Last July, Ted LeNeave, Chief Executive Officer at Accura HealthCare, got a call from the Iowa Department of Inspection and Appeals. A nursing facility in Sioux City was shutting its doors, leaving 56 nursing home residents in limbo.
The state asked Accura, which operates 22 facilities in Iowa, to temporarily manage and close the facility. Although the state mandates 60 days to rehouse nursing home residents, LeNeave said his team was able to do it in eight.
But it wasn’t easy.
“It was a very emotional process,” he said. “You have residents that lived at that nursing home for many years. And family members that would come and visit them. Some of them were within walking distance that now their loved one had to go 30 to 45 minutes away.”
LeNeave estimated that many of the operators in Iowa were only at 50% occupancy at time of closure.
And Iowa is far from the only state where such situations are becoming all too common. Operators and advocates in states including Wisconsin and Montana describe similar scenarios that are creating a crisis in nursing home access for patients, while operators that already are under financial and operational duress are facing further strains caused by closures.
While the closures have meant higher occupancy for the operators that do manage to remain functioning, their revenue is negatively impacted by inflation, labor issues and higher costs to run their facilities. As a result, some operators have found themselves taking on larger amounts of debt just to stay afloat; LaNeave himself took on about $5 million in personally guaranteed debt last year.
LeNeave said that when a building closure is announced, staff quickly begin to look for other jobs.
“Taking that long to close a facility is not healthy for the residents,” he said, adding that despite the relative efficiency of the transition, there was still a lot of pain for everyone involved. “People who were once together and maybe had been together for two, three years in that building now are in different buildings and they’re losing those friendships.”
For one resident, moving facilities would mean he could no longer see his wife, who walked to visit him every day.
“We did have a nursing home about three blocks down the road,” LeNeave said, which would allow her to continue visiting. “But we were completely full – so we worked it out with the State Health Department to allow us to go above our license by one so she could still see her husband every day.”
Still, many residents will not be afforded this chance.
The Iowa Health Care Association reported that 19 nursing homes have closed since 2022, the majority in rural areas, with five more slated to close this year. The closures resulted in the loss of 562 health care jobs and a reduction of 859 licensed beds.
“Years ago, I think every small town wanted a nursing home,” he said. “So, farmers in every small town got together and said let’s all invest and build a nursing home.”
The problem now, he said, is that there are too many nursing homes in the state with low occupancy levels. The facility Accura took over closed because it was not able to make payroll and went into receivership.
“I think a lot of people will say, ‘Well, closure is good if you have too many nursing homes,’” he said. “But what it is doing to families has been very hard for us to witness.”
A long road to recovery
At Accura, LeNeave made the decision to personally take on about $5 million of debt last year to keep the doors open at his facilities.
“I had to make a decision last year: do I borrow this money? Do I put pressure on my vendors and ask them to give me greater terms to pay them back over time, so I can keep my doors open until I can get to a better reimbursement structure?” he said.
Ultimately, he decided it was worth it; and since Accura has a good relationship with lending institutions, he was able to procure the funding. But he said most local operators in the state don’t have the ability to borrow money, and some have already borrowed against their farms.
“They will lose part of their farms if they close and that’s why you haven’t seen even more closures,” he said. “If people didn’t have as much debt, they would probably go ahead and close these buildings.”
LeNeave said that although a lot of the immediate hardship of the pandemic has passed, the state is still recovering.
“In these rural places, it just takes a long time to recover,” he said. “You don’t recover that census in a month or two, or even six. In some cases, a rural facility that is 40 beds that might have lost 20 residents during COVID. And if you’re only admitting one a month it’s just going to take a year or two to recover from that.”
Medicaid reimbursement issues
LeNeave said the closures in the state have resulted in an increase in occupancy levels for his facilities, which are now 70% to 95% occupied. Yet that hasn’t necessarily helped his bottom line.
“I have facilities that are at 95% occupancy that are still losing money, because of the [Medicaid] rate and inflation,” he said. “While the closures have helped some facilities with occupancy, it didn’t fix their problem. Because if you’re losing on every patient and you’re taking in just bringing in more patients, you’re still losing on those patients as well.”
LeNeave said until the rate issue gets fixed, just increasing your volume isn’t going to help existing providers in the state.
“Our rates are locked in for two years,” he said. “If inflation increases by one or two percent during those two years, you can manage it. But when inflation increases 15 to 40 percent during a two year period, and your rates are locked, and your margins are already at a two or three percent profitability – that’s why we’ve got a problem here in Iowa.”
For context, the hourly Medicaid reimbursement rate in the state of Iowa is about $240 per day, $40 of which residents pay through Social Security. Of the remaining $200, the federal government contributes $120 and the state of Iowa funds the remaining 40%, which is $80 per day or $3.33 per hour.
Kris Hansen, CEO at Western Home Communities, said the rate should be increased to $4.33 an hour. The legislature is going to review rate increases this July.
“We’re in a rebasing year so hopefully the legislature and the governor are going to allocate some additional funds to help,” he said. “But of course, that won’t kick in until July. And we’re hopeful that some of the moves that the department is making will happen a little quicker than that.”
Staffing challenges
Western Home Communities operates four buildings, three of which are skilled nursing, in northeast and central Iowa.
“We’ve decertified a number of Medicaid licensed beds,” he said. “We’ve actually taken 20 out of use and decertified them from both Medicare and Medicaid and are in the process of converting some of those to assisted living.”
Beyond reimbursement and inflation, Hansen said the company is limited in the number of residents it can take in due to staffing and cost challenges.
“If you were going to fill the rooms up, you’d have to use more agency … One of the biggest issues is just brand risk around quality, and quality risk is really about our residents,” he said. “Of course, we don’t want to put our brand at risk when we can do things the right way.”
To cope with staffing and occupancy challenges, Hansen consolidated his assisted living buildings, but staffing remains an issue.
“Whenever we would move our staffing wages up to try to retain and or attract talent, the agencies would go up even more,” he said.
Still, he is hopeful that a bill the state passed regarding staffing agency transparency will begin to give operators a leg-up.
“We’re just finally getting to a point where we’ll be able to gather some data on that to kind of show what’s going on,” he said.
Challenges beyond Iowa
Other states are feeling the impact of closures as well. In Montana, 11 facilities closed last year, about 16% of the state’s nursing homes. Steve Laforte, Director of Corporate Affairs & General Counsel at Cascadia Healthcare, said Cascadia has taken over some struggling facilities in the state, including a facility in Libby, a rural part of the state.
“When we took it over it was losing a lot of money and not taking care of patients,” he said. “Now, it’s a five star. And it’s self-sustaining for the most part because it’s serving such a massive area, because there’s not a lot of SNFs in the area.”
Still, he said, the dwindling number of nursing homes in the state is problematic.
“I wish there was something that was a safety net that would allow a good operator to come in and help transition a facility,” he said. “What’s ultimately happening is they’re just running into the ground, selling them for the real estate and then losing the beds and losing the opportunity to serve the community.”
Rick Abrams, President of the Wisconsin Health Care Association, said the value of keeping rural nursing home facilities alive goes beyond just serving a patient population.
“Wisconsin is a very rural state, and if I go out and travel the state to see my members, you know, so many of these facilities, especially in rural areas, I mean, they’re community assets,” he said. “The people who work there have lived in the community for years, but people who are residents, have [also] lived in the community for years, and we’ve got to keep those facilities viable.”
Brent Willett, President & CEO at Iowa Health Care Association, said the group is working to better understand the full impact of closures and admissions limitations on rural Iowa.
“Closures are one thing; the impact on the local community is traumatic and significant,” he said. “But in terms of the threat to the stability of the continuum of care, up and down the acute and post acute [spectrum], I think that we’re certainly starting to detect a level of anxiety from our hospital partners about placement for residents.”
