By Anne Federwisch
Photo by Margie Paschke
May 10, 1999

The Balanced Budget Act of 1997 hasn’t balanced the federal budget yet. But it has shaken up the long-term care industry with its alterations of Medicare reimbursement, leaving many allied health professionals without jobs and wondering exactly what hit them. Those who have held on to their jobs have had to redefine their roles to work within the new system.

"It’s been devastating," said Steven White, PhD, director of healthcare policy and financing for the American Speech-Language-Hearing Association (ASHA). "Many of our members have lost their jobs. Others have taken severe pay cuts. The limitations on the time spent with patients in nursing facilities has been dramatically decreased."

The Balanced Budget Act put in place both a prospective payment system (PPS) for Medicare inpatients as well as a $1,500 cap on outpatient therapy. Under the previous system, Medicare reimbursed facilities and practitioners for each service provided. Under the new PPS rules, Medicare pays facilities a predetermined, per diem rate for each beneficiary—based on his or her clinical condition. From those funds, skilled nursing facilities (SNFs) must pay for all services a patient receives.

Excessive cuts?

This new reimbursement regime has shaken up the nursing home and skilled nursing area. The result: Many allied health professionals are losing their jobs or taking huge pay cuts. Speech pathologists, physical therapists, occupational therapists, and respiratory care professionals in SNFs are being hit hardest by the fallout from the PPS system, experts say. Basically, PPS is affecting long-term care facilities the same way diagnosis related groups (DRGs) affect hospitals.

To stay within the per diem parameters set by the PPS, nursing homes are cutting back on services, said Christina Metzler, director of the federal affairs department for the American Occupational Therapy Association (AOTA). But since it’s easier to cut back on therapy than on pharmaceuticals or medical equipment, "there’s a disproportionate effect on our members losing their jobs," she said.

Susan Campbell, vice president of investor relations for Philadelphia-based NovaCare Inc., a long-term rehabilitation services provider, agreed that many nursing home operators are over-reacting to the complicated, confusing regulations by cutting rehab too severely. "It’s good for taxpayers that there’s a more reasonable approach by the government in reimbursing nursing homes," she said. "But nursing homes are reacting to the complex nature of the rules and the requirements of those rules in a way that’s more than PPS intended." Campell said the reimbursement changes are actually projected to bring in more cost savings for the federal government than previously projected. She cited recent statistics from the Congressional Budget Office that the SNF changes will result in $16.2 billion in savings over the next five years. That figure exceeds original estimates of $9.6 billion by almost 70 percent.

Quantifying the effect

Just how many allied health professionals have been affected is difficult to determine because things are changing so quickly, said Barbara Sanders, PhD, PT, president of the Texas Physical Therapy Association. But anecdotal evidence suggests that the impact is immense.

"The Balanced Budget Act has devastated the therapy market," said Curtis Pryor, vice president of Allied Consulting Inc., an Irving healthcare staffing firm. Pryor said his company has not done any recruitment searches for physical therapists this year. Before PPS, he recruited almost 200 PTs a year. Business for nurses and pharmacists remains high, however, Pryor said.

Susan Rigby, MA, CCC-SLP, a speech-language pathologist and state task force director for Medicare and Medicaid for the Texas Speech-Language-Hearing Association (TSHA), knows firsthand about job losses. "All our staff have been switched to hourly rates and had their hours cut," she said. Rigby, the area clinical director for Prism Rehab Systems in Austin, said that by the end of the month, the fallout from PPS will be even more damaging. "Our company is going to close down all of our outside business as of May 31," she said. "The therapists who are in outside contracts [non-Prism-owned facilities] will have to find other jobs." That includes Rigby. Prism employees aren’t the only ones hit hard by PPS. Rigby figures that 50 to 75 percent of Texas speech therapists working in SNFs have also lost their jobs. The AOTA estimates that 35 percent of OTs in nursing homes have been laid off.

The reach of PPS extends to the future as well because prospective allied health students are being scared off by lack of jobs. Sanders, professor and chair of the PT department at Southwest Texas State University, noted a 40 percent decrease in applicants to PT programs across the state. OT programs in Texas have also noted smaller sizes, said Evie Harness, OTR, chair for the council on standards and practice for the Texas Occupational Therapy Association.

HCFA defends changes

Despite the drastic decreases in therapy positions in SNFs, the Health Care Financing Administration (HCFA), which oversees the Medicare program, defends PPS. The cost-based reimbursement system provided no incentive to deliver care efficiently, a HCFA spokesperson said. "PPS is about providing the right care at the right time in the right setting in return for receiving a fair compensation," she said. If therapists are losing their jobs because of the move to PPS, she said, it could be a confirmation that services were being provided in excess of what was needed.

AOTA’s Metzler said such reasoning is flawed. HCFA is assuming that the care provided under PPS is the proper level of care, yet it has no system in place to monitor this, she said. "If HCFA is saying all that therapy wasn’t necessary [before PPS], why did their fiscal intermediaries pay for it?" she asked.

HCFA needs to remember that a capitated system has its downside as well, said Sam Giordano, MBA, RRT, executive director of the American Association for Respiratory Care. "When you provide a capitated payment system, you inadvertently provide an incentive to stint on services," he said. "The bottom line is, a lot of the skilled nursing industry has decided that because of the prospective payment system, they’re not able to afford paying professionals." Instead, they’re trying to find a cheaper substitute, who may or may not be qualified, he said. "Safety and quality is an issue across all disciplines." Outcomes studies are needed, Giordano said, to measure the effects on quality of care to patients. "Unfortunately, it’s not going to help [long-term care patients] today," he said.

Reshaping roles

All the disciplines are rallying to defend and define their roles in long-term care. "The patients aren’t going away," Sanders said. "The nursing home beds are still full. The demand for skilled services is still there."

Practitioners need to think in terms of public relations, said Brynda Pappas, spokesperson for the AOTA. For example, they should educate administrators and other decision makers that their discipline is good for the bottom line by improving residents’ function and decreasing length of stay or the need for continual assistance, she said.

Meanwhile, therapists who remain in long-term care settings are adapting to shorter treatment times under PPS. Rigby said that her therapists are learning to do shorter evaluations and training caregivers to help reinforce treatments outside the clinic. "It’s a new way of working for a lot of the therapists," she said.

Most agree that the previous Medicare reimbursement system warranted changing. But they’re not convinced PPS improved anything. "Yes, we’ve saved money with PPS," Sanders said. "But we are just shifting the cost, and it’s going to cost us more later because people aren’t getting the same level of services they’ve been getting in the past."

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