“Where’s our business going to be in the next five years?”
For skilled nursing organizations, this isn’t just a question of strategy, but often one of survival. And those organizations who are prepared to answer it have embraced the need to embrace a policy of diversification of care.
But how does diversification in healthcare apply to skilled nursing? And what should leaders of these organizations understand about the benefits, and potential pitfalls, of diversification?
In this multi-part series, I’ll explore those questions and more, offering an insider’s perspective on diversification in care for skilled nursing, as well as why that shift isn’t just beneficial, but increasingly necessary. And later, I’ll go on to explore the impact of that shift, as well as other factors like government involvement and what the future holds for businesses that do diversify.
What is diversification in healthcare, and what does it mean for skilled nursing?
So, what is diversification in healthcare? In the context of the skilled nursing industry and out-of-hospital post-acute care, diversification of care is a way to offer additional services or otherwise expand an organization’s business model to stay profitable and continue to grow.
As such, diversification in skilled nursing can be defined in two ways. On one hand, it refers to organizations diversifying the types of care they provide. This usually involves skilled nursing facilities offering similar care services like home health and hospice care, dialysis services, ventilator care, behavioral health, and so on.
It should be noted that fairly high percentage of providers already do this. Many larger organizations in particular, like multi-facility chains, offer home health services, for instance. And among MatrixCare partners and associates, many of these organizations are seeing favorable returns from this type of diversification.
The other type of diversification affecting skilled nursing organizations is the expansion of business models, or care models, such as the addition of new special needs plans. In this case, diversification is focused more on reimbursement and finding other models of care that can drive greater profitability, along with the potential for a higher quality care.
Of course, the focus for skilled nursing organizations is always going to be on quality of care. But this type of diversification also works to help ensure sustainability and help build long-term stability. The result is that organizations increase their ability to actually stay in the game when the challenges against doing so have become pretty formidable
What are the benefits of diversifying for skilled nursing organizations?
Given these motives, the appeal of diversification is clear. There’s a good reason why it’s become popular among successful skilled nursing providers, and is now being actively encouraged by a lot of the industry professionals—especially consultants working to help providers develop strategies to stay in business.
Leaders focused on long-term strategy understand the formidable challenges they’re up against, which include:
- Higher acuity. Residents continue to have more chronic conditions.
- Growing demand. Facilities often have more residents than beds.
- Staffing shortages. Potential residents are being turned away for lack of workers to care for them.
Taken together, these challenges indicate an increased demand for care providers over time. It may not appear that way right now, because of the staffing crisis. But as the Baby Boomer generation continues to get older, leaders understand that the need to expand capacity in new ways is more pressing than ever
In many cases, diversification gives them the ability to do just that. Empowering sustainable growth by integrating related services lines, diversification provides skilled nursing organizations with opportunities to:
- Boost reimbursement dollars by better servicing new care models,
- Gain flexibility by adding lines of business,
- Increase capacity of residents treated, and
- Accept more patients from more providers under new care models.
Diversification in healthcare offerings can also offer an important boost to an organization’s reputation at a time when that’s never been more important. It can lead to more referrals, and improve appeal among potential residents and their families. Those who may be considering facilities for loved ones are likely to be impressed to find one that can offer a variety of different care services under the same umbrella, for instance.
Impactful diversification areas for skilled nursing
From hospice and home care to rehabilitation and therapy, the market is booming for many of the types of services that can integrate with skilled nursing. And many organizations have already embraced diversification for this reason—because it aligns so well with their current offerings. It’s not out of left field, but a natural evolution of their business model.
For instance, home health is a natural fit for diversification. It makes strategic sense for skilled nursing providers to begin to provide home care services for residents, and doing so can also lead to add-on benefits like the ability to treat more residents with fewer full-time staff members.
In fact, home health is such a natural fit for skilled nursing providers, and so many have already embraced it, that it deserves exploration as a topic unto itself. I’ll explore the opportunities and challenges facing SNFs as they diversify into home health in greater detail in upcoming entries to this series.
Beyond home health, some other impactful diversification areas in skilled nursing are dialysis and ventilator services, behavioral health, and pharmacy services. These not only sync well with resident needs, but they also help organizations better seize the opportunity of current Medicare Advantage (MA) models of reimbursement.
Moving toward these models may also help providers partner with more physician groups, ACOs or other organizations for additional experience, some resources. For example, it’s proven that involving nurse practitioners with resident care leads to more positive outcomes. So, the new models of care expand access to doctors and NPs for the benefit not only of the patient, but outcomes, too.
Skilled nursing facilities that have proven that they can also provide quality dialysis care or ventilator care will not only get more referrals from hospitals and other third-party organizations, but will be able to better treat those patients, too. This offers operational and financial flexibility by supplementing current streams with sources of revenue.
Now that we’ve covered the definition of diversification in healthcare and how it can specifically benefit skilled nursing organizations, please join me next time as I discuss the topic in more detail. First, I’ll explore the specific opportunities awaiting leaders as they take the first steps in diversifying their services. Then, I’ll conclude with a look at the challenges they can expect to face.