Hospitals, nursing homes join to increase revenue

October 24, 1991|By Blair S. Walker

Changes in state and federal health-care reimbursement programs and declining hospital use have caused some hospitals and nursing homes to become economic bedfellows, health-care experts say.

"Concern about diminished Medicaid funding is causing everyone to be more concerned about other sources of revenue," said Howard L. Sollins, a health law attorney with the law firm of Ober, Kaler, Grimes and Shriver in Baltimore. He spoke at a health law seminar sponsored by his law firm that will continue at the Harbor Court Hotel in downtown Baltimore today at 9 a.m. and ends at 4:30 p.m.

"What's happened is that, because of the way in which hospitals are reimbursed for the cost of care, there's an incentive to move patients out of the hospital as soon as possible," Mr. Sollins said. "Which means that nursing homes are called upon to take much sicker patients."

From 1965 to 1984, Medicaid reimbursed hospitals for acute-care patients pretty much regardless of cost. That was changed to a system where hospitals began to receive a fixed price, which averages around $4,500. Hospitals that treat acute-care Medicaid patients and don't use the entire $4,500 get to keep the remainder.

Many Maryland hospitals responded by forging relationships with nursing homes in the community, Mr. Sollins said. The hospital benefits by being able to discharge patients without using all of the Medicaid funds authorized: The nursing homes benefit by having an additional source of revenue.

Other hospitals have tackled the problem by creating sub-acute units "almost like a nursing home within a hospital," thereby creating new profit centers, Mr. Sollins said.

A decade ago, such hospital-nursing home pacts would have been unheard of, said Steven C. Renn, who is managing director of a Baltimore information services and consulting firm.

"The hospital industry has lost 20 percent of its patient volume between 1984 and 1990" to entities such as health maintenance organizations and out-patient surgery centers, said Mr. Renn, who heads Health Care Investment Analysts Inc.

"What that has meant to the industry is that the hospital industry has tried to recoup," he said. "I think that's made them much more receptive to these stronger alliances with long-term care providers, such as nursing homes."

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