Genesis Healthcare should see its annual operating costs reduced by $30 million as it focuses more on group and concurrent therapy services under the newly implemented Patient Driven Payment Model, CEO George Hager Jr. said Thursday.

“Last quarter, we mentioned that we would be able to reduce our cost to providing therapy services by 10 to 12 percent while using more cost-effective modalities,” Hager said during a third-quarter earnings call. “We have successfully met this goal.”

The savings, however, come at the cost of therapy jobs. Genesis Healthcare recently announced that it had reorganized its therapy gyms in response to PDPM and other industry changes, and laid off 585 employees.

“As we look at group and concurrent therapy (and) as we participate in the (Bundled Payments for Care Improvements) program, we did some research studies and found that appropriate use of group and concurrent therapy can actually be at least equal, if not better, or more efficacious that one-one therapy in certain cases,” Hager said. 

“What you’ll find there is if you provide therapy with more efficient modalities, you need less therapy resources,” he added. 

Hager said the same holds true for other skilled nursing providers as the “industry looks to provide therapy through more efficient modalities, such as group and concurrent therapy.”

“With lower staffing levels in the therapy gyms throughout the industry, I think that would ease any wage pressure and that assessment is accurate. We don’t see any wage pressure whatsoever in the therapy side of the business,” Hager said. 

Skilled nursing layoffs and reorganization plans amid the switch to PDPM sparked much concern from therapists.

The Pennsylvania-based skilled nursing chain recorded net income of $46.1 million and revenue of $1.12 billion for the quarter. During the third quarter of last year, the company recorded a net income of $58.1 million and revenue of $1.2 billion. 

‘Significant milestone’

Genesis executives noted that the company recognized about $1.7 million in income from the Medicare Shared Savings Program for the third quarter. The company reached the minimum savings rate required for gain share during the 2018 performance period. 

“This is a very significant milestone that validates our participation in the MSSP and our ability to successfully manage costs and outcomes in this innovative value-based program,” Hager said. 

It also entered into its second MSSP agreement with the Centers for Medicare & Medicaid Services. The agreement will allow it to share up to 75% of the savings with CMS, but also be at risk for 40% of any increase in cost above defined targets.

In addition, Hager also announced that Genesis Healthcare ACO has changed its name to LTC ACO and plans to “to aggressively market to other non-Genesis long-term care nursing facilities and clinical providers over the coming year.”

Company officials said they believe membership in its ACO can be significantly expanded throughout the SNF industry.