Inside One Ailing Skilled Nursing Facility’s Finances — And the Strategy to Fix Them

Faced with a potential closure due to declining revenues, one hospital-based skilled nursing facility enlisted the help of third-party advisory firms to diagnose its problems — and suggest a few novel solutions.

Back in July, the Sonoma Valley Hospital (SVH) in Sonoma, Calif. released a report indicating that its 27-bed SNF unit would lose about $879,000 in fiscal 2019. In turn, the hospital’s board began mulling the complete closure of the wing, and requested an independent analysis of the pros and cons from consulting firms Regulatory, Risk, Compliance Specialists, Inc. (RRCS) and WIPFLI, LLC.

The local Sonoma Index-Tribune first reported on the findings.


The analysis, released last week, found that while closing the wing would achieve the immediate goal of financial savings, keeping it open “would be a strategic public relations benefit.”

“Closure of the SNF as it currently operates appears to remove more cost than revenue, thereby saving SVH money,” the firms concluded. “However, operating the SNF differently (e.g., correcting error rates, billing issues, and staffing for nursing and therapies) has the potential of making the SNF profitable.”

Those three areas have contributed to projected losses at the facility, in RRCS and WIPFLI’s estimation. The skilled nursing wing was overstaffed with three registered nurses and three certified nursing assistants on a weekend day shift, the firms found, adding that such coverage was more appropriate for an acute-care operation.


“Findings of this report do not support the need for two direct-care RNs on duty at all times,” the consulting firms concluded. “It is noted that the RNs are cross-trained and utilized between acute care and skilled nursing units. Floating and sharing of staff has an opportunity for further optimization through innovative planning.”

RRCS and WIPFLI also found a host of billing issues — with an overall claims error rate of 6.79%, above the government review threshold of 5% — as well as high turnover in the physical therapy department, which generated lower-than-prescribed therapy minutes in three out of 10 claims that the firms analyzed.

“The use of a therapy company skilled in understanding and providing the appropriate amount of therapy would improve efficiency and cause the hospital to incur cost only when it will be reimbursed,” the report stated.

The audit included a look at Minimum Data Set (MDS) and Resource Utilization Group (RUG) data, as well as interviews with a host of leaders and employees at the hospital and its skilled wing.

RRCS and WIPFLI offered a range of potential solutions for the skilled nursing facility’s woes, including reducing direct patient care and therapy staffing hours per patient day — for a savings of $1.2 million — and relying on outside therapy contractors to provide more flexible costs. The firms also recommended that leaders advertise the hospital’s skilled nursing services to other acute care facilities in the area that do not have in-house SNFs, while emphasizing a general need to adapt to value-based care initiatives.

“The organizations that will do well in the future will ensure effective/timely primary care access, integrated IT platforms that can track the lives of patients within the delivery system of care, effective health management of the populations served, cost-effective continuum of care management, and real-time data analytics,” the companies noted.

Written by Alex Spanko

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