Nursing homes are battling a continued workforce crisis while being three years deep into a pandemic that has disproportionately affected its residents.

Looking ahead to next year, as many as 40% of residents may be displaced, as the sector’s operating margin is projected to be between -3% and -8%, according to a report released by professional services firm CliftonLarsonAllen (CLA), in partnership with the American Health Care Association/National Center for Assisted Living (AHCA/NCAL).

The industry is being called out by the Biden administration too, with proposed reforms issued last week that call for minimum staffing levels and financial transparency, among other changes, all without any indication of financial aid for providers attached.

That’s why stories of nursing home financial successes, especially one of a not-for-profit standalone facility, are unique given all of the challenges nursing homes have faced the last few years.

Greenwich, Conn. nursing home The Nathaniel Witherell, the last of its kind in the state to be run by a municipality, was able to extract itself from years of financial turmoil to report a predicted $1.1 million in profit by June.

The 202-bed facility had been bleeding $5 million to $7 million a year, according to Greenwich First Selectman Fred Camillo.

Witherell Executive Director John Mastronardi said prior experience as the assistant administrator of another not-for-profit nursing home helped him evaluate Witherell’s business model from a different perspective.

Mastronardi was kept on as part of a transition team, when the not-for-profit was acquired by a for-profit nursing home chain, an experience he said was “really uncomfortable.”

“The hard lessons that I learned from that were before the for-profit signed on the dotted line to close the deal … they said you’re too richly staffed, you’ve got to cut 30% of your staff,” Mastronardi said. “I went in with the rest of the leadership team into the auditorium. We called in a combination of about 40 nursing staff CNAs, LPNs, RNs and we told them that this was their last day, we had to let them go.”

Mastronardi told Skilled Nursing News that if he was ever in that position again he would do things differently, but he also recognized that the for-profit’s close scrutiny of expenses like vendor contracts is something a not-for-profit should consider.

“There are things that we can learn from for-profits,” said Mastronardi, who has always worked in the not-for-profit space. “It’s paying really close attention to your staffing, are you appropriately staffed?”

Mastronardi was brought on as Witherell’s executive director in late March 2020.

Right sizing

With the advice of his director of nursing and CFO, Mastronardi made the decision to cut 10 nursing positions from the Witherell roster – three nurse managers, three registered nurses (RNs) and four certified nursing assistants (CNAs).

“We evaluated nursing, because nursing is clearly the largest department in a long-term care facility,” Mastronardi said. “The strategic plan the team created when I was hired for the position was to right size, which we did.”

Staff cuts will make up $950,000 in savings per year, Mastronardi said, including salaries and benefits.

The second task for Witherell leadership was to start looking at its big contracts for outsourced vendors: food services management, rehab therapy and pharmacy being the big three, Mastronardi said.

“We reviewed the contracts, the original contracts, and the original requests for proposal and what we were really doing was giving the incumbents in those areas the opportunity to negotiate better terms, but at the same time they had to bid on the contracts,” explained Mastronardi. “We didn’t automatically renew those contracts. The company got a chance to bid along with competitive bids from other vendors.”

Conservatively, the RFP process would save the facility $1.5 million a year, Mastronardi said.

The Witherell also established a group purchasing organization, saving the facility $215,000 a year. The facility plans to better manage overtime, another $200,000 in savings annually.

The last reworked business aspect was the Witherell’s pharmacy drug formulary, or a list of generic and brand-name prescription drugs covered by a health plan. By standardizing this list of drugs, the Connecticut facility is likely to save another $100,000 per year, Mastronardi said.

“All of these are what I term ‘unglamorous,’ added Mastronardi. “It’s they’re things that, oftentimes, just get away from people and organizations.”

For-profit lessons in a not-for-profit world

In the case of Witherell, Mastronardi did have to make staff cuts, but he also looked at other ways the facility could save money and create efficiencies. The Witherell team turned a more critical eye toward vendors and sought to better manage overtime.

“I kind of look at it almost like corporate forensics,” Mastronardi said. “I worked with the for-profit and watched the way that they managed. Everyone looked at every single expenditure, every single process assiduously and reevaluated everything.”

There’s great value and great opportunities to do better financially without negatively impacting the kind of care you’d like to give, Mastronardi added.

“All of these strategies are time and battle tested; They’re designed to be sustainable,” Mastronardi said.

The not-for-profit mission was never about the bottom line, Mastronardi said; that can lead to overstaffing in the not-for-profit setting, unnecessary overtime and perks.

Charge nurse pay, for example, was cut for Witherell staff – originally, a nurse would get paid extra if assigned to a short-term rehab unit. Witherell leadership told nurses eligible for such pay that they should be able to deliver care no matter where they go or what unit they’re in, Mastronardi said.

“Every single dime counts, when you’re operating on these kinds of razor thin profit margins,” he added. “It’s painful. It’s hard work. But ultimately, I believe that’s the work that we’ve got to do as not-for-profits in order to survive.”