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CEO Roundtable: Skilled Nursing

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Springfield Business Journal Editor Eric Olson discusses changes in skilled nursing with Deanna Beckenholdt, executive director of Sunterra Springs Springfield; Gene Vestal, administrator of Birch Pointe Health and Rehabilitation; and Matthew Gould, administrator of The Manor at Elfindale.

Tides turning
Eric Olson
: In a single word, how you would describe the industry?
Deanna Beckenholdt: We have the same word. [Matthew Gould nods.] Changing.
Gene Vestal: Organic.
Olson: What is changing about it?
Gould: Everything. The (Centers for Medicare and Medicaid Services), which regulates long-term care, has come out with what’s called the rules of participation. That is being phased in over four years. And within those rules of participation are tremendous changes for the industry. The other big thing would be the demographics of the residency. It’s not as big a change, but it’s coming as far as the baby boomers.
Olson: What do they say – it’s like 10,000 a day are turning 65?
Vestal: That’s correct.
Olson: You guys are on the frontline of meeting certain needs and working with that population. What are those top changes that you are having to adjust to?
Gould: The survey process. We’re surveyed by the Department of Health and Senior Services, both on the state and federal level. Just last year, there were major changes to how that survey process is conducted. Before, it was pen and paper, and now they’ve gone to a computer model.
Vestal: Anybody that accepts either Medicare or Medicaid funding has to participate in this regulatory survey. It has changed and it will continue to change in the next year from what we were used to, which was about a four-to-five day process where they came in and did a lot of observation and questioning with residents, staff and families. The actual interviews have grown with this new survey process.

Increased care, lower reimbursement
Olson
: Is there a standard staff-to-patient ratio you’ve got to meet?
Beckenholdt: We hire and staff to patient acuity. The more difficult and more complex, the more staff that we need to take care of them. I see us having higher and higher acuity as the hospitals push out the residents sooner.
Vestal: The assisted living facilities are keeping people in place longer than they used to because they want to stay there. But they end up further down the life cycle when they (arrive at) all three of our facilities.
Olson: What is the average length of stay?
Vestal: We do a lot of short-term stay rehab at our facility – we’re shooting for 20 days or less. That’s all kind of driven by the (Accountable Care Organizations), which is a hospital base.
Gould: That’s what I was going to say is another big change – how the referral basis is changing to be Accountable Care Organizations. Everybody is looking at your data.
Vestal: That’s your average length of stay or return to the hospital rates. Those are the two main ones I would think that they’re looking at and the hospitals are looking at. If you have good ones, in their opinions, then you’re going to be referred to more often.
Beckenholdt: A preferred provider for the ACO.
Gould: You can receive up to 100 days in a Medicare stay. It used to be a lot of people, they used all those days. It’s definitely swung the other way. There are certain diagnoses, they only pay so much. So, say if you have your hip repaired, they’re going to pay – I’m just pulling numbers out of the air – $50,000. That’s hospital, home health, nursing home, whatever, sharing in that $50,000. So, if they are rehospitalized and you need more care than that $50,000, usually the hospital has to eat that percentage. You want to have a goal, but at the same time sometimes they’re individuals. There’s not a standard. It’s not like a lawnmower that’s got a broken belt: “We’re going to fix it here, and we’ll have it out to you in two days.”
Olson: How have reimbursement rates changed?
Gould: Medicare used to be the primary, if you were 65 or over. Now, there’s Medicare Advantage plans, Medicare Replacement plans.
Vestal: UnitedHealthcare, Humana.
Gould: Reimbursement has changed. They redesigned that several times.
Vestal: Traditionally, it was therapy-driven, fee for service. Coming down the pike, it’s going to be more medically driven than therapy.
Beckenholdt: It’s called PDPM, patient driven payment model.
Olson: With these changes, are reimbursement rates going down or up?
Beckenholdt: It’s going to change. Some things you get more money for.
Gould: Some you get less.
Beckenholdt: The winners for PDPM are shorter length of stay. Higher nursing needs and complexity with a shorter length of stay – these are the new PDPM winners.
Olson: What’s a winner?
Vestal: That you don’t lose money or you make a little money.
Olson: You’re in business to make money, I presume.
Vestal: To provide a service, and to do that, you have to stay solvent.
Olson: Are any of you nonprofit?
Vestal: No.
Beckenholdt: No.
Gould: Yes, which is a change for us. Our company went to nonprofit last year. We are owned by an individual, and he and his wife are in their 80s, and I think they wanted to leave a legacy.

Development opportunity
Olson
: One thing that’s been evident is the attraction by developers and investors. Two of the three facilities represented here are new. Have you seen in investment in your industry like this before?
Vestal: No, not really. I think the new building and proposed new building is more than I’ve seen.
Beckenholdt: We’re following the market demand for an increased level of care.
Olson: Some numbers we’ve reported in tracking the developments: about 300 independent living units, 60 memory care, 200 skilled nursing beds, 200 assisted living beds, that was recently completed or planned developments. At one point that represented about $65 million in projects ongoing. Is this healthy still? 
Gould: I don’t know all the Census numbers for homes in town, but I’m sure that we’re not bed-bound. We’re not at 100 percent. We’re building an assisted living, as well.
Gould: In Missouri there’s a certificate-of-need process. I know it’s been talked about revamping that. They are supposed to be looking at occupancy rates before they approve additional beds.

Staffing challenges
Vestal: We all struggle with being able to staff our buildings. If they continue to build more buildings, there’s only a certain number of staff available.
Olson: What’s the issue with staffing?
Beckenholdt: Certified staff, certified nursing aides, registered nurses.
Vestal: There are two huge health systems in the area, and then there are 23 skilled-nursing facilities in the greater area and we’re all competing for that entry-level person. It’s the lowest paid, hardest job in the area.
Beckenholdt: There’s just not enough people.
Vestal: We are hiring people between the ages of 18 and 25 generally for that entry-level position. It seems to me that’s not what they want to do or can do.
Olson: Are each of you hiring right now? [Everyone nods.] About how many positions are open?
Vestal: That may be different for Deanna and I because we’re new. We’re trying to grow our census at a certain percent per month, so we have to kind of gear up for that. We are constantly trying to hire.
Gould: It historically has always been a high-turnover position, the highest position would be the certified nursing assistant. It’s physically, and then emotionally and spiritually, demanding. Caring for people is not easy work.

[CEO Roundtable sponsor Byron Pierce of UMB Bank joins the conversation.]
Pierce: What is the starting salary for a CNA?
Gould: It’s $10-$12 an hour. You can go to Chick-fil-A and make $10 an hour.
Olson:With the minimum wage increase just approved and the plans for that, will that number change?
Vestal: I think we’re all paying more than the minimum wage.
Olson: Will you scale it?
Gould: Dietary, laundry ... those are well above minimum wage.
Vestal: We’ll have to look at that scale and, once it comes into play, readjust accordingly.
Olson: By 2023, the minimum goes to $12. I see the issue that you’re describing because it’s a very demanding task. It doesn’t seem compensatory.
Gould: It really takes a special type of person to be a good caregiver. You have a heart for it. It’s not like flipping burgers, and I don’t say that flippantly, either. Nursing homes get a bad rap. If you don’t have the right people taking care of the people, it can go south quick.
Vestal: These people are dealing with the most intimate processes of a person’s life and they have to deliver that in an upbeat way on a daily basis.
Beckenholdt: I started out as a CNA when I was 18 years old. It was a stepping-stone for me.

Future needs
Beckenholdt
: Our bed needs for Greene County are 245. That’s a need unmet for this county.
Olson: Is that from the state certificate of need analysis?
Beckenholdt: Yes.
Gould: It’s a year 2020 projected need. That need is based on projection of the population age 65 and over.
Beckenholdt: You see people with choices instead of going to maybe a semiprivate room with a shower down the hall, maybe the newer homes have showers in the room or private rooms. I see that need in our area. That’s something that consumers want. They want a private room, cable TV, high-speed Wi-Fi.
Vestal: For the baby boomers coming in, it’s a totally different product. We have a full-service bistro in our facility. A lot of our short-term stay residents specifically said, “We came there because we have that.”
Gould: Nursing homes historically had been an institutional model, and that’s going away. Home-like environment is how it’s supposed to be. This industry, I think, is slow to change because it’s difficult to change. Culture change has been happening, and the people who don’t change will be left behind.
Olson: What do you see as part of facilities in the next 10 years?
Vestal: The activity portion of what we’ve been doing historically for years is going to have to change drastically. We’re not going to be able to support bingo three times a week. That’s not what they’re going to want.

Industry shifts
Olson
: Are you seeing any particular types of care more common than others?
Vestal: The acuity level for our residents is getting higher in the last five years for sure. People are aging in place longer, so when they get to us they need more care.
Beckenholdt: We’re running more IV antibiotics than ever before. Keeping them in-house instead of back to the hospital. They’d rather be in a home-like environment, where they get to choose what time they wake up.
Vestal: Exactly. I’ve been in the industry for about 28 years, and when I started there were some facilities that were rest homes and there were people who came there when they were 65 and they were very active still. It was a different environment. Today, I kind of feel like if you’re a skilled facility, you’re like a miniature hospital.
Olson: How is technology disrupting the industry?
Gould: Electronic medical records.
Beckenholdt: Ours have iPads and headsets and everything goes to the electronic record.
Olson: It’s not your grandmother’s nursing home anymore.
Vestal: We had a resident who was there for a short-term stay with us that was a local radio personality, and he did his radio program from his room. That wouldn’t have happened 10 years ago.

Revenue streams
Olson: What about the daily rates per bed? A study that I read by a research analyst firm called Marcus and Millichap, said it was an average of $318 per day, per bed. Is that on par with local rates?
Gould: Ours go from $214 to $275. That’s our private pay rate. At $318, I assume they are talking private, because I think the average Medicaid reimbursement in Missouri is $155.
Vestal: We’re $206 to $247.
Beckenholdt: They do long-term care. I only do short-stay rehab to home, so ours are $400 a day.
Gould: Rates will continue to increase because cost of everything continues to increase, probably anywhere from 2 to 4 percent.

Excerpts from Features Editor Christine Temple, ctemple@sbj.net.

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