Hager: Shift from SNFs to Home Has Run Course, Therapy Costs to Drop 10% to 15% Under PDPM

Large-scale efforts to shift post-acute residents from skilled nursing facilities to the home health space have largely “run their course,” Genesis HealthCare (NYSE: GEN) CEO George Hager said Tuesday, while also predicting serious cost savings under the new Medicare payment model.

Though industry leaders have long worried about payers’ growing preference for the lower-cost home health approach, Hager told an audience at the Barclays Global Healthcare Conference in Miami Beach that most post-acute patients who can receive services at home already do — and that skilled nursing facilities are poised to be the lowest-cost setting for more complex cases.

“I think those things have reached a point of equilibrium, and that we’re beginning to see some marginal growth in total census,” Hager said. “I’m less concerned about migration out of our setting or diversion away from our setting.”

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He challenged the crowd of financial industry players to tour any skilled nursing facility in the country and identify patients who are well enough to receive care at home without substantially more expensive investments in community services and supports.

“Both the reimbursement systems and all the diversion efforts have moved those patients over the last five to 10 years into the community, where they can be served and cared for safely in the community,” Hager said. “The acuity levels of an average patient in a skilled nursing center have increased dramatically.”

Hager’s upbeat tone mirrored his recent comments on earnings calls and in an interview for SNN’s “Rethink” podcast, in which he pointed to small but significant census gains as a reason for optimism in the skilled nursing space. He doubled down on those claims in his remarks at the Barclays event, asserting that the industry has passed the “inflection point” at the end of persistently sparse census figures caused by the low birth rates during the Depression — which in turn created a smaller-than-usual group of 85-and-over seniors who are most likely to require skilled care.

“From the demand side, I think once we’ve hit the inflection point, which it looks like we hit in the fourth quarter of 2018, we should expect to see steady — but not significant — but steady census growth and demand for skilled nursing for the foreseeable future,” Hager said.

The upcoming Patient-Driven Payment Model (PDPM) also played into Hager’s sunny outlook, with the CEO predicting therapy cost declines for providers of between 10% to 15% amid the rise of group and concurrent therapy. While providers can only provide 25% of residents’ therapy hours under the new model, many companies have indicated that the current proportion sits below 1% — and with therapy no longer driving Medicare reimbursements, the cost-saving potential could be significant.

“We effectively will be allowed to provide therapy with more cost-effective, equally efficacious modalities such as group and concurrent therapy,” Hager said.

The Kennett Square, Pa.-based Genesis has already begun modeling its projected reimbursement under PDPM, and Hager said he’s “comfortable” that it will be revenue-neutral for the company while also bringing cost savings on the therapy front. In addition, he noted that many Medicare Advantage and other managed-care payers already demand cost-saving solutions such as group and concurrent therapy, putting providers that have experience with the plans at an advantage — and further eliminating the distinctions between traditional Medicare residents and covered under MA plans.

“We will now be providing therapy services under a much more consistent program, not needing to distinguish between the Medicare Advantage patient and the Medicare fee-for-service patient,” Hager said.

Genesis will report its fourth quarter 2018 and year-end earnings before the market opens next Monday morning.

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