Skilled nursing finances are “much worse” than previously thought, according to a new report outlining the financial effects of the COVID-19 pandemic on the nation’s nursing homes, American Health Care Association President and CEO Mark Parkinson said Wednesday at a press conference.
“Unfortunately, the results of the report are very sobering. The sector is in deep risk right now,” he added.
The report, commissioned by AHCA and produced by CliftonLarsonAllen, highlights that the cost of care and other operations in nursing homes is far exceeding their reimbursement rates, resulting in a projected 4.8% negative margin. CLA constructed more than 12,800 site-level simulations to assess the 2022 outlook using various key driver assumptions. The report focuses on margins, as well as the cost of care and other contributing factors, such as occupancy and labor costs, to determine nursing homes finances overall, according to Deb Emerson, principal at CLA.
“We decided to take a holistic view of the industry taking available 2021 data in addition to the 2020 data that was used by other studies,” she said. “As we looked at things and went through the data, we found significant risk associated with the sector.”
Key findings
According to a press release issued in conjunction with the press conference, key findings of the report include:
- Increasing costs due to labor and inflation. The CLA report found that average increase in wages for nurses at all levels doubled from 2020 to 2021. Rates for contracted and agency nurses are also two to three times higher than pre-pandemic rates.
- ​Negative margins. CLA projects the median 2022 year-end operating margin to be –4.8%, with a median occupancy of 77.3%. This projection is based on maintaining the current Patient-Driven Payment Model through Medicare and state public health emergency funding levels. The CLA report emphasized that any reduction in reimbursement could deepen financial issues for skilled nursing operators.
- Increased risk for closures. The CLA report found that 32% to 40% of residents (as many as 417,000 residents) currently are living in nursing homes that are considered financially “at risk,” including buildings with Five-Star quality ratings.
- Challenges with access to capital. Medicare margins and public health emergency-related funding provided help and support throughout 2020 and early 2021, but potential cuts to these programs pose risk to nursing homes as they continue to face financial challenges such as occupancy decline, staffing shortages, and increased labor costs.
“It’s sobering to look at the [CLA] report and see that over 400,000 residents are living at facilities that may not make it,” Parkinson said. “That’s not just crying wolf.”
State of the Union reaction
Also on the call, regarding President Biden’s State of the Union address Tuesday evening, Parkinson broke it into two categories: the rhetoric and the reality.
“Unfortunately, the rhetoric does not match the reality of what is actually happening in nursing homes. A premise of the rhetoric is that the quality of nursing homes has gotten worse. Nothing could be further from the truth,” Parkinson said.
“To say that the quality of nursing homes has declined is factually inaccurate,” he added.
In addition to the pandemic of the past two years, Parkinson said, “We’ve been victimized by bureaucracy on a bipartisan level. There were some very bad public policy decisions made by both parties.”
Those decisions, he said, resulted in thousands of people dying. “At the same time, the heroism of these facilities has saved thousands of lives,” Parkinson added.
Setting aside minimum staffing requirements and skilled nursing finances, the CEO said he agreed with Biden’s drive to rid the industry of “bad actors.” Doing so should be the focus of Biden’s industry reforms, he said.
“But to continue the attacks on good operators. …we’re not going to just stand by and let the attack,” Parkinson said. “It’s just not fair.”
See McKnight’s Senior Living for additional long-term care industry reaction to the State of the Union address.
