In recent months, the nursing home sector has witnessed a concerning uptick in the abrupt closure of nursing homes across the United States, with closures in New Jersey, Missouri, California and Vermont, displacing residents.
Many factors are at play in the abrupt shuttering of these nursing homes. A tough economic environment, stubborn staffing problems, a frequent change of ownership in the sector, a complex and punitive survey process and fines, and shifts in federal regulation are partly to blame. But regardless of the reason, experts believe enough planning and constant examination of financials and staffing levels can avert a such a crisis.
“It just seems like the past two years and three years have seen way more bankruptcies and closures, and a bankruptcy doesn’t always mean a closure,” Matthew J. Murer, chair of Healthcare at Polsinelli, told Skilled Nursing News.
The surge in bankruptcies and closures observed in recent years, notably during 2019 and 2020, were an outcome of various economic factors, including wage inflation, supply cost increases, and stagnating Medicare and Medicaid reimbursements, Murer said.
Some of the closures have also been due to frequent changes of ownership in the sector, which inevitably result in downsizing, he said.
“You know, we see a lot of workouts, especially with CCRCs, where a new party comes in and buys them, but what we have seen is with some of these portfolios of nursing homes, they go into bankruptcy,” he said. “When they come out, maybe the portfolio shrinks from 10 to six, or from five to three, just so that you see some of these poor-performing facilities closing.”
Financial strains on SNFs’ ability to sustain operations has ultimately led to closures, especially among underperforming facilities.
Demographics and regional dynamics also play a key role in closures. Urban facilities face intensified competition and operational hurdles, and often struggle to modernize aging infrastructure and attract residents. Conversely, rural communities grapple with declining populations, and face diminished support for healthcare providers, failing to attract enough workers.
“In the urban markets, there’s more intense competition,” he said. “If you’re in an older building, you’ve got a lot of new assisted living facilities, you’ve got a lot of memory care. You’ve got maybe one or two new I-SNPs that have come into the market. And rural communities just continue to get smaller every year. And so, we see that rural hospitals have been closing at a really, really shocking rate over the past two years.”
The spate of abrupt closures could be related to a shift in federal policies too.
Murer noted that anecdotally, he has seen the CMS policy around closing nursing homes become stricter in recent years.
“Until a couple years ago, CMS was reluctant to terminate SNFs and generally only did so as a measure of last resort,” he said. “That seems to have changed. Others in this space have come to the same conclusion. I am not sure if the data bears this out but I wonder if there has been an increase in CMS initiated terminations.”
Andrew P. Aronson, president & CEO of Health Care Association of New Jersey, echoed Murer’s concerns, emphasizing the adverse effects of closures on residents and healthcare systems. Aronson underscored the importance of effective communication and collaboration between regulators and providers to mitigate abrupt closures and ensure resident welfare.
The challenges posed by regulatory frameworks, particularly the punitive nature of survey processes and associated penalties, are definitely at play, Aronson acknowledged. Regulatory reforms to foster a more supportive environment for nursing home operators are needed, he said, explaining that operators need a balanced approach to regulation that prioritizes resident care while supporting provider sustainability.
Operating environment in New Jersey
In the context of New Jersey, Aronson acknowledged that the potential for increased closures was due to a challenging operating environment marked by staffing shortages, rising costs, and stringent regulations.
“In the last several years since the pandemic, payment rates, government payers have not kept pace with the increasing costs. And the regulations from a survey and penalty perspective, have gotten much more harsh – they have become much more difficult for operators,” he said.
Recently, in New Jersey, the abrupt closure of Princeton Care Center and Woodland Behavioral and Nursing Center left over 70 residents displaced, prompting the suspension of the facility from the state’s Medicaid program starting in late March.
The closure of these nursing homes mirrors a similar event in St. Louis with Northview Village, resulting in the displacement of 170 residents. The sudden closures left residents and families in distress, with inadequate notice and support.
While addressing the trend of abrupt closures, Aronson expressed concern about the implications for residents. He stressed that such closures deprive individuals of essential services and can lead to adverse outcomes, including prolonged hospital stays. Despite acknowledging that New Jersey has experienced a limited number of abrupt closures, he underscored the need for a more structured and resident-focused closure process.
To avert more closures, collaboration between regulators and providers is key, Aronson said. Transparent communication and cooperation can go a long way, he said, and it can ensure that the closures, if necessary, occur in an orderly fashion that prioritizes the well-being of residents.
For Arsonson, to reduce closures, federal authorities should consider easing the complicated and punitive nature of surveys. Severe penalties that may hinder providers’ ability to deliver quality care effectively could have unintended consequences, he said.
“It is certainly possible that you’ll see more closures, but I would like to propose what I think a better solution to the problem would be is having the regulatory agencies, the regulators, and the providers work together, particularly in cases where policies result in closures,” he said. “There should be clear communication. None of this should come as a surprise to anybody. This communication should foster a working environment that allows things to happen in a much more orderly fashion. I believe that communication is key to making the process work.”
Responsible facility closure
Meanwhile, some operators believe that facilities should be examining their financial status and staffing levels constantly to allow for contingencies and avoid abrupt closures.
For Jim Polaski, Senior Vice President of Operations at Westminster Communities of Florida, the decision to close one of his nursing home facilities was made last year after such planning with his team. And another of Westminster’s facilities is currently in the process of downsizing. This advance move, he explained, was driven by a careful evaluation of their fiduciary responsibilities and the broader healthcare landscape.
“We looked long and hard at our fiduciary responsibility,” Polaski said. “With staffing levels and reimbursement rates at the time, we found ourselves essentially competing with our own facilities for staff and referrals.”
This internal competition, he added, prompted the decision to close the facility located in close proximity to another community. The decision-making process, according to Polaski, was not sudden but rather a result of extensive planning and consideration.
“We’ve probably planned for a long time and then implemented a big communication plan,” he said, to ensure all residents and stakeholders were informed and supported throughout the transition process.
Polaski also emphasized the importance of supporting the staff affected by the closure. “Part of the decision was staffing,” he noted. “We were able to provide jobs for the vast majority of the staffing in our other facility.”
This strategic approach not only facilitated the closure process, but helped staffing at the remaining facility, ultimately benefiting both residents and employees, he said.
“It actually helped the other facility by bolstering their staffing,” Polaski said.
