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Nursing homes compete for rehab

The Associated Press

HATBORO, Pa. — John Smyth needed more than the big flat-screen TV, towel warmers and homelike furniture offered at the Willow Ridge Center to convince him to stay in the nursing home’s rehab unit following knee-joint replacement.

What sold the 70-year-old retired plumber was the ability to sleep, eat and exercise in space separate from the suburban Philadelphia home’s long-term patients — “the really older people,” he calls them.

“Both parents died in a nursing home and I guess that sort of put me against it a little bit,” said Smyth, a 6-inch stripe of metal staples still adorning his garishly swollen right knee.

With billions of dollars at stake, nursing homes across the nation are rushing to reinvent themselves to compete with hospitals and affiliated rehabilitation facilities for short-term, higher-paying patients such as Smyth. They are spending hundreds of millions of dollars on renovations and additions and new features such as aromatherapy, brightly colored decor, spacious therapy gyms and Internet cafes to try to create a new, warmer, less institutional image.

Most often, they are providing postoperative rehabilitation for knee- and hip-joint patients, but heart attack and stroke victims are also coming in for therapy. Though many are retirees, others are still in the work force and some patients are as young as their 20s.

Offering treatment at lower costs, nursing homes are undeterred by criticism that they do not have the expertise that hospitals do, and that some data show a decline in the quality of their rehab care.

The prospect of bigger payments has spurred a pace of building unusual for an industry with many properties dating to the 1970s, and which has seen home-based care and assisted-living facilities compete for the older, sicker patients who, while less profitable, have been their core customers for decades.

“Trying to attract a better-paying patient is a major strategy,” said Bill Bonello, a Wachovia Securities analyst in Minneapolis who tracks the nursing home industry.

Medicare, the federal health insurance program for the retired and disabled, pays two to three times more per day for its patients than Medicaid, which covers the vast majority of traditional nursing home patients.

“It’s a higher-cost business, higher-risk business, but there’s a greater opportunity” in rehab than in traditional nursing home care, said Tim Lukenda, president of Tendercare Michigan Inc.

Tendercare’s just-opened facility in Suttons Bay, Mich., has fewer beds than is typical of its 29 other nursing homes. But the footprint is larger, with private rooms, a library lounge, interior courtyards and a “Main Street” featuring a beautician, massage therapist, mail room, barber and dining room.

The moves by the nursing home industry represent yet another assault on the hospital industry, which has seen other competitors, such as surgery centers, also siphon off some of its best-paying customers.

Nursing homes have gotten a boost from the government, which in 2004 revised a two-decade-old Medicare rule and toughened enforcement to limit the number of enrollees who can stay in rehab hospitals. Also helping the industry: cost-cutting by managed-care companies and commercial insurers, which look for cheaper alternatives to post-surgery stays in hospitals.

Medicare paid $6.4 billion to rehabilitation hospitals in the 2005 fiscal year, and accounted for 70 percent of all discharges from the facilities, according to the Medicare Payment Advisory Commission, an agency created by Congress.

As payments have shifted, rehabilitation hospitals discharged 18 percent fewer Medicare patients in 2006 than they did in 2004, a drop that is projected to be more than twice as steep in 2009, according to eRehabData, a service of the Washington, D.C.-based American Medical Rehabilitation Providers Association.

Medicare estimates that nursing homes can rehabilitate knee- and hip-replacement patients for a third and up to nearly half the cost of hospitals.

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