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Protecting the Bottom Line with Quality Risk Management Programs

Each day, long-term-care (LTC) providers in the United States are caring for 1,383,700 residents in nursing homes and 713,300 inhabitants in assisted and residential care communities, according to the National Center for Health Statistics.

Historically, quality of resident care for LTC providers predominantly has focused on nursing homes, or skilled nursing facilities, as a result of state and federal oversight of facility licensure and certification requirements along with control over reimbursement payments from Medicare and Medicaid. Thus, the history of nursing home quality is interwoven with developments from these government entities. A pivotal moment for the modern LTC industry came more than 50 years ago when the U.S. Public Health Service issued the Nursing Home Standards Guide, which included 77 health and safety standards—55 of which were quality measures.

Demand for LTC Excellence

The call for quality has expanded beyond skilled nursing facilities. In recent years, greater consumer expectations in conjunction with health care reform placing value on outcomes and quality have impacted assisted living and residential care, home health and adult day care. Even though federal and state agencies primarily focus on regulating skilled nursing facilities, prudent LTC providers should implement risk management programs, also known as total quality management, continuous quality improvement or total quality control.

For most oversight agencies as well as for use as a differentiating marketing tool, quality of care must be accurately defined, measured, evaluated and monitored over time. In general, it means providing acceptable, high quality health services to residents at a reasonable price and within a reasonable time. Moreover, the provider should maintain a continuous error prevention or risk management program (RMP) that complements and furthers the mission of providing excellent care.

Quality Improvement Saves Money

In terms of relating it to the bottom line, a savvy provider should cultivate a culture of customer service for a positive cause and effect. By providing the best level of care, a provider will help ensure resident satisfaction as well as foster a positive work environment for employees. Better care means fewer errors in health service delivery, which leads to fewer complaints, less turnover, fewer lawsuits, lower liability insurance premiums and increased access to capital.

Think about quality of care oversight in terms of revenue and expenses. 

Poor quality will affect a provider’s revenue stream. Negative online reviews or comments about a facility will adversely impact its marketability and patient volume. Worse yet, as regulatory and/or deterrent measures, Medicare and Medicaid could withhold reimbursement payments or prevent a facility from admitting any new residents. Although infrequent, a facility could lose its license and certification. 

Looming on the horizon is the Affordable Care Act (ACA), which has established three national initiatives for quality incentives payments: Accountable care organizations (ACOs), bundled payments and Medicare-Medicaid integration efforts. The ACO Medicare Shared Savings Program will allow ACO member providers that meet certain quality standards to share in savings they achieve for the Medicare program. The Bundled Payments for Care Improvement Initiative also will incentivize participating providers on achieving savings and quality goals for patient care. Currently, two-thirds of states have integrated or plan to integrate Medicare and Medicaid to better coordinate care for dual eligibles. The vast majority are pursuing capitated, risk-based approaches. All three of these initiatives are still evolving and exactly how they will impact revenue for LTC providers is uncertain.

Expenses can also be affected by quality improvements. Proactively hiring a risk management firm to develop and implement a RMP can result in fewer claims, which could offset the cost immediately. However, if a facility has a poor track record with the state health surveys (inspections) or has pending liability litigation, oversight agencies or lenders could require it to hire a risk management consultant and additional staff to help rectify issues. This situation can be costly. Other expenses resulting from poor risk management may include increased liability premiums and potential legal fees for lawsuits. Additionally, employee turnover resulting from a poor quality environment will increase recruiting and training expenses for new personnel, overtime for existing personnel and temporary staffing services.

HUD Now Requires a RMP 

In 2013, the U.S. Department of Housing and Urban Development (HUD) made changes to its Operator Regulatory Agreement, which now requires that providers with HUD-insured loans have a risk management program in place that incorporates a real-time incident reporting and tracking system, incident review and follow-up, and staff training. The goals of such a program would be to: 

  • Systematically implement specific initiatives that create the highest levels of patient and workplace safety, both from an environmental and medical/clinical standpoint.
  • Reduce the potential for operator liability by providing management with a framework to monitor and control risk daily.
  •  Ensure that experienced professionals are administering risk management protocols. 

The lender and HUD must review and approve the RMP prior to closing. The RMP must last for the life of the loan, and if an operator requests any changes to the original RMP, HUD Asset Management would review and consider the request on a case-by-case basis. Finally, an operator must notify its lender and HUD electronically within two business days of any negative notices from a governmental authority, such as a G-level or higher survey deficiency or a civil money penalty. The long-awaited “HUD handbook” is expected to detail more specific requirements.

RMP Considerations and Challenges

The cornerstone of a risk management program is a plan that details and prioritizes foreseeable risks, estimates the impacts of those risks and defines responses to the various incidents that may arise. An effective RMP should include the following: 

  • Developing a risk management philosophy and cultivating a culture of quality care throughout the organization.
  • Securing the support of senior management, particularly at the facility level.
  • Obtaining the necessary resources for implementation from ownership/management.
  • Knowing a facility’s “historical and current risk”—both environmental and medical/clinical. 
  • Having systems and people in place to routinely measure and monitor all known risk factors—environmental and medical/clinical.
  • Grading outcomes of the RMP throughout the year.

However, a plan is meaningless if it isn’t put into action. Often cited as key quality measures, staffing turnover and retention can be critical barriers to launching a risk management program. High rates of turnover are associated with poorer quality of care and are also linked to increased costs. If staff retention is low, then resident and employee satisfaction are more likely to be correspondingly low. 

In the American Health Care Association 2012 Staffing Report, a survey of all skilled nursing facility employees nationwide showed that the median turnover rate was nearly 44%. Turnover rates among direct care staff include: registered nurses at 50%; licensed practical nurses at 36%; and certified nursing assistants at almost 52%. For all employees, turnover increased by almost 6% from 2011. Additionally, in 2012, approximately 70,000 direct care staff positions were vacant. That’s up nearly 17% from 2010. In 2012, the median retention rate for all staff at skilled nursing facilities was just over 72%.  For direct care staff, it was almost 69%. Staff median retention dropped about 2% from 2011. 

Additionally, the well documented shortage of professionals in long-term care services will only get worse. According to estimates from the U.S. Department of Health and Human Services and the U.S. Department of Labor, between 5.7 million to 6.5 million nurses, nurse aides, home health and personal care workers will be needed to care for the 27 million Americans who will require long-term care in 2050 —over a 100% increase from the 13 million Americans who required such care in 2000. 

The final challenge to setting up a RMP is to establish a culture of quality improvement in a facility, which involves: 

  • Providing leadership support.
  • Supporting facility team development. 
  • Setting goals and putting measurement systems in place. 
  • Offering adequate training for employees to understand and implement various technologies, such as universal risk monitoring systems.

The Push for Better Care (and Lower Costs)

Current drivers for total quality management include federal and state regulatory measures as well as a variety of quality assurance programs from industry associations and government agencies. The most well-known programs have been created by the Centers for Medicare and Medicaid Services: Five-Star Quality Rating System, Nursing Home Quality Initiative, Quality Improvement Organizations and the new Quality Assurance/Performance Improvement (QAPI) requirements.

As health care reform takes effect, providers will move from fee for service to value-based care, the goals of which are to lower health care costs and improve quality and outcomes. Individuals who receive care from LTC providers and their families will have increasingly higher expectations for the quality of services provided. ACA payment initiatives, when they become more fully defined, will more than likely provide additional impetus for providers to make further improvements in providing quality health care and reducing costs.

The writing is on the wall, so to speak. Putting a risk management program in place to ensure quality care may be inevitable, but it also makes good sense—for the organization’s residents, reputation and bottom line.

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