The new fee-for-service payment model for nursing homes took up most of the oxygen in the industry over the past two years, but the rise of Medicare Advantage in markets across the country could make all of that preparation for naught — sooner than many may think.
The Patient-Driven Payment Model (PDPM) for nursing homes covers just traditional fee-for-service Medicare payments, with Medicare Advantage plans free to mimic the new system, stick to the old Resource Utilization Group (RUG) model, or develop their own ways of reimbursing for skilled nursing services entirely.
“This is very much a payer-by-payer thing — nothing uniform about it,” Anne Tumlinson, founder of consulting firm ATI Advisory, told Skilled Nursing News last year.
And while national Medicare Advantage penetration continues to sit at about one-third of eligible beneficiaries, that figure represents the sum total of all Americans aged 65 and older — and not the proportion of baby boomers who are opting into the public-private plans as soon as they reach Medicare eligibility, a significantly higher number in many markets.
“It’s happening organically,”” Marc Zimmet, president of reimbursement consulting firm Zimmet Healthcare Services Group, said during a presentation at the eCap health care summit in Florida last month. “It’s happening: Medicare is being privatized by Medicare Advantage, any way you slice it.”
For instance, in Zimmet’s home state of New Jersey, total Medicare Advantage penetration sat at 28% in 2019, according to data from the Kaiser Family Foundation.
That puts the Garden State below the national average, and in the lower half of all 50 states in terms of Medicare Advantage uptake. But among those just turning 65, Zimmet noted, two-thirds are opting for some type of MA plan, hooked by the promise of low premiums, additional coverage such as dental and vision, and better deals on prescription drugs — key factors for younger Medicare beneficiaries who may still be relatively healthy and not in need of institutional care.
“If that program had just started, we’d be at 66%,” Zimmet said of the New Jersey Medicare Advantage penetration rate. “It’s going nowhere but up.”
For that reason, Zimmet expressed frustration at the industry’s laser focus on PDPM since it was first announced back in 2018. The new model, the first major fee-for-service overhaul in decades, does represent a sea change for operators in the space, shifting incentives away from therapy volume and toward resident need.
While the early returns seem to be mostly positive for operators, with Zimmet’s own firm producing reports showing average per-day rate increases, he repeatedly argued that the shifting payment landscape in general could render those changes moot.
“We have wasted so much energy over the last year — two years — talking about something that cannot be talked about on a national level,” Zimmet said of PDPM.
Those regional variances go even deeper than state lines: Certain counties have Medicare Advantage uptake figures approaching two-thirds, with Miami-Dade County in Florida boasting a 66.3% rate in 2019, and several counties in Puerto Rico approaching 80% penetration.
“Do you think they give a crap about what happens with PDPM? It’s a rounding error,” he said of providers in those high-MA areas.
Instead of just taking a snapshot of current MA utilization, Zimmet and his firm look at a different kind of metric when assessing the payment landscape in a given market: attrition rate, a measure of how many fee-for-service Medicare enrollees are lost or gained as new people age into the system. Nationwide, among every 100 newly minted 65-year-olds, about 62 pick Medicare Advantage, but in certain markets, that translates to a net loss of FFS beneficiaries: Illinois, for instance, loses about two FFS seniors for every 100 new enrollees.
“That is a significant attrition rate,” Zimmet said.
For that reason, he encouraged operators to at least explore the launch of an Institutional Special Needs Plan (I-SNP), a specialized kind of Medicare Advantage plan designed for long-term care residents. The I-SNP model — specifically in which providers become Medicare Advantage insurers — has emerged as a white-hot topic in the skilled nursing space, promising operators complete control of their Medicare dollars.
Like many others in the industry, Zimmet emphasized that the strategy does not work with every SNF, with operators considering the route requiring scale, financial backing, and a willingness to take on significant risks. Of the nation’s 15,000 nursing homes, he said, about a third are perfect fits for I-SNP, while another third are complete “non-starters”; the remaining 33% could go either way, in his opinion.
But though he was once opposed to the very idea of SNFs entering the Medicare Advantage market as insurers, Zimmet has since come around, investing in plans and framing the question as a necessary one for operators to ask.
“I’ve since changed my tune on that,” he said. “Not because I got involved in it — I got involved in it because things changed. The market changed.”