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Published Monday, November 6, 2017

In recent years, the aging services industry has experienced a record number of mergers and acquisitions (M&As). These transactions represent a response to healthcare reform trends, financial considerations, as well as a desire to expand aging-in-place capabilities. Divestitures, in the form of a sale or facility closure, also are occurring with some frequency — especially in the skilled care sector.

At a time of intense industry consolidation, however, aging services organizations may fail to focus on their primary mission — the delivery of quality care and services to residents and their families. Unfortunately, some organizations that have undergone a recent change in ownership have reported lower performance ratings in areas such as safeguarding resident rights, care processes and staff member satisfaction. During a period of change, resident care must remain a top priority in order to avoid deficiencies that may arise when attention may be diverted to structural change.

In this regard, a view of recent transactions in the aging services sector and how providers can achieve safe and smooth transitions for their residents is instructive.

A brisk pace continues

According to the recent CNA Alert Bulletin® Aging Services Mergers and Closures: A Resident Care Perspective, transactions involving aging services organizations in 2016 accounted for more than a third of all healthcare-related M&A transactions (337 out of 940). In the fourth quarter alone, the number of announced aging services-related M&As increased by 33 percent from the preceding quarter, surging to $6.5 billion in dollar volume – more than double the previous quarter.

The divestiture market in skilled care is equally volatile, fueled by the lowest occupancy rates in five years (82.2 percent in 2016). Except for settings with 50-99 beds, not-for-profit facilities continue to decline in number across all size categories, with the largest facilities (200 or more beds) decreasing the most (2.9 percent) between 2010 and 2015.

Strategic integration can protect residents

Market fluctuation may create a risk of fragmented or delayed care. The following six strategic measures, primarily aimed at acquiring organizations, can help facilitate the process of integration while simultaneously prioritizing resident care issues:

  1. Form a multidisciplinary team to examine the entity or entities to be acquired, focusing on the mission, values, organizational culture and structure, policy consistencies and shared aspirations.
  2. Convene a meeting with the leadership teams of all entities to jointly review policies, procedures and documentation practices in key areas, including fall prevention, skin integrity programs, medication management and dementia care.
  3. Conduct a site visit of the soon-to-be acquired facility or facilities to assess areas of potential risk exposure, including provider credentialing, staff training, resident admission and consent processes, abuse prevention and adverse event management.
  4. Disclose to residents in writing any potential post-merger restrictions on available services or other significant policy changes.
  5. Evaluate the compatibility of existing IT systems and develop a systems integration plan.
  6. Notify residents and family members/guardians in writing of the pending merger or acquisition, outlining additional costs and new billing practices, revised operational policies and adjustments to staffing levels, as well as other relevant changes.

Transition planning is key to safe divestiture-related closures

If it is necessary to close a facility, special attention must be paid to residents' rights during the transition planning process. Consider these eight essential actions and practice safeguards to help prevent gaps, delays or oversights in resident care:

  1. Inform relevant state agencies in writing of the anticipated date of closure at least 30 days in advance.
  2. Provide residents, families or guardians with a written rationale for the closure, including expected timeframes, divestiture-related resident and family meetings, relocation information, and contact names and telephone numbers for the transition coordinator and state long-term care (LTC) ombudsman.
  3. Send a courtesy notice of closure to the state LTC ombudsman, as well as to service vendors, local hospitals, community organizations and media outlets.
  4. Establish a closure team responsible for identifying local vacancies and community-based services, in addition to assisting residents and families with relocation-related tasks.
  5. Compile a profile on each resident, including but not limited to: Medicaid status, Medicare benefit days remaining, medication profile and upcoming medical procedures or appointments.
  6. Create detailed, resident-centered discharge plans that note functional status, activities of daily living, routines, medication regimens, resident preferences, advanced care directives and necessary interventions.
  7. Coordinate transfer dates and times with receiving facilities, and carefully inventory and label all resident belongings before the date of transfer.
  8. Conduct a follow-up call to facility administrators within 48 hours of a transfer in order to check on the resident's status and answer any questions.

The increase in M&A and divestiture activity has created resident safety and quality of care challenges for aging services organizations during the critical period of transition or facility closure. By anticipating and mitigating transition-related risks, and implementing change in a methodical, coordinated manner, providers can effectively manage the transition period and also fulfill the vital mission of serving their resident population.

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Small Business Insurance Fundamentals

Learn more about how to identify the insurance and services you need to safeguard your small business.

For your small business, having the right kind of insurance is critical to success. Are you looking to learn more about the kinds of insurance coverage you need before you contact your local independent agent or broker? We've developed some helpful resources and tools to get you started.

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LItigation Counsel

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