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The Nursing Industry Insurance Crisis

Joel F. Guerin, President, Tempur-Medical, Inc.

Every facility in the nursing industry in the United States seems to be rapidly escalating premiums for liability coverage--if they can obtain insurance at all. But, the crisis isn't as simple as finding someone or something to "blame" and then lobbying to obtain protection and/or increased revenue. Those answers are too simplistic even though both are very serious symptoms of an obviously very real crisis. You might be surprised to learn that much of the answer to this crisis walks through your doors every day--the vendor community that has willingly taken your money for years and delivered too little besides products in return.

One of the greatest culprits is, in a way, a direct outgrowth of the change from a cost-plus form of reimbursement model to prospective pay but not simply because revenues were decreased when PPS was implemented. There is no arguing that funding was reduced, although there is considerable debate over how much and with what impact. This isn't just about money as defined by a level of funding, however. The federal government's position was that PPS would allow the flexibility within the provider industry to gain control of their expenditures and to squeeze some of the waste (and/or fraud and abuse) out of the supply of goods and services, allowing the industry to respond in a fashion that would ultimately be healthier, not become more cash-strapped as seems to be the result.

The real damage done by the change to PPS was the response (or really, lack of response) to the opportunity to change the way business is being practiced. Let us look at some of the dynamics that haven't changed and perhaps why they should.

Access to goods and services: Interestingly enough, the prices charged for some goods and services needed to care for residents have gone down in response to PPS, in some cases drastically. And yet, access to the necessary tools to provide adequate care is more elusive than ever to many nursing care providers.

Cost-plus: While the government ended the concept of cost-plus, most of your suppliers haven't. The more you consume, the more they want to be paid. There is still a mindset in our industry that even if we can justify reducing the price of a widget, if you use six widgets, you must pay for six widgets. But, what if your supplier claims all you'll need on average are six widgets per month, and you average eight? Should your supplier accept payment for six or demand payment for eight? If our supplier wants payment for eight, that's still cost-plus, any way you look at it. And that's a supplier who wants to avoid responsibility for their financial claims ("You'll only need six of these 'babies' on average per month!"). Did they believe their own claim? Did they even know what they were talking about? Are they accountable for the waste, or worse, for the failure of their product to do the job as they presented it?

Clinical claims: One of the greatest nuisances in the life of a nursing home operator is the countless sales people trying to sell something. Does anyone come through the doors to tell you their products won't work as well as what you currently use? That their product is inferior? Less cost effective perhaps? The claims are legion to the point you don't believe anything any more. If you consider using the most widely accepted product in a certain category, you'll still want to trial it--in your facility, with your residents and your staff--as if it might not work for you as well as it does on the other 10,000 people who currently use it! But, perhaps you haven't realized why you go through this ritual of trialing everything in sight, no matter how long or how successful the product has been in the marketplace, because there are so many false and misleading claims and so little accountability within the supplier community.

Liability claims: Ask your vendors where they stand on your litigation problems. You rely on their claims, on their supply, and on their programs and products to care for your residents. Do they accept any responsibility when you're being accused of providing substandard care while using their products? Do they come to the trial to support you? To testify for you? To explain why and how they help you provide better care? Better yet, will they share the responsibility for the judgment or good faith settlements you are forced increasingly to make? They're your "valued partner" as long as you are purchasing their goods and services. If, when the summons is served, you're suddenly left all alone to face the music, isn't that relationship just a little too "fair weather friendly" for your tastes?

"I can't afford it!" This might be your most difficult dilemma of all, because it's the tool used so successfully by the plaintiff's bar. They parade witnesses in front of the jury to tell them all of the wonderful goods, services, and techniques that exist that would have avoided, prevented, healed, or otherwise adequately addressed the problem you are now being accused of callously allowing. The only problem is they don't discuss the fact that you can't afford every product, every service, every latest technological development. They make sure the jury knows either you did know about them and were too cheap to purchase, or didn't know about them and should have. Either way, you lose. The latest vendor wanting to "sell" you a solution by offering to "finance" all this new technology over time doesn't make the problem go away either. If you can't afford it in a lump sum, you probably can't afford it in "easy monthly installments." So, what's a provider (and vendor) to do? Find ways you can afford the new technology. That means identifying and eliminating less effective products or other real cost centers that can truly be avoided, so that your cash flow is at the worst, unaffected, and at best, actually improved. The only question should be, whose responsibility is it to try to identify and eliminate these cost centers--yours or the vendor's? If the vendor really wants to earn your business...

The fallacy of "outliers:" You give a vendor the opportunity to earn money by supplying the goods or services provided to literally thousands of your residents. Ever wonder when you're really stuck with an outlier that's draining your financial resources, why you are the only one who continues to pay? The healthcare industry seems to be the only one where suppliers don't want any responsibility for any case where you're not obtaining desirable outcomes--the "it's not my fault" syndrome!

Does all this rhetoric reflect a jaded opinion of the industry? Not by a long shot! There's a silver lining to every cloud. And you have one here. Simply hold your suppliers accountable. How?

1. Question if your current vendor hasn't done or suggested any of the above, why not, and what they are willing to do to accept more responsibility and provide better support. Tell them, in short, if the problem involves their goods or services. They'll share the responsibility for their claims and for the exposure created in association with the use of their products or services as a cost of doing business with you. If they don't want to accept their share of the responsibility, keep looking. Others do. And the silver lining in PPS allows you to use other goods and services.

2. Demand that vendors look at sharing the risks associated with their financial claims. If they say it will work better/faster/cheaper, there ought to be some teeth in their warranty such that you are indemnified against their claims being false or misleading. The best way to do this is through capping payment but not supplies. If your supplier is a professional, he'll recognize how well his products will work in your environment and approximately how much you'll consume. Let him take the risk if his estimates are way off.

3. Hold your vendors accountable for their clinical claims. "Can't be done," they say? Then why do their clinical statements contain phrases like, "97.3% effective when used..." If they don't know exactly what their products are capable of, under what circumstances, they shouldn't be experimenting on your residents, gaining their much-needed experience at your risk. The best way to limit your risk is by sharing it. Tell your vendor not only will excess consumption of their products be their problem not yours, you'll also expect them to pay for the competitor's product as well, if you're forced to resort to it because theirs doesn't work!

4. Liability exposure: Your biggest exposures for the moment are pressure ulcers, falls, and elopements. Everyone wants to sell you their goods or services to reduce or prevent these occurrences. But how serious is your potential vendor? How confident is your vendor that their products or programs will really work? It's very easy to determine--ask them how much of the jury awards or settlements they'll share. There's no faster way to find out who believes in their ability to really help you with your problems.

5. Last, but no means least, if your vendor claims they don't control your business, so they shouldn't be held accountable for the financial, clinical, or liability claims they make regarding their products, show them the door! They make their claim based upon supposedly valid data and experience. They already know, within a reasonable margin of error, what their products are capable of doing. And they are capable of assessing the quality and expertise you have as a customer. If they believe in their hearts that your facility won't experience acceptable performance by any of their measurements or standards, they owe it to you to disclose that up front. And if they believe you really will experience acceptable performance, they ought to be willing to share in the risks inherent in your using their goods or services. If they are not, they only want your money. They don't really want your "business."

So, you may be asking, where's our sales pitch? Do we put our money where our mouth is? You decide.

Tempur-Medical's Ultimate Skin Management Program (TUSMaP) caps all of your support surface costs, even if a resident of yours needs a powered surface for three years! Once our program is installed, you don't pay an extra cent for any powered surface.

We also cap all of the nonprescription topicals you'll ever need for the life of the program as well. If you need more moisturizer or barrier cream, you get it. If Ms. Smith or Mr. Jones needs $50 per day in specialized products to treat a particularly difficult wound, you still pay pennies per day for that resident.

Clinical responsibility? We address that as well. If we ever fail to provide you with the clinical products sufficient to obtain the best outcome consistent with current medical standards, including AHCPR guidelines, and you have to use products other than ours, it's at our cost, not yours. Your legitimate extra consumption, even of a competitor's products, comes out of our budget. Of course, no vendor can guarantee improvement or healing of any specific wound. But, we take the waste out of your using best practices, and that's what will impress a jury the most--that you do everything possible for your residents.

And finally, risk mitigation. How confident are we that our program will address your skin and wound care needs? For any facility implementing TUSMaP that is compliant with the program, we'll reimburse the first quarter of a million dollars of any good faith settlement or judgment paid by the facility that resulted from a facility-generated pressure ulcer. And, since pressure ulcers are the number one severity-driven claim in the industry, almost single-handedly creating your run-away premiums and loss of coverage, this program could even earn you premium credits!

"Too good to be true!" The only people claiming this are our competitors. And that's because they'd prefer you did not know of or believe in this program. No vendor has ever offered more value and accepted more responsibility to help you in a time of crisis. As president of Tempur-Medical, I'll personally take your call. And if you are serious about solving a large piece of this liability crisis, so are we. I'll introduce you to some of the most prestigious nursing home companies in the industry, people who have already seen what TUSMaP has done for their facilities, people who are already solving some of their insurance crises, in partnership with the value leader--Tempur-Medical, Inc.