Providers Turn to Behavioral Health to Boost Sagging Skilled Nursing Revenue

Depending on the state they’re in, skilled nursing facilities could jolt flagging finances by adding a behavioral health component to their lineup of services.

But they have to proceed carefully. Such services can bolster reimbursement significantly, while also creating additional pressure on hiring, staffing, and programming, according to providers presenting at the LTC 100 conference in Naples, Fla. earlier this week.

“The concept of behavioral health is not a newfangled concept,” Ryan Haller, chief development officer at the Portland, Ore.-based Avamere Group, said on the panel. “It’s something that has been in our facilities for years; there just hasn’t been a call to action or a need for us to properly address it. What I’d say is this: We did not go out looking to be a behavioral health care provider. It was one of those areas of desperation.”


Avamere, which has 65 locations in 18 states spanning the continuum of care from independent living to rehabilitation, has several facilities in the Pacific Northwest — one of the many areas of the U.S. where low Medicaid rates have put tremendous financial pressure on SNFs.

Facilities in the region with occupancy around 85% lose money year-over-year, Haller said.

It was actually the state of Washington that approached the company to suggest it look at behavioral health. And when Avamere began researching the statistics, what it found was “staggering” in terms of how many seniors have behavioral heath issues that go undiagnosed or unaddressed, Haller said.


The Avamere team then analyzed reimbursements under Washington’s Expanded Community Services (ECS) and ECS Plus contracts, concluding that the ECS Plus is a standalone rate comparable to that of many commercial health management organization (HMO) reimbursements, he said.

In the state of Washington, which ranks among the bottom of the 50 states for reimbursement, that was compelling.

“Right now, we have expanded this into five facilities that — I don’t want to say they were hemorrhaging money — but they definitely were not making money, and with occupancy in the 80 [percent range],” Haller said. “Now these are some of our most profitable facilities.”

While Avamere got into the behavioral field over the past year, Generations Healthcare, based in Santa Ana, Calif., has been providing behavioral health for more than 20 years. Generations’ community is licensed as a traditional SNF, and a medical diagnosis is required to get in, Stephen Black, vice president of operations at Generations, said on the panel.

More than another set of SNF services

All the panelists emphasized that adding behavioral services takes more than a desire to improve struggling finances. An already challenging workforce environment becomes even more strained in a behavioral health setting, even though the capital requirements aren’t as extensive as might be expected.

Generations has a full-time director with more than 40 years of experience in behavioral health overseeing its residents, whose diagnoses range from substance abuse to gambling addiction. The goal is to return patients, many of whom come from the surrounding county, back into the community, and Generations has seen considerable success on this front: 98% of its patients that go in the community do not return to the facility, and the average length of stay is six to nine months, compared with an industry average of around 18 months for similar programs.

“We’re looking at starting more behavioral health facilities, where we have clusters,” Black said. “Because they’re not SNF-appropriate, for the most part, and so we’re going to create programs where we have strong partnerships in communities. In those, we’re currently working with Sacramento — we’re meeting with legislators to look at reimbursement. Because you have to stay in business, right?”

One element to consider for SNFs is the logistics of such a program. Staff need specialized training and support; Generations requires its team members to become certified in self-defense, and it provides outdoor areas and a well-appointed break room to allow staff a chance to genuinely relax.

“We staff at an appropriate level,” Black also noted. “It seems kind of simple, but a lot of people staff for state mandates. We staff at what we feel is appropriate.”

And burnout is a particularly acute issue for behavioral programs, not least because patients can take advantage of staff that are struggling with a lack of engagement, he noted. Generations spends most of its capital on staff training, finding the right workers, and giving them the tools to do the job.

“We put a lot of our capital into our people on this thing,” he said.

When it comes to physical plant considerations, Avamere found the costs to be, overall, less than $100,000 per building for existing facilities.

But before investing in people and infrastructure, the first step for any company interested in expanding into behavioral is meeting with the state.

Partnering with regulators — and managed care

Medicaid is the primary payer for such programs, which means the state will dictate staffing requirements, Haller noted. But more broadly, Medicare hasn’t paid attention to behavioral health, he said.

“I think it’s going to be an opportunity under PDPM,” Haller acknowledged, referring to the new payment model taking effect October 1. “However, by and large, it’s been the Medicaid, state-level programs that have been forced to address this.”

That means the first step in getting a behavioral health program off the ground is meeting with the state and other officials. Reimbursement is almost always local, Black noted, which necessitates a thorough understanding of rates, right down to the county level. But states have proven themselves willing to help SNF providers that want to take on behavioral health: One consortium of SNFs in Minnesota received $10.5 million from the state to help improve mental and behavioral health care at its properties.

Another key partner — one that can be very helpful in supplying a population of residents who require behavioral services — are managed care plans, Haller said. If a SNF can demonstrate its ability to take on behavioral health patients and keeps its managed care partners in the loop, the payers “can fill your building very quickly, because the number of SNFs in a market versus the number of SNFs with a behavioral health component is less than 5% in most markets.”

That gives SNFs with such capabilities an automatic competitive advantage, according to Haller.

“A lot of times these individuals are being treated in an acute-care setting,” he said. “Just like anything else, [managed care organizations] are trying to get them out of an acute setting and into a post-cute setting.”

Interest in the behavioral health sector is booming, with some older SNFs seeing new life as behavioral facilities, and leaders at Sabra Health Care REIT (Nasdaq: SBRA) just this Thursday expressing an interest in expanding around behavioral health.

But as with other types of specialized medical conditions, SNFs need to know their limitations, Black cautioned.

“Know what you’re good at,” he emphasized. “Don’t take all behaviors. Know the ones you can handle. Just because you have a behavioral unit doesn’t mean you take them all, even if reimbursement’s good. You bring in one bad resident that doesn’t match your population, it can have a significant impact.”

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