September 16, 2020

Ways LTC Operators Can Comply with Pandemic Relief Funding, Improve Overall Operations

As COVID-19 has continued to plague our country, nursing home operators have received much needed financial assistance from the Paycheck Protection Program (PPP) issued through the U.S. Small Business Administration (SBA) and Provider Relief Funds (PRF) made available through the U.S. Department of Health & Human Services. The relief offered by these programs has sustained many operators during this very challenging time. However, funds are not without strings attached, even as the actual requirements and expectations for receiving the funding continue to evolve. 

This dilemma has placed operators in the difficult position—they need the funds, but there is an opacity as to what future conditions may be laid out by both fund-issuing agencies. In addition, the public-at-large continues to (in many instances) unreasonably criticize the industry as it works to care for our most vulnerable population. 

While there are many uncertainties as the pandemic unfolds, this period offers a unique opportunity to reflect on the best ways to use said funds to create better foundations for operators into the future. Below are some suggestions for ensuring compliance with funding guidelines and ways to create better outcomes down the road.

1. Establish Transparent and Fiscally-Responsible Financial Practices

As part of the $2 trillion coronavirus stimulus package passed in March, the Small Business Administration (SBA) provided up to $10 million in fully forgivable loans to small businesses. The Paycheck Protection Program (PPP) was available to skilled nursing facilities that found themselves in a tight pinch to pay rent, float payroll, and essentially keep the lights on. To this point, SBA has funded 5 million companies and organizations with PPP loans. Healthcare and social services businesses have been the top recipients. 

When PPP loans were initially issued, it was done with little information or detail about the reporting that would later accompany the funds’ issuance. Recipients were given high-level guidance; funds had to be used for labor, rent, and other related overhead expenses. To take advantage of this program, many long-term care operators applied for and received these grants without fully understanding compliance requirements. The lack of understanding, combined with poor accounting, mismanagement, and fraudulent behavior on the part of some operators has heightened scrutiny not only of the PPP program but of the industry.

In August, The Washington Post reported in an extensive analysis that for-profit nursing home facilities across the country were accused of additional fraud associated with coronavirus relief. Pressed for relief during the pandemic that caused sweeping illness from New York to California, the federal government responded with the CARES Act. 

As part of the CARES Act Provider Relief Fund, $4.9 billion was allocated to hospitals, nursing homes, and other healthcare providers with few spending restrictions. The Post reported: “Accusations of Medicare fraud and kickbacks, labor violations or widespread failures in patient care received hundreds of millions of dollars in ‘no strings attached’ coronavirus relief aid meant to cover shortfalls and expenses during the pandemic.”

Facilities and operators need to ask the following question: What measures and improvements need to be in place to show better accountability and fiscal management for relief funds? And what needs to be done to provide quality care for residents while also remaining profitable? Operators that already had fiscally-responsible financial procedures in place were better positioned to meet all reporting requirements for both the PPP and PRF funds and withstand the challenges posed by the COVID-19 pandemic. 

Ensign Services, one of the largest operators in the industry, recently returned all $110 million of the federal funds they received in PRF after reporting one of the most profitable quarters in history according to Skilled Nursing News. Barry Port, CEO, expressed his views about the importance of considering Ensign’s role as a caretaker in the context of being a public steward. As an industry that relies on taxpayer-funded programs for its revenue model, the importance of taking this role seriously should involve a high level of financial prudence and responsibility. According to Port, this weighs heavily on his mind, and drives Ensign’s approach to financial management, which has served them well throughout this current crisis. 

If your facility struggles with the reporting requirements for the PPP, this is a good reality check that may force the review of your financial accounting and reporting practices. Proper financial management should also extend to regularly reviewing expenses to identify areas for improvement or cost savings. This includes allocating all revenue to processes, practices, and solutions that improve quality patient care, better position your facilities in the marketplace, and achieve operational goals. 

2. Implementation of Technology, Data, and Automation

While the industry has been slowly shifting toward implementing technology solutions over the last decade, this remains an area that lags behind other segments in the healthcare industry. From communications and electronic health records to solutions for managing pharmacy spend and tracking supplies, implementation of technology solutions for these areas offer ways to streamline operations better and reduce costs through automation. 

When the federal government issued COVID-19 reporting requirements, many operators went scrambling for solutions. They struggled to find automated ways to send real-time communications to residents, their families, and staff. The technology to send group messages via text or email is not new, but HIPAA compliant solutions for the LTC industry were rarely employed before mandating compliance requirements. 

This example highlights an opportunity for many operators to identify and implement technology solutions to communicate, manage costs, operations and logistics better, and even provide elevated patient experiences. While some technologies have taken hold as industry-standard like PointClickCare—which streamlines critical functions from finance and staffing to compliance and data analysis—many operators continue to use inefficient or manual processes. PointClickCare recently commissioned a study that concluded their technology solutions for the skilled nursing industry result in an ROI of 418%. 

These types of efficiencies and cost savings should not be ignored. SRX—a technology solution for managing costs and increasing rebates related to pharmacy drug spend through automation—offers average cost savings of 11% and has more than doubled rebates for some customers, which can add up to millions of dollars depending on the size of the operator. 

Scott Taylor, CEO at SRX explains: “What we’ve seen with our customers is that those rebate dollars we guarantee have really helped with cash flow during these times. It’s always a challenge to adopt and integrate new technologies, but the benefits of the right technology always outweigh any associated costs. Technology and automation are going to be key differentiators for operators that will lead this industry in the future.”

Solutions like these are raising the standard in the industry. Operators that continue to use manual processes when more efficient and cost-effective solutions are available run the risk of not only falling behind in a competitive market but also failing to control costs and weather economic downturns adequately.

3. Risk Mitigation

Operators are now evaluating many of their policies, procedures, supply chains, and staffing as they understand the new risks inherent in managing to stay afloat in the midst of a global pandemic. While there is no predicting the end of this pandemic or the beginning of another, putting measures in place to account for these scenarios is crucial in proper business planning and growth strategies. 

One of the primary challenges for operators has been adequately sourcing the personal protective equipment (PPE) needed to keep staff and residents safe. Supply chain issues aren’t susceptible only to global pandemics; they happen for many many reasons. As such, operators should continually evaluate their vendor relationships and secure alternatives if possible. This is a crucial element of successfully navigating any business, particularly in healthcare. 

Synergy HCA, a group purchasing organization (GPO) serving the LTC industry, helps operators identify qualified vendors. As they have worked with operators to meet the pandemic’s challenges, supply chain issues are now front and center. Yosef Daskal, COO at Synergy HCA, has seen a tendency for facilities to favor relationships with existing vendors. That trend can create challenges if the current relationship is with smaller vendors with limited manufacturing and distribution networks. As evidenced by the current pandemic, without access to broad networks that are more common to larger vendors, disruptions in supply chains can cut off smaller vendors. This isn’t to say that operators should always source from larger vendors, but it should be a consideration in risk management. 

Daskal explains: “Our primary mission is to help operators secure contracts with vendors that make the most sense. Common sense dictates that SNFs need to have structurally-sound relationships with vendors in order to mitigate risk. An example of this type of strategy involves a recommendation we made to one of our large multi-state operators. They had previously been using a regional distributor for their medical supplies. When looking at cost, value, and risk, we recommended renegotiating with a larger vendor with stronger supply chain and contingency plans. This was prior to COVID. That recommendation ultimately ensured their desperate appetite for critical PPE and medical supplies went largely uninterrupted despite the pandemic. This provided a safety net in their supply chain that they would not have had with their previous vendor.”

Another risk mitigation strategy is to engage with the greater industry community. In a competitive market, it’s common for businesses to operate in isolation and simply repeat legacy behaviors. Employing a more open approach to collaborating can result in valuable information exchanges, including sharing best practices that benefit everyone. Attending trade shows and conferences (live or virtual), connecting with other industry thought leaders, and staying up-to-date on the latest trends, news, and legislative changes are crucial to anticipating challenges and successfully moving through them.  

The American Health Care Association (AHCA) represents long-term care operators’ interests, including providing financial and lobbying support for the industry. AHCA has long been instrumental in influencing beneficial legislation and supporting thought leadership that positively impacts change. This includes bringing operators together to solve issues and advocate for each other. Mark Parkinson, AHCA’s president, has seen a visible difference in the success of operators that participate in their organization and those that don’t. “This crisis has been a bellwether for many operators,” he said, “What we have seen is that those who collaborate with other operators, are open to outside ideas, and who are active in the industry community are surviving, and will likely be the first to start thriving again. Information is power, and information is best gathered through sharing.” 

While there’s no way to plan for every risk or eventuality, operators can use this time to improve fiscal responsibility and practices, identify opportunities and technologies for improvement and cost savings, and develop and revise risk mitigation strategies. These and similar measures can help operators more confidently use available funding, focus on operations and resident quality of care, and better position themselves to move forward through this and future challenges. 

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