Why PDPM May Not Even Rank Among the Top Three Threats, Trends for Skilled Nursing Facilities

The new Medicare payment model for skilled nursing facilities has consumed most of the oxygen around the industry over the past year-plus, with operators, vendors, and consultants working in tandem to adjust to the new math.

But according to one leader, all of that attention on the Patient-Driven Payment Model may not be focused on the biggest threats to skilled nursing success.

“The irony here is that PDPM is probably not the most relevant trend that we’ve had over the last year,” Marc Zimmet, president of consulting firm Zimmet Healthcare Services Group, said Wednesday at the company’s annual conference in Atlantic City, N.J.

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In fact, PDPM — set to take effect October 1 and bring an increased emphasis on resident acuity and needs — ranked fourth among the most important trends of 2019 and beyond, Zimmet said.

Topping his list: Medicaid funding that has been “cut to the bone,” followed by a trend toward moderation in both bed prices and count, and then the rise of SNF-led Medicare Advantage plans known as Institutional Special Needs Plans (I-SNPs). Only then does PDPM enter the equation in fourth place, Zimmet said — and it’s still part of a greater ecosystem where all of the trends play off of each other.

“It’s all connected. Even when you get into PDPM, one is connected to the other — I-SNP, budgeting,” he said. “Everything’s connected.”

Zimmet’s comments came during a wide-ranging talk focused on an inherent disconnect in skilled nursing reimbursement policy: The Centers for Medicare & Medicaid Services (CMS) issues national-level payment policies for Medicare that then run into local laws and market factors that can vary widely even in small geographic areas.

Zimmet gave the example of copayments for dual-eligible nursing home residents. In some states, Medicaid covers the out-of-pocket cost that such a resident would incur, while in others, it doesn’t. As a result, a facility in Rockland County, N.Y. could have a vastly different reimbursement math than one just a few miles down the road in neighboring Bergen County, N.J.

“The facility in New York will get the full copayment for Medicaid,” he said. “The facility in New Jersey will get nothing.”

Even ostensibly federal regulations have a varied local impact. Zimmet pointed to annual adjustments in Medicare rates based on expected costs in local markets, which can see operators gain or lose significant amounts of money overnight when the federal fiscal year resets. Fiscal 2020’s big winner, Fairfield, Calif., will see per-day Medicare rates rise by $39, while providers in Altoona, Pa. will lose $30 per day.

Those may seem like minor changes in isolation — for instance, the conference’s host city of Atlantic City, N.J. will lose $15 per day next year — but they can add up over time, and occur without any real changes in an individual building’s fixed costs.

“We have no control over it,” he said. “It’s a zero-sum game, but some of us get hit every year.”

In addition, while studies on the efficacy of new payment models such as accountable care organizations and bundled payments tend to focus on overall savings or losses, they don’t apply to actual buildings quite so evenly.

Zimmet presented data showing that the rise of new payment models in the Pittsburgh metropolitan area have led to an 18.9% drop in per-capita skilled nursing spending — but just over the border in West Virginia, per-capita Medicare spending on post-acute care has risen 11.8% in the absence of alternative payment models in that state. The same patterns hold on a county-by-county level in New Jersey, where spending in alternative-model hotspots in the northern part of the state dropped amid gains in the more traditional fee-for-service landscape in South Jersey.

“Medicare’s making policy on a national level that impacts us across state lines,” he said.

It’s a message that Zimmet and many others have long emphasized: The idea that the skilled nursing industry is an inherently local business, and that making sweeping national generalizations about the health of the space can be difficult at best and impossible or grossly misleading at worst. That trend has played out in the rise of smaller, regional operators with a focus on local-market conditions, as well as the Zimmet group’s own push to develop new data products for operators.

While Zimmet acknowledged that PDPM remains both a major challenge and opportunity for operators in the space, he called on providers to look at the new rules as part of the larger ecosystem — both to fend off other issues, and to help guide the public and political conversation about the skilled nursing space moving forward.

“It’s easy to blame Medicaid and managed care, but at some point, we’re going to have to rationalize our arguments across the entire country for good policy,” Zimmet said.

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