Finance leaders have updated their outlook on the nursing home sector – with data points worsening as funding cuts and inflation continue to do lasting damage to the industry.
About 47% of nursing home residents are now at risk of displacement due to financially imperiled facilities; roughly 417,000 residents may be relocated, according to a performance outlook conducted by Clifton Larson Allen (CLA).
The report, released on Wednesday as a follow-up to another CLA outlook analysis, was prepared in partnership with the American Health Care Association (AHCA).
CLA’s previous report, published just two months ago, estimated 40% of nursing home residents risked displacement, or 400,000.
“The data continues to raise serious concerns about the ability of nursing homes to weather this economic crisis, especially as federal policymakers consider devastating cuts to the sector,” AHCA President and CEO Mark Parkinson said in a statement.
Parkinson refers to the potential 4.6% cut to the Patient-Driven Payment Model (PDPM) as part of the proposed final rule. The Centers for Medicare & Medicaid Services (CMS) unveiled the rule in April and plans to finalize any changes by July.
“There are hundreds of thousands of residents, particularly minorities and those with complex care needs, whose access to care is in jeopardy should more facilities be forced to close their doors,” Parkinson added. “At this critical moment, we need government investments — not cuts — to ensure residents can continue getting the care they need.”
The CLA report found financially at-risk nursing homes tend to be located in counties that serve a higher percentage of racial and ethnic minority populations – 20.4% – compared to facilities in counties that are not at financial risk, about 13.7%.
“Erosion in financial performance creates the potential for a greater negative impact on hundreds of thousands of residents, especially racial and ethnic minority populations,” Deb Emerson, principal at CLA, said in a statement. “The entire industry will be faced with the difficult task of balancing available capacity while maintaining health equity and serving the health needs of nursing home residents.”
Pre-pandemic, about 16% of nursing homes were at risk of closure, according to the CLA report. By county, 68% are now considered to house financially at-risk nursing homes, compared to 37% in 2019.
“The significant increase in counties with SNFs at financial risk creates a distinct set of national, state, and county challenges,” CLA authors said. “All states and most counties will be faced with the difficult task of balancing available capacity while maintaining health equity and serving health needs of nursing home populations.”
The Minneapolis-based firm surveyed more than 330 facilities across 24 states.
Increased fixed costs due to inflation has escalated such risk, CLA said, with general inflation for nursing home goods and services jumping to 8.5% between March 2021 and March 2022. Between February and March of this year alone, inclination increased by 1.3%.
Coupled with inflation, labor costs for certified nursing assistants (CNAs), licensed practical nurses (LPNs) and registered nurses (RNs) have ballooned between 28% and 34% since the onset of the pandemic, and that’s just hourly wage increases.
Temporary or contracted nurse use has more than doubled among all nursing categories since 2020, according to the report.
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