Even as more and more SNF residents and staff receive COVID-19 vaccinations, the pandemic isn’t yet over—and the negative short-term financial effects on facilities will likely be felt for years.

Therefore, we recommend 11 strategies to ensure smooth and uninterrupted options and build resiliency for the next crisis:

Whatever occupancy levels you ultimately face in 2021, accounts receivable recovery and resolution is an endeavor that makes excellent sense. After all, if you have uncollected dollars, why not get it in the door and boost your cash balance?

When receivables aged 90 days and greater exceeds 15% of total AR, that’s too many to accept in a world where COVID-19 is ravaging skilled nursing occupancy rates, census, case mix and consequently, revenue. At Richter, our Revenue Cycle Management (RCM) professionals work with LTPAC organizations across the country to provide a full range of revenue cycle services, including AR recovery and resolution. In our work, we’ve seen days sales outstanding (DSO) in AR range anywhere from 60 to upward of 100, as well as 60-80% of an organization’s revenue categorized as outstanding. With all the uncertainty you face in 2021 and beyond, now is the time to get the ball rolling and bring those outstanding balances under control.

 Many SNFs that receive Housing and Urban Development (HUD) funding will make draw requests, which enable reimbursement for capital expenditures. The advantages to HUD debt are significant: It’s reliable, long-term, non-recourse and offers comparatively low rates.

Per HUD’s Section 232 program, loans may be used to finance the purchase, refinance, new construction or substantial rehabilitation of a project. A combination of these uses is acceptable—e.g., refinance of a nursing home coupled with new construction of an assisted living facility.

Additionally, it’s wise to leverage banking relationships where they exist, and develop new ones as necessary. Many banking institutions offer construction draws, allowing SNFs to take out a construction loan, and as they purchase items related to that, they fund it back to the bank.

In general, start now to approach your lenders and consider HUD options. Financing generally doesn’t happen overnight; it can be a lengthy and complex process, sometimes extending over months, so get it underway soon to avoid delays and possible cash shortages.

RELATED RESOURCE: Lessons Learned From COVID-19—Strategies to Help Your Skilled Nursing Facility Prepare For the Next Crisis

If you haven’t done so already, approach your lenders and inquire whether they can offer delayed debt service arrangements. Likewise, talk with landlords and other providers (e.g., software as a service (SaaS), office/capital equipment) to potentially defer payments and preserve cash.

This is particularly important if you currently experience dips in revenue, or have forecasted them in the near term. Most covenants are based on financial performance, including revenue and expenses. Certain covenants can also be based on census. Typically, if your facility doesn’t meet debt covenants, it can fall out of compliance with loans, so this merits close attention.

Such alliances exist to gain leverage on pricing in a multitude of areas—from PPE to software, operating services and more. Do some research now to identify co-ops that could be potential targets.

Your facility should consider prudent ways to set cash aside in the event of a future cash crunch. There are four good reasons to do so:

• It’s a hedge against uncertainties
• It may be necessary to help fund bonuses for full-time staff in order to keep them on board
• It could be used to fund PPE and medical supply purchases as costs rise
• It could potentially help offset recruiting and payroll costs

COVID-19 caused a surge in PPE and associated medical supply costs. Costs could likely continue to rise in the future—and your facility needs this equipment. Making sure you have it could entail cost-cutting in other areas. For now, be sure you properly track all purchases in order to utilize any remaining CARES Act funds properly. You can also explore new vendors that you haven’t previously worked with to determine potential cost savings they could offer.

Perhaps clinicians are laser-focused on patient care, so they’re late in completing the required assessments that drive billing. That, in turn, could hinder the claims submission process, which then could impact cash flow.

Related to that, review your technology with an eye toward gaining efficiencies and integrating RCM automation strategically. For more on this, read our recent blog, “Automation in Revenue Cycle Management: Five Strategies for the LTPAC Industry.”

This means:

Budgeting for changes in your rates when you know they take place (e.g., Medicaid)

One practical accounting strategy that can help ensure long-term financial viability is leasing, and that applies to just about everything a facility touches—from office equipment to software, data services, medical/clinical equipment, specialized resident furniture and accessories…even the building(s) in which they operate and the land upon which they sit. Leasing could make financial sense for your SNF, but the answer depends on several factors. Cash flow is a significant consideration, as is the expected length of use, potential resale value and all the associated tax implications.

For more on this, read our recent blog, “Purchasing vs. Leasing: Healthcare Equipment and Facilities—LTPAC Accounting Strategies.”

Contact Richter’s Clinical and Financial Consultants

Want more information on how Richter’s consulting services can help your facility Enhance Outcomes? Contact us here, call us at 866.806.0799 or request a free consultation.