Few industries in America today face a more unique set of challenges than nursing homes and assisted care facilities. Major cuts to Medicare and Medicaid, coupled with ever-increasing numbers of the U.S. population requiring geriatric care, force nursing homes and assisted care facilities to do more with less. When confronted with budgetary shortcomings, the last thing any nursing home director wants to do is make cuts to their staff or services.
According to Chris Carroll and Fred Manuel, principals at leading financial efficiency analysis firm Alliance Cost Containment, optimization of operational expenditures should be the first step in streamlining the budget. Carroll and Manuel, experts in producing savings for nursing home and assisted living facilities, have successfully achieved savings for 100 percent of their nursing home and assisted living clients.
“Nursing home and assisted care facilities are often so overworked and short-staffed they simply don’t have the resources to closely examine their expenditures on a line-by-line basis to consistently avoid overspending,” Carroll said. Carroll recommends considering key expenditure areas common to the nursing home industry, including medical supplies, rehabilitation services, lab/x-ray services, utilities, and security services.
Rehabilitation services, for example, can be a tricky beast to tame, fiscally speaking. “Facilities tend to have a contract with an outside rehabilitation provider, either regional or national, and Medicare comes into play too,” Carroll said. Rehabilitation services include physical therapy, occupational therapy, and speech therapy; specialists in these areas come at a premium. Outside contractors with such specialized skills generate lengthy and often convoluted contracts. Furthermore, renegotiating a contract can be sensitive for administrators concerned about causing irreparable damage and awkwardness to longstanding business relationships with vendors they may want, or are required to continue working with because of limited options.
“Sometimes contracts can be very confusing and complicated, so when an audit is performed, we also check for contract compliance,” Manuel said. “And as third-party analysts, we are able to have a polite, direct, and objective discussion with the vendor that won’t create awkwardness within the working relationship.”
Manuel stressed that it is important to not equate bargains with value, and each analysis should be tailored to a facility’s needs. A facility’s vendor may be charging a low rate, but may also be ignoring the facility’s unique areas of need.
“We don’t always recommend the lowest price contract because we also take into account the quality of service and comprehensiveness of their offering,” Manuel said. “For a medical supplier that offers lower prices but only visits twice a year, may not provide the best value. Or perhaps another supplier offers onsite training for the staff with supplies and devices, which might be a vital and important service to a client. We customize our approach, often resulting in greater savings than produced by Group Purchasing Organizations.”
Striking a balance between value and price via a third-party expert can help nursing homes or assisted care facilities solve their budgetary issues quickly and efficiently. Many firms work on an hourly basis, but some firms work on a contingency basis and only get paid for positive results.
“It’s not just about reducing costs,” Carroll said. “It’s about increasing profit and operating margins by reducing expenditures as much as possible.”
