Strategic planning vital to eldercare diversification

Healthcare Financial Management, Sept, 1989 by Mary T. Knapp, Peter L. DeAngelis, Jr.

Strategic planning vital to eldercare diversification

The elderly represent a growing market for healthcare services. Healthcare organizations contemplating the creation of an expanded product line for older adults should use a multistep strategic planning process. Careful planning of a continuum of care ensures that the elderly receive the most appropriate level of care at the most appropriate time and place.

Healthcare organizations contemplating adding new services for the growing elderly market should use strategic planning to develop a fiscally viable product line.

Four objectives must be met in developing a continuum of care for the elderly: * Meet a demand for services. The

growing elderly population,

which has a preponderance of

chronic, nonacute illnesses, may

be creating a demand for new

services in the hospital's service

area. * Maintain quality of care. By developing a broader array of non-traditional services to the elderly, quality of care should be improved. * Improve financial performance.

By developing an elderly product

line, a hospital can: offset or

spread fixed overhead costs such

as through developing a hospital-based

skilled nursing facility;

maximize capitated

reimbursement through case management;

generate new revenue streams

with the addition of products

such as personal care and respite

care; and gain greater access to

capital through such

arrangements as joint ventures for a

retirement care community. * Maximize market position. The

new services to the elderly,

accompanied by the addition of

professionals trained in

gerontology, will help the hospital to

maintain a competitive edge.

Demographics

The population of the United States is shifting to older age groups, especially those older than age 75. Older adults require a disproportionate share of healthcare services.

The growing number of older persons living alone will require special programs such as adult day care or institutional care to provide them with the support they need to maintain their activities of daily living.

Although older people are healthier than commonly assumed, their healthcare problems generally are related to progressive, chronic, multiple disease disorders rather than isolated, acute, episodic illnesses that are characteristic of younger adults. The older adult can be free of diseases and yet have disabilities related to the physiological changes of advanced age.

Older adults are more diverse than any other age group. Because the elderly represent a diverse market with varying healthcare needs, hospitals must develop a broad array of services to serve this market. A listing of potential services is in Exhibit 1.

By offering many service options within a continuum of care, healthcare organizations can help ensure that older adults receive the comprehensive services they need and that they will use the organization for all their health needs.

An organization with a continuum of care offers older adults a group of providers with a common philosophy of care; a mechanism for receiving, reviewing and updating information for each patient; and a quality assurance

program.

New services

A look at three eldercare services being added by hospitals--skilled nursing facilities (SNFs), adult day care, and claims form assistance programs--offers insight into payment issues and other matters that must be considered when initiating new services.

SKILLED NURSING FACILITY. A hospital-based SNF can provide significant patient care and financial benefits to hospitals, especially those that convert unused acute care beds for this purpose.

By adding skilled nursing beds, a hospital broadens the services it offers to the elderly, increases its options for transferring Medicare patients out of acute care beds, revitalizes unused space, and gains Medicare cost-based reimbursement while reallocating fixed overhead costs.

A typical hospital-based SNF of 20 to 30 beds attracts up to 90 percent Medicare patients, with an average length of stay of 20 to 25 days, usually following hospitalization. To open such a facility, hospital managers must become familiar with long-term care regulations and how they apply in an acute care setting.

ADULT DAY CARE. Functionally impaired patients, generally older than age 70, are served by adult day care plans. These older adults are unable to function independently but do not require around-the-clock nursing care.

Adult day care programs are funded by a variety of public, private, and philanthropic sources. No single revenue source covers all services included in a comprehensive program.

Because the cost of many adult day care programs exceeds revenues, many programs are subsidized by the sponsoring institution.

Medicare does not recognize adult day care as a reimbursable service, but it may pay for rehabilitation, skilled nursing, and physical, occupational, and speech therapy through Part B. When such reimbursement is available, Medicare pays an average of about $20 per day.

Adult day care is an optional service under Medicaid, and some states offer at least partial reimbursement of costs. Social service block grants are another potential source of funds. Social services, such as meals, transportation, client needs assessment, and social therapy, are more often reimbursed by the grants than health services.