to act like BPCI is coming. ¬†BPCI behavior that better health plans and hospitals are looking for is:

  • Proactive communication around readmission and outcomes
  • Integration of hospital’s modalities into the SNF
  • Strong reporting systems
  • Proactive cost containment (shortening length of stay if possible)
  • Partnering with the best home health agencies who understand BPCI as well

Investors are looking for operators who are not just fluent in BPCI but has already (or is actively) implemented those BPCI Behaviors.


RUG IV to RCS1

In my opinion, a much bigger wind of change, if implemented on October 1, 2018 as targeted, is the shift from RUG IV to RCS1.  I attended a conference on that last week by Zimmet Healthcare Services Group in Atlantic City, NJ.

According to Mark Zimmet (https://www.zhealthcare.com/), the announced pre-rule for RCS by CMS (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SNFPPS/therapyresearch.html) earlier this year will dramatically change the way SNFs are operated — specifically replacing the REHAB/Minutes economic engine of operations with a Patient Characteristics economic engine. ¬†Now, Medicare A reimbursement is driven mostly my rehab minutes (type and quantity). ¬†In the proposed RCS 1 model, rehab minutes are completely excluded from the calculation. There is a PT/OT and an ST component in the formula. ¬†But, minutes are NOT part of it. ¬†In other words, under RCS 1, the facility will be paid the same amount for Patient John Doe whether the SNF provides 10 minutes of therapy or 1,000 minutes. ¬†Panelists predict therapy spend will shrink AT LEAST 50%.

The driver of reimbursement shifts away from rehab minutes to patient clinical characteristics. RCS starts with WHY is the patient here.  Which of the 10 categories?

  1. Major Joint or Spinal
  2. Non-Orthopeadic
  3. Acute Neurologic
  4. Non-surgical orthopedic/Musculoskeletal
  5. Orthopedic Surgery (Except Major Joint)
  6. Cancer
  7. Acute Infections
  8. Pulmonary
  9. Cardiovascular & Coagulations
  10. Medical Management

Then, it looks at the functional and cognitive scores, co-morbidities, non-therapy ancillaries.

Remember …

  1. The change isn’t final and may very well change before it’s implemented.
  2. There’s time to recalibrate your structure and competency to hit the ground running if/when the change is made.
  3. I would be talking now with your rehab provider about this. ¬†The message from this conference is that Rehab Co’s in skilled nursing are Dead Man Walking.
  4. Stay up to date on the CMS conference calls, updates.

Goodbye Therapy?

If RCS 1 is implemented as structured today, I would expect the use of therapy services to change and be reduced. ¬†In a word, I believe therapy will be more EFFICIENT. Unfortunately, CMS now incentivizes inefficiency since providers are paid for the minutes they take to deliver therapy. ¬†Does this get abused? ¬†Sadly, yes. ¬†Do we sometimes see a patient who needs rest to recover from illness get dragged into the rehab gym to get our minutes in? ¬†Sadly, yes. I’m totally open to viewpoints on this … ¬†Is this better for the patient or worse? ¬†Can you see operators cutting the newly labeled “cost center” of rehab and giving less than what the patient could benefit by since Medicare isn’t paying for minutes anymore? ¬†I can. ¬†But, I can also see operators providing a lot of therapy (but still less than before) under RCS 1 since they’re ultimately judged based on outcomes. ¬†Almost all admissions to SNFs now are for short-term rehab to get strong enough to go home. ¬†If you cut rehab to save money, you might benefit in the very short-run, but after a couple months, your readmission rate and patient satisfaction and length of stay will suffer. ¬†I can’t imagine a world without Rehab being an essential part skilled nursing, RCS 1 or not.

So, look at Nursing under the RUGs system. ¬†Nursing minutes/hours are not currently reimbursed — like rehab won’t be in the future. ¬†The way operators staff their nursing departments, I believe, will be a predictor of how they staff their rehab departments under RCS 1. ¬†Some Medicaid shops run as lean as possible b/c there simply isn’t enough revenue to support more. ¬†Yet, short-term rehab shops, staff way higher than state minimums because quality care/outcomes/readmission rates/etc. demand it. I believe that will be the case for Rehab.

CMS is infamous for unintended consequences. ¬†They consistently underestimate operators ability to quickly adapt to the moving goal posts. ¬†So, while CMS predicts this will be budget neutral, I wouldn’t be surprised if it resulted in an increase in Medicare spend (and bottom line performance for SNFs), resulting in quick adjustments like we saw in 2011 and 2012.


Here are 3 videos I took of the presenter going through the calculator that shows the new formula at work (note: no input in the new calculator for minutes):

IMG_4619.jpg
This ballroom was packed for both days of presentations. Highly recommend Zimmet for learning about the latest changes to reimbursement & regulation in LTC

Investing in Skilled Nursing – The Basics

I just finished a two-day non-deal roadshow. ¬†Princeton, Philly, and Boston. ¬†Now headed south for a property tour of a couple buildings we have under contract. ¬†As usual, the insititional investors we met with were impressive. ¬†Everyone has their investment “box” that they’re trying to see if we fit in. ¬†This trip, we spent a fair amount of time educating analysts and portfolio managers on the some of the fundamentals of the skilled nursing business. ¬†That got me thinking it would be helpful to provide a high-level intro to the business for investors wanting¬†to get up to speed on the basics.

20 Years of History in 175 words

Skilled nursing facilities exist to provide 2 types of healthcare:

  1. Custodial” (worst term ever), long-term care for “residents” who live in the facility and
  2. Short-term rehabilitative care for patients who are transitioning from hospital to home.

Historically (20 years ago), a “nursing home” or skilled nursing facility (SNF) was where grandma went to live the rest of her life if she needed more assistance with activities of daily living (ADL) than she could get living alone or with family. ¬†For the last 20 years there has been a massive shift in the purpose of SNFs. ¬†With every passing year, they have focused more on caring for higher acuity (clinically complex), short-term rehab patients. ¬†The patients in the SNFs’ rehab units today were treated in acute hospitals 20-30 years ago.

Hospitals and health plans (HMOs) are incentivized to lower the cost of healthcare by reducing the time of inpatient care, thus hospitals have been pushing higher and higher acuity patients out faster and the stronger SNF operators have equipped themselves to meet that demand.

Who Are You?

To understand why SNFs have been willing to adapt to meet the demand of sicker, more clinically complex post acute care (PAC) patients, let’s take a look at the universe of possible patients a SNF cares for …

Medicaid is healthcare for the poor. ¬†In a SNF, Medicaid pays room & board¬†and medications for long-term residents. ¬†Generally speaking, these are NOT the “patients” in the facilty receiving physical therapy (PT), occupational therapy (OT), or Speech therapy (ST). ¬†Rather, they live there. ¬†It’s their home. ¬†Medicaid reimbursement varies by state. ¬†Some pay a fixed rate. ¬†Others pay based on a case mix index (CMI). ¬†The CMI states recognize that the amount and cost of care for all Medicaid residents is not equal. ¬†The more assistance a resident requires, the higher the CMI, and therefore, the higher the reimbursement. ¬†Medicaid reimbursement is the lowest of any type within a SNF.

Medicare is healthcare for seniors (65+). ¬†In a SNF, Medicare pays for short-term rehab for patients who had to be in the hospital for at least 3 nights. ¬†These patients are usually receiving “Skilled Services” from therapists (PT, OT, ST), and/or from nurses (IVs, tracheotomy care, wound care). ¬†The length of stay (LOS) could be anywhere from less than a week to 100 days (Medicare covers 100 days of a SNF stay) depending on the the patient’s needs and prognosis for improvement.

Managed Care or HMO, like Medicare, pays for the same short-term rehab skilled services. ¬†These patients are Medicare eligible people who have signed over their Medicare benefits for a Medicare-replacement type of insurance product offered by health plans like Aetna, Kaiser, etc. ¬†The reimubursement is lower than Medicare (though in some cases the HMO rates pegs to Medicare rates). ¬†And, because it’s “managed” care, case managers at the HMO push on SNFs to care for these patients faster. ¬†HMOs make more money if the length of stay is shorter since inpatient care costs more than care provided in the home (home health, HH).

There are also Private Pay residents.  Expect this to be a shrinking piece of the census pie as assisted living facilities have continue to adapt to provide more assistance today than 20 years ago as well.

The Numbers

Now, let’s take a look at a hypothetical facility through financial eyes.

Let’s call it Dave’s Rockin’ Rehab Facility (anything other than Dave’s Gardens, Village, or Manor, please!). The vital statistics are these:

  • 100 bed facility with the following mix of residents and patients
    • 50 Medicaid residents
    • 20 Medicare patients
    • 10 HMO patients

Now, let’s do some simple math.

50 Medicaid residents x $180/day x 365 days/year = $3,285,000

20 Medicare patients x $525/day x 365 days/year = $3,832,500

10 HMO patients x $420/day x 365 dats/ year = $1,533,000

Total Annual Revenue: $8,650,000

What does is take to run Dave’s Rockin’ Rehab?

Labor is, by far, the biggest expense.

  • Nursing (Registered Nurses, Licensed Vocational Nurses, Certified Nurses Aides)
  • Rehabilitation (PT, OT, ST)
  • Dietary (Cooks, Dietary Aides)
  • Housekeeping (Housekeepers, Janitors)
  • Laundry (Laundry workers)
  • Maintenance (Manager, assistants)
  • Social Services (Social Workers)
  • Activities (Activities Director, assistants)
  • Business Office (Biller, Accounting)
  • Human Resources (HR/Payroll rep)
  • Marketing/Admissions (Admissions coordinator, external marketer)
  • Medical Records (dept. head)

Other primary expenses include:

  • Medications
  • Food
  • Medical Supplies
  • Paper & Plastics
  • Insurance
  • Chemicals
  • Linens
  • Electronic medical record system
  • Marketing
  • Oxygen
  • Labs
  • X-Rays

Let’s put it down on a simplified P&L:

Revenue  

Medicaid       3,285,000

Medicare       3,832,500

HMO              1,533,000

Total               8,650,000

Operating Expenses

Labor             6,000,000

Supplies         700,000

Ancillary        500,000

Food               200,000

Other              200,000

Total               7,600,000

EBITDAR:     1,050,000

EBITDAR%: 12%

Rent:                 750,000

EBITDA:          300,000

So, we see the financial levers are

  • Census (overall occupancy)
  • Skilled mix (percent of patients on “skilled services” aka short-term rehab patients aka Medicare + HMO divided by total census)
  • Daily rates (Medicare RUGs/ADLs — we’ll cover this another time; private pay — again, a shrinking % of the SNF census and so less of a lever than in assisted/independent living/memory care)
  • Labor — staffing efficiently
  • Medication management
  • Expense controls for purchasing

Investors New to Skilled Nursing

Needless to say, there’s a lot that goes into efficiently operating a high skilled mix, profitable facility. This isn’t your grandma’s nursing home. ¬†Or Buick. ¬†And, there’s a huge difference between the blue-chip operators like The Ensign Group and folks still clinging¬†to maintain the status quo from 20 years ago. ¬†I frequently see small owner/operators deciding to sell their facilities because they realize they haven’t kept up with the constant changes and it’s too late (or they’re too tired) to re-tool.

  • There are over 15,000 skilled nursing facilities in the country.
  • Somewhere around 25% of those are owned by large chains.
  • And, somewhere around only 20% are owned by REITs.

It’s a very fragmented industry that has been under pressures to provide better, faster, and cheaper care to sicker and sicker patients. ¬†That trend has been accelerating over the last couple years with bundled payments (I’ll write about that soon). ¬†The only thing that hasn’t changed is that the operators (of all sizes) who are sophisticated, engaged, and committed to quality care are able to adapt to the changes and win and those operators (of all sizes) who don’t adapt,¬†lose.