As more and more state governments struggle with growing budget deficits, Medicaid reimbursement for care centers increasingly falls victim to states’ needs to balance the budget. For many care center providers, this will mean an even greater need to “capture” more Medicare referrals. For those care centers with prime locations or those with new or recently remodeled rooms, capturing a sufficient number of Medicare referrals may not be a problem. However, for the majority of nursing homes, the line between economic struggle or success usually comes down to having a good plan on how to capture Medicare referrals, after the “prime” homes have received their share.
In some instances, having great physician relationships, an assertive nurse liaison, or an aggressive marketing representative may mean that care centers can overcome their place in the hospital referral order. But as we all know, most physicians are not naturally attracted to support care center referrals and there are a very limited number of true care center marketing gurus to go around. Where then does that leave the rest of us?
One strategy we have seen many care providers utilize is to engage in a “partnership” with one or more of the local referring hospitals. This relationship can be based on accepting those hard-to-place patients on the basis that the hospital will become the payor to the care center. This strategy is based on a fairly simple financial truism that it may be more cost effective for the hospital to pay a care center for the cost of caring for a patient than it would be for the hospital to keep the patient in the hospital. Between most hospitals’ fixed and variable costs, even patients who are medically complex can cost a hospital between $600 to $800 or more per day. Keep in mind that most hospitals receive a fixed, lump sum payment based on the appropriate MS-DRG payment scale. Although we often think of DRG payments for Medicare patient payments in the inpatient hospital setting, commercial insurers, Managed Care Organizations (HMOs, PPOs, etc.) and state Medicaid each typically use a DRG-like fixed payment schedule to reimburse a hospital for almost all inpatient stays.
Accordingly, when a referring hospital encounters difficulty in getting various post-acute providers to accept a referral, the hospital receives minimal, if any, additional reimbursement to cover the costs it incurs in extended lengths of stay for hard to place patients. Similarly, many hospitals end up admitting, through their own emergency rooms, patients who have no payor source. Post-acute providers, such as nursing homes, do not typically rush to accept these types of referrals. Nonetheless, a new opportunity may have just presented itself for both your care center and some of your forward-thinking hospital referral sources.
This can be turned into a win-win situation in that the hospital can expedite a referral and discharge, as well as reduce its costs, and your care center may be able to establish itself as a valuable partner to the hospital.
The process begins by having the care center administrator follow up with the hospital administrator, marking representative or the vice president of finance in order to propose a meeting to discuss the hospital’s difficult or hard to place patients.
The following are six critical steps to success in helping the hospital accelerate its difficult discharges. These discharges may involve hospital patients with no payor sources and/or who are medically complex and more difficult to place.
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Step 1
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The initial contact with the hospital regarding your “mutual” opportunity. This can be done based on knowing about special difficulties hospital have, such as payor source or highly medical complex patients.
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Step 2
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Getting the hospital to acknowledge it incurs a significant “real” cost when its discharges are delayed. It is important that the discussion with the hospital be based on knowing how the hospital is being reimbursed and the hospital’s true cost for providing extended care beyond the optimal discharge date.
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Step 3
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Educating yourself and the hospital on how the hospital can financially benefit on becoming your payor source. This is a natural extension of knowing the hospital’s basis of reimbursement and cost of care. Create a financial model with specific examples by comparing hospital cost of care versus what the hospital will pay the care center.
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Step 4
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Identifying those types of patients that can be covered by the new arrangement. Matching the hospital’s needs to the nursing home’s capabilities.
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Step 5
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Developing the contract framework between you and the hospital. One approach is to negotiate a master contract, which details the overall arrangement, level of care pay rate and outliers. For the actual individual referrals, the master contract is incorporated by reference and the shorter “referral supplement” covers more patient specific information.
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Step 6
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Putting the relationship into practice. Now that you have an arrangement, the real benefit is getting referrals that the care center can manage and get reimbursed for.
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