July 17, 2013
How to Reduce Senior Care Business Risk
There is risk in every business endeavor. However, with the multitude of issues inherent in the senior care practice, risk comes from every angle. The pressures that drive these risks spring from regulations, the reimbursement system (Medicare and Medicaid) and good old-fashioned market forces. There are two commonly known types of risks in this industry: business risk capital and business risk of operations.
Business Risk Capital
Business risk capital is the risk that the capital investor or the owner takes in relation to the creation of the senior care facility. It can be divided into two separate and distinct economic familiars. The macro and the micro-risk of doing business as a senior care owner or operator. The macro consists of the demand in relation to other services that may or may not jeopardize the bottom line per annum. Naturally, the micro includes the word-of-mouth reputation and online reviews. Business risk capital is significant because the owner of the bricks/beds/business faces both macro-market risks as well as risks that flow from the day-to-day facility operation. The capitalist/owner has invested his or her own money in the nursing home operation. This relationship is not defined by a paper lease or management contract but rather by the significant act of investing one’s wealth in real estate and a business. Despite the fact that nursing homes operate in a governmentally protected marketplace, they operate in a particularly volatile environment subject to increasing regulatory regimens and reductions in reimbursement.
Business Risk of Operations
Business risk of operations is the term given to the business after the bricks have been laid and the beds made, ready for patients. There are so many variables that may make a well-intentioned enterprise close the doors. First, it is not uncommon for senior care facilities to-simply put-not get paid. Insurance, whether Medicare or private, have been known to delay payment or refuse to pay at all. Second, the senior care facility may not have the capital to advertise properly in order to create the draw the facility needs to efficiently operate. Referring back to macro-capital risks, a bad reputation may and usually does correlate with poor revenue. As anyone in the business knows, it takes surplus revenue to rehabilitate an image after it has been compromised. Lastly, there is always the possibility of having to defend against a lawsuit for the negligent acts of an agent or employee.
The risks that nursing homes face on a daily basis should not be minimized. Although they operate in a governmentally protected market, nursing homes still face inordinate risks that spring from the regulatory system, reimbursement programs and unforgiving market forces.