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REITs Sabra, CareTrust Positive on Payment Reform

Proposed payment updates by the Centers for Medicare and Medicaid Services have buoyed skilled nursing, an industry that’s taken a hit from lowered reimbursements.

In particular, the implementation of the Patient-Driven Payment Model would adjust Medicare payments to skilled nursing facilities based on recovery results of services provided, which “will have the important benefit of increasing a percent of skilled nursing patients that have longer lengths of stays, mitigating the length-of-stay problems that exist with the focus on short-term rehab,” said Sabra Health Care REIT (Nasdaq: SBRA) Chief Executive Rick Matros in a recent earnings call.

“The incentives will shift from solely short-term rehab to complex nursing,” he said, meaning that when value-based care can be established, longer stays would be reimbursed.

Good news for the Irvine-based senior housing-focused real estate investment trust, whose shares plummeted when it merged in August with Chicago-based pure-play skilled nursing REIT Care Capital Properties Inc.

The purchase brought shareholder backlash because it increased Sabra’s exposure to skilled nursing facilities, an asset class to which several REITs have reduced exposure in light of lowered reimbursements.

The Care Capital purchase increased Sabra’s skilled nursing exposure from 57% to 73%, but the company plans to lower exposure to 61% by year-end through divestures, according to Matros.

Company shares recently traded at nearly $20 each for a $3.5 billion market cap.

San Clemente-based CareTrust REIT Inc. (Nasdaq: CTRE) shared Matros’ enthusiasm for the federal agency’s proposal. On a recent earnings call, Vice President of Operations David Sedgwick said the Patient-Driven Payment Model would allow providers more flexibility in the number of therapy hours it bills, correlating payments to patients’ conditions and care needs.

The REIT hasn’t shied from buying skilled nursing assets, including acquiring a 464-bed, five-property skilled nursing portfolio in the Grand Rapids, Mich., area in March.

Second Drug

Aerie Pharmaceuticals Inc. (Nasdaq: AERI) submitted Roclatan for Food and Drug Administration approval.

The once-daily eye drop is designed to reduce intraocular pressure in patients with open-angle glaucoma or ocular hypertension.

The drug is a fixed-dose combination of Aerie’s Rhopressa, which received FDA approval in December and is available in the U.S., and glaucoma medication Latanoprost. The company said the anticipated FDA review period for Roclatan is only 10 months because it combines two previously approved drugs.

It launched Rhopressa this month. Chief Executive Vicente Anido said in a recent earnings call that it’s put together a sales team of “four regional sales directors, 14 district managers and a hundred territory managers” to help with the launch.

The team is led by Chief Commercial Officer Judith Robertson, who in December joined Aerie from Janssen, a pharmaceutical subsidiary of Johnson & Johnson, where she was vice president of global immunology.

Aerie moved its headquarters to Durham, N.C., in March. It maintains significant operations in Irvine, its former headquarters.

Bits & Pieces

Mission Viejo-based Ensign Group Inc. (Nasdaq: ENSG) early this month bought the real estate and operations of nonprofit Grace Presbyterian Village, a 26-acre post-acute care and retirement campus in Dallas. The community is now known as The Villages of Dallas, a full-service senior care campus with 125 skilled nursing beds, 81 independent living units, 36 assisted living units and 26 memory care units. It’s operated by Keystone Care LLC, Ensign’s Texas-based portfolio subsidiary. The acquisition brings Ensign’s portfolio of skilled nursing, rehabilitative care, home health, hospice and assisted living care to 280 senior facilities across 15 states. … Ground broke this month on the Judi and Bill Leonard Institute for Cancer Prevention Treatment and Wellness at Mission Hospital in Mission Viejo. The Leonards gave a $20 million naming gift in March. The 104,000-square-foot outpatient cancer center, across the street from the hospital and next to the Shops at Mission Viejo, is a unique 50-50 joint venture between Mission Hospital and REIT Welltower (NYSE: HCN) in Toledo, Ohio, slated to open in 2019. … Hoag Memorial Hospital Presbyterian in Newport Beach is among 10 hospitals in California included on Becker’s Healthcare’s annual 100 great hospitals in America list. Hoag has campuses in Newport Beach and Irvine, as well as Hoag Orthopedic Institute.

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