Capital providers were warned recently about investing or refinancing too quickly after the start of the Patient-Driven Payment Model on Oct. 1. 

“I’m really urging the investment community that if we have an increase in the aggregate, do not refinance on that,” said Mark Parkinson, president and CEO of the American Health Care Association, in mid-September. “It is possible that some individual operators could have an increase, even though we don’t have an increase in the aggregate.”

PDPM was created to be budget-neutral, which means that any early gains, at least on a system-wide level, should be evened out with corrective measures. Parkinson explained that after the Centers for Medicare & Medicaid Services made an earlier dramatic payment overhaul, margins mushroomed 12%. That led to ill-advised quick refinancings before CMS adjusted payment conditions. That led to the “pain” in 2017 and “horrible” bankruptcies and other financial carnage in the sector.

CareTrust REIT COO Dave Sedgwick said he shared reservations.

“We would be really foolish not to learn the lesson from 2011, 2012,” he said. “We’re going to be cautious, especially this next 12 months, in terms of attributing PDPM value to investments.”