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Skilled Nursing & Hospitals Hold Hands, a Win-Win Relationship

The Skilled Nursing and Rehabilitation market is in the midst of a transformation and faces a new world of accountability and readmission penalties.  There is a long overdue interest and awareness that nursing home providers provide the key that can reduce unnecessary hospitalizations which trigger financial penalties for both the Skilled Nursing provider and the Hospital.  With the realization that private and public payers are committed to VALUE BASED HEALTH CARE, the days are over when financial success was tied to the census of a hospital or a skilled nursing facility.  

THE HOLDING HANDS RELATIONSHIP is new and demands cooperation from both hospital and skilled nursing provider.  Both share the goal of avoiding unnecessary inpatient stays, but a hospital’s facility, protocols and standards are very different from those of a SNF.  Furthermore, the communication gap between the two providers is great.  Nursing homes frequently do not receive the information they need to properly care for patients discharged from the Hospital.  Although there are many programs that address the problems of the marriage of Hospital and Skilled Nursing Facilities, the financial incentive to change to valued based health in the short term view, is not as important to a skilled nursing provider as it is for the hospital.   Cut in reimbursement rates for readmission are significant for hospitals, not for all skilled nursing facilities yet, but the handwriting is on the wall.

THE GOOD NEWS IS the skilled nursing provider doesn’t get off the hook, which is a tribute to the fact that the healthcare industry is “growing up” and adjusting to the demands of the culture.  For example, a good many health systems are creating a network of SNF’s that agree to meet quality standards, share data, provide certain services and work with hospitals to reduce, avoidable hospitalizations.  Upon discharge from a hospital, a patient is given the list of approved skilled nursing facilities that have met the Hospitals requirements and are included in their network.  Of course the patient can choose any nursing facility, but hospitals can help patients make good choices.  If a skilled nursing facility becomes a preferred provider they enjoy increased census and increased revenue.  In the long term when unnecessary hospital readmission from nursing homes reduces their reimbursement rate, the skilled nursing will survive that has developed a value based health care plan.  The ones that do not meet the new higher standards will not survive or end up in the bankruptcy court.

AND SO THE BEAT GOES ON!  The result of all the effort by various organizations like the Medicare-Medicaid Coordination Office and the Center for Medicare and Medicaid Innovation is resulting in the   integration of hospital and acute care providers.  The result is lower costs and improvement in the quality of care.  The entire healthcare industry is becoming more sophisticated and in the big picture is making giant steps in achieving what is necessary to create a structure that will support the goals of Value based care as well as financial reward.

California Sees 19 Skilled Nursing Facilities File Chapter 11

Like many senior living and skilled nursing operators, Country Villa Service Corp was struggling financially in recent years. This, along with class action lawsuits, forced 19 of the facilities to declare bankruptcy. The Chapter 11 filing is not for the entire corporation, but individual assets seeking protection. The two biggest reasons for this move include Medicaid along with the lawsuits.

Medicaid Responsibility

When a patient qualifies for Medicaid, he pays only necessary co-payments or out-of-pocket expenses. Like most other insurance companies, Medicaid is responsible for sending Country Villa funds. Unfortunately, the state of California has been slow in processing and sending money to the skilled nursing facilities. This can be detrimental to the company who cannot then finance their company needs, such as paying wages, attaining medical supplies, or general care needs. Country Villa also experienced lower credit and could not finance through loans.

Class Action Lawsuits

Along with missing funds from Medicaid, Country Villa is up against a number of class action lawsuits. These are due to paid wages and hours along with poor care of patients and medication usage. A total of seven lawsuits are still pending. This led the franchises to file for bankruptcy as a means of protection. It means there are no funds to pay out if the plaintiffs win.

Moving Forward

Country Villa believes there will be no senior housing facilities for sale due to this. There is an overall rate of 90 percent occupancy with a few of the homes at 100 percent. These homes include:

  • Plaza Convalescent Center
  • Westwood Healthcare Center
  • Sheraton Healthcare Center

This means that with diligent planning and financial guidance, the company should be able to move forward. A new financial model was already created so the skilled nursing facilities are ready to start a new chapter after this bankruptcy.

There are a number of reasons skilled nursing facilities must file bankruptcy. Government owned and non-profits cannot use this as a means of protection, but others do and will. It is extremely difficult to make a profit generally, but when the home runs a poor financial plan and does not receive funds due, it is inevitable. If you find yourself stuck and do not think you will move forward from bankruptcy, contact a reputable skilled nursing brokerage. He can help you manage the sale of your senior home and get you out of trouble.