Parkinson: Looming PDPM Changes, $400B Home Care Push Don’t Signal Doom for Nursing Homes

The federal government has made it clear that it wants to adjust how nursing homes receive Medicare reimbursement due to an estimated 5% increase in fiscal 2020 — a gain that runs counter to the goal of keeping Medicare spending level from year to year.

Specifically, the Centers for Medicare & Medicaid Services (CMS) determined that nursing homes saw a total gain of $1.7 billion in fiscal 2020 under the Patient-Driven Payment Model (PDPM). The new system, which replaced the Resource Utilization Group — Version IV (RUGS-IV), was meant to maintain spending at the same amount CMS had spent on nursing homes under the old system.

But early signs indicated that wasn’t likely happening, and the COVID-19 pandemic significantly complicated any attempt to assess the new system. For providers, PDPM was a lifeline to cover the costs of caring for COVID-19 patients, who tend to have higher-acuity needs and require more extensive care.


In the proposed final rule for the fiscal 2022 prospective payment system (PPS), the agency proposed a range of options for recalibrating payments to bring the system back to its original goal of budget neutrality, while acknowledging the complications of the COVID-19 pandemic for operators.

CMS also pointed to its dramatic decision in 2011 — the time of the last major payment-model change — to slash rates by 12.5%, or $4.47 billion, as an example of such recalibration, which could alarm providers.

But Mark Parkinson, the president and CEO of the American Health Care Association (AHCA), actually sees some grounds for optimism in the tone CMS took in the proposed rule. He believes CMS is taking a much less adversarial approach to nursing homes this time as compared with 2011. And even though the Biden administration’s recent announcement of $400 billion to expand home- and community-based services (HCBS) might suggest an anti-institutional preference [link], he believes nursing homes provide an essential service for enough patients that they will always have a place in the health care continuum.


Parkinson, whose association represents more than 14,000 primarily for-profit SNFs and assisted living facilities, joined SNN’s “Rethink” podcast to talk about these issues, as well as the “clinical nightmare” in nursing homes coming to an end — even as the “business nightmare” continues apace.

Excerpts from that conversation, edited for length and clarity, are below, and if you like what you hear, be sure to subscribe on iTunes or SoundCloud.

While COVID-19 cases in long-term care have seen significant declines since the vaccinations began, they are going up in the general population. So where would you say nursing homes stand in terms of how they’re faring? Are there signs of recovery?

It looks like the clinical nightmare is behind us, but we’re still in the middle of the business nightmare. So let’s first of all talk about the good news, which is the clinical nightmare. As you indicated, we are past the first three rounds of vaccine clinics. We’re now into the post-clinic phase. We’ve seen a significant uptake in staff vaccinations; we already had good uptake among residents.

And the net result is that we’ve had remarkable clinical results in buildings. We peaked at 33,000 new cases a week back in late December 2020 and early January. And this week’s reporting [Editor’s note: this interview was conducted on April 9] has us down to 700 new cases. So we’ve had almost a 98% reduction in cases. With that, of course, has been a dramatic drop in hospitalizations, and most importantly, a dramatic drop in deaths.

Now you are right — in the general population, we’re seeing a slight increase in the number of overall COVID cases. In a few areas, most specifically Michigan, we’re seeing a significant increase in cases in the general population. Our concern is that that will inevitably lead to it coming back into skilled facilities. But our hope is that we’ll turn the corner and reach a tipping point with the vaccines so that we can prevent what, at that point, would be a fourth wave of COVID. So we think the clinical nightmare is largely behind us, and we certainly hope that’s the case.

The business nightmare, though, is an entirely different topic. Because the wave of COVID that hit in November 2020 and December 2020 knocked nursing home and assisted living census down another significant amount — about 5% on the skilled nursing side — we have an enormous hole to dig ourselves out of.

Especially now that we are in the vaccination phase for long-term care, has there been any sign of occupancy recovery?

There has been but it’s very early, and way, way too early to start getting comfortable or declare victory of any kind. Here’s the data. Before the pandemic nationwide, we were at about 80% census — 80% of our beds were full.

Immediately after COVID occurred, within three months or so of Kirkland [the first major COVID-19 outbreak in a nursing home in Kirkland, Wash.], we dropped about 7% down to about 73%. We stayed very stable throughout last summer and into the early fall; we only dropped another 1% in the six months between June and November of 2020. So we’re down about 8% at that point.

Unfortunately, this huge wave of COVID that hit in November and December 2020 had enormous impacts on SNF occupancy and dropped it down another 5%. So we dropped down to 67% at the low, and that was in early January. For the last 10 weeks, we’ve seen a very small — and I would emphasize very small — increase in occupancy every single week. It’s either been two tenths of a percent or one tenth of a percent, hitting 69.1% in this week’s report, so we’re up 2% from the bottom.

But we still have 11% ago. So yeah, little teeny sign of optimism, but no way to know if this is a long-term trend or that we’re going to be able to claw our way out of this anytime soon.

One point that has come up a lot whenever occupancy is discussed is this question of whether or not diversions to the setting of the home or in the community are going to become permanent. More recently, we had the proposal from the Biden administration — a $400 billion plan that’s aimed at bolstering Medicaid coverage of long term care that’s outside institutional settings. How is AHCA thinking about that, and is there a path for SNF providers to be partners in that investment?

I think there’s a pretty big misunderstanding of the Biden plan that’s out there. When I first look at the outlines of the plan, I had this reaction: Oh, my goodness, they’re trying to move a bunch of people out of nursing homes; they’re really emphasizing home health. This is a very challenging and potentially threatening proposal to the skilled nursing facilities.

That’s really not what the proposal does. What the proposal does is: There are 850,000 people in the U.S. that are on the HCBS services waiting list. For the most part, these are people that are under 65 — oftentimes young adults who have intellectual and developmental disabilities and enormous needs.

The states just haven’t had enough money to pay for them through Medicaid, so 40+ of the states have developed a waiting list, and what most of this $400 billion does is that it pays off the waiting list, so that these folks can get Medicaid services at home. These are not typically people that we would be treating in a skilled nursing facility.

Now there is a another phenomena: Did referral patterns of the people that we actually do take care of — the older population — have those changed because of the pandemic? And I think that the answer to that question is you have to look at our two different populations. If you look at the long-term care population, the people that come into our buildings, typically on Medicaid, and are there to stay there for the rest of their lives, I think that there is very little threat that that population will suddenly go home.

The reason for that is that these people are quite old and have many, many needs, and it’s just not possible to take care of them at home. I know most of the politicians out there will say: Hey, if we can just spend more money on home health, or home care, we’ll be able to take care of these people at home.

And what I say to them is: Come visit a nursing home with me. Instead of just talking about this in the abstract, I want you to come visit a nursing home with me and walk through at lunchtime where people can actually see our residents. When you do that, you realize that these people need a lot of help, and they really can’t be taken care of at home. So I think that our long-term care population will recover.

I think the tougher issue is the post-acute population, the people that intend to go home after they’ve had a nursing home rehabilitation visit. The threat is: Will they just skip us, or will they spend less time in nursing homes because of things that were learned during COVID?

What we know is that there was already a decline in utilization in post-acute before COVID. And then we know that during COVID, hospitals got even more aggressive about skipping nursing homes and just rehabbing people at home. I think that what will end up happening is that the continued decline in utilization will occur. I think that was a trend that was long-standing before COVID. It may be sped up a little bit because of some things that occurred during COVID. But I don’t think it will be sped up dramatically.

So I see a return to our long term care census, a bigger question around our post acute census, and time will tell on that.

Speaking of that post-acute census, I wanted to bring up the proposed payment rule that CMS issued for SNFs, where CMS said they are looking at recalibrating PDPM — specifically citing the cuts made in 2011. Is there anything you’re seeing in the proposed recalibration about how it might affect SNFs, and whether it would be similar to the 2011 cuts?

it’s a really good question. I would also compare 2011 to 2021, and I’m sure that many of the listeners were in the profession in 2011. One of the things that really struck me about the 2021 rule was just the entirely different tone that was taken in the 2021 rule, as opposed to 2011. I think it really demonstrates that the profession has come a long way with CMS, in the last 10 years.

Back in 2011, the proposed rule and then final rule was very accusatory and negative towards nursing homes, claiming that we had somehow known about this disparity in payments that would occur, this so-called overpayment that would occur, that we had gamed the system, and there needed to be an immediate cut.

The cut was actually like 13%; it ended up at around 11% because the market basket was taken away. But it was very dramatic and very draconian and very accusatory. The tone of this year’s rule is quite different. I think that they realize that we are working really hard to take care of our patients under a new system, and for most of the time of that new system, we’ve been doing it during a pandemic.

So there’s none of the blame or general negativity that existed in the 2011 rule. The other thing that’s quite different from the 2011 rule is that in the 2011 rule, when they felt like there was a 13% overpayment, they cut it all at once. The proposed rule is very interesting, because it acknowledges that to make a recalibration all at once would be harmful to the sector, particularly to do it during a pandemic. So they offer up all sorts of different scenarios and ways that they could create a glide path that might make it easier.

Now, their bottom-line conclusion is that we are 5% above budget neutrality. First of all, I would say this: When you think about the complexity of the prior RUG system, and the complexity of the new PDPM system, I don’t think it’s at all surprising that we could have a variation in payments of 5% or so. In fact, I think it’s almost somewhat remarkable that they were able to create a system and allocate a payment to all sorts of different categories and actually come that close.

What we are doing at AHCA is first of all, we really want to validate the numbers. We’re not at all convinced that providers have received more than 5% above budget neutrality. A number of the folks that we took care of in 2020-2021 have been COVID folks and people that have gotten COVID, so that makes it very challenging.

We’re spending our time right now really trying to figure out if that 5% number is right. If the 5% number is right, or if in fact, there’s been some sort of overpayment, we completely agree with the language in their proposed rule that it would be a terrible time right now to cut skilled nursing rates. We’re still fighting for our lives and fighting for the survival of the sector, and this would not be the time to do it.

So at that point, I think we would absolutely shift to one of the things that they suggest, which is a delay, or a phase-in, or both. So we are cautiously optimistic that we’re going to be able to work our way through this. Again, we appreciate the tone of CMS, and we appreciate the suggestions that they have made in terms of creating a glide path, so we don’t have that draconian cut like we did back in 2011.

AHCA and LeadingAge have put out some proposals on the systemic issues in the nursing home sector that have been highlighted by the pandemic, and workforce issues are a big part of that. There’ve been a lot of calls to look at workforce, and I want to talk about certified nursing assistants (CNAs) and the issue of investing in their pay and careers. Do you have thoughts specific to the CNA role and how providers can elevate that role?

I think everybody in this profession that I’ve ever met has a really strong feeling about CNAs; I think we all just deeply respect what they do, and at the same time, have a nagging bad feeling about how much they’re paid and what their careers are like, and what challenging lives they have.

It’s a complex problem. The fundamental issue, in our perspective, is that Medicaid dramatically underfunds the cost of care. And even though we do end up talking a lot about post-acute when we talk about nursing homes, the large majority of residents in our buildings are still Medicaid people. And it’s really hard to create a great job for a frontline CNA when you’re losing $20 or $30 a day on every Medicaid resident that you take.

But we need to fix that. We need to do something to elevate the status of our CNAs. The providers out there that not only recognize that, but really do something about it, the ones that are very focused on employee satisfaction, employee engagement, employee retention, they just do better than then people that aren’t. Turnover rates are lower, quality scores are better, et cetera.

Now, having said that, even the very best providers, the folks that are at the complete cutting edge of employee retention and satisfaction, are having a really hard time finding workers right now. It was very hard before the pandemic, because the unemployment rate was so low. With the pandemic, we had so many staff get sick and have to quarantine; we had people that that sought out other careers. Now it’s just tough to find people in general to work because — I think, in part because the various incentives that are out there for people to not work.

But we shouldn’t use that as an excuse not to elevate the profession. When businesses are in long-term care are trying to figure out: What can we do to reach the next level on quality? And what can we do to reach the next level on profitability? Spending time and resources on employee retention and satisfaction, I think is that low-hanging fruit that’s still out there in the profession. And I hope that that providers will embrace that.

At the same time, I hope that policymakers will finally figure out that we’ve got to make it so that folks can at least break even. And once we can at least break even, then the benefits and pay that we can offer the CNAs will be much better.

Are there any thoughts on the steps providers can take regarding elevating the CNA role, steps that don’t involve waiting on a Medicaid increase that could take a while?

What the data indicates is that employee retention and satisfaction is related to the rate of pay. But it’s not exclusively the rate of pay. And so there are many organizations that are very focused on creating employees that are satisfied and engaged … just providing an exam or a test or an instrument, where you ask CNAs how they feel about the workplace, and what can be done to make it better — just an initial round of testing will cause a leap forward in engagement scores.

But at the end of the day, if we don’t raise the wages as well, this will not be a profession. It’ll just continue to be a career where there’s an enormous amount of turnover. The CNAs don’t deserve that, and the folks that they take care of don’t deserve that. So we’ve really got to focus on fair Medicaid rates leading to fair wages.

Are increases in Medicaid rates the only way to get to better pay and benefits for CNAs, or are there other levers providers can pull?

There really isn’t any other lever. The vast majority of our residents are paid for almost exclusively through Medicaid. We can work around the edges with the Medicare payments, but those are subject to all sorts of fluctuation. The bottom-line financial problem in the sector is Medicaid, and it’s been that way for 20 or 30 years. It really is time that it gets fixed.