Fitch: DOJ billing probes, bundled payments pressuring SNF margins

More Medicare Advantage members, bundled payment pilots and Department of Justice investigations into billing practices will likely continue to pressure skilled nursing facility revenue growth and compress margins, according to Fitch Ratings.

In the longer term, DOJ investigations into SNF billing practices may reduce revenues and margins by causing facilities to cut back on aggressive billing practices, according to Fitch. In the near term, the investigations could reduce corporate liquidity and dampen capital markets access.

The shorter stays and lower reimbursement rates stemming from the increase in Medicare Advantage coverage have also had a negative impact on SNF earnings, according to Fitch.

Additionally, two Affordable Care Act initiatives, the Comprehensive Care for Joint Replacement model and the Bundled Payments for Care Improvement program, will differentiate SNF operators.

To succeed under the ACA initiatives, which focus on improving quality and value through care coordination and bundled payments, SNF operators need meaningful positions within specific markets, according to Fitch.

Although the credit rating agency expects these challenges to persist for the foreseeable future, it does expect stronger SNF operators to be able to react accordingly.

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