Enthusiasm for creating new business lines, both directly and indirectly tied to core skilled nursing facility (SNF) or assisted living (AL) operations, could not be higher among many long term and post-acute care (LT/PAC) providers.Large and small owner/operators see diversification as a pathway to boost revenue and a means for survival amid increased reimbursement uncertainty, tight margins, and persistent concerns over occupancy rates.
The reasons for branching out are many and peculiar to each company and market geography. Some diversify to fill a market need. Others may do so to get a spot at the table as pay-for-value reimbursement models take hold and accountable care organizations (ACOs), bundled payment systems, and preferred provider networks demand high-quality expertise and differentiation from the competition.
Still, other LT/PAC providers are on the smaller end of the sector’s spectrum with limited numbers of buildings, and they see diversifying as an opportunity to increase their footprint and build scale. If there is a common theme among these companies, it is that margins are tight from Medicare and Medicaid revenue, and it is high time to fill other market niches to grow.
To put some perspective on what is happening, Jennifer Soule, director at S&P Global, says that the three words that seem to be on every health care executive’s lips—continuity of care—are spurring the diversification trend across all care settings. “We are seeing hospitals trying to control more of the continuum by diversifying revenue streams from the inpatient to the outpatient setting,” she says.
And, as hospitals shift their focus, LT/PAC providers need to be alert as their movements affect the next part of the continuum, be it up- or downstream from nursing care.
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