Executives at the largest skilled nursing operator in the U.S. on Wednesday reiterated their optimism about the impact of the new Medicare reimbursement system on their businesses — and expressed some hope that Medicaid payments nationally might start to improve.
“I think we’ve got terrific visibility now on PDPM, and so on the Medicare side of things we feel very good about the rate prospects there,” Genesis HealthCare (NYSE: GEN) CFO Tom DiVittorio said Wednesday in a fireside chat at the Stifel 2019 Healthcare Conference in New York. “We’ve talked about PDPM being flat to positive for us … It’s still early on in the cycle, but we feel very good about flat to positive on the Medicare rate side.”
This optimism even extends to Medicaid, long a thorn in the side of SNF providers from Washington state to the state of Massachusetts. Genesis has seen between 2% to 3% reimbursement rate growth on a “weighted average” basis across all its states for more than a year, DiVittorio told Chad Vanacore at Stifel.
“As we look ahead to next year — I’m being a little cautious here — I feel very good about 2% rate growth on the Medicaid side, with some upside there as well,” he added.
States still make use of cost-based information to drive rates, and there tends to be a lag for Medicaid rates to catch up to inflation — sometimes of as much as two years, Genesis CEO George Hager added during the conversation. He noted that “we’ve been an inflationary environment for the past two or three years,” which makes him believe that rates will start to reflect those costs going forward.
Growing press coverage of the effects of low Medicaid reimbursement on nursing homes, particularly in the state of Washington, is another reason Hager is hopeful about the payment environment improving. He also noted that some states are starting to recognize the problem, citing New Mexico’s efforts to make some adjustments to its program in the form of supplemental payments and rate structure changes.
“You’re seeing an increasing recognition of those problems, so I think the combination of the natural lag in Medicaid rates as it relates to cost in an inflationary environment, as well as recognition of a chronic problem, bodes well to improve the Medicaid rate environment going forward,” Hager argued.
That ties into a point Hager made at Credit Suisse’s 28th Annual Healthcare Conference in Scottsdale, Ariz., earlier in the month, where he and DiVittorio emphasized the upside of admitting Medicaid residents.
“There’s a 15% built-in growth opportunity by adding just one long-term care patient to each one of our skilled nursing facilities, with plenty of capacity to do so,” DiVittorio said at that event.
At Stifel’s conference, Hager reiterated the optimism he expressed in both the company’s most recent earnings call and during the Scottsdale event about Genesis’s potential for upside under PDPM, again pointing to the company’s $30 million in cost reductions and the opportunities for greater efficiency.
Hager also emphasized that the changes Genesis made to its therapy strategy — including the elimination of about 6% of its total therapist positions — don’t mean less rehab for the patients themselves.
“Operationally, the major change for us is [PDPM] allows us to provide certain elements of our care, principally therapy, in a much more cost efficient way,” he said. “We can now use group and concurrent methods where they’re clinically appropriate, without reducing the amount of therapy that our patients receive.”