June 13, 2016
Experts Corner

The changing long-term care paradigm

Matthew S. Bavolack

With close to 15,600 long-term care providers operating throughout the country and a continually changing regulatory environment, providers face a variety of operational and compliance challenges. Opinions on which are the most pressing challenges depend on whom you ask, but two key areas of change come up repeatedly: residents' care needs and reimbursement.

No longer are nursing homes places where the elderly end up spending their last years by default, and no longer can operators rely solely on restorative care as their fail-safe to break even. So what might the nursing home of tomorrow look like?

• Care needs will continue to drive the future of the nursing-home industry. Today's and tomorrow's residents will arrive at the front door with more complex needs, based on the longer lives we are living and the progression of dementia in the advanced-age population. Dementia care needs will be expanded to parallel the advance of the disease. Another thing's also for certain: Care will be continue to be regulated.

• Nursing homes won't be a place for restorative care, which is migrating to out-patient clinics and other types of facilities. We're already seeing joint replacement rehab moving to non-institutionalized settings.

• Resident rooms and physical plants will look different. The Baby Boomers of today don't just want but demand a home-like setting, including spacious private rooms with private baths. Facilities designed to appeal to this generation's tastes and expectations will replace the institutionalized settings that still often characterize many of today's nursing homes.

• The aging infrastructure will be replaced by smaller facilities offering a "neighborhood" environment where employees serve as caregivers, cooks, administrators and the myriad other roles entailed in resident support.

• Employees will be crossed-trained in order to improve efficiency and cost effectiveness, as market demand for services increases and the workforce simultaneously shrinks with the aging of the Baby Boomer generation.

Challenges in reimbursement

With an aging infrastructure and shrinking reimbursements from both government and private payers, how can a facility operator continue to provide care and remain profitable? Operators who are not aggressively developing strategies for survival will find themselves out of business in short order, as the regulated environment for nursing homes gets ever-stricter and less lucrative.

Recall Newton's law of motion: An object in motion stays in motion and an object at rest stays at rest.

Reimbursement will remain a challenge as both federal and state regulators continue to look to cut already stretched budgets. But there are opportunities for nursing-home operators who embrace change. The paradigm is already shifting from volume to value, which refers to the shift of reimbursement to an outcomes-based model.

The federal government has clearly outlined its goals and objectives as follows:

• To move 30 percent of all Medicare payments by 2016 to an alternative payment model focused on how the provider community cares for their residents, instead of the volume of care being provided.

• To continue to extend the value vs. volume concept to 50 percent by 2018.

• The result of this shift to a value-based purchasing model is intended to reduce nursing home lengths of stay.

Adapting to a changing environment

In order to meet these changes in care needs and reimbursement, providers will begin developing programs beyond the traditional nursing-home model. Transitional-living units and assisted-living wings will be developed within the existing facility footprint.

Funded through nongovernmental sources, these programs will complement shrinking lengths of stay while offering residents an alternative. Expanded programs such as these afford a provider the ability to connect with the family and to offer an alternative prior to transitioning to a home-based setting.

The challenges in the nursing-home market will continue to force change, and providers who recognize and embrace the opportunity will be the survivors with health and longevity.

Matthew S. Bavolack is the national healthcare industry group leader at accounting and advisory firm Marcum LLP.

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