Partnering with ALFs: Understand the model
Partnering with ALFs: Understand the model
Know the different models and how they operate
By Molly Miceli
Chief Executive Officer
Lifestyle Options
Schaumburg, IL
Assisted living continues to gain ground as consumers choose a residential model of care for older adults needing chronic care services. In every market, assisted living facilities (ALFs) are proliferating. For the private duty home health provider, ALFs are potentially excellent business partners in providing access to frail older adults who require personal care and support services to remain independent. The demographic and the economic profile of assisted living residents is ideal for private duty home care. To take advantage of this natural synergy, some understanding of the assisted living industry is necessary.
Because state laws govern ALFs, there is a plethora of licenses, regulations, and nomenclatures. Most ALFs, however, function in one of two basic operating models — either a direct provider model or a home health model of service.
Definitions of ALFs
• Direct Provider Model: In a direct provider model, the facility is licensed. Depending on the state, it may be licensed as a personal care home, a domiciliary care home, adult residential care facility, board, and care or other name. The facility bills the residents directly for room and board and all services. While the facility provides all personal care and supportive services, it generally does not provide Medicare reimbursable home health services that are usually available through access to a licensed, certified home health agency. Some outsourcing can occur such as food service, housekeeping, HR functions, etc. — but by and large, the ALF provides its own services. Even those services that are outsourced are transparent to the facility’s residents.
• Home Health Model: In a Home Health Model, licensure is not generally required because the ALF only provides room and board to the residents. Individual units are considered private apartments, not licensed beds. All personal care, support services, and skilled care are provided by a third party located on-site. Under this model, the resident generally receives two invoices billing separately for each party’s services. At times, the facility’s own umbrella organization may own the home health agency, but most often the facility contracts directly with a local third party.
In either model, the private duty company can assist the ALF by offering additional services to the residents. But the larger opportunity is as the home care services partner in a home health model of assisted living. Structuring an effective home health model requires the ALF to outsource the service component to an expert — a private duty home care company.
Choosing an operating model
Why would an ALF choose a home health operating model? These decisions are complicated and in many ways very subjective. Primarily, the decision makers will evaluate:
• Cost: ALFs evaluate the cost of the learning curve. If the facility finds it will be more costly to build the service vs. buying it, then that’s a strong factor for a decision to outsource. Conversely, once a company acquires the expertise, it’s likely that it can perform services less expensively itself. It’s acquiring the expertise that is expensive. Where the ALF places itself on this expertise continuum will influence its decision.
• Liability: Some ALFs feel the service side is just not a business they want to get into. The risks and liabilities are simply too high.
• Expertise: Can the ALF really achieve the level of service their residents expect? If the ALF has limited resources in health care, it’s likely they will not be able to provide the quality level their competitor, with more expertise, can.
• Reduced headache factor: Of all the facets of the assisted living business, the service side without a doubt has the highest headache factor. Labor issues, training, the details of managing individuals’ private day-to-day lives, dealing with families, communicating with referral sources, talking to physicians, discharge planners — those are all very complicated, service intensive details. And, financially, the service side of the business does not produce the healthy margins the real estate side does.
• Benefits of a continuum: There are times outsourcing can provide ALFs with a marketing advantage. Linking with well-known and respected local market health care services such as hospitals, nursing homes, and physician groups can result in faster fill rates and higher resident retention. Contracting with a local home care company associated with such a continuum can provide a new ALF with access to additional services, as well as an automatic established reputation in the community.
• Ability to operate legally in some states: There are states in which the laws will not allow ALFs to operate in a direct provider model. Use of a third party is the only way to provide supportive services on-site.
• Control: When outsourcing such a visible service as personal care, the ALF experiences a loss of control over the staff and services. Often that loss of control over a critical service will preclude an ALF from comfortably outsourcing to a third party.
Selecting a provider
When an ALF decides a home health model works best for its situation, what does it look for in selecting a partner?
• Credentials: In evaluating a Medicare-certified home health agency, ALFs look for a license, as well as certification. In addition, companies look for the seal of approval beyond licensure. For example, Joint Commission on Accreditation for Healthcare Organizations accreditation.
• Experience: ALFs have learned to look for a company that has done many of those projects before. Just like hiring a physician or a lawyer or any other professional service, they don’t want to find themselves paying for someone else’s education.
• Client references: Any reputable company should be able to provide specific client references.
• Synergy in mission and philosophy: An experienced negotiator will set their benchmarks first and select a vendor against those standards. The relationship is much more likely to succeed when philosophical standards are discussed up front. Our company has a decade of experience in working with ALFs. We learned early on how critically important synergy in mission and philosophy is when providing services in someone else’s facility. If the agency and the ALF are not on the same page, the relationship will eventually fail.
Benefits and challenges
While the home health model of assisted living poses an excellent business opportunity for private duty agencies, there are benefits and challenges intrinsic to this model:
• ALF benefits:
The primary benefit to the facility and its residents is that the agency is in the business of health care while oftentimes the facility is not. Providing health care services with little health care experience can pose not only a significant financial risk, but can also result in a huge increase in professional liability. Shifting that risk to the home care company can benefit the facility.
Health care experience means that ordinarily the programs set up by the home care company are structured in a case management model that benefits the residents. A good case management model case finds, refers, supervises care, and is effective in keeping residents healthier — and of course, thus increases retention and improves length of stay.
Finally, if the home care agency is well-known and respected or perhaps affiliated with a strong local hospital, the facility can gain marketing advantage in the community.
Benefits to the home care agency include a guaranteed source of revenue with a fairly predictable staffing cost. The efficiencies gained in a group setting are rare in the home care industry and, managed correctly, assisted living can be more profitable than ordinary home care business.
Another wonderful benefit is the ability to truly impact the health and wellness of a stable population. Home care companies don’t get the chance to do that very often. Rarely do agencies get the chance to follow individuals throughout their lives instead of simply through a course of illness. True process improvement can take place in this type of setting by achieving demonstrable results and sometimes dramatic improvements in function.
There are many challenges to a home health model of assisted living, as well:
• Challenges:
The issue of control can be worrisome. There may be a perception that the agency is following a different agenda than the ALF. For example, an agency may feel strongly that a particular resident is no longer safe in the assisted living environment, but the facility is focused on census and will not encourage discharge. Conflicts over care can arise.
There’s always a perception that the agency is making way more money than it should which can lead to pricing struggles.
Other challenges include confusion on the part of the residents: "Who’s who?" "Why am I getting two bills?" and "Who do I complain to about this resident assistant?"
• Risk of fraud and abuse prosecution:
Even if the ALF does not directly receive state or federal funds, if vendors that act on their behalf receive funds, the community may be brought within the gambit of fraud laws. This risk is especially great when an ALF contracts with an outside health care provide to supply services that the ALF is required to offer its residents, because of a contractual agreement with a resident or a state requirement. This risk may actually provide non-Medicare agencies with a significant business advantage in contracting with ALFs.
And, regardless of how clearly the home health model is communicated, residents cannot help but feel the agency and the ALF are joined at the hip — if one falls, the other falls — so synergy of mission and philosophy is critically important.
Challenges to the home care agency most often come from the mindset of "how hard can this be?" Because we are experts at home care, we often rush into an arrangement that proves more challenging than anticipated. Some specific issues include:
If an agency has little or no experience in assisted living, pricing services wrong will have disastrous results. A lack of experience in providing assisted living services can be financially crippling. Service creep, a phenomenon that occurs in ALFs regularly, is pricing for a basic level of care vs. the time it takes to provide that care. When the task estimated to take 15 minutes, begins to take 45 minutes, as it will with frail seniors, there is no price flexibility to accommodate the cost increases.
Another challenge is moving from a medical model into a social model of care. The difference between acute and chronic care is significant. Home care traditionally has focused on acute, episodic disease resolution, while assisted living focuses quality of life and function vs. cure. One of the most difficult challenges for a home care company operating in an ALF environment is to understand that chronic care is so different. If the agency’s manager is not able to think outside the box, on-site home care companies can find themselves referring residents from the ALF to a nursing home because "they’re too sick to stay here" — a move destined to destroy a business relationship!
Finally, synergy problems occur when you haven’t done your home work up front and the agency and ALF are operating with completely different philosophies. If the upfront work of comparing mission and philosophy has not been done, a lack of synergy could easily make a long term business relationship impossible.
Structure
The home health model has multiple iterations. Depending on the laws of the state, ALFs can be:
• Private labels: Just as when you buy a suit at Nordstrom’s, for example, while the label says "Nordstrom," Nordstrom did not make that suit; they simply put their label on it. In the same way, the home care company operates just as it normally does, but the label is established by the assisted living facility. Our company, for example, carries names like Inn Home Service, Respect Care, and Catered Living Services.
• Owned and operated: In some states, ALFs can own and operate their own home care company as a stand-alone entity and contract with it to provide service at the facility.
• Contractual/third-party: This is a straightforward arrangement where the ALF contracts directly with a home care company to provide services to its residents. As always, home care companies and ALFs have to be careful to understand the state laws. As an example, in some states the third party’s relationship must be purely with the residents and not with the ALF. If the relationship is invisible, the ALF will still be perceived as operating in a direct provider model.
• Partnership/joint venture: This interesting model is again predicated upon state law. Where it’s legal to do so, you can enter into a joint venture with an ALF to provide services while the ALF provides the access to the residents. This model is replete with problems that will exist any time two unrelated parties enter into a partnership, but has the benefit of revenue sharing.
Summary
Assisted living facilities and private duty agencies can be natural allies in providing chronic care services to frail, older adults. Careful evaluation of your agencies strengths and weaknesses, your company mission, values and goals, and your ability to provide services in an assisted living environment will be necessary before attempting to serve this new industry. Handled with care, assisted living facilities can be an agency’s best source of new business growth.
• Molly Miceli, CEO, Lifestyle Options, 1111 Plaza Drive, Suite 330, Schaumburg, IL 60173. Telephone: (847) 240-7330.
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