New Medicare payment model will help skilled nursing facilities, Moody's says

Medicare payment changes for skilled nursing facilities will benefit operators of these facilities and their real estate investment trust landlords, according to a report from Moody's Investors Service. 

Moody's said the changes — which include a 2.4 percent net increase in Medicare payments for skilled nursing facilities in fiscal year 2020, as well as a new case-mix classification system, the Patient Driven Payment Model — provide an opportunity for the skilled nursing facility industry to save money.

The changes "will provide relief to the SNF industry, which has been contending with occupancy pressures as evolving payment models have emphasized shorter lengths of stay," the credit rating agency wrote in its report. "Increased labor costs have been an added challenge for operators. Even as we expect these headwinds to persist, the improved reimbursement environment will offer operators the opportunity to boost margins and cash flow."

Specifically, Moody's said this opportunity to increase cash flow is a credit positive for real estate investment trusts including Omega Healthcare Investors, Sabra Health Care REIT and CareTrust REIT. All are significantly invested in skilled nursing.

 

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