Evolving Nursing Home Business Model Sees Rise of Third-Party Docs, Therapists, Back Office Staff

As rising acuity and reimbursement challenges stymy nursing home workforce growth, third party contracts have been increasingly responsible for providing daily services.

Whether its providing resident-facing clinical work, including use of third party doctors, supplying medical equipment or rendering back office services that focus more on ensuring proper documentation for reimbursement, third parties are increasingly involved in a broad range of essential tasks at nursing homes.

And growth in the use of third parties continues despite some headwinds for third-party businesses in the SNF space – and the trend is driven partly by increased mergers and acquisitions activity. Meanwhile, some of its rise, especially in the use of third party clinicians, is due to a reduced need for pandemic-related telehealth services, resulting in a normalization of sorts.


For Joshua Wallace, vice president of growth strategies at Ohman Family Living, there has been increased collaboration with existing third party partners in clinical and technical services.

Two third party partnerships stick out as significant helpers for Ohman. Therapy provider HealthPRO Heritage, and medical equipment provider, United Medical Supply, have deepened ties with Ohman in recent times.

“They’re tremendous partners with us for clinical reform,” said Wallace of his organization’s third party partnerships. “They understand that we have to achieve certain objectives, they understand payment reform, they understand that there’s a 90-day journey. They work with us to be able to mutually align to our objectives that we have to achieve.”


And even though Ohman may not have increased its use of third party doctors, such contracts are also on the rise.

GAPS Health, which provides third party contracts through pairing up doctors for medical directorships in SNFs as well as assisted living facilities, has seen its core book of business grow by 22% in the last year, according to Dr. Jerry Wilborn, CEO of GAPS. This is despite temporary clinician work tied to Covid seeing declines as a result of pandemic-related severity of disease decreasing, Wilborn said.

However, this has also meant that the need for doctors to be physically present has returned.

“With [Covid severity] dying down a lot of the need for telehealth visits, telehealth services died with it – but our core book of business, working with our partners, has continued to improve,” said Wilborn.

GAPS’ value-based revenue has significantly grown by 180% over the last year. The medical directorship business has nabbed contracts with various major payers, Wilborn said.

“We’re going to see more and more growth in that going forward,” said Jeff Winter, senior vice president of strategic partnerships and M&A at GAPS. “That’s the paradigm shift in this industry right now.”

Mergers and acquisitions influence third party partnerships

Coupled with the trajectory of Covid, Wilborn and others said that another factor in third party trajectory, especially when it comes to third party doctors, has to do with mergers and acquisitions.

Third party providers need to acquaint themselves with new owners, who may or may not be interested in the same level of partnership with existing third parties.

“The nursing home chains are selling. When they sell, it’s kind of like McDonald’s – when it’s sold, there’s 50 different new burger joints. It’s not just McDonald’s anymore,” said Wilborn. “When these facilities are selling, they’re doing things that are different from what might have happened in the parent company.”

In other words, new owners may bring in new providers, or they may have their own set of providers. It could be like starting from square one for a lot of third party businesses.

“The facility chains are changing hands very, very frequently and because of that, their talent is also changing at a local level,” added Winter.

Third parties like GAPS have had to change how they can partner with people more effectively. That means aligning themselves with SNF initiatives, and proving to partners that their medical directors will have a dramatic effect on clinical outcomes.

It’s about aligning with operator mission, understanding what the surrounding community needs in terms of specific medical care, and also aligning financially to help SNFs with cost saving measures.

Dr. Steven Flanagan, president of the American Academy of Physical Medicine and Rehabilitation (AAPMR) echoed what Wilborn and Winter had to say in terms of physician groups as third party partners, and how that connects with value-based care.

Physiatrists too, are currently and will continue to be central to clinical outcomes in SNFs, and in turn reimbursement through value-based care. A physiatrist specializes in physical medicine and rehabilitation for patients with muscular or skeletal injuries, while looking beyond inpatient diagnosis to focus on underlying issues as well.

Some members of AAPMR, similar to GAPS, are businesses composed of groups of doctors and other high-level clinicians, offering their services to SNFs as third parties.

“Facilities recognize the benefit of having someone like that, who has this unique skill set that others don’t. They will argue, and I think rightfully so, that their patients benefit, the facility benefits, and staff benefits,” said Flanagan.

Partners versus vendors

HealthPRO and United Medical Supply, along with other third party partnerships, have helped Ohman be more creative with care and streamline efficiencies in the way that the operator does business.

“We can make sure that our spend is appropriate, and all these things are optimized, and that we’re capturing the things that we need to capture,” said Kurt Ingersoll, VP of operations for Ohman. The Ohio facilities can then reappropriate the right amount of funding to increase staffing and clinical training.

United Medical Supply specifically helps Ohman tackle costs and acuity, Wallace said, as such partnerships help SNFs develop a better cost management system.

“Our aim with them as a partner is to be able to actually get to a place where we have a cost per [diagnosis-related group (DRG)] so that we know, on average, for a congestive heart failure patient, it costs us X amount of dollars,” said Wallace. “We see them less as a vendor and more as a partner.”

Wilborn echoed these thoughts to emphasize a further distinction between vendors and third party partners. With GAPS’ value-based care contracts, the team aims to work with I-SNPs, ACOs or other available models to help SNFs bolster MA revenue through desired clinical outcomes.

The partnerships align with mission-driven incentives too, along with objectively aligning with the business of SNF care. United knows where Ohman is looking to go in terms of care services.

It’s even more important now to choose partners that don’t behave as vendors, Ingersoll noted. That means more trust in third party expertise with SNF focus pulled in so many other directions.

“We pick people who are able to take the ball and run with it,” said Ingersoll. “We trust them to be able to do those things because there’s so many things to focus on since the pandemic that we didn’t have to focus on before. The quality of the partnership is of paramount importance … we either succeed together or we don’t. It’s critical we choose partners that we can trust.”

In finding the right alliances, operators need to make careful financial considerations, Wallace said. When the operator meets certain objectives, the third party partners are also reimbursed in the same way that the facilities are paid.

“To the extent that the third party is able to bill for their services, and be compensated fairly through CPT codes … that is another way that you can increase the utilization of third party providers, where there’s a reimbursement structure already built in to the payment for goods and services rendered in the skilled nursing environment,” said Wallace.

Third parties, staffing and an evolving business model

Ingersoll anticipates third party clinicians will count toward the staffing mandate, as the industry is still struggling to bring enough people in-house and entice clinicians to stay in the space as a long-term career.

“We’re more interested in working with partners who will help us bring more people into the fold,” said Ingersoll.

Unfortunately, the mandate will only dictate “who goes where on what day,” Ingersoll said, rather than what he feels the industry really needs – generating interest in the industry while ensuring adequate compensation.

On a wider scale, Wallace feels the right partner can pack a punch in rebuilding the workforce, or reorganizing services for better cost management. But, these clinicians provided by a third party won’t be sustainable long term, he added.

“The right partner is the one who’s bringing people into the workforce that weren’t previously there, not one who’s grabbing from one place to go to another,” said Ingersoll. “That’s not the solution, that’s just moving around the problem. The right [partners] are the ones who find a way to generate the interest for people to join in the care in our industry, and start being a part of that.”

Ingersoll used Ohman’s therapy provider as an example, with many physical therapy assistants and occupational therapy assistants deciding to add certified nurse aide (CNA) to their list of qualifications – and then use their newfound expertise in Ohman facilities.

Wilborn, on the other hand, believes the SNF business model will be driven by producing consistent quality outcomes, and that quality outcomes will only happen when physicians are engaged and oversee such outcomes.

“Physicians are still viewed as vendors … they’re viewed as a means of census development,” said Wilborn. “I think that’s perfectly fine, if you’re working with a doctor and he works in the hospital and he likes what goes on, referring the patients to your facility. But the reality is, that can’t be the only driver.”

Moving forward, there will be a delicate balance needed for operators, Ingersoll said, in terms of making sure they’re not outsourcing in too many areas.

“If you were to fully outsource all of the things … it would be too expensive to continue running our business,” he added.

One partnership area where SNFs should expand is in education, Wallace said, in order to again drum up interest among students both on the technology side and clinical side.

“That would be like one of the primary places where I can actually tangibly see more people on the floor,” said Wallace.

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