The leader of the largest nursing home association in the country said Wednesday that it should take about six weeks to clearly understand the ramifications of a drastically overhauled Medicare reimbursement system that goes into effect Oct. 1.
“I think we’re going to know five or six weeks into it how we’re doing,” Mark Parkinson told attendees at the fall meeting of the National Investment Center for Seniors Housing & Care in Chicago. “We’re going to know on the therapy stuff right away because people have to report on their therapy in five days … On the revenue side, by the end of November, we’ll have a pretty decent feel for it.”
Previously, estimates had been as long as six months, but Parkinson said his group, the American Health Care Association, has formed a monitoring committee and will quickly gather and analyze data.
He said his analysts remained “cautiously optimistic” about the potential effects of the Patient-Driven Payment System, which represents the largest federal payment overhaul in a generation. It could be “really good,” he added, but also qualified all of his comments on PDPM by first reminding that there’s “just not that much fee-for-service Medicare out there.” Medicaid funds 62% of nursing home care, he noted, with managed care, private pay and other sources also accounting for healthy slices.
He added with a smile that “every [skilled nursing provider] is going to have the best October they ever had” because under the new system, reimbursements start very high for the first three days before falling off incrementally.
He also cautioned the group, which included many investors, that everyone should be patient and not jump to invest or refinance at the first sign of healthy profit margins.
“I’m really urging the investment community that if we have an increase in the aggregate, do not refinance on that,” Parkinson said. “It is possible that some individual operators could have an increase even though we don’t have an increase in the aggregate.”
PDPM was created to be budget-neutral, which means that any early gains, at least on a system-wide level, will be evened out with corrective measures in the short term. He explained that when the Centers for Medicare & Medicaid Services made an earlier dramatic payment overhaul, margins mushroomed 12%. That led to some quick refinancings before CMS took back hundreds of millions of dollars and adjusted payment conditions for providers. That led to the “pain” in 2017 that manifest itself in “horrible” bankruptcies and other financial carnage in the sector, Parkinson explained.
He said it is “very likely” that costs will decline under PDPM and providers may be able to retain some of the savings — but only if outcomes stay high. If rehospitalization rates rise or other negative indicators manifest themselves, the sector will be stained, he warned.
Fellow session panelist Dava Ashley, president of California-based chain Covenant Care, said she was also “very positive” about PDPM, in part because it allows better team care and different uses of therapy.
Clinical complexities have always been tended to, she noted, but under current and past systems, providers couldn’t code and collect for them. She said the key to being able to use more group and concurrent therapy will be making sure good care is still provided.
The other member of the panel, CareTrust REIT COO Dave Sedgwick, said he shared Parkinson’s reservations about investing based on PDPM results.
“We would be really foolish not to learn the lesson from 2011, 2012. We might give some value to the cost savings, but even that’s risky. We’re going to be cautious, especially this next 12 months, in terms of attributing PDPM value to investments,” he said.
To providers in general, he added earlier, that if they haven’t been simulating reimbursement cycles and already have a good idea of what revenue will be come Oct. 1 and PDPM, “you should be nervous.”
The key for providers dealing with capital providers during the PDPM era, he said, will be transparency — that “they’re not hiding stuff, hoping stuff will go away.” He urged providers to start discussions with potential investment partners and ask their advice early because it “helps relationships.”
NIC officials said meeting attendance is expected to set a new record, nearly 3,300, this week. The meeting concludes midday Friday.
