Skilled Nursing Facilities Rank Low on Operators’ Investment Wish Lists

Skilled nursing facilities lag far behind home health and other long-term care settings among providers’ investment outlooks, according to a new survey of major health care providers.

Just 12% of organizations surveyed by consulting and advisory firm BDO said they were making investments in skilled nursing care as part of their two-year plan to 2020 — far behind the 44% each that said they were interested in expanding their home health and palliative care options.

But the BDO Center for Healthcare Excellence & Innovation was slightly more upbeat about the future of skilled nursing in its report on those survey results, emphasizing the ongoing need for institutional long-term care for American seniors.


“Healthcare executives also remain focused on more traditional models like skilled nursing facilities (SNFs) and long-term acute care facilities (LTACs) — as well as more innovative yet lesser-known models like Programs of All-Inclusive Care for the Elderly (PACE),” the firm noted in its report.

Going forward, skilled nursing operators have two options, according to Patrick Pilch, managing director and national leader of BDO’s health care practice: adapt to the changing winds by stepping up acuity capabilities, or abandon ship and use the existing infrastructure to house other settings of care.

“Skilled nursing becomes shorter in stay, step-down units,” Pilch told SNN, referring to the model of nursing homes as steps down from hospital care. “Some will convert to assisted living, but others will be focused on memory care.”


For those who stay in skilled nursing, creating and publicizing a specialty is key — similar, Pilch said, to the way certain hospitals distinguish themselves as cancer or cardiac centers.

“What are you known for in that community, in that market?” Pilch said.

The concept of using existing SNF infrastructure for alternate care settings isn’t new: For instance, nationwide addiction treatment chains have increasingly begun eyeing skilled nursing buildings in order to expand more quickly amid the raging opioid addiction crisis.

“It is a natural alternative best use, if you will, for the facility,” Pilch said. “It becomes less about the SNF and more about location, market, and facility.”

As for the future for players who elect to stay in the skilled nursing space, Pilch pointed to an additional benefit of specializing: Medicare Advantage.

By 2026, he predicted, 40% to 45% of all Medicare beneficiaries will be in some kind of managed plan — as compared to about 33% today — and the providers that can demonstrate the best kind of specialized outcomes will be the ones to win in that landscape. Unlike traditional Medicare, managed plans come with the increased cost-conscious nature of private insurance plans, which means providing the greatest value for the least amount of money will become paramount for players in the space.

“You’ve got to play well in the supply chain,” Pilch said. “You’ve got to design around the payment model to which you are being attributed.”

Written by Alex Spanko

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