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When the prospective payment system (PPS) descended on skilled nursing facilities, RehabCare Group of St. Louis decided to figure out how providers could determine the profitability of patients under the new Medicare payment system.
"What we were trying to do for our clients was to manage these skilled nursing units effectively, and we found we didn’t have the information readily available to do that," says Tom Davis, president of inpatient services for RehabCare Group, which manages 113 acute rehab units based in hospitals, 60 outpatient therapy units, and 30 hospital-based skilled nursing units.
"That need really drove us to develop what we refer to as our cost tool," Davis adds, "and what that allows us to do is accumulate RUGS [resource utilization groupings] revenue data and match that against the direct cost of treating those patients."
RehabCare has its own proprietary system for accumulating outcomes information on all patients, so the organization will adapt that system to the Minimum Data Set for Post Acute Care (MDS-PAC) that the Health Care Financing Administration (HCFA) in Baltimore proposed for inpatient rehabilitation PPS, Davis explains.
"What we’ve done is write cross-walks between outcomes information and the case mix groups [CMGs]," he says. "We’ve already accumulated all of our CMGs by unit for the last several years, so we already know the array of CMGs by unit."
Essentially, the organization has already been collecting within outcomes data the case mix-type scores for motor skills, cognitive skills, age, and comorbidities. "Since we had all the clinical information and the outcomes information on these patients, we were able to cross-walk that outcomes information to show how it would appear as a payment or CMG," Davis says.
Once a facility obtains cross-walk information, it can determine how well it is going to do under PPS when compared with cost-based reimbursement.
"You go to the cost report and determine what your costs are," Davis says. "The real missing piece is what your revenues will look like under CMGs, so it’s critically important to determine the number of CMGs you’re going to have and the various 177 different payment groups because that determines your revenues."
There are some additional benefits to developing a cost tool. For one, a cost tool can be used to create a database for specific information, such as pharmacy costs per discharge, nursing costs per discharge, or radiology costs per discharge. Health systems or companies with more than one rehab facility can use that information to determine which site is the most efficient and then use that site as a basis for developing best practices or protocol.
Alternatively, a rehab provider could use the data to identify problem areas, such as rehab facilities that are outliers in a particular service cost. "That gives us a quick indication of where we need to do some work," Davis says.
Whether the higher costs are due to differences in ancillary utilization or nursing costs, or are a reflection of the type of patients on the unit who result in higher costs, the provider could make changes to bring the costs more in line with expectations. For example, Davis says, a facility may want to emphasize different types of patients depending on its complement of CMGs, and this information may signal the need to add new services.
Developing such a tool is not as time-consuming as implementing it, he notes. "It took probably three months to develop the tool itself, but the real difficult part was getting it implemented in the units."
Rehab staff will need to have a certain level of computer skills and be able to work with spreadsheets. Those who don’t have those skills will need to learn them, Davis says.
Another challenge is figuring out the cost of ancillary services that are used for patients on the rehab unit. "We have spent a lot of time with our clients, writing special computer reports that allow the hospitals to pull this information out of their computer system into a format that made sense for us," Davis says.
For instance, the hospitals are accumulating lab charges in the laboratory department, and the rehab facility will need to be able to show what the lab costs were for the rehab patients, he adds.
Another challenge for rehab providers, in general, will be to look at nursing costs because those costs have always been seen as a pass-through cost that didn’t need scrutiny, Davis notes. "Through our database we’re looking at nursing best practices for nursing man hours, including looking at nursing man-hours per discharge, and using our database to look at how those costs might be restructured," he says.
"What we found on the skilled nursing units was we were able to give more nursing hours but the components were changed significantly," Davis adds. "The mix of RNs to LPNs changed, so we had reduced nursing costs, but increased man hours so patients did better and patient outcomes reflected that improvement."
The same dynamics apply to the therapy side. "This forces you to look at your mix of therapists," Davis says. "We’ve made changes through the years so our therapy costs are very efficient, but they can always get better."
Davis says he’s grateful the company created its cost tool two years ago because now there is a database readily available for use and comparisons. "It’s usable now that we know how the revenues will be generated in the units because of the CMG conversions," he adds.
RehabCare Group is poised to sprint right into using Medicare’s MDS-PAC if and when this is part of the final rule goes into effect. "We don’t anticipate huge changes in our cost tool, and the only piece now that’s missing is HCFA still has not published the software which is the MDS-PAC, and that’s the thing we’re anxiously awaiting," Davis says.
• Tom Davis, President of Inpatient Services, RehabCare Group, 7733 Forsyth Blvd., Suite 1700, St. Louis, MO 63105. Telephone: (800) 677-1202.