Surveys of allied health personnel shortages in the 1990s often put physical therapists at the top of the list. But the changing finances of post-acute-care companies have turned rehabilitation therapy from a hot profession into a dud.
In recent months, six of the country's largest nursing home companies have announced personnel cuts of 10% to 60% in their contract therapy divisions, which supply therapists to their facilities and others.
And early this month, NovaCare, a leading provider of contract therapy to nursing homes, began pulling out of most markets west of the Mississippi River, forcing hundreds of facilities to find new therapy providers within 30 days.
The companies said the cuts respond to changes in Medicare reimbursement mandated by the federal Balanced Budget Act of 1997.
The changes, which limit the amount of therapy and the rate of reimbursement, have prompted many nursing homes to provide less therapy to their patients. And a proposed prospective payment system for rehabilitation hospitals could tighten the screws further (See related story, below).
Sun Healthcare Group, based in Albuquerque, reported the deepest cuts, slashing its payroll of 12,800 therapists to 5,200 in less than six months.
More than 40% of contract therapists at NovaCare will likely lose their jobs as the company trims its contracts, said Chief Executive Officer Timothy Foster.
That's on top of a reduction of 18% of full-time-equivalent positions from its contract services division from June to March.
Separately, NovaCare said last week it will sell its orthotic and prosthetic services division-369 patient-care centers in 37 states-to Bethesda, Md.-based Hanger Orthopedic Group for $455 million. The company will use the proceeds to pay off bank debt.
Other long-term-care companies that have laid off up to 20% of their therapists include Atlanta-based Mariner Post-Acute Network, which cut 1,200 therapists; Fort Smith, Ark.-based Beverly Enterprises and Owings Mills, Md.-based Integrated Health Services, which eliminated 1,000 therapists each; and Kennett Square, Pa.-based Genesis Health Ventures, which cut 321 positions.
Last June, Vencor said it had eliminated 1,000 therapist positions, but the Louisville, Ky.-based company declined to say whether it has made any cuts since.
HCR Manor Care, based in Toledo, Ohio, acknowledged that it had made some cuts but declined to give specifics.
Most of these companies also have reduced therapists' salaries and benefits.
The moves mark a growing oversupply of therapists. As recently as 1996, there were nine therapists for every 10 positions, according to a study commissioned by the American Physical Therapy Association.
The study, released in 1997 before the balanced-budget law was enacted, predicted managed care would depress demand slowly, creating a 20% oversupply by 2005.
The balanced-budget law speeded that trend in long-term care, observers say.
Jerry Connolly, APTA senior vice president for health policy, said the study's predictions were "right but for the wrong reasons. Instead of a managed-care evolution, we had a cataclysmic event (the balanced-budget law)."
"The supply (of therapists) is far greater than the demand," said Larry Lane, NovaCare's senior vice president of regulatory affairs.
Despite abundant anecdotal evidence, data supporting that claim are not yet available, cautioned Connolly.
In 1996, about 25% of physical therapists and 30% of physical therapist assistants worked in facilities with predominantly Medicare populations, according to APTA data.
The new PPS for skilled-nursing facilities folds payments for rehabilitation services into overall payments for skilled-nursing care, giving nursing homes an incentive to reduce the therapy their patients receive.
In some cases, facilities cut down on therapy by overriding doctors' orders, said Corky Glantz, a founder of contract therapy company Glantz/Richman Rehabilitation Associates, based in Riverwoods, Ill.
"Therapists are up in arms because they feel they are being limited," she said.
Since the new payment system took effect last July, treatment and revenues at Glantz's company have dropped by 20%.
The American Occupational Therapy Association conducted a nonscientific survey that found pay levels for half the respondents were static or falling. Some 70% of the 1,000 respondents worked in the long-term-care industry.
Ancillary service providers contend that skilled-nursing facilities are going too far with cutbacks.
"SNFs have viewed therapy as an area where they can cut costs in a significant way," said Peter Clendenin, executive vice president of the National Association for the Support of Long-Term Care, a trade group of ancillary services providers to the post-acute-care sector.
"But Congress didn't change the number of strokes that occur in America," Clendenin said.
The PPS affects payments for Medicare Part A, but payments for Medicare Part B services are now capped at $1,500 per year for physical and speech therapy, and at $1,500 for occupational therapy.
Therapists' earning power has been reduced further by a fee schedule enacted in January that replaced the cost-based reimbursement system for therapy services.
Recent events may turn the tables again. In a move hailed by several national long-term-care lobbying groups, including the APTA and the American Health Care Association, Sen. Charles Grassley (R-Iowa) introduced a bill in February that would allow exceptions to the cap. These would be for patients who have more than one diagnosis requiring therapy and those who would have to be hospitalized if they didn't receive therapy.
And now that most nursing homes have made the transition to the PPS, NovaCare's Lane said he expects the demand for contract therapists to pick up.
"We believe we are in the worst of the trough now," Lane said.
Denver-based Pinon Management, which manages 15 nursing homes in Colorado, was one of many operations that lost its NovaCare contracts.
Mary Manning, Pinon's ancillary services director, said the company may hire its own therapists instead of contracting out. If so, it will have no difficulty filling positions.
Not all post-acute-care companies shed therapists in the first place.
Birmingham, Ala.-based HealthSouth Corp. is an exception. Although the company has never provided contract rehabilitation, it operates about 1,300 outpatient rehabilitation centers and 130 inpatient rehabilitation centers.
"We are not going to lower our therapists' salaries," said President and CEO Richard Scrushy.
"As a matter of fact, we are looking at merit increases over the next 12 months for facilities doing an outstanding job."