Skilled Nursing ‘Under Siege,’ Quarter of Beds to Disappear by 2022

The skilled nursing industry is in a heap of trouble, and there’s only so much that operators can do about it.

That was the bleak message from Lincoln Healthcare Leadership President and founder David Ellis to the crowd at the Post Acute Link Care Continuum Conference in Chicago on Sunday, summarizing the results of a 2016 state-of-the-industry study that sought the input of more than 30 regional SNF CEOs.

There’s a long list of specific challenges facing these operators. They are finding themselves squeezed on both the post-acute and long-term care sides amid the shift to value-based payment models. Hospital admissions are declining, cutting off a key source of post-acute residents. Lawmakers in Washington are trying to slash the federal budget, and entitlement programs such as Medicare and Medicaid represent prime areas for cuts.

“We think the SNF business model is under siege,” Ellis said.

He laid out a dark future for the industry over the coming five years, predicting that as more and more providers exit the space, just about a quarter of SNF beds will be gone by 2022. Ellis cited a laundry list of headwinds blowing in the face of the SNF industry, including the Republican-controlled Congress’s push to repeal and replace Obamacare.

“There’s too much money at play. Democrats and Republicans both want to save money,” Ellis said, adding that no matter what form the final Trumpcare legislation takes, value-based programs will serve as a key cost-saving pillar. “The long-term goal is to cut costs.”

That reliance on the value-based model spells trouble for skilled nursing facilities, especially as hospitals gradually come on board.

“A lot of hospitals are just dabbling in value-based care,” Ellis said. “They’re just getting started. So when they really get started, life’s going to get worse for skilled nursing.”

Despite these problems, Ellis said many SNF operators — especially smaller, family-owned concerns — have what he called a “survivor” mentality, trying desperately to stay afloat as the tides rise. While admirable, it could be a detrimental trend for an industry in need of pruning, Ellis said.

“You want people who are under pressure to go out of business,” Ellis said.

But the survey’s findings weren’t all doom-and-gloom. Ellis laid out several strategies for SNFs to weather the gathering storm, starting with a reduction of facilities: Larger chains should sell off underperforming assets and invest the proceeds in stronger options, such as newer buildings dedicated exclusively to transitional care, especially given the record-high prices that skilled nursing facilities currently command on the market.

“Who can do transitional care best is going to win,” he said.

He encouraged SNF operators to invest in downstream partnerships with home health and personal care providers, while also pursuing upstream connections with hospitals looking to reduce inpatient days. In addition, while the new payment models could end up forcing some of the lower-performing SNFs from the business, the shift from the fee-for-service model will usher in a new era of “meritocracy” in the health care industry — opening up opportunity for providers that can offer a high-quality level of care.

“The best of the best could actually do better,” Ellis said, emphasizing the importance of hiring the best employees and investing in data-driven technology.

That trend was seconded in a panel discussion later Sunday afternoon, when Gene Huang of Remedy Partners and Monique Ruyle of Evergreen Health said that while they predicted overall stagnation or decline for skilled nursing, the best SNFs will grow over the coming years. Connecticut-based Remedy Partners manages bundled payment programs, and Washington-based Evergreen Health is a two-hospital health care system.

Huang, who leads Remedy’s SNF Model 3 bundled payment program, said that the demand for high-quality SNF care will increase, particularly for high-acuity residents, as hospitals attempt to discharge patients faster and faster — emphasizing that hospitals are increasingly becoming solely the domain of the critically sick.

Still, Ellis said Lincoln — a health care research firm — remains “bearish” on skilled nursing over the coming years.

“It doesn’t look good,” Ellis said. “This is the long-term trend.”

Written by Alex Spanko

Photo Credit: Alan Levine , CC BY 2.0

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