Under Medicare Advantage Pressure, Skilled Nursing CEO Fires Self to Save Building

The top executive at a skilled nursing and assisted living facility in Martinsville, Va., is soon to be out of a job — and he’s the one who signed the pink slip.

Blue Ridge Village CEO Chris Oswald cut his own position in an effort to reduce costs amid lower reimbursements and lengths of stay, which he blamed primarily on the rise of Medicare Advantage plans.

The Martinsville Bulletin, a local newspaper, first reported Oswald’s self-firing.

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The community — which has 300 beds licensed for rehabilitation and 60 beds licensed for assisted living — was facing declining revenues due to the increasing penetration of privately-run MA plans, which generally offer lower reimbursement rates for skilled nursing services than traditional Medicare.

“Medicare Advantage was formed not to improve patient care, but to cut costs, and they are doing an excellent job of it,” Oswald told Skilled Nursing News. “They are reducing average length of stay by sometimes double-digit numbers.”

While some residents used to stay between 40 and 70 days for rehab services, the facility’s average length of stay is now just shy of 21 days.

“I have to replace them with three times as many residents [as before] to break even, and they’re just not out there,” Oswald said.

Medicare Advantage on the rise

Medicare Advantage plans have increasingly demanded lower lengths of stay from participating providers, with one recent study finding that MA patients spent on average 5.1 fewer days in a skilled nursing facility than traditional Medicare beneficiaries — while also receiving 463 fewer rehab therapy minutes during the first 40 days following a SNF admission. That same study additionally found that MA patients had lower re-hopsitalization rates and easier integration back into their communities following a SNF stay.

But in Blue Ridge’s case, Medicare Advantage has largely served to erode its bottom line: The community’s annual total revenues dropped from roughly $15 million two years ago to about $12 million now. And the Virginia operator isn’t alone.

Managed Medicare revenue per patient day (RPPD) dropped nationwide to $431 in the first quarter of 2018, as compared to $522 for traditional Medicare residents, according to recent data from the National Investment Center for Seniors Housing & Care (NIC). The lower reimbursements come as more and more seniors elect to participate in Medicare Advantage programs, with current nationwide penetration sitting around 33% of all Medicare beneficiaries — a number that’s expected to rise considerably over the coming years, potentially at a rate 6% to 7% annually.

At Blue Ridge, planned cost-cutting measures include laying off some non-clinical employees, renegotiating better terms and pricing with business partners, and arranging a possible lease reduction with the community’s lienholder.

But it could have been more drastic.

“We had talked extensively about severely slashing wages, severely cutting ratios on the units,” he explained. “If we reduce our quality of care, then we step into a death spiral.”

Combined with nixing the CEO role, the moves could save the community as much as $300,000 to $400,000 per year, which is just enough to help the facility break even. Blue Ridge is also exploring ramping up its behavioral health offerings, already taking on 20 such residents with plans to add even more.

Moving forward, a licensed administrator will lead the rehab facility, while an executive director will manage the assisted living community. Both employees formerly reported to Oswald.

“I’m leaving here on an up note. I really think we have positioned this facility to be successful,” Oswald said. “It’s a celebration today and not a funeral.”

Oswald said he hoped his story would push more leaders across the industry to get creative in slashing operational costs.

“I would hope that I would inspire them to look at other options besides cutting wages for the lowest paid individuals, [such as] your rank-and-file LPNs, CNAs, nursing assistants, dishwashers, and dietary employees,” he said. “Because at the end of the day if this facility is going to ultimately make it … it’s going to be on the backs of those kinds of people.”

Written by Tim Regan

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