Therapy Cuts Were ‘Inevitable’ Under PDPM — and Providers Must Prepare for Possible Payment Drops

Reports of therapist layoffs and cuts in therapy hours hit the news within days of the implementation of the new Medicare reimbursement system for skilled nursing facilities, sending shock waves throughout the rehab provider community.

But according to one major skilled nursing trade group, the cuts to therapy were baked into the system of the Patient-Driven Payment Model (PDPM). The more important question for SNFs will be how patients fare in the new paradigm — and whether or not the government responds with payment cuts down the line.

“Lots of press has been going on about cuts in therapy,” American Health Care Association senior vice president for government relations Clifton Porter said during a Tuesday regulatory update at the group’s annual convention and expo in Orlando, Fla. “That was inevitable as it relates to how the system’s structured, because [PDPM] is structured based on clinical conditions, and that being the driver. There’s clearly going to be shifts. But are we going to not have therapists? Absolutely not.”

What eventually ends up happening in therapy, according to Porter, will be related to efficiencies. The new PDPM allows for a great deal of flexibility in terms of providing group and concurrent therapy, and SNFs should be ready to use it as part of their work to gain efficiencies and reduce expenses, he said — and there are no subsequent differences in terms of outcomes in delivering those modalities, according to Porter.

That means SNFs shouldn’t be afraid to use it, if it’s appropriate for the patient and resident needs. What they have to do is make sure that its use is well-supported, particularly since gaining efficiencies under PDPM is one of the key opportunities for SNFs, Porter noted. The government is expecting the new payment system to be revenue-neutral, meaning that the Centers for Medicare & Medicaid Services (CMS) won’t be paying any more for PDPM than it did under the previous system.

“The real opportunity, and the real question that we really still have, is the expense line, and how creative and responsive all of you are going to be from an efficiency perspective,” Porter said.

Group and concurrent therapy is one example of that. In fact, Genesis HealthCare (NYSE: GEN) cited group and concurrent therapy as one of the factors that would lead to an estimated 10% to 12% in cost savings in a May presentation at the RBC Capital Markets Global Healthcare Conference.

“A $100,000 reduction in therapy cost per building is a meaningful improvement in margin if we’re accurate in our assessment that the top line is revenue-neutral,” Genesis CEO George Hager said at the time.

Specifically, SNFs can start looking for efficiencies in therapy by looking at whether they pay a premium for agency staff and how much PRN, or as-needed, staff they use, Porter told the audience at AHCA’s government relations update. But they have to make sure they are focused on their outcomes.

And collecting data on outcomes, such as discharge to the community and readmissions, is going to be essential to support providers when the government asks about the decisions they’ve made. To ensure that AHCA and other trade groups can go into Congressional offices unscathed, providers have to make sure that outcomes for patients have not changed.

“The fundamental thing is that you have to focus on your outcomes,” Porter said. “You cannot be in a position where whatever changes you make, therapy outcomes are compromised. Because guess what? They’re still watching. They’re still looking at minute delivery … Members of Congress will hold us accountable, and I don’t want to get called to the principal’s office without being able to say ‘What about the outcomes?'”

Problems with PDPM are inevitable to some extent; whenever anything new occurs, “it’s usually wrong,” Porter commented. That means that CMS either will likely end up paying providers too little or too much — and that means operators have to be ready for either outcome. If they’re being overpaid, there needs to be some way for providers to avoid a major shock when CMS rectifies that issue, he stressed.

AHCA, for its part, is meeting with CMS almost daily to talk about error codes, billing codes, and other issues providers communicate to the association. Any trends or issues that providers report are immediately brought to CMS so they can be resolved, Porter said.

Battling the ‘red hand’

In terms of the legislative landscape, drug pricing is “sucking most of the oxygen out of Congress right now,” Porter said, tying up most of the authorizing committees that might relate to the SNF field.

But the association is working on developing connections with legislators in the event of various situations that could unfold. Democrats have been taking note of the reports of abuse, and some have also zeroed in on the underfunding of Medicaid, according to Kim Zimmerman, a vice president at AHCA who works with Democrats in Congress.

AHCA is particularly upset about CMS’s recent announcement that it would include a warning icon on SNFs with abuse citations, and is working on getting them to change course — whether through altering the icon or in some way adjusting the star penalty that comes along with the symbol.

In a separate session, Evan Shulman, director of the division of nursing homes at CMS, presented a very different point of view. For one thing, a small portion of facilities — about 5% — will be receiving the icon, he said in his comments. In addition, there will be a consumer guide with questions for consumers to ask when considering a facility hit with the warning sign: a red circle with an open palm in the middle.

“It is not a ‘do not proceed’ icon,” Shulman said.

Porter disagreed.

“The red hand is dumb,” Porter said. “The red hand says ‘Don’t go there.’ The red hand is punitive; the red hand is not about transparency. The red hand is about piling on a consequence in a back-door kind of way. It’s insulting to me. I’m sure more insulting to you … It’s misleading, and I’m fine with being on the record saying that.”