Senior Living Non-Profits Charged 3.3% More for Skilled Nursing in 2018

The cost of care at non-profit senior living facilities rose the most for skilled nursing residents in 2018, according to a new survey, but operators are still feeling the pain across all levels of care.

The Chicago-based specialty investment bank Ziegler found that fees for skilled nursing services at non-profits rose 3.3% in 2018, based on a survey of more than 230 chief financial officers at senior living companies around the country. That’s compared to a 3.17% boost for independent living services, and a 3.14% gain for assisted living.

While Ziegler conducts this survey annually, the 2018 edition — released earlier this month — was the first to break out increases by service type, and director of senior living research and development Lisa McCracken wasn’t shocked to see skilled nursing leading the pack.

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“If you look at the comments of what’s driving it: It’s labor, labor, labor, labor,” McCracken told SNN. “That’s a big portion of it. It’s not a surprise. I think we all know that people are feeling the pressures are on labor.”

For instance, one provider in California reported wage increases of 9%, while a representative from an Arizona operator noted that the minimum wage is set to increase in that state through 2020 — and another respondent said that wages and benefits account for 60% of the community’s overall operating expenses.

“High demand, low supply — wage structure needs to change to accommodate,” the Arizona respondent said.

Those ongoing trends drove Ziegler to predict a 3.2% increase in costs for skilled nursing services at non-profits for 2019, slightly higher than the 3.18% each estimated for independent and assisted living.

The surveyed CFOs also identified the conversion of semi-private skilled nursing rooms to single units as a reason for rising costs, as it essentially creates fewer potential opportunities for reimbursement with the same overhead expenses. But those same providers may not be receiving enough cash from government sources to cover the costs of the residents who remain.

“I don’t think anybody is seeing greater reimbursements. That’s generally a story where reimbursement levels are going down — particularly [amid] the pressures from the managed Medicare and MA plans, and that varies state by state,” McCracken said. “But providers are feeling the squeeze.”

In addition, McCracken pointed out that not all providers saw the biggest increases on the health care side of their businesses. Some reported the growing demand for certain ancillary services that don’t necessarily generate revenues — such as higher-end dining and wellness centers — as a reason they were seeing pressure on their independent living costs.

Written by Alex Spanko

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