What are CHOW’s, and why are they relevant to me working in a healthcare facility? Suffice it to say that this market craze is affecting all aspects of the skilled nursing world, especially on the financial side of things.
CHOW stands for Change of OWnership. As the larger monster-size chains began weaning themselves out of the SNF market a few years back, it gave opportunity for many regional operators, as well as newbie operators to seize an opportunity to acquire these facilities.
It goes without saying that the heightened demand increased the cost per bed in certain markets. A higher fee to pay for a facility means the operator has to get creative in ways to enhance the facility to ensure demand for their facility is high, census stays strong, and ultimately the facilities are performing well.
As this began affecting the market, governing agencies and payers each respectively began noticing the frequency of these transactions and potential pitfalls, and began forming policies around that. Licensure with state departments of health became more inquisitive, to ensure new operators and investors have the capability and wherewithal to handle these proposed acquisitions responsibly. This extensive process led to longer timelines until a facility obtained its license. Managed care organizations who have typically allowed contract assumptions and using prior contracts, now pulled back.
Longer licensing timelines mean that Medicare and Medicaid provider enrollments, which are required upon CHOW, are now held up, as license approval is a necessary item to begin each enrollment. The Medicare approval process also got extended due to new processes.
I think you are guessing where the next step is going — managed care payers that require Medicare or Medicaid approval are now held up on drafting new contracts due to the wait on CMS or Medicaid approvals.
All of these delays affect cash flow of a facility, and when operations get tight and spending gets scrutinized the facilities can potentially go one of two ways.
One is the operator identifies areas they can improve even further. This includes expediting the necessary approvals, trimming the costs the facility is spending in areas not worthwhile, and of course negotiating on their reimbursement and financial terms in order to keep a healthy and profitable facility running.
The less desirable way some operators deal with this is to reluctantly take an honest look in the mirror and be realistic on the chances of them successfully operating this facility. When they come to the realization the distance between them and success is beyond reasonable measures, they begin feeling out the market and consider selling. And that my friends is how we go full circle, leading back to a new CHOW. Rinse. Repeat.
This cycle is great for those in the CHOW and managed care contracting business (cough, cough), but is not the most healthy for a facility to change hands frequently. To be clear, a CHOW very often leads to fresh eyes and a better operator leading the facility and better outcomes. However, like the resume that shows the candidate hopping from one job to the next every six months, a facility changing so many hands leads to a broken chain in the operational experience.
While often these changes of ownership are not preventable and even necessary, it is important that each staff member prepare ways to ensure that this does not affect patient care and the overall flow of day-to-day operations. Preparation is the name of the game.
The outgoing operator needs to educate the new operator on the dynamics and specifics of how each area of the operations have run, and by whom. The incoming operator needs to prepare an extensive list of all the items that need to be put in place to ease the transition, and to continue operations forward. The facility staff need to bring up any questions on how this change may affect their area to the operator, who may not be aware of the specifics needed unless brought to their attention. By having these preemptive discussions, it will ensure all has been taken into consideration.
Upon CHOW, aside for the technical hiccups such as email addresses changing and perhaps staffing workflow rearrangements, there is also often confusion on the admissions and business office end regarding working with the payers. Depending on the agreement made with the seller, and based on state requirements, there are varying arrangements that may be set up regarding new admissions, authorizations and billing.
This communication is one we have found to be most tricky, especially as new payer contracts are set up and the information is a moving target as it continues to change for the following months post CHOW. One of the responsibilities our contracting team begins working on weeks before CHOW and during is giving clear direction to each department based on insurer and payer allowances. As the weeks go on every time a payer updates their arrangement, a new report is shared with staff to work off regarding which credentials to admit new admissions with; how to obtain authorizations; and ultimately how to bill at month’s end.
This may all sound foreign to you, as it may be your first time experiencing a CHOW. You can rest assured that this process is one that many professionals deal with quite often, and by preparing properly and taking their guidance on best practice, you too can CHOW like a pro. The key is, as they say in The Lion King, be prepared!
Steve Shain is Partner, EVP of Contracting at LTC Ally. His team negotiates Managed Care contracts and authorizations on behalf of Healthcare providers. Contact him directly at [email protected].
The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.
