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May 31, 2019

What is PDPM and How Will it Affect You? With Marc Zimmet of Zimmet Healthcare

We were so fortunate to spend a few minutes with Marc Zimmet, CEO and President of Zimmet Healthcare, where we discussed the new changes coming to the world of nursing home reimbursement.

What is true?
What are just rumors?
How will this affect day to day operations?
Will this mean more or less money for SNFs?

Listen to the full episode for the answers to all these questions.


What does Zimmet Healthcare actually do?

Zimmet Healthcare is a consulting support firm specializing in skilled nursing facility reimbursement, compliance and strategic planning.

Initially started as a service vendors creating cost reports and appeals for Medicare and expanded as the industry has matured.

Zimmet Healthcare currently employs about 60 people servicing about 300 facilities across the country.

Do you see a significant trend in the reimbursement method for SNFs from when you started out to today?

There’s a complete shift in SNF reimbursement.

To be frank, clinical reimbursement is a complex topic and the goal of this conversation is to get a better understanding of the big picture, the coming changes and how they will affect day to day operations of your nursing home.

With that in mind, let’s go back to Marc’s answer.

In the earlier days, reimbursement was based on the costs a facility incurred when caring for a particular resident.

The more the facility spent on the resident, the more was their reimbursement within reason.

This is now changing to a model that is based on price and not cost. There is a fixed rate per day for a residents’ condition, diagnosis and plan of care.

The facility will get reimbursed at that rate regardless of the actual costs incurred by the facility.

Why is Medicare Changing the Reimbursement Methods?

One of the biggest challenges with the current PPS/RUG method of reimbursement is that there is too much of an emphasis on the therapy received by the resident.

For example, if there are to residents who receive the same level of therapy, the facility will receive similar reimbursement for them even if one has significant other clinical challenges (such as wound care or cognitive issues etc.).

PDPM - Patient Driven Payment Model

PDPM which is starting October 2019, enhances the reimbursement sensitivity of the all the different payment drivers and takes the focus away from therapy as the primary driver of payment.

PDPM Vs. RUGs

To understand the difference in reimbursement consider the following.

We are going from a RUG system which has 66 RUG scores (of which we only use 20 or so of them), to PDPM which has almost 29,000 rate composite possibilities, which boils down to 15-20,000 rate combinations that will actually be used.

In simpler terms, with more words in the language we can be that much more precise.

How Does This Affect the MDS Process?

The MDS job description will change a bit. There will be fewer assessments, however, it will require working more extensively with the other disciplines.

Whereas in the past the reimbursement was driven primarily by therapy and ADLs, now the other disciplines will play a significant role in the reimbursement process.

For example, dietary will need to capture a mechanically altered diet. The psychologists, respiratory therapists and others will play a large part in this process.

Who is Pushing for These Changes?

The federal government is pushing for these changes. MedPac (The Medicare Payment Advisory Commission) has been almost begging congress and CMS to implement a patient specific payment model that does not recognize the frequency and duration as the payment driver because it provides an incentive to over treat the patient.

Is the Government Trying to Save Money With This?

Theoretically, this is supposed to be budget neutral.

It’s a redistribution from facilities that focus primarily on the therapy intense patients, to facilities that take the sicker, more compromised patients on the vents and trachs.

The medically complex patients reimbursement will go up considerably and the therapy intense patients will go down.

Will Facilities Make More Money in PDPM?

Zimmet Healthcare expects that facilities will get better at taking credit for the care they provide and in the first year Medicare will actually spend more than their budgeted amount.

This will be followed by a rate reduction that will recalibrate the dollars to make it budget neutral.

So perhaps in year 1, the facilities that learn and implement programs to accurately take credit for the care they provide, may make some extra money.

However, once the rate is adjusted, it should remain budget neutral.

Who Gains by These Changes?

Ultimately, these changes are indeed in the best interests of the patient.

The problem with the system is that you almost have to provide a high level of therapy in order to keep your doors open.

Let’s take the dialysis patient as an example.

In the RUG reimbursement model, the facility would lose money.

The rates are simply inadequate.

Facilities would try an aggressive treatment approach where they would take the resident to therapy early in the morning knowing that the resident will not be able to tolerate the therapy on their return.

With PDPM, this will not be necessary because the other clinical challenges will be considered as well in the reimbursement rate.

What is Changing in the Medicaid System?

Being that Medicaid is not a national system, and each state runs their own program, it’s difficult to speak about the specifics of the program.

However, in general terms, Medicaid started out as a cost based model, many states then went to a case mix and acuity model, to a priced based system and finally to managed care. This is not universal but is the general trend.

More importantly, every state has x number of dollars to spend on their Medicaid program. The main concern is not the distribution of reimbursement for the program, rather, it’s the overall total funding of the program.

An astute operator will learn to maximize their Medicaid reimbursement dollars in any Medicaid system. The problem lies in the total dollar amount that the state allocates to the Medicaid program.

Are the Articles That State the Amount a Nursing Home Loses Per Day Accurate?

It may be true that the rates are inadequate, however, the facility was never going to be profitable just by the reimbursement payments.

In order for a facility to be profitable they will need a good short term rehab census as well. This together with the Medicaid payments can make the facility viable and profitable.

If the facility was 100% filled with Medicaid patients with the right acuity mix, and everyone had Medicare Part B you would not be losing $37 a day.

Is Owning and Operating Nursing Homes Still as Profitable Now as it was 25 Years Ago?

In the early 90’s it seemed like a really simple business to run. Nowadays, it’s a very complex business.

Today, there is tremendous potential in the post acute care continuum which SNFs are such an important part of, is where the opportunity lies.

In post acute care management, there real opportunity to meet the new demands of the new nursing home residents.

A stand alone nursing facility that is well managed can absolutely be a profitable business and serve the community well.

Where are Those Baby Boomers?

We are always being fed information by the media that with the baby boomers are coming of age and nursing homes will have to scramble to meet the need.

While in reality, nursing homes are struggling to survive due to lack of patients.

As mentioned earlier, there are a variety of variables that are causing this to happen, including the push to provide for these elders within the community.

However, the statistics do show a sharp increase in the Altzheimers disease in the coming years of which 75% of those over 80 will need to be admitted to a SNF.

That is something that will significantly increase the utilization of SNF care and should sharply affect the overall occupancy.

Contact Marc Zimmet and learn more about Zimmet Healthcare at
ZHealthcare.com

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Transcript

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The problem with the system is that you almost have to provide

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an intense level therapy to keep your doors open.

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You have an aggressive treatment approach where the patient is

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taking therapy early in the morning before they go out to dialysis

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because they'll be too weak at the end of the day to receive it.

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So the new model, the patient driven payment model PDPM that starts October,

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enhances the reimbursement sensitivity to

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use that term, of all the different payment drivers and

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takes the focus away from therapy as the

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primary driver of payment.

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Welcome to The Nursing Home Podcast, your Goto source

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for professional insights in the long term care industry. Hear from

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leaders and experts as they share current and practical insights to

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help make the most of your day. I'm the longterm care financial specialist.

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What that means is I help people plan for the inevitable. Nobody wants

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to think about getting old, but it's possible that some day we might need a

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little bit of care. Here's your host. Nursing home Administrator

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Turnpodcaster Schmoel, Septimash.

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Welcome to this episode of the Nursing Home Podcast,

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the podcast which is becoming your Goto resource for the

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professionals in the nursing home industry. Today's guest

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is the President and CEO of Zimmer Healthcare

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Services Group and they offer innovative solutions for

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the post acute care industry. So today's guest is Mark Zimmetm.

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Welcome to the nursing home podcast. Thanks for having me. Well,

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thank you for coming on and I know how precious your time is and

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we're going to try to make sure that it's the most beneficial for

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both of us and of course for the listeners.

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So for those who just to paint a little bit of a

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picture, not to spend too much time on, this is for those who don't know

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who you are or not familiar with your company and some of the accomplishments

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that you've done professionally so far. Can you give us the short

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version of whom our Zimmet is and how

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Zimmet Health Care came to exist? Yes.

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Zimmer Healthcare is a consulting support

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firm specializing in skilled nursing facility reimbursement, compliance operations,

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strategic planning. We have been around just

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over 25 years, started out completing Medicare cost

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reports and appeals when Medicare was reimbursement,

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was based on allowable costs and have

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just expanded as the industry is matured and we now employ

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about 60 people servicing nearly 3000

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facilities and stakeholders across the country.

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Well, okay, so it's quite an expansion over

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a significant number of years. Now, obviously,

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your company definitely deals with clinical reimbursement for nursing

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homes. And this is kind of where the rubber hits the road when

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it comes to after speaking as an administrator, after all the

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care issues that we deal with and all the customer service and staffing

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and dealing with everything. The end of the day if we are not reimbursed appropriately

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or if we don't do the things to make sure that that happens so

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that we will not be successful. So before we even get

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into the weeds too much but on a global

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or more general way, do you see that there's been a very

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significant change in trend from

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25 years ago to today and the way the

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facility is getting reimbursed? Yeah, there's been

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a complete shift in S and F reimbursement.

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Again, when I started out, Medicare was cost based and

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the different Medicaid programs also for the most part reimbursed

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based on how much a facility spent. The hospitals used to

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be paid that way. They were the first to go into prospective payment to

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limit costs way back in the early eighty S and then skilled

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nursing followed and then home health care. So it's

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all an attempt to rein in program cost to provide

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reasonable incentives. So we have sort of the arc in skilled nursing

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reimbursement from cost based to some type of Acuity

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based system to then managed care. And we're

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seeing that in all aspects, medicaid programs switching

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over to managed care in some form, medicare being

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almost privatized by default with Medicare Advantage that's

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going to be a 50% pretty soon and is over 65%

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in some markets and then it's impacting even

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the long term care population through the institutional

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special needs platform. And on top of that we've

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got all the pressures from hospitals and health systems looking to

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reduce monthly pay as well. Okay,

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to be perfectly frank as an administrator, this is the piece,

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and I'm sure I'm not alone with this, this is the piece where it

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would be I did my job and now let the clinical reimbursement specialist

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do their piece. This is the part which although we're very involved

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in operations part, but the reimbursement part maybe not as much.

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So there was just a lot of terms in there. I want to make sure

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that everyone understands what you just said. So initially

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you're saying that it was a cost base reimbursement and

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I know I'm going to be generalizing a lot of things. I just

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want to make sure that at least the listeners walk out of our

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conversation with a better big picture and the immediate changes

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that are coming. So that means that

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if I spent, let's say $1,000 caring for this patient so

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my reimbursement was spend plus x and telling

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me, correct me if I'm wrong because these are questions yes,

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spend plus x or spend minus x so we won't get

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too technical. I apologize for that. No, let's get what

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do you mean spend minus x? They put caps

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on. Again, I'll try to not get too specific

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here to accounting jargon. So if

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you spend $1,000 there'd be limits because the

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state or the Medicare system didn't want to reward inefficiency.

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So a lot of different ways they do this either cost plus or cost

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minus. But again, that is old

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models. Okay, but initially that's where

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the models were. The reimbursement was directly tied to

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either actual or expected or reasonable spend.

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Right? Because even what you said before, cost minus. So that's because

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to discourage in efficiency, meaning that you spent 1000. But we think

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for this type of carrier you should have spent 800. So we're going to pay

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900, right? Yeah, kind of.

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Okay, close enough.

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That's been the general approach

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to this. And now when you're saying that it's changed already significantly

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in all the specific applications you've already mentioned,

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again, on a general level,

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the 40,000 foot view is that changing from being based on

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cost to being based on what price I think is the

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best way to put it. And that's the prospective payment system. That's the Rug

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model, that's the new PDPM model and

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that's a model many states have adopted. So it

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has nothing to do with costs. They actually set a rate,

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a fixed rate that the facility has a little control over based

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on patient acuity and how we manage and capture

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the Acuity based on cost. It's based on a

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fixed fee per day and the fixed fee is based on

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diagnosis condition. It's based on a

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number of payment drivers,

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conditions, diagnosis services. One of the big criticisms

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about the current PPS, the Rugs model in Medicare,

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is that it's driven way too heavily by therapy

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a patient receives. So you have two patients, both receiving the

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same amount of therapy. One is non medically complex and one has

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three wounds and IV and has cognitive problems.

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If they both receive the same amount of therapy, you're getting the same

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reimbursement for both of those patients. And that's what Medicare is moving away

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from. So from a facility standpoint,

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if you have two residents that come in, they both are coming

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after knee replacement, they both need the same extensive therapy, but the

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other one has all these other issues going on at the same

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time. There's maybe advanced dementia, there might be,

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like you mentioned, the wounds and the other clinical piece.

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So the old model, they would both have the same amount, not the same,

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but very closely, pretty much the same amount of money.

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And that's not focusing. So I

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guess that's simply not fair from a nursing home perspective because either

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the one who has no issues other than the therapy

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is being overpaid or the other one that's more complex

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is being underpaid, but it's definitely not going to be consistent.

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The people that facilities providing care are getting

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reimbursed based on based on the

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care which they are providing. And again, this is not based on cost.

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So we're not discussing the

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amount of money it's going to cost for the additional staffing, equipment,

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time and all that. But even from a diagnosis standpoint,

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I'm processing this as we're speaking. So tell me if I'm getting this wrong,

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but that doesn't make sense. Let's just stick

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to Medicare short term rehab reimbursement.

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So where is that up to right now?

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You pretty much hit it right on the head there that

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it really wasn't fair. All those other clinical services that

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we mentioned beyond rehab weren't reimbursed.

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Insensitive is the term we use. So the most profitable

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patient under the Rugs model is the non medically

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complex, short term rehab, the heavy rehab which we can't

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get and everybody fights over. Yeah, they pretty much disappeared.

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So the new model, the patient driven payment model, PDPM, that starts October,

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enhances the reimbursement sensitivity,

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use that term of all the different payment drivers and

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takes the focus away from therapy as

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the primary driver of payment. So to give you an idea

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how much more sensitive PDPM is than the Rugs

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model, we're going from 66 Rugs scores, and we really only use 20

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or so of them to PDPM, which technically has

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almost 290 rate composite possibilities.

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Now, some of those are mutually exclusive, but figure 15 to 20,000

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rate combinations will be used and that is all

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based on the conditions and the services

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and the diagnosis that a patient exhibits.

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So I mean, by definition, by having more words in the language you can be

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more precise. Exactly. And therefore the reimbursement

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can be that much more precise. Now what does this mean internally

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operationally for the nursing home?

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How does it affect the MDS process? Yeah,

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it reworks the MDS process considerably. First of all, we don't

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need as many assessments under PPS. We need at least five

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over 100 day period benefit period. Under the

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PDPM, we essentially only need one.

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And that's the initial assessment, which was called the five day.

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So that one assessment can set the

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rate or the base rate for the full benefit period.

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Now why is that? If it's more complex, why do we only need one

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assessment? Well, the system is more complex with

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respect to the rate sensitivity, but the

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administration of the system, the rate setting process is

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based on one assessment, so that limits the administrative burden.

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And Medicare will allow us to change the score

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if a patient's condition changes through something called an interim payment assessment.

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But the actual structure of the program is

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far more complex. But the administration of the program is

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designed to limit the administrative burden on the provider.

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Okay, so for them, the coordinators that are listening and the nursing home administrators

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are listening and they hear their MDS coding, is complaining about

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PDPM and what are we going to do? So basically

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it is a more complex system and there might be a learning curve

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or maybe even a steep learning curve, which is why we have all

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these training programs and the has their own training program

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coming up. But once the program is

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learnt and the facility learns how to appropriately

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set these assessments and so then it's set

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it and forget it type of thing, unless there is a significant change, like a

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change of therapy or change of, I don't know, a change of care.

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Well, not therapy that's poisoned by the definitely

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not therapy, but yeah, right, but that's what we used to,

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you know, it's all rehab based, I guess.

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Okay, but once again, let me just make sure that that's

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correct. Right. So for them coordinators, I was an

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active administrator until a few weeks ago,

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maybe a month and a half ago, and we were working on this with the

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MDS coordinators and getting them all ready and trained for

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PDPM while we were discussing it. What would

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it be? So now what is it actually going to be for them to coordinate?

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They're going to have to learn this new system,

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but once they learn it, they're going to be doing much less MDS.

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Yeah, it's different. The job description changes, so they'll be doing

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fewer assessments. I don't believe that we're going to be able

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to reduce the MDS staffing.

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So I don't think we're cutting any positions on MDS, but the job description changes.

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So the basic fact is that therapy drives reimbursement.

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Now under the Rugs model, under PDPM, there's a

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lot more moving parts. The way we explain it, far more moving parts.

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It's not just therapy and ADLs. You've got really a broad

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spectrum of disciplines that are

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now part of the reimbursement management team. So to give you an example,

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dietary dietitian impacts reimbursement for

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every single patient that comes in by way of mechanically

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altered diet. If the resident needs a mechanically altered diet,

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there's additional dollars. We have psychologists

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involved with respect to signs of depression and

14:43.945 --> 14:49.027
cognition being reimbursed in drivers. We have it

14:49.045 --> 14:52.767
goes on and on. Respiratory therapy, which many facilities

14:52.827 --> 14:56.427
provide, nebula treatments, but they're not reimbursement

14:56.457 --> 15:00.402
sensitive. Now we have the incentive to formalize the respiratory therapy

15:00.432 --> 15:03.725
program. Not more work. It's not a care issue. It's a capture issue.

15:04.087 --> 15:07.407
And respiratory therapy becomes a big reimbursement driver.

15:07.497 --> 15:11.762
So different disciplines I'm sorry and everything from admissions

15:12.262 --> 15:15.592
when the patient comes in, becomes critical to capture and take credit

15:15.640 --> 15:19.552
for. Got it. So the MDS coordinator is not making

15:19.645 --> 15:22.702
as many assessments and as they are.

15:22.720 --> 15:25.927
Now, they could barely catch their breath, and they're just churning out those

15:25.945 --> 15:29.617
MDS. So now it might not be that,

15:29.740 --> 15:33.172
but at the same time, it's going to be more involved with the other

15:33.205 --> 15:37.072
disciplines, whereas whereas the current model, then the

15:37.105 --> 15:40.925
coordinator is doing most of it and getting their bits and pieces from

15:41.287 --> 15:44.977
the other disciplines. But now it won't just

15:44.995 --> 15:48.877
be MDS and rehab coordinator running most of

15:48.895 --> 15:52.677
the show as far as the reimbursement process is concerned,

15:52.707 --> 15:56.047
but taking everything else into consideration. Now,

15:56.080 --> 15:59.802
I'm just trying to think of this a little bit from the bigger

15:59.832 --> 16:03.777
picture, the drive to change this. I know we mentioned earlier

16:03.807 --> 16:07.992
that it's wrong to have two patients

16:08.052 --> 16:11.692
who are receiving the same level of therapy, but one of them is very

16:11.740 --> 16:15.922
clinically complex and the other one is not. But is this

16:16.030 --> 16:19.177
the push for this is coming from where it comes from the facilities is it

16:19.195 --> 16:23.347
financial? Is it clinical? It's coming from the

16:23.380 --> 16:27.592
federal government Med pack. The Medicare Payment Advisory Commission has

16:27.640 --> 16:31.942
been really almost begging congress and

16:32.065 --> 16:35.750
CMS to implement a more specific,

16:36.712 --> 16:40.175
patient specific payment model that does not

16:41.137 --> 16:45.012
recognize the frequency and duration of skilled therapy

16:45.162 --> 16:48.472
as the payment driver because it provides an incentive to

16:48.505 --> 16:51.937
overtreat. And that's what Medicare wants to get away from. Okay,

16:52.000 --> 16:55.122
so it's coming from to be frank,

16:55.242 --> 16:58.550
the government thinks it's going to be cost savings. It's true.

16:58.987 --> 17:02.937
No, it's supposed to be budget neutral.

17:03.087 --> 17:07.107
So it is a redistribution. Theoretically it's a redistribution

17:07.272 --> 17:10.752
from the heavy rehab provider for non

17:10.782 --> 17:13.872
medically complex, although we don't have many of those anymore.

17:13.992 --> 17:18.502
New facilities that don't focus

17:18.595 --> 17:22.467
on non medically complex rehab and take the sicker patients.

17:22.602 --> 17:26.922
So the biggest increase in revenue

17:26.967 --> 17:30.327
comes for higher Acuity patients, vent and tragic

17:30.357 --> 17:33.952
patients. Their reimbursement goes up considerably where

17:33.970 --> 17:37.357
that non medically complex rehab payment goes down.

17:37.435 --> 17:40.925
So theoretically it's supposed to be budget neutral. We expect

17:41.362 --> 17:44.887
based on history with changes,

17:44.950 --> 17:48.157
improved or behavior that facilities are going to

17:48.160 --> 17:52.002
get better at documenting, capturing formalizing programs

17:52.032 --> 17:55.627
that drive payment, taking credit for the care they provide. So we expect the

17:55.645 --> 17:59.197
first year Medicare to spend more than

17:59.230 --> 18:02.947
they budgeted. It won't be budget neutral. It will cost the feds more money in

18:02.980 --> 18:06.200
our opinion, for facilities that understand how to manage the system.

18:07.762 --> 18:11.377
The next year, very soon after we will have

18:11.395 --> 18:14.802
a repeat of 2012 where medicare changed

18:14.832 --> 18:18.757
and overspent and they recalibrated and basically

18:18.835 --> 18:22.775
implemented a rate reduction to compensate for

18:23.437 --> 18:27.547
the case mix creep, the changes in provider behavior, the fact that facilities got

18:27.580 --> 18:31.207
better at capturing the care, so long run it should

18:31.210 --> 18:33.350
be budget neutral. Wow.

18:35.062 --> 18:38.917
In other words, I am thinking about this from if

18:38.965 --> 18:42.832
you're one personal thank you, that was very, very clear and

18:42.985 --> 18:45.622
if it was clear for me, I'm sure it was clear for others as well.

18:45.730 --> 18:49.357
But if you're one which makes a

18:49.360 --> 18:53.802
lot of sense as nursing home administrator we get all these referrals

18:53.832 --> 18:56.962
and a lot of them are very clinically complex and you have a choice to

18:57.025 --> 19:01.572
pick someone who's pretty much alert

19:01.617 --> 19:05.572
oriented and independent going back to the community and support a family. Therefore a

19:05.605 --> 19:09.512
physical therapy issue versus someone else who's

19:10.387 --> 19:14.000
morbid obese and has no social

19:14.587 --> 19:18.362
support has a whole slew of psychological

19:19.387 --> 19:23.227
maybe in psychiatric issues and it's very difficult to

19:23.245 --> 19:26.827
care for such a resident. But knowing that basically

19:26.920 --> 19:30.502
it's almost if it works in practice as

19:30.520 --> 19:33.757
it sounds in theory, it should even out that

19:33.835 --> 19:37.702
facilitates should be getting reimbursed closer to the

19:37.720 --> 19:42.127
level of difficulty it is to manage the resident in

19:42.145 --> 19:44.482
a way that could be amazing. And you're right that there are going to be

19:44.485 --> 19:48.367
some facilities that are not going to manage this properly in the first year and

19:48.415 --> 19:51.502
as a result they might still be therapy and says I'm sure a lot will

19:51.520 --> 19:54.727
still be focused too much on therapy and they're going to lose out in the

19:54.745 --> 19:58.617
other areas. And there'll be facilities that are going to all these conferences

19:58.677 --> 20:01.477
and they're learning. And as soon as it hits, they can be doing it right

20:01.495 --> 20:04.637
and they're going to be doing it correctly.

20:06.487 --> 20:10.432
Those facilities will gain in year one, but then year two,

20:10.585 --> 20:13.782
it's going to balance it out with a rate reduction,

20:13.947 --> 20:17.592
which means that everyone's going to learn how to claim

20:17.727 --> 20:21.067
and be paid evenly. So really, in theory, it really

20:21.115 --> 20:25.302
should work. If the goal was that facilities

20:25.332 --> 20:29.312
were incentivized to provide too much therapy as opposed

20:30.037 --> 20:33.697
to push it on people who maybe didn't need it just in order

20:33.730 --> 20:37.107
to survive, in order for them to get reimbursed for the care that they're providing,

20:37.197 --> 20:40.867
because that's what matters too much. So it sounds like

20:40.990 --> 20:44.932
realistically, this could actually work for Facilitators to actually

20:45.085 --> 20:48.757
be able to provide the care the resident needs and

20:48.835 --> 20:52.387
still get reimbursed appropriately. Yeah, I think it's better

20:52.450 --> 20:56.197
for the resident. So I use the example of a

20:56.230 --> 21:00.072
dialysis patient, goes out three times a week facilities.

21:00.117 --> 21:03.367
And the problem with the system is that you almost have to

21:03.490 --> 21:06.922
provide an intense level therapy to keep

21:06.955 --> 21:10.567
your doors open to the current system. So there is that incentive to provide

21:10.615 --> 21:13.857
that ultra high level of care. So you take a dialysis patient.

21:13.947 --> 21:17.722
A dialysis patient without therapy today is

21:17.755 --> 21:21.642
a money loser. It's difficult. The rates are inadequate.

21:21.777 --> 21:23.912
So we have facilities.

21:25.387 --> 21:28.897
Theoretically, you have an aggressive treatment approach where

21:28.930 --> 21:32.677
the patient is taking therapy early in the morning before they go

21:32.695 --> 21:36.367
out to dialysis. Yes, because they'll be too weak at the end of the day

21:36.490 --> 21:40.522
to receive it. So that is probably not

21:40.555 --> 21:44.307
in the best interest of certain residents to have that approach.

21:44.397 --> 21:48.657
Now we're

21:48.672 --> 21:52.147
not incentivized to provide that level of therapy, and we

21:52.180 --> 21:55.837
get a reasonable rate for the dialysis patient without having

21:55.900 --> 21:59.197
to stray from a you'd be very

21:59.230 --> 22:01.250
politically correct, but I understand that.

22:03.337 --> 22:06.942
I've had family members complain to me about dialysis patients.

22:07.002 --> 22:10.507
Specifically, mom is so weak and dad is so weak. Why are

22:10.510 --> 22:13.072
we so busy focusing on the knee? We don't even care about the knee right

22:13.105 --> 22:16.147
now. We're not even sure how much longer he has left or she has left

22:16.180 --> 22:19.507
to live. And the goal is to make it day to day.

22:19.660 --> 22:23.647
And it's true that our job is to provide for the entire

22:23.830 --> 22:27.427
residence and for every facet, but if

22:27.445 --> 22:31.537
there was zero financial gain or if there's a better

22:31.600 --> 22:35.677
system, we would actually be allowed to be

22:35.695 --> 22:38.827
allowed to care for them the way that they should be cared for. So that

22:38.845 --> 22:42.852
is actually really sad. What about from a Medicaid perspective?

22:43.032 --> 22:46.597
What are the big changes that are coming or have already come?

22:46.780 --> 22:50.667
Okay, Medicaid is hard to talk about in a vacuum

22:50.727 --> 22:54.952
because we don't have a national industry. We have

22:55.120 --> 22:58.777
thousands of micro markets. But Medicaid is obviously a state specific

22:58.870 --> 23:02.367
or plus DC. They have their own Medicaid systems.

23:02.427 --> 23:05.932
Some are better than others, some are completely

23:06.010 --> 23:09.737
woefully inadequate and some are reasonable.

23:10.462 --> 23:15.207
But the overall arc of the Medicaid reimbursement

23:15.372 --> 23:18.952
maturity, I suppose, is we went early on

23:18.970 --> 23:22.737
from a similar cost based model. Based on the cost reports.

23:22.812 --> 23:26.472
Many states then adopted a case mix, an Acuity

23:26.517 --> 23:30.307
driven model using usually the Rug system

23:30.460 --> 23:34.567
and then switching over to a price based system which

23:34.615 --> 23:38.392
sets the rate and then managed care. So not

23:38.440 --> 23:41.427
every state obviously has followed that progression.

23:41.532 --> 23:45.125
But that seems to be the overall run of the

23:45.562 --> 23:49.657
maturity of a Medicaid system. So every single one is different,

23:49.810 --> 23:52.917
but it doesn't even necessarily

23:52.977 --> 23:56.617
matter. I'm not concerned with the revenue delivery system of a state.

23:56.815 --> 24:00.277
Simply put, a state has x number of dollars to

24:00.295 --> 24:04.162
spend on Medicaid. Most states have that budget and if they exceed it,

24:04.300 --> 24:08.097
they implement what's called a budget adjustment factor scale

24:08.142 --> 24:11.917
back. They reduce rates to back

24:11.965 --> 24:15.532
into their budget. So I'm more concerned when I look

24:15.535 --> 24:18.817
at the Medicaid system not about the revenue delivery system,

24:18.865 --> 24:21.812
but about the overall funding and is it adequate?

24:22.837 --> 24:26.092
Every state is different. Okay, so how many

24:26.140 --> 24:30.127
dollars are going into the Medicaid bucket period? Not what is

24:30.145 --> 24:34.107
the method of reimbursement? Because I'm

24:34.122 --> 24:36.817
putting words in my mouth and you'll tell me if this is incorrect, but because

24:36.865 --> 24:40.347
it's not as disproportionate

24:40.392 --> 24:42.950
as the Medicare reimbursement system was.

24:43.987 --> 24:47.352
Yes, because for the most part there are certain strategies

24:47.457 --> 24:50.847
a facility can implement in almost every Medicaid

24:50.892 --> 24:54.297
system to ensure that they are optimized,

24:54.342 --> 24:57.627
that they are as high as they should be based on their profile.

24:57.732 --> 24:58.400
Okay,

25:00.562 --> 25:04.132
theoretically you could exceed that profile, but your rate is still going

25:04.135 --> 25:08.677
to be inadequate. And that speaks to the overall funding as

25:08.695 --> 25:13.197
opposed to the sort of threshold

25:13.317 --> 25:17.152
or the corridor that a facility can manage their rate.

25:17.245 --> 25:20.452
At the end of the day, if a facility's Medicaid rate maxes out

25:20.470 --> 25:24.307
at $180 a day and

25:24.385 --> 25:27.802
their costs are $220 a day, there's nothing you can

25:27.820 --> 25:32.247
do to make that difference up. So I'm more concerned about the overall funding

25:32.442 --> 25:35.975
of the Medicaid program, skilled nursing as opposed to,

25:36.787 --> 25:40.932
again, the revenue delivery system, the way that's distributed

25:40.947 --> 25:43.992
to the states I'm sorry, to the facilities.

25:44.127 --> 25:47.952
Right. So for sure here in Massachusetts,

25:48.132 --> 25:52.167
the facility that I was enclosed and last year 20 facilities

25:52.227 --> 25:55.507
closed here and there's a few ready to close this year and quite

25:55.510 --> 25:59.167
a few more that are scheduled to close. And a lot of them I'm talking

25:59.215 --> 26:02.872
specifically for Massachusetts it has to do with the Medicaid rate.

26:02.905 --> 26:06.322
There's a lot of advocacy issues to pressure to

26:06.355 --> 26:10.072
change some of that. I think the number, the average number they have is $37

26:10.105 --> 26:13.797
a day of a loss per Medicaid resident.

26:13.992 --> 26:17.727
You know, I'm not supposed to say this as an advocate

26:17.757 --> 26:21.147
of the skilled nursing industry, but I never liked those studies.

26:21.342 --> 26:23.762
The rates are inadequate but those studies,

26:26.662 --> 26:29.977
they don't recognize the cost allocation for more

26:29.995 --> 26:33.777
expensive Medicare patients and they don't include Medicare Part B revenue.

26:33.807 --> 26:36.777
So I don't love those studies, but the fact is the rates are inadequate.

26:36.882 --> 26:40.477
But it's a bigger picture. It's not only the rates. It's about the

26:40.495 --> 26:43.412
marketplace. It's about the position of a facility.

26:45.562 --> 26:49.057
What do you mean by that? Yeah, go ahead. We've had

26:49.060 --> 26:52.222
the movement over the last 20 years. When I started this business in the early

26:52.255 --> 26:55.902
90s, we had the proverbial little old ladies,

26:55.932 --> 26:59.497
nice little old ladies in the nurse home that were private bag. So many of

26:59.530 --> 27:02.782
those residents, so many of those patients, the beneficiaries do

27:02.785 --> 27:06.427
not go to the school, nursing school anymore. We have assisted living. We have a

27:06.445 --> 27:09.592
big push for home and community based services in the state.

27:09.715 --> 27:13.852
We have Medicare Advantage that tries to avoid or

27:13.870 --> 27:17.172
bypass the skilled nursing facility. We have Medicare innovation.

27:17.292 --> 27:19.550
Things like the bundling program.

27:19.912 --> 27:23.187
BPCI. We have accountable care organizations.

27:23.262 --> 27:27.522
So we have all these programs designed to limit

27:27.717 --> 27:31.167
the post acute spend, to limit utilization the facility.

27:31.302 --> 27:34.432
And as a result, we haven't had many more beds come online in

27:34.435 --> 27:37.700
the last 20 years. We have fewer beds now.

27:38.587 --> 27:42.702
We have lower census. And the Medicaid

27:42.732 --> 27:45.587
rate is only part of it because your typical facility,

27:46.237 --> 27:50.127
even in a state that is not known for reasonable Medicaid

27:50.157 --> 27:53.802
rate, if we're operating at a high census, 95% census

27:53.832 --> 27:57.137
for arguing, and we have a nice decent

27:57.487 --> 28:01.337
mix of patients with Medicare and even Medicare Advantage,

28:01.687 --> 28:05.047
the Medicaid rate is inadequate. But we

28:05.080 --> 28:09.052
can survive. Facilities get into trouble where they

28:09.145 --> 28:12.877
lose the short term care residents based on

28:13.045 --> 28:17.047
they go other places. The spotlight, facilities that

28:17.080 --> 28:21.287
open up, disrupt the market. And if we're at 70% occupied,

28:21.637 --> 28:24.412
then no, we're not going to be able to COVID our rate.

28:24.550 --> 28:27.997
So cover our expenses. So it's more than just the rate.

28:28.180 --> 28:31.567
It is about again,

28:31.615 --> 28:35.047
the overall sense is a big piece of it and then quality and everything else

28:35.080 --> 28:37.972
that goes into today's environment. Years ago,

28:38.080 --> 28:41.337
20 years ago when I started, we had three rates medicare, Medicaid and private.

28:41.487 --> 28:45.657
And facilities were 90 plus percent occupied

28:45.747 --> 28:49.732
and they were making money. So you've got almost a perfect storm of

28:49.885 --> 28:53.712
the downward pressure on utilization and emissions and episodic costs

28:53.787 --> 28:57.172
use that term. And overall census and the different

28:57.205 --> 29:01.452
rate pressures, losing Medicare to Medicare Advantage and Medicaid

29:01.482 --> 29:05.197
shortfalls, that if you miss out

29:05.230 --> 29:08.452
on all of those, if you check every box for those

29:08.470 --> 29:12.812
negative indicators, it's going to be very difficult for survive.

29:13.162 --> 29:16.882
Okay, well, that's a very complete answer.

29:17.035 --> 29:21.007
Let me make sure, just so I understand this, that the

29:21.085 --> 29:24.802
articles that I was quoting and a

29:24.820 --> 29:28.737
lot of the advocacy groups and they're talking to the general population

29:28.812 --> 29:31.625
and they're saying they're losing x number of dollars a day.

29:31.987 --> 29:35.647
That is like almost with the assumption that if you could run a

29:35.680 --> 29:38.877
nursing home just with Medicaid patients and be reimbursed appropriately,

29:38.982 --> 29:42.622
that that could work. And now that the rates are off so now it's not

29:42.655 --> 29:46.937
working. But really in order to be viable

29:47.887 --> 29:51.472
and profitable as a skilled nursing facility, it's expected that you

29:51.505 --> 29:54.822
need to have a healthy short term

29:54.867 --> 29:58.837
rehab churn and have those Medicare patients and

29:58.900 --> 30:02.737
Medicare Advantage insurance patients and

30:02.800 --> 30:05.977
private pay. If you can get any of those and if you

30:05.995 --> 30:09.897
have that and you're maximizing your Medicaid reimbursement

30:09.942 --> 30:13.302
even as is, then not only could it be survivable,

30:13.482 --> 30:16.325
you could really thrive. Yeah,

30:17.137 --> 30:20.812
really thrive. Yes, you can do well.

30:20.950 --> 30:23.922
But there's so much that goes into the equation that is lost.

30:23.967 --> 30:28.227
It doesn't matter what the Medicaid rates are. If a facility is 50% occupied,

30:28.407 --> 30:31.672
you're going to have a very hard time covering your

30:31.705 --> 30:35.202
cost. Right? So if a facility was 100% occupied

30:35.232 --> 30:38.767
with Medicaid and everybody had Medicare Part B and

30:38.890 --> 30:42.212
you had the right patient mix, acuity mix,

30:42.712 --> 30:47.052
you wouldn't be losing $37 a day. But it's

30:47.082 --> 30:50.227
a lot of variables going to that equation. It's just

30:50.245 --> 30:54.352
not that simple. So a

30:54.370 --> 30:57.802
lot of dynamics that have to be considered and also you

30:57.820 --> 31:01.977
have the difference between operating costs and debt

31:02.007 --> 31:06.232
service. So what I mean by that is if

31:06.385 --> 31:10.522
a facility is sold, somebody comes in and buys the facility or

31:10.705 --> 31:14.612
an overstated price and they've got a mortgage on that facility,

31:14.962 --> 31:18.082
you might take a look at the operating piece, how much it costs you to

31:18.085 --> 31:21.417
care for that patient and still have a margin.

31:21.477 --> 31:25.387
The revenue covers the operating cost. But then because

31:25.450 --> 31:29.225
debt service is so high, because the facilities were so expensive and

31:29.737 --> 31:33.622
we can't make our debt payments and that's where facilities have gotten into

31:33.655 --> 31:37.872
trouble or operating got into trouble. It's not that the overhead,

31:38.067 --> 31:41.887
the revenue doesn't necessarily cover the cost of care in all

31:42.025 --> 31:46.342
matters. But the debt service is what

31:46.390 --> 31:50.497
causes some problems. They can't make the mortgage payments. That's pretty

31:50.530 --> 31:54.097
much it. Again, that's certainly not

31:54.130 --> 31:57.327
universal. But that unfortunately has gotten all the attention,

31:57.507 --> 32:00.847
all the quality facilities that are doing well in serving the community and doing

32:00.880 --> 32:04.722
excellent, providing excellent patient care, the 90% of those facilities

32:04.842 --> 32:09.372
are not getting all the attention that the few problem facilities

32:09.417 --> 32:12.867
are getting. And that makes a very good sound bite to say the Medicaid rates

32:12.927 --> 32:16.402
are inadequate, which they are. But that is

32:16.420 --> 32:20.150
only part of the story. Wow. So the general

32:20.587 --> 32:24.500
notion the guy in the street thinks that 2025 years ago

32:25.012 --> 32:28.762
owning and operating nursing homes was a very profitable business

32:28.825 --> 32:32.052
and now the media is doing a good job about showing everybody how nursing

32:32.082 --> 32:35.847
homes are closing. And like we just discussed, blaming it on the Medicaid

32:35.892 --> 32:39.277
rate. And as you pointed out, that's only a piece of the

32:39.295 --> 32:42.357
pie. But as an operator

32:42.447 --> 32:45.817
or as an owner, is it still a

32:45.865 --> 32:49.492
good business opportunity for someone who is really

32:49.540 --> 32:52.957
on top of his game and is educating his.

32:53.035 --> 32:56.912
Team to operate appropriately and capture whatever they can capture.

32:58.912 --> 33:02.107
Is it a tougher game that's more difficult or do you

33:02.110 --> 33:05.902
think that leveraged properly, it could still be as exciting as

33:05.920 --> 33:09.022
it was 25 years ago when you started. Okay,

33:09.130 --> 33:12.817
what I'll say is that looking back 25 years,

33:12.940 --> 33:16.402
I can honestly say that that's not because I'm getting old here, but I can

33:16.420 --> 33:19.492
honestly say that in the early ninety s, it seemed to be a very easy,

33:19.615 --> 33:23.152
straightforward business. It is a complex business now, so I

33:23.170 --> 33:26.767
always put it in these terms. I have a son that's looking at college.

33:26.890 --> 33:30.402
So if this was five years from now and he was thinking about a career

33:30.432 --> 33:33.447
and he said, dad, should I go into the nursing home business? I would encourage

33:33.492 --> 33:37.002
him to go into that business. Not because I'm

33:37.032 --> 33:40.552
in it, but because there is tremendous potential not only in

33:40.720 --> 33:44.422
owning, operating, or whether or

33:44.455 --> 33:47.802
working for a nursing home company, a skilled nursing

33:47.832 --> 33:52.152
company, but the entire post acute care continuum,

33:52.332 --> 33:56.557
which skilled nursing is such a big part of. That's where the opportunity is

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for care management and quality

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incentives and risk management and solutions that improve

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the entire postcute care continuum.

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And that's where the opportunity is. So we shouldn't be thinking necessarily in

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terms of the nursing home industry, skilled nursing industry,

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let's look at it in terms of postcute care management.

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And that provides a wonderful opportunity for skilled nursing facility providers as

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well to expand their reach into the

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care continuum, take some risk with respect

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to payment and care management

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and quality. That's where the opportunities really

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lie. But yes, a skilled nursing facility, standalone skilled nursing facility that's

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well positioned and well managed can absolutely be

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a very profitable and strong and honorable

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position and serve the community

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very well. Okay, that's very encouraging to

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hear that. And it's important that this should be broadcasted

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and people should it's not all gloom and doom. It might be

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change, and we don't like change and means. People have to adapt and

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innovate and like you said, expand beyond just

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it's not a nursing home world. We're caring for seniors in

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this post acute space and there's more

35:23.755 --> 35:27.352
to it than just skilled nursing. Now, do you

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mean to say that nursing homes should experiment with

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home care companies or other solutions other

35:35.065 --> 35:38.272
than just skilled nursing care? Well,

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I'm not saying that. No, by no means am I suggesting that skilled nursing facility

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should be getting into home care. That's not necessarily it. Some of my clients are.

35:45.490 --> 35:49.227
But looking beyond the walls of the skilled nursing facility

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to identify needs in the community, to identify

35:53.667 --> 35:58.112
partners in care management, to consider innovative approaches

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to the financial limitations

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and possibilities of caring for seniors and

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longterm care patients, we get into the dynamics going to change. We don't

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have the quote unquote, little old ladies in our facility.

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We have sick patients. We have an Alzheimer's pandemic

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that is going to sweep the nation more so than

36:22.045 --> 36:25.257
Nerdy has and in my opinion, create a shortage of nursing home beds

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in 15 years. And we're going to have to meet those needs,

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and the care is going to have to be paid for. But it's

36:32.397 --> 36:35.622
not going to be that straight line $100 a day versus

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$90 a day cost. It is going to require integration and

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creativity and quality. Wow. Okay,

36:43.300 --> 36:46.522
excellent. One last question, if you don't mind,

36:46.555 --> 36:50.722
is before we wrap up there's the

36:50.755 --> 36:54.652
notion everyone keeps on saying that the baby boomers are coming of

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age and nursing home beds are going to be more scarce

36:58.092 --> 37:01.237
and we have to meet the need. But as we've mentioned

37:01.300 --> 37:05.032
a couple of times here already, that's certainly not the case. And there are

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variables for that. Like you mentioned home care companies,

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and there's encouragement to find

37:11.590 --> 37:14.825
community based resources to provide for their care.

37:15.412 --> 37:19.392
But now you mentioned that with Alzheimer's increasing

37:19.527 --> 37:23.482
that we do expect to see that. Why hasn't that already happened

37:23.560 --> 37:25.100
or has it already happened?

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It's interesting. I was just working on something about this,

37:30.430 --> 37:33.802
something on this today. I'm looking at a map right now that shows the

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expected increase in Alzheimer's over

37:37.480 --> 37:41.007
the next 20 years I'm sorry, not 20 years, the increase

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in Alzheimer's of diagnosis for the 65

37:45.115 --> 37:48.952
plus age population growth between 2017

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and 2025. What the expansion

37:52.692 --> 37:55.902
is, and just taking a look at these, we have Florida,

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an increase of 39%, texas, 36%, vermont,

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42%. Every single state in the nation

38:03.612 --> 38:08.772
is expecting a large increase as the aging population grows.

38:08.817 --> 38:12.772
That's really it. I mean, the only market in the entire country that

38:12.805 --> 38:16.227
is expecting no change in Alzheimer's dementia is Washington,

38:16.257 --> 38:19.642
DC. And I joke around because saying everybody down there is dementia anyway,

38:19.690 --> 38:23.952
dementia anyway. Already there's no there's no room for expansion, but it's

38:23.982 --> 38:27.687
really tied into the growth of the population.

38:27.837 --> 38:32.127
And statistically, of the population 80

38:32.157 --> 38:36.607
years old and above, 4% of

38:36.760 --> 38:40.447
the population will need to be admitted to a skilled nursing facility by age

38:40.480 --> 38:44.300
80 with that overall. But 75%

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of the population with Alzheimer's disease will need to be admitted to a Smith

38:48.132 --> 38:51.575
by age 80. So the utilization is much higher. Got it.

38:52.387 --> 38:55.850
So in short, you're saying it's coming. It hasn't come yet,

38:56.662 --> 39:00.275
but in the very near future, it is coming where

39:01.012 --> 39:04.297
the residents won't be able to be cared for in the community with

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any of the resources that are available. They're going to need to be a

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skilled nursing facility, which well, one final point is that we know

39:11.890 --> 39:15.582
that nursing homes care for many people that don't belong in nursing homes,

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and hopefully some of these reimbursement

39:19.302 --> 39:22.402
changes can help take credit for what

39:22.420 --> 39:25.175
we're doing for them. And at the same time,

39:26.062 --> 39:28.627
the seniors that belong the nursing home should be in the nursing home. Those who

39:28.645 --> 39:31.957
can really receive adequate and

39:32.110 --> 39:34.550
sufficient care in the community receive it there as well.

39:35.587 --> 39:39.027
Mark, it's been a pleasure having you on the show. I know you're

39:39.057 --> 39:42.262
busy schedule and I really am very grateful for you making

39:42.325 --> 39:46.222
some time for us today for listeners. Want to learn more

39:46.255 --> 39:50.127
about some of the innovative solutions that your company is offering

39:50.232 --> 39:53.947
and to know some of upcoming events. Where's the best place for us to send

39:53.980 --> 39:58.447
them? Zhealtealthcare.com. Just the letter Zhealthcare.com.

39:58.480 --> 40:02.047
Okay, this is great. I appreciate the opportunity and

40:02.230 --> 40:05.112
it's great that you're doing this. Okay, well, it's been a pleasure,

40:05.187 --> 40:08.757
Mark. I really appreciate you coming on the show and sharing.

40:08.922 --> 40:12.717
Really, you have the national

40:12.777 --> 40:16.572
picture from all the different states and the wide perspective

40:16.617 --> 40:20.242
and the specifics and I'm sure our listeners are really going to enjoy

40:20.290 --> 40:23.602
this. I certainly have enjoyed it. It doesn't say much. My wife

40:23.620 --> 40:25.412
says I can talk to a stick,

40:27.112 --> 40:30.402
but this really was honestly, as an administrator,

40:30.507 --> 40:34.272
there's a certain anxiety sometimes when ownership pushes

40:34.317 --> 40:38.022
down too much on the financial side and pushes.

40:38.217 --> 40:42.087
I'm not saying they push to do certain things, but they're expecting

40:42.237 --> 40:46.117
sometimes from administration to understand some of the complexities that

40:46.165 --> 40:49.447
we never really need to deal with on a daily basis. And for me,

40:49.480 --> 40:53.077
this was very helpful and I'm sure there are other professionals in the field who

40:53.095 --> 40:55.597
will find this helpful as well. So thank you so much for your time.

40:55.780 --> 40:57.050
Okay, thank you.

41:01.837 --> 41:05.622
I hope you've enjoyed this episode of the nursing home podcast.

41:05.742 --> 41:08.877
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41:08.907 --> 41:14.437
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