Beware RCS Models!

I recently spoke with the owner of a therapy company regarding RCS. He told me his therapy software vendor was using historical data to create a model to show him the effects of RCS on his business. I haven't seen that analysis so I'm not commenting on it specifically. I AM saying you should use extreme caution when attempting to model RCS.

Here are a few reasons why:

  1. RCS isn't finalized yet. There could still be changes that significantly impact both how you'll be reimbursed and how you'll behave once those rules are in place.  (CMS has released classification logic so we should be getting close to the final version but...)
  2. You don't operate in a vacuum. Each facility will adjust to the new RCS reality in different ways. In aggregate, that means the market rate for therapists will change. Estimating this change is nearly impossible. (In conversations I've been involved with I've heard from negative $1 to negative $10(!) per therapist hour.) More importantly, wage changes will be hyper-local depending both on the supply of therapists and local pre-RCS operating conditions. Additionally, wage changes may take months or even years to settle out.
  3. If therapist employment falls, how many will leave the industry? Some will retire early. Some will have higher paying options outside of therapy. Some will be willing to work for less. These decisions will have an effect on the average hourly wage in your market.
  4. Will employers risk across-the-board wage cuts? Targeted-wage cuts? Lay-offs? It depends on who I talk to, how they operate now and the local market in which they operate. At least one person I spoke with said his facilities will largely see increases in reimbursement and he plans no operational changes in service delivery, wages or employment. Another believes his customers are probably looking at losing more than $250k per building annually. There WILL be operation changes there. Even if you plan NO changes at all, if the large provider down the road from you lays off 20 therapists you WILL see resumes and people motivated to work for less than your current employees.
  5. Even the Provider Specific Impact Analysis assumes 2014 running conditions and NO adjustments to the way you operate under new rules. How likely are those two assumptions?

What CAN you do now?

  1. Be self-aware. The RCS technical report is clear that mid-sized, for-profit homes that run a lot of ultra high part A days will be the most negatively impacted. Is that you? if so you are probably headed towards lower reimbursement.
  2. Develop a contingency plan. How would you respond if your therapy reimbursement was reduced by 10%? 15%? 20%? Would you need to reduce staff? Wages? Start planning now. Write guidelines now. Create criteria for selecting who might be impacted by a wage cut or layoff. You don't need names at this point, just a plan. For example you could consider rate, full-time status, discipline and productivity. You'll think more clearly about potential difficult realities now rather than in the heat of the moment.
  3. Focus on the outcome. How can you give the patient the absolute best chance at a high quality of life given the operating constraints? Don't think in terms of minutes delivered. Think in terms of being efficient and effective. The long-term winners will be the ones that deliver the best patient outcomes at an affordable rate.