Nursing Home Closures Hit Smaller Markets as Financial, Staffing Crisis Deepens Across Industry

Skilled nursing facilities situated in small markets across the country have faced mounting pressure to sell or close after more than two years of a pandemic, an ongoing workforce crisis and federal reform on the horizon with no monetary support.

If a closure does happen, that leaves residents and their families sometimes separated 40-plus miles from each other, or families having to make the tough decision to move away to be closer to their loved ones.

“It’s something that hits home for us … 70% of our communities are in what I would describe as rural communities,” said Nate Schema, CEO of The Evangelical Lutheran Good Samaritan Society. “We’re talking towns of anywhere from 600 to 1,500 people. In some of these communities that we’ve been serving for 50 to 100 years, we’re often one of the largest, if not the largest employer left in the community.”

Advertisement

In many of these smaller communities where the age demographic tends to be older, there “really isn’t much of a community left” once the nursing home workforce leaves, according to Cory Rutledge, managing director for CliftonLarsonAllen (CLA).

“The community really is at stake in some of these situations, because they are either the largest employer or the second largest employer,” added Rutledge.

Good Samaritan has had to close or sell nine facilities in the last eight months, the vast majority of which were in rural communities.

Advertisement

“During the pandemic, it was an operational crisis. It truly has turned into a workforce and a financial crisis,” noted Schema. “Those stimulus funds aren’t there to support us and to buoy us up anymore, and you know, quite frankly, the occupancy hasn’t returned. Now we’re struggling to find staff.”

The American Health Care Association (AHCA) has projected 400 SNF closures in 2022, with nearly 240,000 job openings as a primary driver. Good Samaritan currently has nearly 2,000 job openings – on average, that’s roughly 14 openings per facility.

Schema and other leaders at Good Samaritan are figuring out ways to transform themselves in order to serve such communities for another 100 years.

Medicaid loss is felt more in small communities

Simply put, Medicaid isn’t keeping up with the cost of care in many states, Schema said – it has reached an unsustainable level in small markets where agency costs are piled onto existing shortages.

In smaller communities, Medicaid shortcomings are felt more acutely since the nursing home in these areas serves all people, regardless of payer source.

“An urban center in Minneapolis or Chicago, they might have the ability to say, ‘I’m going to cap the number of Medicaid residents that we serve to 10%.’ There’s so many people that they can do that, especially if they’re a quality provider,” explained Schema.

Even so, in smaller states like Rhode Island, 87% were considered at financial risk, or at high risk of closure, with operating losses at 7.5% or more, according to a report published by CLA and commissioned by AHCA.

That’s higher than the national number of nursing homes at risk of closure – 47%.

John Gage, president and CEO of the Rhode Island Health Care Association, attributes state statistics to chronic underfunding of Medicaid, coupled of course with the workforce shortage and inflation.

The state has seen five nursing homes closures in two years, a “staggering number,” Gage said. Thirty-plus years ago, the state had 113 nursing homes; that number is now 79, he added.

As a larger organization, Good Samaritan has been able to find agency staff from across the country to stem further closures, but facilities can only pay agency prices for so long before leaders have to reflect and come to the conclusion that this won’t work long-term, Schema said.

Operators must look to immigration to help fill the gaps, and let legislators know how expedited training programs for staff tied to the public health emergency got staff acclimated to the community that much faster, according to Schema.

“I’ve often said it’s like we’re paying physician wages now for caregivers, when you’re paying $90 to $125 an hour for a caregiver,” added Schema. “There are thousands and thousands of people that are wanting to come to the United States and would love to have the opportunity to work in the healthcare sector and be a nurse here.”

Schema, along with other members of the American Health Care Association (AHCA) said much the same on Capitol Hill this week, as part of the association’s congressional briefing.

“We have to be able to open that pipeline a little bit more broadly, in my opinion, so we can get those people in there, so we can prevent future closures and consolidations in these small rural locations,” Schema said.

Dried up access to care, knowledge

While Good Samaritan has been able to retain anywhere from 50% to 75% of residents and staff from closed locations, there’s still “absolutely” been an impact on the immediate community, Schema said.

Most recently, the organization made the decision to close their Lennox, S.D.location and move residents and staff to nearby Sioux Falls and Canton. About 75% of residents and 50% of staff opted to stay with Good Samaritan so far.

Good Samaritan Society-Lennox administrator Luke Wanous said residents want to go where their favorite staff members are going, and vice versa, emphasizing the close relationship between residents and staff at the 53-bed facility.

In terms of the closure’s impact on the wider community, Wanous said it remains to be seen how city officials handle the change.

“I think the health care system is the focal point of any community that you’re in, doesn’t matter if it’s a town of 2,000 or a town of 200,000,” said Wanous. “It’s going to be tough for the community of Lennox to grasp that this staple of their community is not going to be there anymore, an employer is no longer there; I don’t know what the plans are for this location.”

The Lennox location will officially close on July 15, with residents settled in new locations long before, Wanous said, who plans to evaluate leadership opportunities with Good Samaritan once the consolidation is complete.

Wanous said a lot of choices are out of their control when it comes to the viability of small community nursing homes; the state legislature is tasked with addressing an insufficient Medicaid rate and soaring agency costs.

“I know that there’s a need for nursing homes in every community. We need somebody to care for our loved ones,” Wanous said.

Ultimately, access to health care facilities is going to deteriorate unless the industry intervenes in a more meaningful way, Schema added.

“Whether that’s for a reimbursement overhaul, long-term care reform – as a whole access will look different,” said Schema.

The same can be said for leaders that are well prepared for any updates to regulatory compliance in the field, according to Rutledge.

It’s much more difficult for nonprofit, independent facilities in such areas to remain in compliance, more difficult to manage the changes the industry has experienced in the last two-plus years, he said.

“It’s just categorically more difficult than it was in say 2012 or 2017,” added Rutledge. “[Small nonprofit nursing homes] don’t really have the same level of resources to be able to navigate those challenges, like a larger organization would.”

Recognizing that there could be other pathways, including but not limited to selling the facility to a larger for profit organization, Rutledge said, is really important if these organizations are looking to survive.

“I think it’s easy for nonprofit boards to demonize for-profit entities, but frankly, if there’s a desire to keep the skilled nursing facility up and running in a community, and resources to do that, that seems like it’s at least worth considering as a viable option,” added Rutledge.

CLA has found that organizations with 11 to 40 facilities – mid-size regional players – perform better financially than single sites, or those with one to 10 facilities, according to 2020 data.

“What that speaks to is that there could be a more sustainable and viable path forward in certain instances, with a regional player,” said Rutledge.

Telehealth’s role in small markets

Schema applauds the Biden administration’s efforts to bring care closer to home via community-based services, but the amount of miles between communities “looks very different” in rural America.

Good Samaritan and its parent company, Sanford Health, are working on a more permanent virtual care strategy to launch in the summer for its facilities. Philanthropist and Sanford Health namesake T. Denny Sanford invested $350 million to create the Sanford Virtual Care Center.

Schema plans to use telehealth to connect with people in their home and then augment that with additional care delivery systems and home health. Primary care will be brought to small communities lacking a hospital or clinic, he said, with Sanford satellite clinics starting in the Midwest.

These clinics will be launched in “deeply rural communities,” added Schema. Satellite hubs will be manned by a registered nurse (RN) or administrative personnel, with lab access and specialists available with a virtual care platform.

While the platform is in its infancy stages, Schema said the ultimate goal is to bring additional services and the highest level of care wherever the residents and communities call home. The virtual care center will be headquartered in Sioux Falls.

“That doesn’t happen overnight. It certainly doesn’t happen without the right investment into the long-term care space,” he said.

Companies featured in this article:

, ,