Nursing Home Industry Recovery Requires More Pain and Innovation

It’s hard to pin down how nursing home operators should be feeling as the end of the year approaches.

The best way I could describe it, one week after attending the American Health Care Association/National Center for Assisted Living (AHCA/NCAL) conference in Nashville, is a combination of optimism and pessimism that fluctuates depending on the day.

By the end of the first day of the conference, I was frankly surprised by the overwhelming sense of positivity cast toward the sector by industry leaders.

AHCA/NCAL President and CEO Mark Parkinson told a room full of long-term care providers that he was confident the sector was going to recover — not in small part due to the government’s “unspoken commitment and agreement” to fund the sector.

Had the government not stepped in when it did in the early days of the pandemic, the industry “would’ve gone broke.”

“But the government didn’t do that. They provided us tens of billions of dollars at the federal and the state level. Again, not enough that we’re suddenly having a bunch of money, but enough to keep our doors open, and I believe the government will continue to provide those funds,” Parkinson said during the presentation.

One day later, however, in a meeting with members of the media, he cast a different tone.

Parkinson admitted that while the clinical issues related to the Covid-19 pandemic that devastated the nursing home population are “largely behind us,” the business side has “probably never been worse.”

As to where that leaves nursing home executives, I believe there were a few key takeaways that operators should keep in mind from AHCA/NCAL’s annual conference:

• Workforce challenges will continue to hold occupancy recovery back as a whole, but innovative operators are providing reasons for optimism

• Progress will only come with pain for many operators

• Even though the PHE has been extended again, providers must be ready for government support to enter a post-pandemic phase

What’s standing in the way — and how to break through

In explaining why the business of skilled nursing is so bad, Parkinson pointed to two challenges: Occupancy and workforce.

Occupancy gains have only amounted to roughly 2% to 3% for the sector overall, meaning it could take until the end of 2023 or even the beginning of 2024 before nursing homes reach pre-pandemic levels, he said.

The health care sector as a whole returned to pre-pandemic workforce levels in September with the addition of 60,000 jobs, according to the latest data from the Bureau of Labor Statistics — but the skilled nursing industry continues to lag far behind.

Nursing homes did see some job growth last month, up 18,300 jobs from its pandemic low back in March, but the sector still remains 220,200 jobs below pre-pandemic levels.

Breaking it down even further, and perhaps some good news: The share of skilled nursing properties reporting nursing staff shortages declined from 28% in January to 20.8% in September. Similarly, those reporting aide shortages declined from 29.7% to 21.6% over the same time period, according to Centers for Medicare & Medicaid Services data compiled by NIC Analytics.

Operators like The Evangelical Lutheran Good Samaritan Society are still looking to fill roughly 2,000 open positions, but are seeing some success in a few of the recruitment and retention tools they’ve developed.

So, count Good Sam CEO Nate Schema as part of the optimist camp. When we caught up last week in Nashville, Schema admitted that while Good Samaritan still has a long way to go in its recovery, he remains “bullish and optimistic” and feels that the challenges have also created some new innovations in the space.

Some of the workforce innovations he shared include a director of nursing (DON) in training program, a national certified nursing assistant (CNA) online program for the 22 states where it operates and the virtual care center as part of its merger with Sanford Health.

Accura HealthCare has innovated in ways such as taking on the increase in insurance costs — amounting to roughly $500,000 — that staff would have otherwise had to pay, in hopes of continuing to remind the staff of their sense of place and purpose in the company.

The company has also focused on the leaders in each of its buildings and has turned its organizational chart upside down on purpose to promote the voices of the staff.

It all comes back to Accura’s mission statement: Partners in care, family for life.

“There’s not enough workers out there to staff every single building and so the worker’s have a choice — they have all the power to choose who they want to work for … But the difference is who do you want to work for? Do you want to work for a company that feels like family, or do you want to work for a company that has so many layers of corporate structure that everything is a no or everything is just hard on them,” CEO Ted LeNeave told me.

These kinds of innovations both in recruiting staff and other business adjustments are imperative to surpass industry expectations of a painfully slow recovery.

Operators like The Ensign Group have paved a path toward success by creating a decentralized market model that many have tried to follow.

The regional and local market model has been embraced by other operators as well, with the top 50 largest providers on average operating in six states. Of those 50 providers, many tend to focus on one or two states in terms of local density, according to Stifel’s analysis of recently released CMS data.

Genesis HealthCare is another example of a skilled nursing behemoth that has recently shifted toward a more regional focus. By the end of last year Genesis had 250 facilities in 14 skilled nursing markets across 22 states, a far cry from the more than 400 facilities it had operated as recently as 2018.

When COO Melissa Powell joined the operator Genesis had more than 5,000 open positions. She told SNN back in June that was netting 1,100 hires on a monthly basis, retention has seen slight improvements and census portfolio-wide hovers around 87%.

But as the Genesis example makes clear, innovation alone will not be enough to right the ship for many struggling providers. They are still facing painful decisions that must be made related to issues such as portfolio restructuring and corporate downsizing, which are necessary to maintain margin and care quality.

Take Good Sam. Like many other providers serving mostly rural markets, the company has faced tough calls on shuttering buildings. The not-for-profit senior care giant has had to close 10 buildings over the last 10 months.

Even Good Samaritan is stepping back as it looks toward the future to better define what its strengths are and where it has the most density.

“Where we have a huge hospital presence, where we have a lot of density within our own organization, we have more influence. We’re absolutely looking at where the future lies within the Good Samaritan Society and where we continue to grow our mission,” Schema said last week.

State and federal support changing

In the short-term at least, the good news is that the public health emergency (PHE) was extended last week until at least early January 2023, which again buys time for operators to continue with their recovery efforts with federal government support.

The PHE has provided pandemic relief for nursing homes ranging from telehealth flexibilities to elevated Medicaid payments to the continuation of the three-day stay waiver.

The reality is the PHE will come to an end — perhaps sooner rather than later — and in the meantime there doesn’t appear to be much hope when it comes to meaningful policy action on big issues like immigration.

Clif Porter, senior vice president of government relations at AHCA/NCAL told reporters that if any legislative priorities related to workforce get passed in the near-term it will be as part of a larger funding package put together at the end of the year.

Looking past the midterm elections and the end of the year, Parkinson again stressed the importance of immigration reform for the sector to move past its workforce woes – though that continues to remain an unlikely option given the divisiveness of the issue and the partisan split.

Instead of the “big tectonic move[s]”, the association needs to do everything it can to impact workforce issues and challenges “bit by bit and byte by byte,” Porter told reporters.

It seems the biggest reason for optimism surrounds making Medicaid rate increases tied to the pandemic and the PHE permanent across the country. Some states have already taken such action, but right now there are 12 states that have Medicaid add ons tied to the end of the declaration.

“What we hope that all 50 states do is to rebase their rates, to take a look at the actual current cost of taking care of people in the Medicaid setting – not relying upon numbers that in some cases are 10 years old and they’re just attaching an inflation number to it … So we would hope that every state would actively consider rebasing those rates,” Parkinson told reporters.

Our team has been closely monitoring actions on this front, and have been pleasantly surprised to see the work many state legislatures have undertaken to develop funding packages that are tied to staffing — but there’s still a lot of work to be done.

The clock is ticking and providers have to be ready for what comes next, including tougher fights for reimbursement and favorable regulations on pressing matters like staffing minimums.