Skilled Nursing Stocks Get Boost From New Payment Model

Even as operators and investors sort out the implications of the new proposed skilled nursing payment model, one reviewer has given it a firm thumbs up so far: the stock market.

Publicly traded companies with interests in skilled nursing facilities got a shot in the arm from the new Patient-Driven Payment Model when it was introduced in late April, according to a new analysis from Integra Realty Resources.

“There definitely has been some movement,” Brad Schopp, managing director of the Denver-based Integra’s health care and senior housing practice told Skilled Nursing News. “[Though] I guess it’s a little bit easier to have an upward trend when you have such a long downward trend [in the sector].”

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The Centers for Medicare & Medicaid Services (CMS) pitched the plan as a more provider-friendly version of the existing proposal to update therapy payments in nursing homes, and PDPM has already drawn mostly optimistic responses from executives in the industry. A survey of therapy professionals from Optima Healthcare Solutions also found an upbeat outlook for the new model.

The white paper from Integra suggests that Wall Street is also on board with the possibilities.

Boost after PDPM

The Dow Jones Industrial Average, the S&P 500, and the Nasdaq had consistent growth from June 2017 to June of this year, increasing 16.6% on average, but this solid growth didn’t reach skilled nursing. Senior nursing facility stocks — defined by Schopp as including mostly skilled nursing but some other types of investments — haven’t been so lucky.

In fact, SNF stocks fell 6% during the same time period.

That changed dramatically after PDPM was revealed.

“During the 30 days after the PDPM announcement, these SNF stocks increased in value at a rate of 14.8% on average,” the Integra analysis noted. “This outpaced the broader stock market by a magnitude of about seven.”

Sabra Health Care REIT (Nasdaq: SBRA) and Omega Healthcare Investors (NYSE: OHI) have seen particular gains over the past 45 days: Sabra’s share price has increased about 18%, while Omega’s has gone up about 15%, according to the white paper.

Those real estate investment trusts (REITs) have the largest leased fee exposure to SNFs, and the increases in share prices came alongside rising interest rate headwinds, Integra observed.

“The REITs have really done well with the interest rates being low,” Schopp explained. “So … even though interest rates have been going up, which might be squeezing them, their stock prices have gone up.”

The growth wasn’t limited to real estate investors: providers Genesis Healthcare (NYSE: GEN) and the Ensign Group (Nasdaq: ENSG) also showed the upward pattern, Integra said.

Many different elements have effects on stock prices, and other factors could be causing some of the positive trends, Schopp said. But the boost coming so soon after PDPM is “cool,” even if the new proposed model isn’t necessarily the only reason for the uptick.

“With how those SNF stocks have been going down, it’s a whole trend in the skilled nursing market, with things just being negative and going down,” Schopp said. “So this has been a reason to shine some positive light, I guess, for the future.”

Written by Maggie Flynn

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