SNFs Could Benefit Under Bundled Payment Changes

Skilled nursing facilities are in for a short-term reprieve if a proposal to reduce some bundled payments by the Centers for Medicare & Medicaid Services (CMS) is finalized, according to a recent Fitch Ratings report.

CMS proposed reducing some bundled payment models and canceling mandatory programs yet to be implemented. The move, while largely unsurprising given the current Health and Human Services leadership’s views on mandatory initiatives, is likely to give SNFs some relief from current headwinds, according to Fitch Ratings.

The proposal, which CMS announced in August, would scrap the Episode Payment Models and Cardiac Rehabilitation Incentive Payment Model, which were originally scheduled to begin January 1, 2018. It would also reduce the number of mandatory geographic areas participating in the Innovations Center’s Comprehensive Care for Joint Replacement (CJR) initiative, from 67 areas to 33.

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While home health care providers could see a hit from the changes, skilled nursing facilities (SNFs) — which have been seeing lower volumes as bundles push patients into lower-cost settings — could benefit.

“General acute care and SNFs received a reprieve from one of their operating headwinds when CMS took more definitive steps to pause bundled payment initiatives,” the report reads. “Bundles were structured to lower aggregate payments by incentivizing coordination and risk sharing amongst providers by paying for episodes of care rather than individual components, and had led to some care occurring at lower cost settings such as home health.”

However, the long-term headwinds are likely to remain for the skilled nursing industry.

“Skilled nursing have been buffeted by headwinds so any reprieve is likely a welcome one,” Britton Costa, senior director at Fitch Ratings, told Skilled Nursing News. “Our outlook for skilled nursing operators and their REIT landlords remains that top-line growth and profitability will be pressured.”

Home heath care operators will be negatively affected by these changes, as the programs acted as a catalyst for more patients to be directed toward home heath care, according to the report.

“We expected bundles would be another catalyst for lower risk patients to be cared for at home rather than be discharged to a skilled nursing facility given the potential financial incentives for the referring hospital,” Costa told SNN. “However, the cardiac bundle would likely have had less of an effect on volumes than joints. We continue to expect volume growth for home health, though the bundle changes soften our expectations.”

Written by Amy Baxter

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