This year might have presented the hardest operating environment ever for skilled nursing operators, American Health Care Association (AHCA) President and CEO Mark Parkinson said this week at the organization’s annual conference in Las Vegas.

Favorable demographics ultimately will be a boon to the sector, but in the meantime, there are some strategies that can lead to quality care and financial success, he told Skilled Nursing News.

While political tumult and major regulatory shifts contributed to the pressure on operators, he identified declining census as a particularly tough challenge to surmount. The declines are principally due to lower length of stay (LOS) among post-acute patients, driven by the growth of managed care companies and accountable care organizations. Average LOS was around 27 days in traditional Medicare fee-for-service, while it appears to be closer to 14 days for managed care patients and 20 days in ACOs.

“The future of this sector is really a math question,” Parkinson said. “Will the aging of the population overwhelm this trend of a decline in length of stay, or will the decline happen faster than the aging of the population will occur? If you knew the answer to that question, you would know exactly how the sector is going to do in the future.”

A huge surge in the 80-plus population will hit around 2025, but providers cannot afford to bide their time until then. Today’s successful companies are figuring out how to offer quality care in a shorter period of time, to win preferred provider status with the managed care players and ACOs. More patient volume helps compensate for less stability in census.

“There are some success stories there,” Parkinson said.

Successful providers also tend to have a variety of service lines and some are bringing in new types of patients.

“As these pressures develop for census, everyone’s going to look around and say, who can we take care of … to fill our rooms?” Parkinson said. “One of those areas is behavioral health, mental illness type issues where the people tend to be younger.”

Some operators have started offering other niche services such as caring for younger people with brain injuries or multiple sclerosis, or even aging prisoners.

“If your business strategy is, I’m just going to be a SNF with 120 beds and all I’m going to do is take care of long-term care patients and 20 or 30 or 40 rehab patients, that model’s not going to work great in the future,” Parkinson cautioned. “You need to have other services to make it work.”

Physical therapy and pharmacy are strong businesses offering high margins, and many flourishing providers either own these services outright or have some stake in them, he said. Even mid-size or small providers can make this play, although they might need to collaborate to do so.

Current conventional wisdom says that small to mid-size providers might actually have an edge on their larger competitors, but Parkinson believes that success is not dependent on size.

A few years ago, he noted, conventional wisdom said exactly the opposite—that the sector was bound to consolidate into eight or so major companies. If an enterprise has good leadership, is in the right markets and is financed wisely, it can flourish regardless of its scale; some of the large companies that currently are struggling are highly leveraged, he pointed out.

“There’s no doubt that in our space, it gets harder the more buildings you have,” he said. “But it’s not impossible.”

RoP push continues

AHCA also is continuing a push to delay the Medicare requirements of participation.

More than 120 members of the House of Representatives and nearly 20 Senators have signed on to letters urging the Centers for Medicare & Medicaid Services (CMS) to reconsider the new requirements of participation (RoPs) for skilled nursing facilities. The massive regulation is unduly burdensome and expensive for providers to implement, the letters state. The RoPs are is set to take effect in three phases, with the second phase hitting on Nov. 28.

It appears that CMS Administrator Seema Verma alone will decide whether to delay the requirements, and it’s harder to anticipate what an individual will do than, for example, counting votes on a piece of legislation, Parkinson said. AHCA is trying to provide Verma with the support she’ll need to “stand up to the bureaucracy” and delay the RoPs.

“Hopefully, it will occur,” he said.

The letter that circulated in the House of Representatives drew 122 signatories and was delivered to Verma on Monday, Oct. 16. The Senate version will circulate until Wednesday, Oct. 18.

As of Tuesday morning, 17 Senators had signed on, all Republicans. AHCA was working to gain Democratic support but this would be a challenge, according to Parkinson.

The recent resignation of Health and Human Services Secretary Tom Price has left a void at the top of the agency. While AHCA does not have inside information about anyone tipped to succeed him, Verma would be one sensible choice and one that the association would support, Parkinson said.

Written by Tim Mullaney