Heading into 2021, do you have a good handle on what your long-term post-acute care (LTPAC) facility’s occupancy levels will be?
If the answer is no, you’re not alone. As we all know by now, the coronavirus (COVID-19) pandemic has, ironically, made uncertainty the only constant in the LTPAC realm. From dealing with PPE shortages to meeting challenges around infection prevention and control, staffing, decreased hospital admissions and more, LTPACs everywhere are finding it harder than ever to serve current residents and patients and budget appropriately for the short and long term.
Other issues beyond COVID factor in as well. The broad trend in SNFs is toward more community home-based care vs. institutional care. So SNFs, their long-term census has really reduced over the past several years as reimbursement has been geared more toward incentivizing these community-based services and assisted living.
Assuming occupancy levels in your LTPAC facility are uncertain for 2021, what can you do to manage expenses in ways that help ensure financial viability and resident/patient outcomes?
Consider 10 best practices:
If you haven’t already, develop your 2021 annual budget. In your financial world, all decisions are predicated on allocations made in a sound and strategic annual operating budget. Ideally, the majority of your facility’s operating expenses will be laid out based on a patient-per-day (PPD) amount. As occupancy changes, you can look back at your budgeted PPD and realign the total expense dollars to the reduced patient days. While that applies in many areas, it’s particularly useful when it comes to staffing, which is 65-75% of a post-acute care provider’s cost base. When we help skilled nursing facility (SNF) clients prepare annual budgets, we often examine hours per patient day – not dollars per patient day. We do so because SNFs typically have a higher payer mix of skilled residents versus intermediate care found in long-term facilities. In other words, SNF staffing usually is structured differently (i.e., more RNs and LPNs than aides) so as to cater to higher-acuity-level residents. Beyond that, it’s also helpful to examine the mix of direct care staff being scheduled. If you have fewer skilled patients, you probably need less hours of RN and LPN time. The bottom line here: Look at your payer mix between skilled and unskilled, then readjust your hours per patient day based on skilled needs. One additional piece of advice around budgeting: After a draft is completed, review it with all impacted department heads to get their insights on whether allocated amounts are realistic or not, whether all relevant items within their spheres are accounted for—and also to gain additional knowledge or feedback. Including them at this stage builds trust and makes them feel like they have a real say in the financial operations of their department, which in turn, can make them more accountable to budgeted allocations.
Invest in technology that drives accounting and financial efficiency. Technology used for any valid COVID-19-related purpose is eligible for use with stimulus funds. So, if you’re planning to invest in anything outside of core operating expenses during the first half of 2021 with the additional funding, technology should top the list—specifically technology around EHR and required hardware—e.g., hand-held tablets, kiosks, temperature checks. Additionally, technology used to facilitate virtual visits (i.e., telehealth/telemedicine) is covered under the CARES Act. Telehealth is here to stay, regardless of the pandemic. The additional technology could also help with infection control efforts, so it’s a worthwhile investment that can pay dividends in many ways.
Consider participating in a healthcare co-op. Such alliances exist to gain leverage on pricing in a multitude of areas—from personal protective equipment (PPE) to software, operating services and more. Do some research now to identify co-ops that could be potential targets.
Explore potential delays in debt service or other payable obligations. 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.
Ensure adequate inventory control. 2021 should be the year your LTPAC closely monitors its inventory system. This entails closely inspecting the central supply, assuring that documentation is complete and accurate at all levels and utilizing technology to manage inventory effectively and efficiently.
Strengthen your purchasing system – whether it’s centralized or decentralized. Centralized systems utilize one primary contact within a facility to handle orders, work with vendors and ultimately authorize purchases. Fewer cooks in the kitchen (figuratively speaking) simplifies and stratifies purchasing; yet, it also can be time-consuming for that individual, so it’s important to have realistic expectations about this person’s role. In a decentralized system, department heads are responsible for purchases in their respective areas. In this case, it’s essential they be trained in proper procedures—and obviously, they must also stay within budget. Which system is better for your LTPAC? It depends on many factors—from department structure and procedures in place to the use of a purchasing system, internal controls and beyond. Whichever system you choose, make sure your processes are 100% buttoned-down.
Convert your receivables to cash. 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 sitting on the books, why not get it in the door and boost your cash balance? When 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 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 heading into 2021, now is the time to get the ball rolling and bring those outstanding balances under control.
Invest in training and education for benefits all around. Training and educating help staff build professional competency and deliver better service that enhances resident/patient outcomes. It can also help your facility’s bottom line. How? In order to receive some incentive payments, your LTPAC facility must meet certain quality care benchmarks. And to achieve those, it’s necessary to invest in staff development. From that standpoint, relevant training for 2021 could include infection control and prevention for everyone in your facility (clinical and beyond), as well purchasing-related training for accounting staff and department heads.
Automate time-intensive manual accounting tasks to build efficiency and free up staff for higher-level work. While this applies to many areas within the accounting function, it’s particularly helpful around staffing. Specifically, scheduling software that integrates with your payroll system can track hours that employees are working, when they work and what overtime amounts they submit. It also enables you to schedule the hours you should be running, which helps you stay in budget with payroll costs. It also helps manage labor costs so you can plan ahead when scheduling. Additionally, we recommend utilizing purchasing software that tracks all purchases within your facility. This provides granular insight on every purchase order, so you’ll have assurance that everything was billed correctly. Finally, most high-functioning EHR systems offer the capability of uploading your budget, which we also recommend.
Ensure total compliance throughout your facility – don’t leave anything to chance. Stimulus funds are tied to stringent rules and regulations. If your facility’s expenses are found to be tied to sanctioned vendors (i.e., those that have been banned from the Medicare program for fraud or abuse), they will be disqualified from the forgiveness consideration. COVID-related reporting could potentially be audited, so you must comply with all associated regulations and keep accurate records.
Do you have questions about managing expenses for uncertain occupancy levels for your long-term post-acute care organization, or other accounting challenges? Call Richter’s healthcare accounting professionals at 866-806-0799 to schedule a free consultation.
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