Semi-Markov Process and Microsoft Excel

Using Mathematical Tools to Improve Operations

August A. Saibeni, CPA (inactive)

Several years ago, the author was responsible for the operations of a new skilled nursing division of a regional medical center. In addition to operations, part of the responsibilities included facility acquisitions. While reviewing acquisition possibilities, the author noticed that many skilled nursing facility (SNF) residents or patients had MediCal (California's version of Medicaid) as the payment source. On average, Medi-cal residents constituted approximately 80% of the residents of area SNFs. Since Medi-Cal pays SNFs far less than private-pay residents, it is imperative that operators try to increase the number of private-pay residents if a facility is to remain solvent. Increasing the private-pay census is a goal of most SNFs, however, making this a difficult goal to achieve. The common sense reason for the high Medi-Cal census among facilities is that many residents do not have the resources to fund more than a brief stay before exhausting their own funds and thus defaulting to Medi-Cal as the source of payment.