2022 Skilled Nursing Outlook: No Labor Relief In Sight, Providers Eyeing Diversification Strategies

Staffing is unequivocally, and unsurprisingly, the top challenge for the skilled nursing industry in 2022.

That’s according to the Skilled Nursing News 2022 outlook survey, conducted online late last year as a way to identify the top sources of concern and opportunities leaders saw in the year ahead.

Labor challenges are not only widespread, but survey respondents expect the problems to be long-lasting — and this could weigh on occupancy. But providers are pursuing a variety of business strategies to adapt for the future, including through new ancillary services and health care partnerships. Meanwhile, private equity continues to dominate the anticipated investor mix.

Be sure to download the report to see the full set of results — and where your organization stacks up against the crowd.

Staffing challenges

Nearly 59% of respondents said maintaining staffing levels would be the greatest COVID-related challenge in the next year, followed by 16.5% who said occupancy declines. But looking past the pandemic, an overwhelming 82.2% of respondents said staffing concerns would remain top of mind.

Several short and long-term options to curb the industry’s staffing crisis have been identified – increased pay, better reimbursement, creating flexible schedules for current staff, hiring workers from overseas, reining in staffing agency prices, the list goes on – but there’s no silver bullet.

Survey respondents don’t expect the staffing climate to improve anytime soon. Approximately 41.5% of respondents don’t see things getting better until after 2023, followed by 28.6% who said 2023 and 21.7% who indicated the second half of 2022.

Only 8% of respondents expected the staffing climate to improve in the first half of this year.

The industry needs to do a better job at promoting skilled nursing as a career path, especially at the certified nursing assistant (CNA) level, said Steve LaForte, director of corporate affairs and general counsel for Idaho-based Cascadia Healthcare, during SNN’s Reputation & Referral Summit last week.

“How do we get people into our buildings at the CNA level? How do we promote them and then promote a career path to LPN or RN, not for everybody, but for the people who want it, and create that incentivization that this is different — this isn’t just a job, this is a career, and make it worthwhile for those people and have it commensurate with the importance of the work,” he said.

Operators have also had to get creative when matching acuity levels with the number of available staff to safely manage the current staffing crisis.

Bill Chase, vice president of business development for Monarch Healthcare Management in Minnesota, said during SNN’s Reputation & Referral Summit that some of their facilities have shifted to lower acuity “because you can take care of more with less.”

“So you try to figure out the staff you have, what you can safely take care of and who you can safely take care of,” Chase said. “We’re in sort of a nice spot because we have quite a few facilities that we can work with that and move people around when we need to and move our staffing around.”

The nursing home industry has lost more than 420,000 jobs since the start of the pandemic, according to the U.S. Bureau of Labor Statistics.

Staffing and occupancy often go hand in hand. If nursing home operators cannot fully staff their buildings then they are unable to increase their occupancy and take on additional residents.

As of the end of October the industry’s occupancy rate sat at 75.4%, according to recent NIC MAP data released by NIC MAP Vision. Occupancy still lags behind pre-pandemic levels; it was at 85.8% in February 2020.

Skilled nursing occupancy recovery may face an elongated recovery path, according to a Jan. 30 note from Mizhuo Securities LLC.

“Given the current slower pace of demand as well as labor issues limiting operators’ ability to admit new residents, we see the potential for a recovery to get pushed into mid-2023,” the analysts wrote.

The note referenced a recent physicians survey conducted by Mizuho’s Healthcare Services analyst Ann Hynes, which showed that among all specialties, 48% of physicians estimated that senior elective surgery volume would be lower in the first financial quarter of 2022 compared to the fourth financial quarter of 2021.

No single way to invest in the future of SNFs

This year it remains clear that there is not just one dominant new business strategy that SNN’s survey respondents are pursuing.

Similarly to 2021, deepening relationships with accountable care organizations (ACOs) garnered the most interest with 26.6% of the respondents.

But that was followed by investing in specialty care services (24.6%), launching an ancillary business (18.5%) and Institutional Special Needs Plans (I-SNP) with 16.9%.

The number of ACOs in the Medicare Shared Savings Program (MSSP), increased to 483 in 2022, compared to 477 in 2021. This however was fewer than in 2020 when there were 517.

Even though ACOs have not historically had the best relationship with the skilled nursing industry, now may be the time for providers to reconsider their models.

Other operators are growing their clinical capabilities.

Some skilled nursing operators like PruittHealth are launching their own SNF-at-home type of service, while others like Trilogy Health Services are taking their subsidiary business to new heights.

Dubbed PruittHealth Family First, the 10-county pilot program is a move that is seen by CEO Neil Pruitt Jr. as a must, as skilled nursing operators adapt to a different SNF patient.

“There’s obviously more of a demand and shifting consumer expectations for home services,” Pruitt recently told SNN. “I think the people that are going to survive post-pandemic are going to be the ones that are willing to listen to the consumer and model their product to meet the changing consumer demands.”

And when it comes to Synchrony Health Services’ expanded launch, Trilogy Co-Founder and former CEO Randall Bufford expects the bundled service provider will be enticing to operators throughout the care continuum.

Synchrony plans to start its lab services division in the second financial quarter of this year. The division will provide routine and stat labs, including chemistry, hematology, coagulation and urinalysis.

Private equity reigns supreme

For the last three years, SNN outlook survey respondents have declared private equity as the biggest buyer of skilled nursing assets.

While still at the top this year with 36.2% of respondents, private REITs (26.2%) and public REITs (11.2%) are catching up compared to years prior.

In 2021, nearly half of all respondents (47%) believed that private equity would be the biggest buyer of skilled nursing assets.

LaForte said when Cascadia was first starting out, REIT capital was what the company gravitated toward to assist its growth. Now that Cascadia has gotten bigger and developed a balance sheet, its leaders have started looking into other capital providers.

“We will next week grow one of our REIT relationships and at the same time we’re also going to be purchasing some facilities, so I think it’s a mix, I think it’s a healthy mix,” LaForte said.

In general, the skilled nursing industry has access to “great financing” sources that will pursue alignment with operating partners, he added.