Nursing homes try to reinvent themselves

John Smyth needed more than the big flat-screen TV, towel warmers, and homelike furniture offered at the Willow Ridge Center in Hatboro to persuade him to stay in the nursing home's rehab unit after knee-joint replacement.

What sold the 70-year-old retired plumber was the ability to sleep, eat and exercise in space separate from the 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 six-inch stripe of metal staples still adorning his 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 like Smyth. They are spending hundreds of millions of dollars on renovations, additions and new features like aromatherapy, brightly colored decor, spacious therapy gyms, and Internet cafes to try to create a 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. Although many are retirees, others are still in the workforce, and some patients are as young as in their 20s.

Offering treatment at lower costs, nursing homes are undeterred by criticism that they do not have the expertise that hospitals have 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 that has many properties dating to the 1970s and that 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.

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 revised a two-decade-old Medicare rule in 2004 and toughened enforcement to limit the number of enrollees who can stay in rehab hospitals. Also helping the industry: managed-care companies and commercial insurers, which look for cheaper alternatives to postsurgical stays in hospitals.

Medicare paid $6.4 billion to rehabilitation hospitals in fiscal 2005 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 shifted, rehabilitation hospitals discharged 18 percent fewer Medicare patients in 2006 than in 2004, a drop that is projected to be more than twice as steep in 2009, according to eRehabData, a service of the Washington-based American Medical Rehabilitation Providers Association.

Medicare estimates that nursing homes can rehabilitate knee- and hip-replacement patients for between one-third and nearly one-half the cost at hospitals. The homes say they can provide care cheaper because they have much lower overhead than hospitals, including in areas such as services, staff and equipment.

Meanwhile, questions about the quality of rehabilitative care in nursing homes remain a concern.

This month, the Medicare Payment Advisory Commission cited data that it said showed the quality of rehab care at nursing homes was falling.

The commission said that, on average, nursing homes did not discharge as many patients as quickly in 2004 as in 2000 and that the number of their patients returning to the hospital for certain conditions rose during that period.

Andrew Star, an orthopedic surgeon who is director of joint-replacement surgery at Abington Memorial Hospital, said rehab patients at nursing homes did not have the same access to therapy equipment or their doctors as they did at hospitals.

"The level of care is not nearly as good," he said.

One of the nation's largest nursing home chains, Manor Care Inc., of Toledo, Ohio, has been among the most aggressive in seeking out short-term patients.

About half of all the patients in the company's 280 nursing homes are now discharged in less than a month, chief operating officer Stephen Guillard said.

In its 2005 annual report, Manor Care credited its shifting focus to rehab patients for its revenue growth, which exceeded 6 percent that year.