In addition, some states have considerable deficits. For example, Minnesota's current deficit is $1.2 billion, but it's projected to go up to $5 to $8 billion. There are projected $10 billion deficits for New Jersey and even larger deficits for California, according to the Center on Budget and Policy Priorities. The largest expense area in most states is often Medicaid, and state legislators have no choice but to look at cost reductions, particularly in states with legislatively mandated balanced budget statutes.

Couple these realities with declining Medicare reimbursement and increasing acuity of all skilled patients, and you come up with potentially devastating financial conditions for your senior health care facility.

A 10-Step Plan To Succeed

Don't despair, though. There are ways to succeed in these challenging times. You may have to manage your senior living facility in a radically different manner than you did before, but it can be done. Following different approaches that involve more structured in-depth efforts can help change your operations for the better. Making these changes can help you survive now, thrive eventually and lead the way into the future. Consider the following 10 steps to achieve success in this era of economic challenges.

1. Make margin matter. If you're a non-profit provider and you've become accustomed to deficit spending or months of red ink, stop it now. You can't count on previous funding patterns to make up for shortfalls or weak revenue cycles during the year. If you've been relying upon charitable giving to ensure net income targets or cash flow, this must also cease. Many charitable organizations are also experiencing declines in giving due to the economic challenges. Health care facilities can't rely upon gifts or giving to meet financial obligations for successful operations.

2. Tell the story. Make sure everyone with a vested interest in your facility's success understands the challenges ahead. Do this in a controlled and honest manner. Don't incite panic or anger. Rather, focus on informing, educating and rallying the troops. Include not only department managers, but all staff, families, physicians and union representatives in buildings working with organized labor. Garner the understanding of all these constituencies to ensure success. The support of these parties will be especially necessary when you have to make difficult decisions.

3. Maximize current reimbursement systems. Do you regularly measure and benchmark RUGs distributions within your facility? Are all of your staff accurately coding ADLs (and hence the MDS) to ensure accurate and complete assessment? Despite the onslaught of audits purporting the contrary, most providers under-code patients' assessments and reduce their own reimbursement. If you work in a state with Medicaid reimbursement based upon case mix, take each opportunity to accurately code Medicaid assessments and capture your rightful reimbursement for care delivery. Take these steps today, and even in an era of declining reimbursement, you may come out ahead.

4. Know your referral sources and give them what they want. Hospitals in your market will become accountable care organizations and will dictate the cost of future Medicare services in the most efficient manner. Is your team controlling unplanned discharges back to the hospital? Are you measuring this metric? If so, is your facility ranking below the national average of 18 percent? Are you providing easy 24/7 access for admissions, or are there barriers? What are the clinical and deficiency goals of your hospital system(s), and what are you doing to partner with them for their success? Providers who understand this relationship and their place in it will be successful.

5. Manage sales/marketing activity. If you have a dedicated sales position (e.g., admissions director), this person needs to be out of your building selling every day. If she has to return to your facility to coordinate an admission, that's a problem. You only increase your census through targeted and strategic selling initiatives (see No. 4 above).

This is not just a matter of provider practice: this is revenue generation. As a wise colleague once told me: "You cannot save your way to a Mercedes Benz." You have to make more revenue. To make this happen, insist upon full team support and participation in a dedicated external sales effort. Your internal management team members will have to facilitate the admissions process so the dedicated salesperson can focus on sales activity outside
the building.

6. Collect the money that people owe you. What are your facility's collection goals? Are you measuring a percentage of collections over monthly billing or day sales outstanding? Whatever your measurement, calculate and manage it. Review these metrics monthly or bi-monthly. This is an area where firm and direct wins out over kind and caring. Your staff provided the care and caring; now the payer needs to pay you. Also, directly involve administrators and executive directors in collections activity. Don't delegate major accounts that are overdue to your social worker for follow-up. Finally, don't be afraid to issue notices of discharge for nonpayment. While many providers feel this is a challenge given the acuity or support services available for residents, it's nevertheless important. Notify attending physicians, the ombudsman, medical director and others of the severe collection challenges and potential ramifications.

7. Manage staffing to census. Unless your state is giving you dollars specific to acuities, staff your building based upon census and revenue. If census drops by three today, adjust your labor hours today, not three days from now. Managers should review not only the schedule, but actual hours worked for the previous day, daily, and address negative variances within the pay period. And if your state reimburses based upon acuity, reduce staffing when acuity declines.

8. Keep overtime below the industry benchmark of 3.5 percent. Many providers can pick up $10,000-$20,000 per payroll by managing this expense. You and your management team must keep daily control of labor expenses, which make up 65 to 70 percent of your expenses.

Use per patient day budgeting. Too many senior living facilities continue to provide whole number figures for expense limits. When census drops, staff continues to spend up to the designated limit. Your revenue to cover expenses dictates your expense budget. The best way to manage your expenses is by using a per-patient-day ratio. For example, when census drops, there is less money in the budget. Conversely, census surplus leads to larger expense budgets. The PPD remains constant, but the dollars available fluctuate in direct correlation to census. Many senior living leaders control expenses by providing a slightly lower PPD than budget, thus providing a cushion for expense management while addressing residents' needs.

9. Leverage vendors for improved pricing. If you aren't part of a group purchasing plan, where several facilities pool together to attain discounted pricing for goods and services, explore this option. Major multi-site providers may pay as much as a 50 percent discount for the same products you purchase. Also, consider who does your purchasing. Does this person have the fiscal understanding to minimize expense while providing for the facility's needs? Is your facility in a position to make payments in a shorter time frame and thus receive discounted pricing? The current economy challenges product vendors as well; if you can pay on time, they may offer you a discount.

10. Seek counsel and assistance. During times of lean revenue and challenging expense management, many providers shy away from the expense of hiring a consulting or management group. A good consulting and/or management group, however, will eventually help you save and increase revenue above and beyond its costs. Competent and confident consulting groups will also be willing to engage in a risk-sharing arrangement to limit your risk. Our health care sector is becoming more complex every day. Don't put your facility, the lives of your residents and the livelihood of your staff in jeopardy due to your lack of resources and support. Know when to seek help.

The challenges we face today are going to be a part of our health care sector for at least the next few years. Establish long-term solutions to overcome these obstacles. Follow the steps above to help you ensure fiscal control and responsibility, while fulfilling your organization's mission.

Glen W. Roebuck is senior vice president of operations for Health Dimensions Group, Minneapolis.