The long-term care (LTC) industry is in a period of existential crisis. COVID-19 has had acute, sustained, and adverse effects on resident populations impacting occupancy. More importantly, the pandemic created population-wide narrative and perception issues that will likely take years to combat and overcome.
At the same time, LTC facilities are bearing increased costs for staff, medical supplies, and PPE—it’s like a triple whammy.
Here’s what is affecting cost:
- Decline in Population
- As of December, more than 100,000 residents who contracted COVID-19 have died. This reality has impacted public perception of long-term care facilities, with many families now opting to keep loved ones home and finding alternative care solutions. Additionally, discharges from hospitals to home healthcare settings will increase as a share of all discharges for years to come as another result of this crisis. As a result, the population of residents paying for care has plummeted.
- Demand for Personal Protective Equipment (PPE)
- As of April 2020, the demand for PPE rose 1,000 percent, causing the cost of N95 masks to skyrocket from $0.38 to $5.75 or greater. The supply chain couldn’t keep up, causing disparity of supply throughout the healthcare industry. PPE requirements are likely to be in place for some time, if not permanently, along with these increased costs for operators.
- Staffing
- The impact of COVID on staffing has been significant. Low-paying industry jobs and long hours paired with the fear of contracting the coronavirus have limited the supply of qualified workers. Additionally, the cost of clinical staff rose meaningfully during the most challenging times during the pandemic, putting further strain on finances.Though President Biden is proposing to increase to the federal minimum wage from $7.25 to $15 which may increase interest in becoming Certified Nursing Assistants, for example, these trends are likely to continue to be a challenge for the entire healthcare system for years to come.
I am hopeful that there is light at the end of the tunnel in 2021. Things should improve as we start putting COVID in the rearview mirror. Below are some of the dynamics that I believe will lead to a recovery for the LTC industry.
A Widely Circulated Vaccine
Nursing homes will become a COVID-free environment as the vaccine is administered across the country. Once COVID gets suppressed, I believe patients in need of rehabilitation will be the first new residents back. This should help improve financial outcomes as rehab is typically the most economically attractive part of the business. Overall, occupancy will continue to suffer, and that dynamic will likely persist through 2021 until the economy recovers, and some of the negative perceptions that have been developed through this period begin to wane.
A Reclaimed Global Supply Chain
The global supply chain has risen to meet the challenge of distributing PPE. Capacity has come online, and costs are now what they historically have been. However, we have a more significant expense associated with PPE, not that each mask is more, but we’re buying more disposable masks, more face shields, just more, which is likely to continue in the future. Luckily, the global supply chains have responded—Medline, McKesson, TwinMed—all of the companies that are generally supplying the med-surg business with operators are now capable and aren’t getting rationed as heavily.
Pharmacy Cost Controls
At the end of the day, there will be an even more acute focus on controlling and managing costs within the walls of a facility and ensuring that LTC operators are maximizing reimbursements for given residents. Being able to control costs without government bailouts is empowering for operators and beneficial for the long-term success of LTC operations.
At SRX, our mission is to help LTC operators gain control of their pharmacy spend. We are continually maximizing rebate dollars to affect the net cost of money coming into the building. But our other services focus on formulary management, the “what” that’s coming into the facility and ending up on the bill, and the reconciliation and analytics needed to make sure every bill is correct and operators get credits they deserve. SRX technology also creates analytics around behaviors that can be modified, whether it’s OTC utilization, optimizing med-surg spend versus pharmacy spend, or reducing waste over time. All of that will become more important as the industry recovers and operators are charged with finding long-term care solutions.
In addition, SRX provides tools that go beyond maximizing rebate dollars. We are about to bring more solutions to the marketplace to help clients maximize pharmacy-related exclusions that our clients can bill, such as managed care plans for certain medications and patients. Insurers that manage care companies have made it intentionally difficult and opaque to know what operators are entitled to, identifying reimbursable opportunities, and making sure those opportunities are submitted and received. We foresee that the portion of the “premium mix” short-term resident population that’s going to be paid by a managed care company—versus straight from Medicare Part A—will grow over time. Therefore, those opportunities for exclusions and incremental billing will only increase. We found it critical to assist our clients by maximizing reimbursements on the revenue side while also providing tools to ensure that they achieve the lowest net cost on purchases.
Our strategy is to attack it on both ends to help deliver long-term care solutions for the long-term.
We hope you reach out to us to find out how we can help your LTC facility achieve financial success. We stand with LTC.
—Scott Taylor, SRX CEO
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SRX is a technology and advisory company that helps LTC operators realize the lowest net cost on pharmacy spend. We help our customers improve drug utilization, manage pharmacy relationships, reduce costs and waste, and maximize rebates. We are committed to transparency and accountability and guarantee our quarterly rebates are paid on time, every time. Contact us at 833 633 6833.
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