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Paul Willging Says...

May 1, 2005
by root
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When It Comes to Quality, Wall Street Might Be a Problem

When it comes to quality, Wall Street might be a problem I've often wondered whether publicly traded corporations might well be antithetical to quality long-term care. I realize how easy it is for me to make that bold statement, now that multifacility corporations no longer pay a substantial portion of my salary. But even when they did, there were questions that could not easily be ignored, even by those of us in their employ.

I remember so vividly the early days of the Medicare Prospective Payment System (PPS) for nursing homes and the howls of pain that emanated from corporate headquarters-how the very future of long-term care was in jeopardy, given the impending bankruptcy of 10% of the industry. How the quality of service stood on the precipice, and only additional federal dollars could avert Armageddon.

It looks as though brighter days are ahead for the big companies, both financially and in terms of quality. But let's look back for a moment: For example, what about those 1,600 "bankrupt" facilities? Indeed, the inadequacies of PPS were disproportionately shouldered by the multifacility corporations, not by the industry as a whole. An overwhelming majority of the 1,600 were owned and operated by the very multifacility corporations that filed for Chapter 11. Very few were managed by small and midsize operators, even though they constituted 80% of the industry.

Why all the pain for the big companies? Take, for example, their emphasis on the provision of "subacute" care which, unfortunately, PPS inadequately reimbursed, at least initially. Also, high levels of debt and corporate overhead were not compensated by PPS (nor should this have been expected). Finally, corporate ownership of ancillary services (such as therapy companies) became a drag on profitability when PPS turned "revenue centers" into "cost centers."

So their cries of protest notwithstanding, multifacility operators were at least partially culpable for their own financial difficulties. That was one problem they faced. The other was, in my opinion, their disinclination to recognize the critical nexus between reimbursement and public perception. Success in the legislative and regulatory arenas is, to a considerable extent, a function of public perception. What is the perceived value of the taxpayers' investment in long-term care? If the product is seen as desirable and valuable, then public sentiment is likely to be favorably inclined toward supporting it. If the public is skeptical, then even the most vigorous advocacy will achieve only minimal and temporary success.

As an organizational leader, I found this to be a difficult concept to sell. Too many among my contemporaries in corporate headquarters assumed that success was largely a function of political action and grassroots involvement. While both are indeed critical, absent a credible product, they cannot succeed.

Indeed, they can create even worse problems. Take, for example, the involvement of multifacility nursing home corporations in a recent political brouhaha in Texas. In a criminal indictment handed down last year by the District Court of Travis County, the defendant was The Alliance for Quality Nursing Home Care-an organization of the country's largest nursing home chains (and headquartered in the corporate offices of one of them). Now, why were the chains so eager to get embroiled in Texas politics? The political contribution that got them into trouble was made out to "Texans for a Republican Majority." I suspect the multifacility operators were less concerned with a Republican majority in the Texas statehouse (or the U.S. Congress) than they were in currying favor with Tom Delay (R-Texas), majority leader in the U.S. House of Representatives.

That sort of political involvement is not unique in the history of multifacility corporation politics. Too often, the assumption was that political favor could be curried with political contributions and "name" lobbyists. Personally, during my years with the American Health Care Association, I was never sure that such expenditures bought us much more than a reputation for attempting to circumvent the public perception (warranted or otherwise) of our product. I recall more than one frustrating meeting with those who now make up the Alliance where it seemed that investments in the political process seemed more easy to come by than investments in improving quality.

What's changed since then? I would suggest that the change I see underway today is one of vision. I see in many of the multifacility corporations an increasing recognition that the value of the product is an indispensable prerequisite for legislative and regulatory success. It is not all that persuasive to argue that $1 of costs is being reimbursed at 80ó if the public thinks the product is only worth 70ó.

It is this recognition of "value" that, I believe, has motivated dramatic change among many of the larger players. I've had the pleasure of chatting with a number of them during the past few months, and this sense of renewed vision is gratifying. I've also seen their sincere support of campaigns (such as "Quality First") launched by the major trade associations within the past few years. And while I suggested four columns ago (January 2005) that Quality First was old wine in new bottles, that doesn't mean the old wine wasn't a pretty good vintage to start with.