‘CMS Loves That’: Moderate Therapy Shifts, Bureaucratic Reality Could Slow PDPM Changes

Despite steady reports of increasing reimbursements under the new Medicare payment model for nursing homes, at least one industry leader believes that the federal government will be happy with the early returns — and that any changes are fairly far down the road.

Skilled nursing operators have not gone overboard with the strategy changes that are most likely to raise the hackles of Centers for Medicare & Medicaid Services (CMS) regulators, American Health Care Association president and CEO Mark Parkinson said Monday.

“It doesn’t appear to be that there’s a dramatic drop in therapy minutes,” Parkinson said during a presentation on the new Patient-Driven Payment Model (PDPM) at the eCap conference in Doral, Fla., just outside of Miami. “People have been very conservative to change their therapy practices.”

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Though Parkinson stressed that most of the information about provider behavior under the new system remains anecdotal, he said that overall therapy minutes have dropped only by about 10% to 15%, while the proportion of group and concurrent therapy has generally risen to about 10% to 15% — well below the 25% maximum mandated under PDPM.

In addition, that change represents a much less dramatic shift than the industry saw when CMS removed group and concurrent incentives under a previous payment model, which Parkinson said prompted operators to slash their use of the modalities from about 27% to 1% in a month.

“CMS loves that,” Parkinson said.

On the revenue side, Parkinson pointed to publicly released results from The Ensign Group (Nasdaq: ENSG) as being in line with the figures he’s been hearing from operators in the space.

The San Juan Capistrano, Calif.-based skilled nursing giant last week reported that its same-store facilities saw 6% Medicare revenue gains under PDPM, while its transitioning properties — SNFs that it had purchased within the last two to three years — notched a 3% boost.

Blended out throughout the company’s portfolio, Parkinson estimated a roughly 4% gain for Ensign — and, extrapolating further, the industry at large.

“That’s pretty consistent with many, many discussions that I’ve had with CEOs and CFOs across the country,” Parkinson said. “That’s sort of what they’re seeing.”

While that figure does exceed CMS’s stated goal of budget neutrality, the AHCA CEO tried to frame the early PDPM returns as a much better outcome than a 2011 tweak to the now-defunct Resource Utilization Group (RUG) model that brought a revenue spike north of 12% — and with it, increased attention from regulators.

“We have seen what I’ve defined as a modest increase above budget-neutrality. It’s not budget-neutral, but it’s also not 2011,” he said.

Speaking in a separate panel discussion later in the morning, Genesis HealthCare (NYSE: GEN) CEO George Hager seconded Parkinson’s assessment of both rate growth and therapy patterns.

“There was a lot of discussion that therapy minutes provided to patients would decline precipitously post-PDPM, that there would be enormous growth in group and concurrent therapy,” Hager said. “I don’t think Mark’s seeing it around the industry, and we’re not seeing it, either.”

Aside from the first trickle of reporting from publicly traded skilled nursing companies and their landlords, independent data does show steady rate improvement for operators over the first three months of the new system.

Controlling for a variety of factors — including a one-time rate bump that providers received for residents who were already in nursing homes on October 1 — operators logged average per-diem rates of $619.92 in December, according to Zimmet Healthcare Services Group president Marc Zimmet.

That’s a gain from $614.22 in November and $604.57 in October, based on an analysis of nearly 900 facilities by Zimmet and affiliated data firm CORE Analytics.

But Zimmet asserted that the gains came from simple process improvements in capturing conditions and other factors that had always been prevalent in the typical nursing home’s census — and not major shifts in strategy.

“I think this is a learning curve,” he said. “I think these are conditions that were always there, or have been there for several years, but we are adapting to capturing and billing — but we’re not seeing changes in acuity levels overall.”

And he echoed Parkinson’s assessment that operators have not jerked the therapy wheel too far in the other direction.

“That was the most pleasant surprise in looking our data,” Zimmet said. “I was expecting a huge difference among the different categories.”

In addition, as he had in previous analyses of PDPM results, Zimmet emphasized that it’s difficult to make clean, big-picture conclusions about the effects of the new model on overall spending and provider behavior. For instance, shorter lengths of stay drive the per-diem rate upwards, given the way PDPM front-loads payment levels to cover the initial few days of each resident stay, when their needs are presumably greatest.

Though that may look good on paper, lengths of stay have been steadily tracking downward amid the rise of Medicare Advantage penetration in markets across the country, resulting in potential drops in per-episode reimbursements. Coupled with varying Medicaid rates and potentially vast differences in state regulations, Zimmet argued that PDPM is part of a wider landscape that’s difficult to compare to past models.

“PDPM is just one component of an inconsistent, inequitable, and unsustainable SNF revenue delivery system,” Zimmet said.

Much of the discussion around PDPM’s first few months has centered on if, when, and by how much CMS will eventually tweak the model, and potentially cut off some of the gains that operators were able to capture in the early going.

But even if top officials at the agency want to twist the dials on PDPM, they can’t necessarily do so quickly, Parkinson emphasized. The proposed fiscal 2021 Medicare payment rule for nursing homes will be released around May 1, with finalization necessary prior to the start of the federal government’s fiscal year on October 1.

Much of the work on that rule, Parkinson explained, has already been completed as of today.

“The rule’s already been written. It’s not like they wait until May 1 to figure out what our rate is going to be,” he said. “Our rule has already been written.”

That’s not to say that the government couldn’t take steps to intervene between now and the springtime, but the evidence would have to be clear and compelling to force such a quick shift.

“I don’t think that CMS has, or we have, enough information now to currently act,” Parkinson said.

Officials could also implement an interim payment rule, Parkinson cautioned, but he predicted that the most likely outcome will involve some changes to the fiscal year 2022 rule, due for proposal by the start of May 2021.

Because even the severe 2011 payment gains didn’t result in clawbacks of reimbursements already paid out, Parkinson predicted that CMS would be unlikely to try a similar move on PDPM — and floated the potential of the feds potentially taking no action and letting the gains to stand.

That said, he described the latter scenario as a “very, very tough battle” given CMS’s budget-neutral goal. But if residents receive the same or better care under PDPM, operators could have a leg to stand on when making that argument.

“In particular, if we have a really compelling argument on outcomes — if outcomes are very, very good — that would be very good,” Parkinson said.

Perhaps predictably, therapy may prove to be an area ripe for adjustment. Zimmet pointed to data showing that in December, the average combined physical, occupational, and speech therapy rate clocked in at a little under $220 per day — a figure that comes in higher than $179.14 figure provided to operators for residents classified as “very high” under the old system.

“The irony here is that in one sense, PDPM is perpetuating the very concept, in reverse, that they were trying to eliminate from RUGS-IV,” Zimmet said. “We do feel like there needs to be some correction there.”

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