Addition by Subtraction: Nursing Home Operators Mull Decertifying Beds to Stay Afloat

As currently constructed, bed counts form the bedrock of nursing home finances.

More beds mean more chances for reimbursement, more ways to fill a need for a hospital partner, more opportunities to offset fixed expenses. But more beds also mean a greater risk for COVID-19 infection, more logistical challenges for cohorting and staff separation, and with occupancies still low amid the ongoing crisis, more unused space in an already empty building.

It may go against one of the central tenets of nursing home operations, but actively relinquishing certified beds could actually provide concrete benefits for facilities navigating the pandemic.


“People look at you like you have two heads,” Marc Zimmet, president of consulting firm Zimmet Healthcare Services Group, told SNN. “But it’s part of a bigger calculation.”

Zimmet and his firm recently published a report encouraging operators and investors to consider the “post-pandemic capacity” of their facilities, a figure that may be substantially lower than their historic highs.

Nationwide, nursing homes sat at just 74% full during the third quarter of 2020, according to the National Investment Center for Seniors Housing & Care (NIC), and individual facilities have logged significantly worse census numbers.


Skilled nursing utilization had already been on the decline before the pandemic, as both payers and consumer preference conspired to funnel more patients into the more comfortable and less-costly home rehab setting. COVID-19 only accelerated that trend, with home health heavyweights stepping up efforts to accommodate the growing percentage of seniors who want to avoid institutional care at all costs given high death tolls and visitation restrictions.

“Consumers have lost confidence in nursing homes — or better said, they’ve become deathly afraid of entering one,” Sidney Greenberger, CEO of skilled nursing operator AristaCare, told SNN earlier this month.

In addition, the reality of needing to separate COVID-positive patients from the rest of the population has forced operators to convert previously dual-occupancy rooms to singles, a move that is increasingly becoming a prerequisite to secure referrals from acute-care partners, Zimmet noted.

“Hospital discharge planners are strongly advising only going into the private rooms, and to wait for the private rooms,” Zimmet said. “People do not want to go into nursing homes unless they’re getting a private room, and that forces the facility to cut down the double into a single.”

But while those trends accelerated swiftly, the nuts-and-bolts calculations behind nursing home operations remain the same as they were before the pandemic began — and so many of them revolve around the number of certified beds in each facility.

Multiple expenses, from electronic health record software to linens to rent, are often linked directly to that figure, Zimmet observed, whether those beds are completely full or half empty.

At the same time, states that use cost-based reporting to set their Medicaid rates will often implement an occupancy-floor element to avoid rewarding inefficient providers, Zimmet noted in his company’s analysis — essentially penalizing operators a set number of dollars per day in payments for having a skewed ratio of occupied to certified beds.

“The state has a vested interest in having full nursing homes — not having too many that are struggling — because of the way they reimburse,” he said.

For all those reasons, it could be time for operators to seriously mull approaching their state health departments about voluntarily giving up a certain portion of beds. Zimmet himself is already aware of several, although the move requires a significant shift in mindset.

In most states, individual bed licenses can be something of a commodity: With certificate of need (CON) laws governing the number of beds that can legally operate within a state or region, any new development or expansion of nursing home capacity must be offset by contraction elsewhere, or changes to the total number of allowable beds statewide.

That makes each certified bed a financial asset, a ticket to revenue from the federal and state governments along with private payers. Summaries of skilled nursing facility transactions often note the value of a building in terms of total dollars and price per bed, for instance, and that number can give observers a quick window into the general operational health of a building or chain.

While it may take investors and operators some convincing, states themselves will be more than happy to take back some unused bed capacity, Zimmet noted. Officials could also be open to an arrangement in which the beds are surrendered with the caveat that they can be restored if needed again, he noted: If demand suddenly returns to pre-pandemic levels, neither the operator nor the state would want to have a capacity shortfall in their post-acute and long-term care systems.

Consumer preference for private rooms, along with the pandemic reality of cohorting residents and staff, is unlikely to change anytime soon, and a slower-than-expected vaccine rollout is already prompting predictions of a delayed rebound in volume.

As operators look out onto an uncertain 2021, addition by subtraction could be a positive strategy both clinically and financially.

“It’s all about a new way of thinking,” Zimmet said. “Nobody’s giving up a bed — but when you’re 50% occupied, there are a lot of reasons to give up that bed.”