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Do Nursing Home Alliances Work?

August 1, 2000
by Kathryn Melendy, CEO
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Four status reports
Some say alliances are passe,
but these organizations are finding
new benefits for members
  Some long-term care experts contend that the era of nursing home alliance is passing. With managed care stuggling, and with facility esxecutives unwilling to share substantial assets or information, so the argument goes, nursing homes need to seek other sources of support and survival. And yet at least four such alliances founded within the last few years appear to be discrediting this argument. Does this mean there is still hope for the alliance model? if so, what does it offer nursing homes, now in their hour of greatest need? Top executives at the for alliances recently shared their reflections on these questions with Nursing Homes/Long Term Care Management.   "The Aurum Network was formed by a group of forward-thinking owners of independent skilled nursing and assisted living facilities as a response to a difficult and extremely competitive environment. These owners felt that there were strength and expertise in numbers, particularly in negotiating contracts, group purchasing, developing best practices and establishing a platform where their voices could be heard.
"Much has changed in the past two years. Yet, while large chains and managed care organizations have had their difficulties and reimbursement issues have become critical, our membership has grown. We have managed to survive and flourish even during these difficult times.

"The key has been our ability to respond to the changing marketplace as a network, while allowing the members to retain their independence and local autonomy. As a network, we have been able to find economies of scale in purchasing, health insurance, worker's compensation, pharmacy and other areas.

"We understood that it was absolutely necessary to upgrade our management information systems (MIS), a very expensive and time-consuming process. We are able, as a network, to evaluate how we might be able to have a high level of sophistication at a reasonable cost.
"Also, when you're a network representing 5,000 beds, as opposed to 120 beds, you tend to command some influence over pricing. Just recently, for example, we were able to negotiate a healthcare insurance plan for all our facilities that would never have been achievable for a single entity, with savings 40% greater than they would have been.

"In other areas we share our expertise. We have a number of subcommittees sharing information and data that help all members. One goal is to collect data to establish best practices. If a member is doing something well, he shares it with the other members-from improving staffing patterns and benefits packages to streamlining the admission and referral processes.
"It took a lot of courage for our members, who are technically competitors in a very competitive business, to come together and share information. Most, however, are geographically dispersed in such a way as to not be competing for the same local market. There had to be a comfort level and a trust level, which we feel we have achieved, in order to share financial information and data.

"We also share a commitment to providing the highest standard of care. But we are not content merely to say that. We want to prove it. Recently, all our facilities took part in a resident satisfaction survey. The survey was developed for the Healthcare Association of Michigan to survey resident satisfaction in Michigan nursing homes. We were given permission to use it, and our results were quite impressive. We received a 92% overall satisfaction rating from our residents and their families.   Leta Beam, President, KAIROS Health Systems:
"Over the past four years we've become a functionally integrated health-care system for subacute services, post-acute services and retirement community living. We now have 70 nonprofit subacute and skilled nursing centers located in Pennsylvania, Maryland, Delaware and New Jersey. All of our members own shares of stock in KAIROS , which is privately held. Collectively, our stockholders employ more than 17,000 employees, and their combined operating budgets total more than three-quarters of a billion dollars. On any given day our campuses serve more than 22,000 individuals.

"We do, as a collective, all of our managed care contracting, our continuous quality improvement (CQI) program and group purchasing initiatives. Last year, we also established a virtual consulting and training company called ExpertLinks, which brings top-notch training and consulting services to our stockholders in a timely and appropriate fashion.

"Last year we formed a strategic partnership with Aegis Healthcare Business Solutions, a subsidiary of the Mid-Atlantic Non-Profit Health and Housing Association (MANPHA). Any new partners that we will bring on from the Maryland marketplace will come from the Aegis membership; if we need additional service sites, that is the pool from which we will tap. They will be offered our group purchasing initiatives and can use ExpertLinks.

"One benefit of an alliance is an immediate acceptance by the managed care marketplace. We now have relationships with 37 MCOs throughout the Mid-Atlantic region. We're developing and nurturing those managed care relationships, and our stockholders can take advantage of them when they join the system. Of late there has been considerable consolidation of managed Medicare and managed Medicaid organizations, and KAIROS has been particularly attentive to its relationships with them.