SNF Occupancy, Operating Margins Continued to Drop in 2016

National occupancy rates and operating margins for skilled nursing facility (SNF) providers trended downward in 2016, according to a new report from health care financial consulting and accounting firm CliftonLarsonAllen — though certain areas of the country fared better than others.

The report, which included data from more than 15,000 Medicare-certified SNFs across the U.S., provided more evidence that the skilled nursing industry is experiencing ongoing operational woes that don’t appear to be letting up any time soon.

“Substitutions of care are driving a larger percentage of hospital discharges toward other sites of service, including home health, [while] hospitals and Medicare Advantage plans are expecting shorter lengths of stay,” the report reads. “Together, these trends are reducing occupancy and profitability nationwide.”


An ongoing labor crunch and evolving regulations also helped drive up operation costs and push lower performing providers closer to insolvency, the report noted.

Trouble signs

One indicator of the industry’s ongoing difficulties was occupancy, which continued to sag in 2016. National median occupancy for SNFs dropped 120 basis points to rest at 85% in 2016, according to the report. For comparison, the National Investment Center for Seniors Housing & Care (NIC) logged skilled nursing occupancy at 81.6% for the third quarter of 2017.


Though median occupancy declined across the U.S. in 2016, the numbers were worse for providers in some regions, according to the report. Skilled nursing providers in the Southwest saw the lowest median occupancy with 71.1%, while those in the Northeast had a median occupancy of 89.8%.

“As health care payment transitions to value-based reimbursement, physicians are beginning to embrace care protocols that reduce overall health care spending,” the report reads. “These influences, along with the increased proliferation of managed care, are reducing skilled nursing facility admissions and average length of stays.”

Another sign that some SNFs are experiencing turbulence was the national median operating margin, which hit 0.5% in 2016—a decline from 1.2% in 2015 and 1.3% in 2014. If that trend continues, “the median SNF will experience negative operating margins in 2017,” the report noted.

The average age of nursing facilities also hovered at 12.3 years in 2016, indicating some facilities were in need of major remodeling or renovations. Though that number was unchanged from 2015’s average age, it’s a slight increase from 2014, when the average age of a SNF in the U.S. was 12.2 years.

“Higher-margin residents tend to be rehabilitation, short-stay residents, and the median age of those individuals is lower than traditional long-stay residents,” the report reads. “Therefore, if a SNF is going to remain relevant, it will need to cater to the expectations of a younger resident, which may require a facility to invest in a renovation.”

Read the rest of the CliftonLarsonAllen report.

Written by Tim Regan

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