Looking Locally at Skilled Nursing Industry Could Show Brighter Future

If there’s been one recurring theme in the skilled nursing industry over the last few years, it’s distress, with dropping national occupancy stats and new payment models changing the way providers deliver post-acute care.

But one leading industry voice says it isn’t productive to ask about the future of the skilled space as a national, monolithic entity. Instead, like politics, the health of all SNFs is local.

“The answer to that question really depends on where you are in this country,” Marc Zimmet, president of Zimmet Health Care Services Group, said at his company’s annual conference in Atlantic City, N.J. last week. “Health care is a local business. We cannot define the state of skilled nursing facilities on anything but specifics.”

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For instance, the rise of Medicare Advantage plans has been blamed for a decline in lengths of stay and lower reimbursements, as these privately managed plans generally demand quicker turnarounds for residents in skilled facilities. But Zimmet asserted that there are certain regions of the country where Medicare Advantage penetration sits higher or lower than the nationwide baseline of about 33%, making the effects of these managed insurance companies uneven depending on region.

In addition, individual markets have seen pressure from so-called “boutique” SNFs that cater to short-stay rehab patients, as well as lower Medicaid reimbursements from state governments.

“But you can’t apply that to what is happening everywhere,” Zimmet said, noting that each state’s Medicaid program is different — with stark differences in coverage even between neighbors New York and New Jersey.

Zimmet’s comments came during a wide-ranging talk urging players in the skilled nursing industry to take a bottom-up view of statistics, rather than relying solely on national occupancy and patient-mix numbers. The Morganville, N.J.-based Zimmet Healthcare Services Group is also in the process of rolling out its own state-based data service that incorporates information from Medicare claims.

Cost-of-living differences

In another example, Zimmet pointed to the upcoming 2.4% market basket increase from the Centers for Medicare & Medicaid Services (CMS), which the government projects will bring an additional $820 million in funding for skilled nursing facilities in the next fiscal year. But not everyone will see those gains: Individual Medicare reimbursements, Zimmet said, will vary based on local-level cost data determined by the federal government, which breaks down each core-based statistical area (CBSA).

So an operator in Longview, Wash., where the government determined the cost of living has grown about 10% relative to other statistical areas, could see a Medicare rate increase of $40 per day — while a facility in Casper, Wy. could see a sharp decrease because the cost of living has declined.

“They’re taking monster hits, and you need to know this, not only for planning, but … it’s sort of hidden factors that catch people by surprise,” he said.

Bed surplus ahead?

When reviewing deals, Zimmet said he always asks about the state where the properties are located — with some states falling into a “no-go” category that he won’t entertain.

“Is the industry in distress? We can’t define it that way. Some states, some markets are low-pressure. Others are not,” Zimmet said. “We can’t talk about it as ‘the industry.'”

Like other industry-watchers, Zimmet spoke optimistically of the demographic wave heading toward the skilled nursing industry. While there’s been disagreement about when, exactly, the masses of aging baby boomers will begin to require skilled nursing services — with some predicting 2019, and others holding off until 2025 — Zimmet emphasized that the numbers are in the industry’s favor.

“In terms of occupancy, [in] five years. ten years — locally, in the long run — there’s going to be a shortage of beds,” Zimmet said.

Written by Alex Spanko