A positive outlook - Medicare Prospective Payment System - Editorial

Nursing Homes, April, 1999 by Richard L. Peck

There's no shortage of gloom-and-doom reportage on the Medicare Prospective Payment System (PPS). Confusing rules, staff downsizings, facilities unwittingly losing thousands of dollars a week, patients at risk for denial of care, the looming threat of federal prosecution for mistakes - this is all grist for the journalistic mill. And you will see it covered, in coming months, in the pages of Nursing Homes/Long Term Care Management: I hasten to add that you will also find expert advice and suggestions for solving these problems or avoiding them altogether. But, leaving aside all that, what most of us really like to see is a success story - events or attitudes that give us hope, or perhaps even "show us the way."

That's why I was heartened to receive a letter not long ago from Mr. Theodore M. Duay, III, MSA, CPA, chief financial officer for the Mount Sinai Nursing & Rehabilitation Center, a 150-bed, hospital-based SNF in Miami, Fla. Mr. Duay was responding to our February 1999 guest editorial by Howard W. Dickstein, PhD, the brave skilled nursing facility owner who had the temerity to suggest that "PPS Isn't Working," primarily because of conceptual flaws. Dr. Dickstein was eloquent, and word has it that his opinion is shared, albeit somewhat more quietly, among many operators in the field. But, as I'm sure Dr. Dickstein would agree, it's one thing to critique a program, and it's quite another to let things get you down. As is so often true in life, you have to play with the cards you're dealt.

That's why Mr. Duay's expression of an administrative can-do attitude felt so restorative. "I think PPS is very survivable," he writes, "but takes great planning and coordination among all disciplines: admissions, social services, therapy, medical director and the business office." And it's worth the effort: the previous cost-based reimbursement approach, he writes, gave providers no incentives to control costs, but PPS, while "far from perfect, is much more rational...." Providers "now have an incentive to be prudent buyers of services. Is this really unreasonable?"

Mr. Duay, whose facility made the transition to PPS on January 1, but actually began planning for it the previous May, says he and his colleagues had already fully analyzed all their Medicare rates for all RUG categories months in advance of formal notification by HCFA. By their January 1 PPS start date, they had:

* renegotiated their pharmacy contract to set a capitated rate for all Part A residents, complete with a drug formulary program, physician education and case-by-case utilization review - a renegotiation that was expedited, Mr. Duay says, by a highly competitive situation among pharmacies in his area; and

* brought therapies in-house, leading to "tremendous cost savings," direct control of quality of care and even enough financial planning leeway to provide pro bono services for patients in need.

"As far as our facility is concerned," Mr. Duay concludes, "the quality of service is the same, if not better, under PPS.... Our facility has proven that we can provide superior service under PPS without hurting the bottom line."

So, there you are: some encouraging words, an example of seizing the initiative and making the best of a situation. In the last analysis, unless PPS is drastically revised - a seemingly unlikely event any time soon - it is this sort of attitude that will carry the day for many a facility. By the same token it will help if HCFA, for its part, keeps its ears open to the critics.

We thank Mr. Duay and encourage all readers to share their thoughts and experiences with us at 629 Euclid Ave., Suite 1200, Cleveland, OH 44114, or to fax us at (216) 522-9707 or send e-mail to editor@nursinghomemag.com.