Editor’s Take: Multiple CEOs (Probably) Can’t Be Wrong on PDPM

When covering any industry that operates under heavy government scrutiny, hearing one CEO praise a new set of regulations is a surprise.

Hearing near-unanimous support is frankly shocking.

But that’s where the skilled nursing industry finds itself with the Patient-Driven Payment Model, the latest overhaul of the way SNFs receive reimbursements from Medicare. On its face, the PDPM should be enough to keep any executive, investor, or administrator up at night: Replacing the anticipated Resident Classification System, Version I (RCS-I) at the relative last minute in regulatory terms, the PDPM has sailed through the normally plodding government approval process and finds itself on track to become settled policy on October 1, 2019.


Gone are the incentives to fatten up on therapy hours to offset reimbursement pressures elsewhere. Here are a new set of “reimbursement-sensitive” procedures and services that operators must study to keep their bottom lines stable through the transition period and beyond.

Still, when the Skilled Nursing News team tucked into the latest round of earnings calls, we heard nothing but praise for the PDPM from some of the industry’s biggest names.

“Once fully integrated, we believe this new model … will allow us to reduce certain administrative costs, use more cost-efficient therapy modalities such as group and concurrent therapy, and redirect clinical resources to patient care,” Genesis Healthcare (NYSE: GEN) CEO George Hager said. “While we are still reviewing the details, and need to build out our model, we continue to view PDPM as an overall positive for Genesis and the industry.”


“[PDPM] creates opportunities for service efficiencies via group and concurrent therapy protocols without sacrificing outcomes,” Omega Healthcare Investors (NYSE: OHI) CEO Taylor Pickett said. “We are optimistic that PDPM will positively impact both facility performance and patient care with its focus on the needs of patients rather than the volume of services provided.”

“CMS issued their final rule affirming the October 1 2.4% market basket increase and the implementation of PDPM in October of 2019 … both obviously are good news for the skilled nursing space,” Sabra Health Care REIT (Nasdaq: SBRA) CEO Rick Matros said.

Those are not the words of leaders concerned about a bold new direction from the federal government — and, considering they were all spoken on quarterly earnings calls, likely represent the deliberate result of internal discussions about how to respond.

Even the subject of group and concurrent therapy, one of the more contentious portions of the PDPM, has received a warm welcome. Executives extolled the potential for offsetting some of the reimbursement losses with lower therapist expenses. And while the PDPM caps the total per-patient proportion of group and concurrent services at 25%, those services currently account for a small fraction of the overall pie — making the cap more of a ceiling to strive toward for now.

On the more regional, mid-sized level, health care consultant Marc Zimmet was similarly sanguine about the potential for PDPM upsides.

“It is not a funding reduction. It is a change in the revenue delivery system. So in terms of not wanting to deal with the change, I get it,” Zimmet said at his company’s annual conference in New Jersey earlier this month. “Who wants to deal with [it]? …  But in terms of the ultimate impact, you shouldn’t be scared. We’re not worried about it.”

That last quote hinted at the “but” coming in this piece: Skilled nursing providers will have to work for the benefits they could realize through PDPM. It’s going to take, in some cases, a radical re-imagining of the way operators think about how money flows from Medicare into their buildings. But it’s not outside the ability of most providers, and in many cases, fighting the effects of lower therapy reimbursements could be as simple as training caregivers to capture services they’ve provided for years — but which will now either bring in more dollars if recorded, or result in losses if never documented.

The only downside we’ve seen so far is the prediction that PDPM will be the final straw for some smaller, family-owned operators that simply don’t want to bother with adapting to the new model. This is an effect that strikes any industry when something major shifts, from the sudden influx of more desirable competition to new regulations and rules. But as long as these departing operators can link up with the innovators who quickly learn how to navigate the new system, the net effect will likely be positive for the buyers and residents alike.

So in short, the industry is staring down a payment model that’s more closely aligned with the services they already provide and focused primarily on resident needs, while also providing opportunities to make up for the potential short-term dip in therapy reimbursements. It’s not a bad place to be in the wake of a major model shift, and unless things take a turn after the fall of 2019, it’s hard to believe that this many industry players could be wrong.

Written by Alex Spanko

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