Kindred Healthcare is getting out of the short-term rehab facility business, otherwise known as skilled nursing. The Louisville-based company said Monday it will sell all 36 facilities by the end of 2017.
The news comes as Medicare is changing the way health care providers are paid. Traditionally, medical providers are paid per service, no matter the patient’s outcome. Now, hospitals are getting a pot of money to handle a patient’s care that they have to disperse to other providers who are also involved in say, a knee replacement surgery.
“This is where you get one lump sum of money to take care of someone and make them well,” said Frank Morgan, a market analyst who covers Kindred for RBC Capital Markets out of Nashville, Tennessee.
In the past, a patient undergoing knee replacement surgery would be sent to a rehab facility for longer periods without much concern about cost. Now, those people are either spending shorter times there, or being sent home after a hospital stay and getting someone like a nurse or physical therapist to visit them at home.
Kindred previously said in an earnings call that the move will save about $200 million a year. The majority of skilled nursing facilities are owned by local companies, and the ones being sold by Kindred likely won’t close.
The staff, however, will likely have to become more skilled, according to Brent Feorene, a health care consultant who works on nursing home issues for Health Dimensions Group, based out of Cleveland, Ohio. Feorene said the shift means staff at skilled nursing facilities have to become more advanced because the people who do get sent to them will have more complex health issues.
“The staff of the skilled nursing have to work at a higher level than what they’re used to, maybe more RNs with higher skill sets,” Feorene said.
The payment changes came with the Affordable Care Act in an effort to stop health care costs from continuously rising.
Another factor that’s pushing for more advanced care at skilled nursing facilities is penalties that hospitals face if patients are readmitted within a certain amount of time after surgery. Being able to treat patients in-house instead of the emergency room also takes more skilled medical staff.
“If something flares up, they have the ability to contact the doctor on call and handle it,” Feorene said. “And that’s not always been the case.”
More people age 65 and up are also in Medicare Advantage plans now. These are privately-run plans that offer the same benefits as traditional Medicare but are supposed to restrict unnecessary care more.
‘When a Medicare Advantage patient shows up, they stay several days less than those on Medicare fee-for-service with a comparable condition,” said Morgan. “When you have a high fixed-cost operation, and you have all these employees, it affects your profitability.”
Kindred bought home health care company Gentiva last year, with an eye on the uptick in the number of seniors being taken care of post-hospital stay by home health workers versus in a facility.