Washington s Impact on SNF Financing. September 2018

Transcription

1 Washington s Impact on SNF Financing September 2018

2 TABLE OF CONTENTS Washington Update & Impact Financial Review & Outlook Financing Options Observations & Predictions

3 REPEAL & REPLACEMENT DIES

4 Total Return Index Value WASHINGTON S IMPACT BCRA Released Graham-Cassidy Released 350 AHCA Released 340 Presidential Election Source: Bank of America, U.S. Healthcare Facilities Index, Total Index Return

5 REFORM STILL LOOMS Reduced Regulation & Reimbursement Congress CMS Other President s 2018 Budget [$650bn Medicaid cuts] Medicaid Waivers [work requirements, reduce benefits, increase beneficiary costs] Unified, Post-Acute Medicare Payments Bipartisan Budget Act of 2018 [reduced 2019 Medicare rate] Regulatory Relief [Voluntary Bundled Payment Program] UPL Payment Scrutiny

6 DYNAMIC PAST 2012 PAYER CONTRIBUTION Medicaid Private Managed Medicaid Medicare 16% 5% 12% 26% 7% 11% 63% 48% 14% 10% PATIENT MIX REVENUE MIX MARGIN -12% 1.8% average -5% Source: National Investment Center

7 DYNAMIC PAST 2017 PAYER CONTRIBUTION Medicaid Private Managed Medicaid Medicare 13% 6% 9% 24% 10% 9% 66% 49% 11% PATIENT MIX REVENUE MIX MARGIN 8% -11% 0.7% average -6% Source: National Investment Center

8 MANAGED MEDICARE IMPACT FFS vs. Managed Medicare Rates $540 Medicare Managed Medicacre $520 $522 $522 $519 $519 $518 $521 $521 $500 $480 $489 $483 $475 $460 $440 $462 $448 $441 $433 $420 $ Source: National Investment Center

9 ACA IMPACT Medicare Admissions (per 1,000 beneficiaries) Medicare Patient Days 1893 (per 1,000 beneficiaries) Length of Stay (in patient days) % 87.0% 86.0% 85.0% 84.0% 83.0% 82.0% 81.0% 80.0% Occupancy 86.8% 86.9% 86.2% 85.9% 84.4% 83.0% Source: National Investment Center, MedPAC

10 BRINGING IT ALL TOGETHER 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Medicare Margins 14.1% 13.2% 12.8% 12.8% 11.4% Non-Medicare Margins Total Margins 0.0% -0.5% % 2.0% 1.8% 1.9% 1.9% 1.6% -1.0% 1.5% -1.5% -2.0% -2.5% -2.0% -1.9% -1.5% -2.1% -2.3% 1.0% 0.5% 0.0% 0.7% Source: MedPAC

11 VARIATIONS AMONG THE MEAN Medicare = 0.7% Non-Medicare = (10.2)% Total = (4.9%) Medicare Mix = 14% Duel-Eligibles = 27% H-End Therapy= 79% Daily Census = 66 Length of Stay = 36 Medicare = 11.4% Non-Medicare = (2.3)% Total = 0.7% Medicare Mix = 19% Duel-Eligibles = 32% H-End Therapy= 83 Daily Census = 77 Length of Stay = 39 Medicare = 20.2% Non-Medicare = 4.6% Total = 5.9% Medicare Mix = 24% Dual-Eligibles = 39% H-End Therapy= 87% Daily Census = 88 Length of Stay = 42 Source: MedPAC

12 FUTURE CONSIDERATIONS Value-Based Healthcare Remains Pricing Volume Costs Patient-Driven Payment Model Home health / ALF competition Rising minimum wages Medicaid funding reform Length of stay pressure Rising liability costs Managed care growth Telehealth / remote monitoring Refurbishment requirements

13 PATIENT-DRIVEN PAYMENT MODEL Removes therapy minutes as basis for payment Instead, uses clinical characteristics Establishes separate payment category for non-therapy ancillary services Divides therapy into three separate payment categories (PT, OT, SLP) Creates sliding payment scale that changes with resource use over a stay Source: CMS Characteristic $ Impact All SNFs 0% By Ownership For-Profit -1% Not-for-Profit +2% Government +4% By Location Urban -1% Rural +4% By Affiliation Freestanding 0% Hospital-Based +17% # Days Billed as RU 0-10% +28% 10-25% +16% 25-50% +7% 50-75% 0% 75-90% -6% % -10%

14 ROBUST INVESTMENT TRENDS $100,000 $80,000 Price-Per-Unit $75,324 $69,123 $71,320 $68,293 $90,181 $85, % 12.0% 10.0% Cap Rate 11.2% 11.5% 10.5% 10.1% 9.6% 10.0% $60,000 $40, % 6.0% 4.0% $20, % $ % Source: National Investment Center $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 $5,694 Sales Volume (in millions) $3,264 $3,777 $7,083 $7,205 $5,

15 IMPORTANCE OF CREDIT STRENGTH Banks Cash from Operations Credit Strength Government (HUD/FHA) Non-Banks

16 SNF FINANCING OPTIONS Banks HUD/FHA Flexible Short-Term Recourse Speedy Rigid Long-Term No Recourse Slow Rate?

17 BANK LOAN YIELDS % Bank Yield (%) Fed Funds (%) Source: Bank of America, U.S. Healthcare Facilities Index, Effective Yield; U.S. Government, Federal Funds Rate

18 Source: Bank of America, U.S. Healthcare Facilities Index, Effective Yield; HUD/FHA, Interest Rate on Final Endorsements, U.S. Government, Federal Funds Rate BANK DEBT VS. HUD/FHA RATES % Bank Yield (%) HUD Rate (%) Fed Funds (%)

19 OBSERVATIONS & PREDICTIONS Legislative & Regulatory Fool s game trying to predict major healthcare reform measurers Minor reform measurers will continue via Congress & CMS Value-based healthcare is here to stay Financial Outlook SNF financials will remain under pressure over near-term SNF pricing/volume/expense pressure will continue Credit metrics will tighten, especially with legislative uncertainty Financing Options Credit strength will remain important & dictate financing options HUD will remain active, but with stringent terms & conditions Bank loans will continue to offer high flexibility & attractive rates

20 APPENDIX BOK Financial Healthcare Banking Geographic Dispersion of Commitments ($000) Jason Almiro, CFA, CPA $25,544 $2,271 Director, Healthcare Research FALSE FALSE FALSE $12,788 $21,739 $514 $12,600 $662 $5,115 $8,778 $29,136 $20,870 $67,580 $28,100 $2,900 $5,478 $4,000 $56,814 $112,534 $83,888 $132,903 $13,737 $71,113 $108,506 $127,532 $279,413 $100,386 $76,048 $8,792 BOK Financial N.A. Top 30 U.S.-based bank holding company Leading healthcare & energy lender nationwide Healthcare Banking $2.3 billion total commitments $950 million SNF commitments National SNF/senior housing expertise $4,420 Hospitals 23% $321,908 15,000 30,000 50, , ,000 $14,997 $9,200 TOTAL STATES 35 $12,284 BOK Financial Healthcare Banking Sector Distribution of Commitments Services 20% $5,862 $71,384 SNFs 41% ALFs 16%