Top Trends That Will Shape the Skilled Nursing Sector in 2024

Margins squeezed by interest rates and inflation, staffing shortages amid a draconian staffing mandate proposal, an invasion of Medicare Advantage and mixed efforts at adapting to Minimum Data Set (MDS) changes are among a litany of the challenges facing the skilled nursing sector at the start of 2024.

However, all is not doom and gloom – and generally, the sector’s ability to be resilient and bounce back from pain is still intact. Moreover, industry leaders are encouraged by an overall improvement in fundamentals for the sector, including better occupancy rates.

Meanwhile, a source of negative pressure – high interest rates as the U.S. Federal Reserve consistently raised them over the course of 2023 to curtail inflation – promises to ease. And dealmaking, also dampened in 2023 by interest rates, could be on the upswing for some investors that have recently been sidelined.


Headwinds for the sector in 2024 are related mainly to staffing shortages and the possibility of tighter regulation, with the federal staffing mandate looming over the industry. However, it must be noted that advocacy efforts are alive and kicking, and ready to bring down the proposed staffing mandate – or at least cause it to be tamed.

All said, the Skilled Nursing News team expects the following trends and predictions to have the largest impact in 2024 – albeit in a much more positive manner than in the past several quarters. And although overall, SNN is predicting the sector’s turnaround to continue in 2024, troubles are far from over.

Skilled nursing will make headway in Medicare Advantage battles

In 2024, expect policy makers and nursing home advocates to notch some wins in their battle against problems associated with Medicare Advantage plans, including what some call a shadowy process of denials.


As 2023 draws to a close, Medicare Advantage has almost 50% penetration on average across the U.S., with almost 70% penetration in states like California. The growth of MA plans has been challenging for operators, impacting margins and exposing problems that include “astronomical” claims denials for service providers.

Legislators seek to make the process of denials more transparent and urge for more clinician involvement. On top of that, the back and forth of the MA claims process has added an “insane” amount of administrative burdens during a time when nursing home staff is stretched thin.

And as MA penetration has increased, skilled nursing operators have felt the sting of lower payment rates as well as access issues for people trying to access SNF care. The access issues are linked to MA companies seeking to cut back on SNF use in favor of lower-cost options such as home health.

These trends have led to the SNF sector losing about $275 million annually ​​for every 1 percentage point increase in the total proportion of Medicare beneficiaries enrolled in MA, according to an analysis shared in August by Zimmet Healthcare Services Group.

But, there are reasons for at least cautious hopefulness that 2024 will bring some victories, however small they might be relative to the mega-trend of rising MA penetration.

One of the solutions to watch for in 2024 will be how the industry players scale up to counter the large insurance providers. The American Health Care Association (AHCA) is playing a role here, in helping providers in certain states team up to enhance their negotiating power.

Going forward, providers must work together in this way even if they are competitors, given the size of scale of the insurance companies. Operators also need to move toward “owning our own risk” – through such endeavors as Institutional Special Needs Plans (I-SNPs) – to generate financial upside for delivering cost savings and quality care, according to industry leader Phil Fogg Jr., CEO of Marquis Companies and former chairman of AHCA.

Fogg called the rise of Medicare Advantage (MA) a “major challenge.”

As for federal policy, a key question for 2024 remains what impact CMS’ rule related to coverage will have.

As one hospital system operator – Dr. Christopher Boyle, chief of stewardship and physician advisor services for NorthShore University HealthSystem (recently rebranded to Endeavor Health) – put it to SNN, he is in a wait-and-see mode regarding CMS’ plan to stop MA companies from inappropriately diverting beneficiaries away from SNFs in favor of home health. He fears the rule actually could have some unforeseen negative consequences, but it at least provides some indication that federal overseers are taking concrete steps to ensure SNF access.

The recent lawsuits filed against UnitedHealth (NYSE: UNH) and Humana (NYSE: HUM) over their use of artificial intelligence (AI) to inform decisions over whether post-acute care is necessary also mean that MA-related court battles will heat up in 2024. And legislators seek to make the process of denials more transparent and urge more clinician involvement.

So as 2024 gets underway, some of the largest insurance companies in the Medicare Advantage space are under increased pressure and scrutiny over their practices related to skilled nursing care. The year ahead will be an important time for the sector to keep voicing concerns and pressing its case for new policies and practices.

Staffing mandate gets watered down

The skilled nursing industry had barely begun to shake off post-Covid staffing pressures when the federal government decided to go forth with its proposed staffing mandate. The Centers for Medicare & Medicaid Services (CMS) released the proposed mandate on Sept. 1 to much criticism and concern, as the industry is far from making up the shortfall of 200,000 workers lost during the pandemic.

Besides the glaring fact that funding is missing – and workers simply aren’t there – a major concern is the exclusion of LPNs.

Hence, the industry is pushing for completely defeating the mandate. It seems unlikely that the final version of the mandate will be released this year, and if it is, expect a watered-down version.

More than 40,000 comments on the staffing mandate — mostly negative — were posted on the Centers for Medicare & Medicaid Services’ (CMS) website amid legislative and advocacy efforts to defeat it. This, as a KFF analysis revealed that more than 90% of the nonprofit nursing homes and 60% of for-profits would fail to meet its standards. According to estimates by advocacy group LeadingAge, if the mandate were to be implemented as proposed, an additional 16,000 additional registered nurses and more than 75,000 nurse aides nationwide will need to be added to the staff at nursing homes at a cost of anywhere between $4.2 billion and $7.1 billion in the first year.

Technically, the agency has until 2026 to release the final version, and it is widely expected that the final rule will be deferred and likely will not see the light of day in 2024. Federal officials might take their time, with some sources saying it could take the agency all of the three years allowed to tweak it.

Whether the industry will be pleased with the changes is another matter. Already, AHCA officials have indicated they will litigate against it, if that’s what it takes to make the mandate disappear, unless the federal government supports it with funds and, miraculously, more workers appear on the market to support it.

But while advocacy against the mandate will continue in 2024, nursing home providers also will – and must – continue to hit the gas pedal on strengthening the workforce.

While agency use is down, it is a concern and will likely continue to be so, especially in less densely populated and more rural markets. That said, some states are clamping down with legislation to limit price gouging by agencies, something likely to gain traction across the nation as agency use continues to be needed but is associated with large costs.

Workforce initiatives are also key in keeping clinical workers at nursing homes, not leaving to work for competitors’ higher paying and less stressful jobs.

Some of these initiatives are already underway, including building a culture of trust to improve retention, offering career development and training. Some are focusing on allowing workers to ultimately work in their specialized fields for greater job satisfaction – a strategy for retention. Other providers are simply paying better wages and adding bonuses.

As for obtaining immigrant nurses – often cited as a solution to alleviate the shrinking pool of clinical workers – legislative efforts haven’t made much headway. This solution is likely to progress little in 2024, since it gets erroneously tied up with the bad publicity around illegal immigration, according to CEO of Atlanta-based nonprofit A.G. Rhodes and LeadingAge board member Deke Cateau.

Expediting immigrant nurse visas, however, did see small scale success but the numbers are still too small for this pool of nurses to make a dent in the staffing problem. It will take political will – and getting past the flawed public image of immigrant labor – for this initiative to succeed, an unlikely scenario given the disdain for immigration among the Republican majority in Congress, Cateau said.

MDS headaches will keep afflicting providers

The latest round of Minimum Data Set (MDS) changes took effect in 2023, but they could cause more consternation than usual in 2024.

But amid lingering staffing challenges, training of clinical workers took a back seat as a thinly stretched staff dealt with incorporating the MDS changes. New quality measures and updates to Five-Star amid this lack of training amounted to what some experts called a “triple whammy” of MDS-related problems to hit the industry. Providers will remain on their toes in getting their staff up to speed — at least for some part of 2024.

This is clear from the experiences that providers have had since the changes first took effect on Oct. 1. SNN has reported on error codes creeping in due to software not being programmed properly to incorporate the MDS changes, and this could be a cause for continuing concerns. Meanwhile, high-risk drug coding in MDS is another area prone to errant coding and requiring extensive training of staff.

Clinical teams at Ignite Medical Resorts shared their overall frustration with SNN over the new MDS changes, including maintaining the accuracy of Section GG, which is used to evaluate a resident’s self care and mobility, as well as sections used to screen for depression.

“From a 500-foot view, I think we’re feeling optimistic, we’re feeling good, feeling prepared but still trying to wrap our heads around our checks and balances,” said Shawna Rainey, vice president of clinical reimbursement with Ignite.

Moreover, a concern on the horizon is the state level handling of the MDS changes. The federal government is allowing states three options. States can convert to PDPM, or move to an optional state assessment (OSA) option – which allows Section G and GG to be running at the same time – and delay their shift until 2024 or 2025. States can also simply freeze their case mix, freeze their rates and not move to PDPM until next year. Any of these scenarios is intended to allow for breathing room, but the mix of approaches is sure to be a source of confusion in 2024, especially for providers with facilities spread out over several states.

“That is essentially dual system management,” Vincent Fedele, partner and director of analytics at Zimmet Healthcare Services Group, told SNN, with some providers managing case mix in two systems, resource utilization groups (RUGs) and PDPM.

For these reasons, providers have shared a wide range of feelings related to the MDS, from some being “overwhelmed” to many being ready to hit the ground running in 2024.

The effects of the MDS changes are sure to add up to trouble, requiring hiring and training of staff with knowledge, something likely in short supply for 2024.

Return of the REITs to drive dealmaking

The price of capital went up in 2023, driven by higher interest rates. And amid stricter regulation and margin pressure, this pushed the industry into a survival-of-the-fittest mode. For 2024, expect more opportunities for the big players as small players continue to exit.

“Struggling businesses hit by these factors are prime acquisition targets for opportunistic investors,” noted 2024’s outlook on dealmaking for health care organizations by audit and advisory firm PwC.

And while large players such as Omega Healthcare Investors (NYSE: OHI) sat on the sidelines in the third quarter, executives shared that the Maryland-based real estate investment trust (REIT) is brimming with access to capital that it plans to use in 2024 – a sign for others to follow.

Some other large players such as Welltower Inc. (NYSE: WELL) have already started to ramp up SNF acquisitions, and the pace should heat up in the year ahead. The Ohio-based REIT has slated $600 million for SNF deals in the upcoming financial quarters in 2024.

So, dealmaking volume should rise over the next 12 months, improving on lackluster activity in 2023. The senior housing and care sector registered the lowest spending towards dealmaking in a decade in the third quarter of 2023, with 115 deals being processed in total, according to data released by LevinPro LTC. About 41% of these transactions were related to SNFs.

Another perhaps overlooked factor at play when it comes to the deal outlook: Medicaid reimbursement rate adjustments related to the new case-mix under PDPM. In an attempt at budget neutrality, states typically withdraw funds that they initially allocated, in an effort known as “recalibration.” In 2024, the recalibration might be more widespread and large scale than anticipated, posing financing threats to the sector because lenders are basing loans on rate projections that are expected to be scaled back, according to Marc Zimmet, CEO of Zimmet Healthcare Services Group.

States will be clawing back money, with the rate reduction already beginning to happen in dozens of states, Zimmet said, who called it “the great transition.”

“It’s a bubble. These loans are going to be made, are being made, and the rates are not going to be what [operators] think they’re going to be on paper. They will be clawed back. You’re going to have [something] like the housing crisis,” Zimmet told SNN.

Moreover, rural nursing and smaller homes are the most vulnerable in 2024 to closures due to macroeconomic factors, and will be the biggest casualty of lingering financial issues. Another opportunity for investors on the hunt for SNF assets in the coming year could come from nonprofit senior care organizations – particularly those that operate continuing care retirement communities (CCRCs) – reducing their nursing home footprint or exiting the sector altogether, as Eskaton has recently done. This has been an ongoing trend for many years, and should continue in 2024.

The trend towards the SNF portfolio being minimized relative to other properties, particularly by organizations with large CCRC holdings, will continue in 2024 – the willingness to operate SNFs is dampened by reimbursement levels and expensive overhead.

And whether CMS’ transparency rule for disclosure of ownership will have any impact is unlikely in 2024. The federal agency has already improved transparency by including ownership information on Care Compare. And while it hasn’t been a user-friendly system for consumers, the disclosure of ownership has not impacted dealmaking by private firms thus far.

AI goes from ‘wait-and-see’ to ‘must-have’ tech

Artificial intelligence (AI) use steadily increased at nursing homes in 2023, as the technology began to deliver on its promises to improve efficiencies in a wide variety of areas, from clinical outcomes to back-office work. In 2024, AI will become more sharply defined, more generally accepted and more widely adopted by nursing operators, as the technology — at least in some form — becomes a must-have.

The controversial use of AI tools for Medicare Advantage claims denials notwithstanding, AI-powered tools made life easier for workers and residents alike in 2023, as they worked their way into nearly every facet of nursing home operations.

AI was used in a range of arenas from enhancing clinical decision support, to improving staff engagement and the resident experience, to assessing risk for falls and pressure ulcers, to having robots serve food and clean. It empowered health care providers with data-driven insights, advanced decision support, improved patient outcomes and elevated customer experiences.

“What people need to know about AI is it’s not automation, it’s augmentation. It’s not going to replace people … but it can save them hours of time and follow-ups, preparations, event planning, all types of things,” Dustin Distefano, CEO of A Place at Home, told SNN.

As AI tools continue to improve in areas such as natural language processing, the technology will continue to drive improvements in care while uplifting bottom lines and staffing challenges.

Already in 2023, AI tools reduced the use of agency labor for some SNF organizations by making time consuming tasks such as medication dispensation and the admission and discharge processes more efficient.

Operators also spoke to SNN about the use of Robotic Processing Automation (RPA) and bots to automate administrative tasks and ease admissions intake and other tasks.

And while AI has its limits, the gains organizations made on managing labor, cutting agency use and allowing skilled clinicians more face time with patients will certainly mean that AI’s footprint will only deepen in 2024.

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