Industry Insights

Skilled nursing facilities (SNFs) have two primary therapy staffing models for the delivery of physical therapy (PT), occupational therapy (OT) and speech therapy (ST) services:  the contract therapy model and in-house employee model.

Because of the numerous Medicare changes implemented by the Centers for Medicare & Medicaid Services (CMS) for SNFs effective October 1, 2010, and again on October 1, 2011, it is important to reevaluate the key differences between the two delivery models.

Contract Therapy Model

Most SNFs use the contract therapy model, where the SNF has a contractual arrangement with a certified rehabilitation provider to provide therapy services. Although these services are outsourced, it is important that the SNF remains involved in the care of its residents by the rehab provider. Rehab providers range from small providers covering a portion of a state to providers offering services nationwide. In negotiating with a rehab provider, cost is an important consideration, but so are the quality of the provider and industry experience.

The rehab provider typically provides services to all types of facility residents. However, the largest volume of service provided will be to residents covered under a skilled Medicare Part A (or Medicare Advantage) stay. The second-highest volume is likely provided to facility residents receiving Medicare Part B outpatient therapy services, followed by private pay and other payor sources. Generally, private pay and other residents would be receiving Part B therapy services, as they likely have optional Part B coverage, which could include Medicaid-eligible residents.

There are two primary payment methods by the SNF to the rehab provider:  paying by the Minimum Data Set (MDS) classification category of the federal rehab daily resource utilization group rate or payment by minute. This applies to Part A and inpatient therapy services. Payment for outpatient therapy services is generally paid on a percentage of the Medicare-approved Resource Based Relative Value Scale (RBRVS) fee schedule charge corresponding to the CPT-4 code of the services provided by the rehab provider. Percentages paid commonly range from 70 percent to 85 percent of the RBRVS charge. This methodology of providing therapy services creates a variable cost, where the SNF only incurs the cost if therapy services are rendered.

In-House Employee Model

The second option evaluated is the in-house employee therapy staffing model, which differs from the contract therapy model in that therapy managers and staff are SNF employees. This therapy delivery model is generally a fixed cost rather than a variable cost for the SNF; however, it can be a partially variable cost if staff members are willing to work only when they are needed. This situation primarily depends upon the SNF’s location and therapy volume. 

Key Considerations

There are several items SNFs should consider when comparing in-house therapy to outsourcing:

1. Legal liability issues should be considered. Residents’ families and plaintiffs' attorneys are filing more lawsuits, so it is important to limit SNF risk. If an unrelated rehab company provides therapy services and there is physical harm or other potential litigation issues, certain liability exposure could be the responsibility of the rehab provider. A SNF should review the rehab provider contract for the amount of professional and other liability coverage the rehab provider carries, as well as other insurance specifics, such as “per injury or incident,” “aggregate per year” and “coverage for each occurrence of property damage.” The SNF should evaluate whether it will allow the rehab provider to provide insurance through self-insurance and/or reinsurance.
   This and other key legal liability issues, along with all contracts, should be discussed with the SNF’s legal counsel.
2. It is often challenging for an individual facility using the in-house employee model to obtain timely education for their staff in a constantly changing, complex area of SNF rehab therapy that extends over the three disciplines of PT, OT and ST. However, a quality rehab provider operating regionally or nationwide should be able to provide timely and quality staff education at no direct cost to the SNF.
3. It can be difficult to find a qualified person to run an in-house employee therapy department in a smaller community. Even if the SNF has a qualified therapy department supervisor who works well with staff and stays current on education, it could be challenging to replace that type of person. In addition, under new CMS rules, it is more common for therapy to be provided more than just weekdays, potentially complicating an in-house employee staffing model.
4. There is a shortage of qualified, well-trained therapists, especially in rural areas. This can make it difficult for a SNF to have adequate and flexible staff, since a SNF’s Part A census and Part B utilization can fluctuate. Larger rehab providers often are able to recruit nationally and sometimes worldwide.    
5. Many industry consultants are concerned that an in-house employee model tends to leave Part B therapy behind—often being provided only when the therapy staff has time.
6. Another challenge in the in-house employee model is the ability to cover sick, personal and vacation leave. A SNF can occasionally contract with therapists in the surrounding area or find temporary staff to provide this coverage. However, a contract rehab provideroften can find staff from other providers they service to more effectively cover a leave situation.
7. When a SNF contracts for its therapy services, it has, in effect, made therapy a variable cost—cost is incurred only if the SNF is receiving therapy service and will be billing for that service. Conversely, a SNF using the in-house employee model likely makes therapy a “fixed cost” unless the SNF has near-perfect productivity, where the employee hours available exactly fit the need. The burden of therapist productivity is borne by the SNF in the in-house model. It is important to consider these issues in evaluating cost.
8. CMS and other government agencies are placing greater emphasis on review and auditing of SNF billings. A therapy contract with a reputable, experienced rehab provider should include an “indemnification clause” and other wording. This should require the therapy company to provide supporting documentation if the SNF is audited by one of the various sources, i.e., a Medicare Administrative Contractor Probe Review, Recovery Audit Contactor audit, Zone Program Integrity Contractor audit, Additional Documentation Requests or other claims reviews, and assist with the appeals process. This would potentially idemnify the SNF for any denied or downcoded claims should the therapy delivery and/or documentation be at fault.

Regardless of the model that best fits your organization, good communication and collaboration are crucial between the therapy department, nursing, billing and management to properly manage your Medicare program and to provide quality care, reduce risks and improve reimbursement.

There are many important issues for a SNF to consider in providing therapy services. For more information, contact your BKD advisor.