By Alex
Spanko | December 18, 2019 Pixabay | CC0
As we
prepare to close the door on the 2010s, we’re also about to say goodbye to a
year that probably felt like a full decade for operators and investors in the
post-acute and long-term care space.
With a
new Medicare payment model, continued Medicaid pressures, and a raft of
regulatory attention from Washington, D.C., 2019 will likely go down as a
landmark year that industry players, years from now, will discuss in hushed
tones whenever the topic of conversation turns to dark times and old war
stories.
But the
world, and the skilled nursing space as a whole, will keep spinning into 2020,
and many of the trends that gained steam over the last few years will continue
to intensify — along with new challenges and opportunities that we see in the
months and years to come.
As has
become an annual tradition at Skilled Nursing News, we’re using the final
business week of December as a platform to discuss the year that was, as well
as our staff’s top predictions for the year to come. Some of our 2019 prognostications came true, and others
didn’t; just like in years past, we encourage you to send
your feedback on our crystal-ball skills.
First
up, three predictions from editor Alex Spanko.
CMS
clawbacks will come faster than the industry thinks
More
often than not, when I trot out the federal government’s line that the new
Patient-Driven Payment Model (PDPM) will be revenue-neutral, I’m greeted with
knowing chuckles from leaders and investors in the industry: Sure it will, the
implication goes — and Santa himself will come down my SNF’s chimney on
Christmas Eve with a brand-new, $500-per-day Medicaid rate.
If
there’s one truism in covering an industry that overwhelmingly relies on
government agencies to exist, it’s that operators will quickly adapt to
whatever new rules that officials implement in an attempt to control their
behavior.
It
happened under the old Resource Utilization Group (RUG) system, which saw
operators maximize their reimbursements through providing as much
high-intensity therapy as possible, clustered around the times when it mattered
most. It will happen under PDPM, with early returns demonstrating that there
are far more reimbursement winners than losers,
even when accounting a quirk of the transition process that saw most every
operator receive a non-repeated boost for certain residents.
The
Centers for Medicare & Medicaid Services (CMS) has all of this data and
more; many of its employees also read this publication on a daily basis. They
know exactly the levers that operators can pull to boost reimbursements under
PDPM — from adding ventilator units to reducing therapy minutes to boosting
group and concurrent services — and they will not be amused with providers who
can’t back up those decisions with firm clinical justifications.
The
best operators have prepared for PDPM by thoughtfully pairing every
reimbursement-based decision with a clear, demonstrable benefit to their
residents. The smartest leaders have also recognized that while they can
certainly benefit both clinically and financially from PDPM, they shouldn’t go
spending any surpluses immediately.
The CMS
hammer will fall — whether it’s through clawbacks from operators deemed to have
changed their strategies solely to cash in on the new model, an unwillingness
to raise the market basket rate for Medicare nursing home reimbursement, or
some as-yet-unseen penalty. We predict the fallout will start sometime in 2020,
making it a key area of compliance attention for operators and their leaders in
the coming year.
Washington’s
laser focus on SNFs will continue
At the
dawn of the Trump administration in 2017, there were likely many skilled
nursing leaders and investors who — regardless of their personal political
leanings — thought a unified Republican government would spell the end of
regulatory scrutiny, at least for as long as the GOP held power.
Reality
certainly hasn’t worked out that way.
Seema
Verma, the president’s pick for CMS administrator, has overseen sweeping
changes to nursing home oversight, from the PDPM shift to her flagship five-point plan on beefing up skilled
nursing regulations. Under Verma’s watch, CMS has tightened the screws on
staffing; overhauled the five-star rating system to specifically make it more
difficult for operators to reach and maintain high marks; and set out to reform
the state-level agencies that perform regular nursing home inspections on
behalf of the federal government.
While
Verma’s language is often couched with business-friendly nods toward reducing
paperwork and other bureaucratic burdens — the inspection push, for instance,
also came with CMS’s position that higher-rated operators should be subjected
to fewer surveys in order to focus more resources on the worst performers —
she’s made it clear that nursing home oversight is a top priority of both CMS
and the White House.
She’s
not alone. Sen. Chuck Grassley, the powerful Iowa Republican, has used his
position as chairman of the Senate Finance Committee to host hearings on
nursing home safety that brought harrowing and unacceptable stories of abuse
and neglect to Congress and the public at large. In conversation with reporter
Maggie Flynn this month, Grassley asserted his desire to introduce a new nursing home oversight bill
before the end of the year — one that might include an increased focus on
exactly who owns the nation’s nursing facilities, and whether or not their
pasts include tales of abuse and bankruptcies.
And
with 2020 as a presidential election year, operators shouldn’t expect the
rhetoric and action to stop anytime soon. In a sharply polarized political
landscape, just about everyone can agree on the importance of protecting
America’s seniors from harm and neglect, and nursing home oversight bills are
perfect opportunities from lawmakers to score bipartisan victories with the
general public — while also ushering in needed reforms.
We
predict that post-acute and long-term care will appear on the agendas of both
Congress and the still-crowded field of candidates vying for the Democratic
presidential nomination.
Long-term
care shortages begin in certain markets
Low
occupancy numbers have been a consistent theme of my time covering the nursing
home space, with no national relief in sight: The overall number, according to
quarterly updates from the National Investment Center for Seniors Housing &
Care (NIC), has hovered in the low 80% range for some time now, with June’s
83.7% figure representing the first year-over-year gain since 2015.
But as
many leaders have pointed out, nursing home success relies more on local market
factors — from Medicaid rates to hospital partnerships to specific state laws
that encourage home health over institutional care — than national trends.
Given Medicaid
funding shortfalls that have triggered waves of closures in states as
geographically and politically diverse as Massachusetts, Kansas, and Washington
state, many markets could soon start seeing bed shortages instead of empty
wings: Demand for nursing home services in 17 of Wisconsin’s 72 counties will
meet or exceed supply in 2020, according to a trade group in the state, with a
statewide mismatch by 2027.
And
Wisconsin isn’t an outlier. The demographic wave of aging baby boomers will
crash on all 50 states, while the supply of long-term care beds will dwindle
based on two separate but equally important factors: continued closures or
bed-count reductions due to difficult Medicaid reimbursements, and persistent
disinterest in developing new facilities that specifically serve long-term care
residents.
State
governments must shore up their Medicaid funding for nursing home care in order
to spur investment in desperately needed beds now, before the effects of the
“silver tsunami” fully reach the nursing home sector.
Until
that happens, certain markets can and will find themselves short of space for
the residents who need it most — creating both challenges for residents and
their families, and significant opportunities for operators that can swoop in
to alleviate the shortages.
And
now, three more trends from reporter Maggie Flynn.
Operators
and landlords will start taking new looks at their leases
Senior
Care Centers’ (SCC) Chapter 11 bankruptcy, which saw the operator place the blame on its burdensome leases, might have
been declared late in 2018, but the fallout of the case continued well into
2019. One of its major landlords, Sabra Health Care REIT (Nasdaq: SBRA), had to
record a $77.7 million first-quarter loss due to an
impairment charge related to SCC’s bankruptcy.
Meanwhile
the bankruptcies of both SCC and Preferred Care, which filed for bankruptcy for 33 of its SNFs in
2017, ended up causing problems for another landlord, the real estate
investment trust (REIT) LTC Properties (NYSE: LTC).
And
those are just the bankruptcies that started prior to this year. In September
2019, the seven-facility operator Absolut Care also put the blame on leases
when it filed for Chapter 11 bankruptcy, citing “crushing rent burden” in its filing.
In November, the 14-SNF Cornerstone Healthcare Services pointed to issues with leases in its Chapter
11 filing, even though they weren’t the primary cause.
And
even when operators didn’t declare bankruptcy, their leases could become a
problem. Omega Healthcare Investors (NYSE: OHI) has run into persistent problems with Daybreak Venture over the past year, and was one of the
landlords — Sabra was the other — that renegotiated leases
with operator Signature HealthCARE when it fell
behind on rent payments.
Even
for success stories, such as the work of turning around major operator Consulate Health Care,
renegotiating leases came with the territory.
That
means leases and rent payments are going to come under the microscope at the
negotiating table. And it’s not out of the realm of possibility that state and
federal authorities might start putting ownership and lease agreements under
the spotlight. Multiple states have passed new laws related to vetting ownership of SNFs after the
fallout from the defunct Skyline Healthcare, and many of those require
information about the financials of the operators.
Lease
agreements are a key factor in operators’ ongoing viability. Expect providers
and landlords to take a hard look at the cash flow of operations and reassess
existing agreements — for the sake of both the bottom line and possibly the
law.
SNFs
will bite off more than they can chew — on both services and payment models
I
should preface this by saying that quite a few SNFs will see — or are already
seeing — success by branching out into other service lines, even if they hit
some speed bumps along the way. Multiple consultants and CEOs have advocated
diversification beyond standard SNF services, and many operators are seeing their ventures pay off in the form of
new lines of business and new opportunities.
This will
only become more important as Medicare Advantage becomes more and more
widespread, and as states increasingly move to managed long-term supports and
services. The former will keep pushing their beneficiaries to the cheapest
setting possible, while as part of the latter shift, governments and
municipalities are emphasizing home and community settings as the preferred
places of care.
But
when it comes to moving into the Medicare Advantage space via the Institutional
Special Needs Plan (I-SNP) model, and adding services, many SNFs could get
badly burned.
Seemingly
every industry conference I attended this year had sessions on how SNFs could
break outside the skilled care box, mostly with I-SNPs and occasionally through
other lines of business. But it’s the I-SNP model that draws the most attention
consistently.
It’s blown up the phone lines and inbox of Jill
Sumner, the American Health Care Association’s (AHCA) vice president of
population health management, and multiple operators have expressed interest,
both at conferences and in conversations, about moving into the model. For many
providers, the wheels are already in motion to become insurance providers.
But the
I-SNP model is also the one that constantly comes with warnings: It’s not the
right fit for every provider, especially those struggling with rehospitalizations.
It requires scale. It’s a path that’s fraught
with peril for providers who move into it.
“You
need to look at all the health plans that were started by medical groups and
hospitals that didn’t survive,” René Lerer, CEO of Longevity Health Plan, said on a recent episode of SNN’s Rethink
podcast.
I-SNPs
have been taking up a lot of oxygen in the skilled nursing space, at the
expense of some of the other options that might be less capital-intensive and
less strenuous in terms of regulatory hurdles. And while home health, assisted
living, and other service lines can certainly ease the pain SNFs are feeling
financially, that’s assuming the investments in time, talent, and resources
work out. That won’t always be the case.
For
providers who’ve overreached, 2020 could be the year when the first signs of
overextension emerge.
The
Medicare Advantage pincer will start to tighten
Medicare
Advantage (MA) plans are going to significantly increase their ancillary benefit offerings next year,
from adult day services to home care. This isn’t going to directly affect SNFs
— yet. The real impact of these expanded services are probably at least a few
years out; if Medicare Advantage plans see success in generating savings with
these benefits, expect them to go all-in on ways to move more beneficiaries to
the home and community settings in the next few years.
But
2020 is the year SNFs can start to get ready for this pinch, which is not going
to be confined to ancillary services offered to Medicare beneficiaries by the
MA plans. Increasing numbers of states are looking to managed long-term
supports and services to control the costs of their long-term Medicaid populations,
and with more and more SNF stays covered by Medicaid,
providers can expect even more reimbursement pressure.
That
means providers have to start engaging with the plans now, especially since
they won’t necessarily break into a plan’s network right away.
It’s also going to be an uphill battle, since post-acute isn’t always top of mind for the Medicare
Advantage and other managed-care insurers. But plans are thinking about the
dollar impact of the full continuum, and providers need to use that fact as a way to start
engaging with the plans.
And
there’s no better time to start than 2020, as insurers are establishing their
footprints and their patterns in the field of aging services — both in Medicare
and Medicaid.
Alex
Spanko covers the skilled nursing industry for Aging Media Network,
with a particular focus on the intersection of finance and policy. Outside of
work, he reads nonfiction, experiments in the kitchen, enjoys pretty much any
type of whiskey or scotch, and yells at Mets games from his couch — often all
at once.
No comments:
Post a Comment