SavaSeniorCare Sees COVID-19 as Wake-Up Call: Nursing Homes Must ‘Rethink Our Business Model’

The COVID-19 pandemic has led to severe occupancy hits for skilled nursing facilities, with two major operators seeing significant declines over the course of the past few months. And no aspect of the business — from short-term rehabilitation after elective surgeries to long-term care to capital expenditure — has been left untouched.

Aid from the federal government, in the form of funding from the CARES Act and other sources has, helped SNFs survive the immediate short-term crisis, Ray Thivierge, executive vice president and chief strategy officer at SavaSeniorCare, said on a Thursday webinar hosted by the National Investment Center for Seniors Housing and Care (NIC).

But the long-term implications of the pandemic will forever alter how SNFs function, not least because that federal and state aid will not necessarily last forever.


“If you strip away COVID, the good and the bad — the expenses and the added financial incentives — you’ve still got a situation where we’re dealing with an impact to our long-term care days through this fire. That’s going to take us a long time to come back from,” Thivierge said on the webinar. “The sector was already trending down on long-term care, and the fact of the matter is this virus has done two things: It has eroded our long-term care base. But it has made people much more fearful of the environment.”

That fear comes as COVID-19 hits occupancy at seemingly every level, in addition to the effect on long-term care days. SavaSeniorCare has seen a 10% decrease in total occupancy, for 14,100 in total occupancy now. Of those, 20% consist of “premium mix,” or non-Medicaid residents — roughly what it was prior to the pandemic, Thivierge noted.

The financial incentives are providing the cash flow for operators to survive the hits, he said. But they’re also having an effect on the longer-term outlook for the SNF sector.


“Longer range, those incentives are providing us an opportunity to get through the day and get through this period,” Thivierge said. “But they’re also forcing us to rethink our business model and rethink what it looks like. How are we going to operate these centers at a lower occupancy and still sustain the level of service we need to provide to our residents?”

The occupancy decline was similar at industry giant Genesis HealthCare (NYSE: GEN).

B.J. Hauswald, senior vice president of strategic development at Genesis, said occupancy varies greatly depending on the market, but the two main factors were admission holds due to COVID-19 and “the fact that hospitals were essentially cleared out,” she explained. Referrals are still roughly 80% of what they used to be pre-COVID, Hauswald said, while admissions are about “50% to 60% of what they were.”

Genesis has about 400 SNFs, assisted living facilities, and rehabilitation centers in 25 states, and Hauswald cited that footprint as a challenge when dealing with various strategies for dealing with COVID-19.

The Atlanta-based Sava is not as large, though it’s not clear how many facilities it has; a June 2016 report from Provider magazine estimated it at 200.

Genesis has received about $190 million in federal funds, Hauswald said, including about $8 million from the sequestration suspension for this year and about $30 million from state increases of the Federal Medical Assistance Percentage (FMAP). The Kennett Square, Pa.-based Genesis also accessed the Medicare Accelerated and Advanced Payment Program to add about $160 million, though those funds are temporary; repayment is scheduled to begin in August, Hauswald noted.

“We’re hopeful and we’re having conversations about the potential deferment of that until next year, like it was for hospitals,” she said.

Expenses have increased, whether there’s COVID-19 in a facility or not, with most of the expenses stemming from staffing, Hauswald said. This includes increased agency staffing and higher pay for staffers — but also relates to inefficiencies stemming from the smaller units.

“A facility used to operate one facility; now you have essentially three facilities in one,” she said. “You might have your COVID-positive facility, dedicated staffing; COVID-negative, dedicated staffing … and PPE [personal protective equipment]. So there are incremental expenses and inherent inefficiencies in the way we’re operating today.”

Those expenses are not likely to go away any time soon. Testing access and costs, as well as securing supplies of PPE amid price increases, remain top concerns for operators as COVID-19 shows no signs of slowing.

But the pandemic is forcing skilled nursing operators to rethink everything from building layout to ventilation systems, to say nothing of how everyone from the general public to physicians view the nursing home setting, Thivierge explained.

And as scientists note the possibility of the coronavirus surviving for longer periods in the air, that means recalculating everything from PPE to implementing filters and redesigning and reengineering buildings, to create a safe environment for residents and workers, he added.

None of that will come free, but the COVID-19 situation makes the value of these investments more apparent, Thivierge argued.

“We are a modern health care industry, and yet the only way for us to provide safe visits for our families right now, because of the state of our environments, is to have folks wave at their loved one through the window,” he said. “That’s a wake-up call. It’s got to be a wake-up call. If the pandemic does that for us as a broad sector and provides a realignment of some resources to help us get that done, we’ll all be better off for it.”