Mark Lamb, CareTrust’s director of investments

CareTrust REIT executives don’t believe the proposed Medicaid Fiscal Accountability Regulation will “significantly impact” revenues at its facilities despite warnings from several provider advocates and calls for the Trump administration to withdraw the proposed rule. 

“We don’t expect that there will be significant impact based on everything we’ve read so far,” CareTrust REIT CIO Mark Lamb said during a fourth-quarter earnings call Friday. 

The Centers for Medicare & Medicaid Services announced the rule in November. It would set new requirements for states to report provider-level information on Medicaid supplemental payments. It also would revise Upper Payment Limit (UPL) demonstrations.  

Executives for the California-based real estate investment trust believe the UPL component of the rule is in the most trouble. They added that, if finalized, states and providers will have “a period of several years” to work adjust and protect that revenue. 

“The Medicaid revenue, as you know, in skilled nursing is just not rich enough to cut. Medicaid knows that. They’ve signaled their intention is not to cut the Medicaid funding from this,” Lamb said when asked how much revenue in the company’s existing portfolio could be impacted. 

“We think it’s really an attempt for transparency and accountability that CMS wants to see. We’re not really projecting or giving out any guidance or numbers as to a threat to a cut of revenue that we don’t expect [to happen],” he added. 

Executives also noted that it’s “too early” to make conclusions about the impact of the newly implemented Patient Driven Payment Model. 

“We’re frequently asked whether PDPM might significantly miss its budget neutrality targets, prompting a takeback or other draconian change by CMS. We believe that PDPM’s [plan] to set rates from patient characteristics — rather than from therapy volume — is a much better approach and will produce better outcomes, and we applaud CMS’ efforts here.”

“Even if the budget projects turn out to be a little bit off, we hope and expect CMS will have the flexibility to thoroughly assess the impact before making adjustments, if any.”

They noted, however, that the new payment model could be slowing deal flow. 

“We suspect that some SNF operators, who might otherwise be sellers, have been on the sidelines waiting to see how PDPM might shake out. We believe this is a temporary phenomenon that might be making deal flow a bit lighter at present,” Lamb said. 

He added that there’s no reason to expect the company won’t get its “fair share” of acquisitions this year. 

Overall, executives reported that 2019 was “the biggest year ever for acquisitions” with more than $340 million in new investments. The company also completed the sale of six facilities, operated by Metron Integrated Health Services, for $36 million earlier this month.

For more news from this earnings call, see our sister publication, McKnight’s Senior Living.