Shady Health Care System

Shady Health Care Systems

HRM-630-Q4287 Topics in Health Admin 16TW4
Dr. Isaac Kahn
Kenneth J Comeiro, Tiffani Fagan, Erin Easterling, Courtney Downs, Danielle Ringgold
July 24, 2016

Shady Health Care System

Shady Health Care Systems

As we start to sort through the issues with Shady Health Care System, it has apparent that
a lot of the problems stem from inappropriate utilization of resources. With the changes in the
healthcare landscape this organization has been slow to adjust creating losses in both personnel
and financial from a lack of creativity in adjusting with the times.
I.The Analysis
Clinics could be challenged with as many as 20 million new patients over the next five
yearsbut with many clinics already experiencing long waiting lists for care in the current
financial environment, even the large new funding available may only be a down payment on
what will truly be needed to meet the requirement for services (About Our Health Centers, n.d.).
Several of the clinics on which poor and uninsured patients do not benefit from federal
grant funding, including funding from the recent legislation. That includes free clinics, womens
clinics and other providers of reproductive health care, and faith-based clinics, which are often
supported by volunteer labor and individual charitable contributions. They play an essential role
in the safety net, but theyre not included in the ambitious plans for clinic expansion. Neither the
substantial stimulus money that has already flowed to federally-funded clinics nor the
forthcoming funding for Information Technology will reach these key providers (About Our
Health Centers, n.d.).
A great deal of the recent federal investment has gone to building community clinics in
other communities, while support for existing clinics has not kept up with operating expense
increases and patient growth. At the same time, recruiting and retaining staff members in a
competitive labor market has grown more challenging, and outside individuals have increased

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requirements that clinics must meet to stay in operation and to provide state-of-the-art clinical
care, as well as to tackle racial and ethnic disparities and public health issues. Community clinics
face a number of challenges. Above all the challenge of recruiting and keeping a full
complement of medical, nursing, dental, and allied health professionals able and willing to
engage in high quality practice in medically underserved communities (Community Health
Centers Tackle Rising Demands and Expectations, 2007)
The 4 skilled nursing facilities has seen issues with employee retention and inability to
upgrade or come into the times due to lack of funds. Currently according to Harrington and Swan
(1984) Medicaid payments to Nursing homes was about 10% or 27 billion in 1982 at an average
of 33 dollars a day. According to 2015 numbers, this has risen to 207 dollars a day and with the
increasing aged population has accounted for more money from the government. The other
issues as pointed out (PNC rates, 2015) is that rates are usually 4-5 years behind with
adjustments not meeting inflation and cost of living adjustments. This is making it almost
assured that cuts in care are going to be even greater.
Currently as for profit the margins are slim making retention difficult and upgrades
even harder. Mullin (2013) reported that in a for profit facility the cost of a private room is 248
dollars a day and semi-private is 222 dollars a day. If the average stay is 835 days, then that is a
loss of 12,000 to 29,000 per patient over the course of their stay. That is based on the above
mentioned rates.
Patient to nurse rations increase in a population that is heavily dependent on the care of
others, creating fatigue, burnout and potential for errors. - good staff leaves as a result for better
pay and safer working environment. Success of the organization starts with the culture that

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shows an investment in its health care team (Lazar, 2016). For profit homes pay an average of 11
dollars less as day per patient for nursing care.
An electronic medical record would reduce errors and improve the flow of care to reduce
waste and redundancy of tasks. However, the cost is prohibitive in the current state of things.
Paper charts and orders leads to increase risk of med errors putting patients in harms way The
cost to health care is staggering and this has become one of the meaningful use criteria for
continued Medicare reimbursement (Andrews, 2013)
The need for assisted living in the future will drastically increase over the next 10 to 15
years. It can cost people up to 3000.00 dollars out of pocket per month which can be cost
prohibitive in this current change in social demographics but Patient has own private room or
home, centralized location for meals and activities, medical professionals onsite, 24-hour
security (National Center for Assisted Living, 2016). The issues of cost could have been part of
the reason that dollars have been moved away from marketing due to gentrification and again
issues with socioeconomic decline but as an essential need for this population is hindering the
ability to advertise throughout the area. This is a major misappropriation of resources
According to Medicare (2016) some of the issues with home health and as evidenced here
is that it is a higher cost when compared to alternative long term health care options. The average
hourly rate for a home health care aide to visit a patients home is $19, if the patient requires 24hour care then the annual cost for the service is roughly $170,000 annually which is 100,000
more annually than long-term care. Often these costs are out of pocket as Medicare and private
insurances offer very limited reimbursement. Even those with insurance may have to foot 1/3 of

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the bill so based on the higher operating costs it is an impediment to usage based on the changes
within the communities that Shady Acres serves
Studies have shown that more than 80% of Americans battling end stage illnesses prefer
to die at home (Cloud 2008). This is part of the reason we see a drop in census. Most Hospice
services are covered by Medicare and Medicaid but many changes have limited reimbursement
which can be another reason as it limits the ability for the Hospice to run efficiently. A lack of
education around Advanced Directives with discussion about end of life is another possible issue
as Medicare/Medicaid will no longer reimburse for any intervention that is seen as life
prolonging.
Shady Acres pharmacy has a 40% gross profit margin which is great so it needs to
continue its operations as is to remain positive. Independent pharmacy average gross margin
profit is 27%, therefore Shady Acre pharmacy is well above the independent pharmacy. Shady
Acres health system needs to focus its efforts in this area to maximize profit margins to offset
other areas that need help to establish appropriate changes.
Lab services are often very lucrative if they are performed appropriately. The issues with
lab typically can be placed back on the ICD-10 coding of services rendered. When codes are
incorrectly written the reimbursement is held up. Often when the lab is tied into a larger
Medicaid population the actual reimbursement is smaller and the coding is an even bigger
potential roadblock. This as well as utilization from all facets of the health care system need to
be addressed

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II.The Solutions
Shady Acres administrators for the clinical setting might consider partnering with a larger
health network to deliver clinic services as an urgent care facility. It would be better if this was a
non for profit system to allow for growing pains that come with this partnership. Many clinics
are partnered with a regional hospital network. The advantage of doing this would be to increase
the flow of patients with means to pay for services, but are looking to save on those services by
using an urgent care facility. Additionally, many insurers offer no co-payments if patients use
these facilities over emergent care. There are many added benefits of a partnership including
shared services. They may be able to eliminate the laboratory services and contract with the
partner facility. They could then shift resources to more profitable business divisions.

A Focus on preventative services/education would be attainable through shared risk with

a larger health network. This would help to reduce clinic visit frequency, improve outcomes and
increase revenue. With a partnership and changing focus it could survive with the contracted
Medicare and Medicaid rates as the demographic under these plans increases. This is difficult to
determine without knowing the scope of services being offered.

Set up the SNF/Nursing home as a separate entity under the Shady Acres system and
rename it. The purpose is to create a non for profit status. These facilities are always going to be
in need and in order to remain open due to the Affordable Care Act, the new regulations will
demand a number of beds made available to this population as Medicaid. As the population in
this catch basin becomes more dependent on state aid, the need will be greater here. For profit
status will be an issue. Lazar (2016) reported that For-profit nursing homes often are cited for

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more health and safety problems than nonprofit homes, while they are far more likely to divert
money to a web of affiliated companies.
With non-for profit status, it will be easier to provide top notch care and put any and all
profit back into the corporation. The tax exemptions and other advantages can assure this part of
the Shady Acre health system will not be a burden. It will be giving back to the community by
providing a place for people in need to go. As a byproduct of this, the other for profit services
under Shady Acres will benefit from the show of corporate social responsibility. The issues with
food service, social activities and nursing care can be improved with a more holistic approach to
overall delivery of care.
Changes in documentation will improve reimbursement because each aspect of outcome
measures will be easily evaluated and monitored. The cost of the electronic medical record can
be offset by tax savings and available grants for implementation with the long-run savings being
well worth it (Shedenhelm et al, 2008)
There needs to be a redesign of the way care is delivered by the four homes. Shared risk
is simple concept described by Hacker and Jacobs (2009) as distributing the cost of health care
services across several participants. Shady Acres needs to change its status to non for profit and
then look for partnerships to share the risk in hopes of defraying costs and maximizing revenue
According to Shi and Singh (2013) in 1989 Medicare developed the relative value scale
that assigned relative value to all services rendered. Each year these fee schedules change and
current procedure terminology codes (CPT) were born from the Health Insurance Portability and
Accountability Act (HIPAA) of 1996 and came into practice as of 2000. These are the codes that
dictate how much is billed for the services rendered and many private insurers follow them as

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well. This will be the butter to the bread for the 275 bed facility as it becomes a full-fledged
acute short term and long term rehabilitation center. A partnership with the local hospitals to take
these patients will be developed and a negotiation with Medicare and private payers for an
acceptable bundled rate will be established with the caveat that they can be re-negotiated every
six months after careful review to assure there are not losses. An initial investment would need to
be made to assure that renovations and upgrades were done and those would come from donors,
grants, and loans with acceptable rates. This will be the flagship that will be the envy of many
throughout the communities for its attention to top notch health care delivery.
Program of All-inclusive Care for the Elderly (PACE) programs are becoming a bigger
part of society and in the population that Shady Acres is seeing. It is a capitated program that
delivers all aspect of care to maintain patients at home but often end up in a Skilled Nursing
Facility or nursing center. Shady Acres needs to share the risk of the patient population by
contracting with the local PACE programs for managing their patients. The idea is to provide all
the resources for physical, emotional and medical support to cut cost with a maximum
deliverable model of care.
Two of the homes would serve as the contracted long term care facilities and assure that
level of care remains high. That money as a non for profit is going back in for upkeep and
maintenance of these homes. One of the homes would have a small rehab, convalescing area for
the assisted living patients who needed it.
The fourth home would be renovated and made into a psychiatric facility with a locked
memory unit, inpatient psychiatric as well as outpatient day programs. Some alcohol and drug
rehabilitation could be established as it grows. Mental Health care costs had been compared to

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the cost of caring for cancer patients in 2006 at over 57 billion (Insel, 2011). A large part of that
is the issues with unemployment, homelessness and associated health issues that come with it.
Having an institution that provides the mental health counseling as well as job counseling and
assistance with finding places to live, would be a big boon to the area
Adopting a sense of Corporate Social Responsibility will endear the community to you.
The staff will see the reward of the mission that each home will take and newer incentive for the
staff may be born. Things like tuition reimbursement, education seminars and a uniform
allowance will improve the culture and indirectly help the other entities.
There are nearly one million Americans that reside in an assisted facility and that amount
is expected to double by 2030; there is slow growth of assisted living programs due to the
economy decline, but this senior care facility option has a better chance of withstanding any
other facility in the industry. The reason behind this is the type of care that is given to the
patients/residents and the affordability. With the high rise of patients wanting/needing an assisted
living facility, there has been a push for state Medicaid programs to expand their coverage for
assisted living facilities, especially since Medicaid accounts for 73 percent of long term care
payment for nursing home care. By expanding Medicaid coverage, the doors are being opened up
to the lower class/financially hindered patients that require the same type of care, this will result
in a large increase of residents in these facilities. Currently there are 115,000 people living in an
assisted living program under the Medicaid guidelines, but there is anticipation for a large
increase once Medicaid expands its coverage. (SBDC Net, 2016).
Clearly there is going to be a high demand for assisted living facilities in the near future,
as the want/need for home health care services changes. To facilitate for the future needs, Shady
Acres Healthcare Services should hon in on its assisted living marketing; there is a lack of

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funding to provide this marketing service so they should re allocate resources away from other
programs that might be consolidated. Shady Acres should shift those funds to expand the future
of assisted living. With a decline in the economy, people are not able to outright afford home
health services out of pocket. Not only can it be expensive, but it doesnt even include the cost of
housing, food, activities, etc. The solution for this program would be to have it align with the
SNF facilities as a way to transition patients back to home in the assisted living or their own
residence. It would again be under the non for profit umbrella and with the Medicaid Personal
Care Attendant Program, many potential providers could be trained and reimbursed for their care
of the patients. These can be family, friends or associates. They dont need medical backgrounds
to take part. According to the Paying for Senior Care (2016),) Unlike other home and community
based services through Medicaid these benefits are considered entitlements, so eligible seniors
are guaranteed personal care services once enrolled. The Hone Health Services would be scaled
back to include these services and then contract with a local Visiting Nurse Associations (VNAs)
for the other care. These VNAs can be lucrative but with new restrictions and the overhead to
run them it may not be beneficial in the long run for the bottom line. It is assigning risk to
another agency
A pharmacy is a branch of the Shady Acres Healthcare System that prepares, preserves,
compounds and dispenses drugs and medications to its patients. (Merriam-Webster, 2016). The
current gross profit margin of Shady Acres is 40 percent which is much higher than the 2013
independent community pharmacy owners. An independent community pharmacy is a
pharmacist owned, private practice setting. In 2013 the independent community pharmacy gross
profit margin was a little over 27 percent. (National Community Pharmacists Association, 2013).

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Considering Shady Acres high percent of gross profit margin compared to other facilities, it is
safe to say that whatever the pharmacy is doing it needs to continue in that path.
There are many ways to ensure that a pharmacy is operating a positive facility by staying
and/or becoming a profitable network, this could be by cutting staff and increasing the patient
volume. Although this is not a bad way to increase profits, its not taking the pharmacy to its
highest potential, rather it is cutting corners just to make an extra buck or profit. In order to
remain a profitable pharmacy, it is understanding the market and needs of the patients. Tips to
consider to remain profitable include the following:

Driving sales toward the best margin in order to make a profit, its good to understand
where there is a best margin for profit and direct sales and marketing. If a drug is going to
cost the pharmacy more than payment from patients, it is not a good option to carry that
drug, the pharmacy should consider alternative medications/generic medications that

provide the pharmacy with a larger profit but also fits the needs of the patient treatment.
Know who your 20% are the pareto principle states that 20% of any group produces
80% of the result. Know where the biggest result is going to come from, dont waste

resources on products/medications that are not going to be profitable to the organization.

Insist on measurable ROI in marketing ensure smart decisions are being made in

marketing the brand and/or products by the measure of effectiveness there is on sales.
Be expense vigilant make sure the expenses associated with the operational duties are

kept in reasonable amount.

Turn your staff into a sales force staff should become engaged in the customers needs
to ensure that the customer experience factor keeps the customer coming back for
medications.

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Keep the big picture in mind if the pharmacy experiences setbacks dont let that justify
the success of the company, rather work through these issues to remain in a positive
outlook.
(The Honest Apothecary, 2014)

As the gross profit demonstrates Shady Acres has generated a large profit when compared to
other pharmacies, therefore, there isnt much to change about the operations of the pharmacy
Finally, in looking at the Hospice and the Laboratory, these two entities need to be
drastically changed. The Hopsice house can actually be closed and the building and lands can be
sold. With the change in the Skilled Nursing Facilities, a Hospice Wing can be developed within
one of them. This way the staff is not lost but shifted. Making a shift in home health care by
training those employees for end of life care and merging hospice and home health can help cut
costs as well. The overhead of the stand-alone facility is gone and the sale can be put back into
the system for changes and upgrades throughout.
The Lab is a little trickier. With the correct ICD-10 coding and effort it could be lucrative.
However, when partnering with a larger health system, they often like to roll their lab services
into their own entity. So the decision could be to sell it outright to the larger health care system
or a competitor, or sub contract the services out the hospital so that Shady Acres retains the
building and the service but the larger health provider staffs it. The sharing of revenue can be
determined fairly and Shady Acres can increase the use of its facility while reducing overhead
and recouping some profits. Of all the changes, the Pharmacy and the lab would remain for profit
and might need to be a separate entity under the Shady Health umbrella.
In Conclusion, we see the issues that this health system has. Overall many of the changes
include embracing the change in demographics and payers by changing its status to not for profit,

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looking at a larger health system to partner with, consolidating services and applying for many of
the programs that Medicaid offers. In time much of the savings can be put back into the facilities.
This should help to keep pay competitive, retain staff and provide excellent patient care. The
hope over the long-term is to use revenue to provide increased educational opportunities like
tuition reimbursement and career advancement through seminars and trainings. With streamlined
approach and retention schedules can be flexible with an emphasis on work life balance. Overall
this will improve morale and outcomes.

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References
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