Financial and operational challenges in a climate of ever-tightening regulation have intensified to the point where industry leaders have been continuously adapting, yet bleeding profits.

In a panel discussion led by Skilled Nursing News titled, “Mandate and Margin: Skilled Nursing CEOs on Rethinking Staffing, Payments, & Strategic Business Imperatives,” executives discussed how SNF operators are attempting to minimize losses and prevent the demise of skilled nursing amid concerns of a crisis of access brewing, especially in the aftermath of the staffing mandate.

A range of factors, including shifts in reimbursement policies, the increasing influence of managed care organizations, staffing pressures, and tightening regulations at both the state and federal levels, have culminated in a dire situation for SNFs. These facilities, already operating on the slimmest margins within the health care sector, have been grappling with escalating costs, aging infrastructure, and now, the daunting challenge of meeting new staffing mandates, panelists said.

Erin Shvetzoff Hennessey, president and CEO of Health Dimensions Group (HDG), said so many factors have eroded margins over the years, contributing to a slowly dying business. 

“It kind of feels like death by 1000 cuts,” said Hennessey. “[Skilled nursing] is part of the senior care continuum that has the lowest margin and the highest regulation. When you look at health care as a whole, [SNFs] have the lowest bounce back in labor.” 

And in the midst of this, she said that the Centers for Medicare & Medicaid Services’ (CMS) staffing rule felt like “the final kick when we were down.”

The shift in lowered payments began even before the Covid-19 pandemic and happened when the sector was already at crossroads, she said.

“We started to see some changes in reimbursement and increase in managed care, a push from the hospitals to take more complex patients, more expensive patients,” she said. “We had aging physical plants. And then, of course, the pandemic had a huge, huge impact on senior care, but specifically skilled nursing, where we saw the most deaths. And then after, we had a subsequent labor crisis.”

To top it all, high inflationary pressures followed, and instead of federal and state government helping, more stringent regulation was introduced, leading up to the latest staffing mandate.

HDG is a national management consulting organization supporting the successful delivery of senior living, assisted living, post-acute and long-term care. And the company provides management services to 29 communities across eight states.

Regulatory Mandates and Staffing Challenges

One of the most pressing concerns facing SNFs is the recently finalized staffing mandate, set to roll out in phases.

Stu Almer, president and CEO of Gurwin Healthcare System, expressed skepticism about the mandate’s feasibility given the current staffing shortages plaguing the industry, judging by how such mandates already in place on the state level have played out.

In New York, where Gurwin operates, only a fraction of SNFs comply with the requirements on a daily basis, highlighting the operational strain it places on these facilities, he said.

Almer also noted estimates that meeting national staffing standards would necessitate the hiring of over 102,000 additional nurses and aides, costing billions—a financial burden SNFs simply cannot bear without substantial funding support, he said.

Financial strains and payment pressures

Financially, SNFs face a dual challenge of declining reimbursements and increasing administrative burdens from managed care organizations. Almer called out the low payments for Medicaid, which constitutes a significant portion of SNF revenue of approximately 60% for Gurwin.

This underfunding, exacerbated by pandemic-related costs and staffing challenges, pushed many facilities to the brink of closure, and yet operators failed to see relief. As SNFs were forced to sell or shutter their operations due to financial strain caused by these, Medicaid funding remained inadequate.

“For an organization like ours, the loss per day per patient on Medicaid is about $80 – that’s the spread,” Almer said. “And if you do the math, that’s a lot of money.”

Gurwin offers a full continuum of health care and senior living services for medically complex individuals and older adults at multiple locations, with skilled nursing offered at its Gurwin Jewish Nursing and Rehabilitation Center and Island Nursing and Rehabilitation Center. Gurwin’s other services include independent living, assisted living, specialty care such as respiratory care and dialysis, adult daycare and home care.

In the midst of the long-standing issue of Medicaid underfunding, payment has been complicated by a rise of managed care and Medicare Advantage. Managed care not only pays lower rates but also demands extensive administrative efforts for certification and billing, diverting resources away from direct patient care, Hennessey said.

“In addition to that lower [payment] rate, a lot of time is spent on certification, recertification, data requests record,” she said of the increased administrative burdens. “There’s just so much time put into it. So not only is it a lower rate to begin with, but [Medicare Advantage] is a more expensive payer to manage.”

Both Hennessey and Almer advised staying on top of facility data and statistics. Data-driven decision-making and strategic partnerships with hospital systems to negotiate better rates and improve care outcomes can also improve managed care payment rates, they said. 

“Who do we work with? How do we negotiate? How do we make sure that our documentation is great so that if we do have something that comes back for a second look, we’re ready,” she said. “[We also have] experts in billing to make sure that we’re billing everything.”

HDG has centralized the billing role so that on the facility level, it can focus on the clinical aspects of care, Hennessey said.

All said, she said that managed care payment handling is another area that’s market and state specific.

Reduced use of expensive agency labor

While reimbursement pressure abound, there is a glimmer of hope from reduced use of agency staff. However, it can be hard to resist as SNFs try to shuffle a delicate balance between maintaining quality care and managing costs.

Hennessey noted that while agency staff can temporarily boost staffing levels, they often lack the familiarity and commitment to resident care that full-time staff provide.

“What I say is, ‘We like to be at 3, 4, 5-Star staffing without agency. But I’d rather be at 3-star staffing without agency than 4-Star with [agency]. So it’s kind of that constant balance,” Hennessey said. 

Efforts to shift away from expensive agency staffing, though challenging, are bearing fruit and will, no doubt, help both quality and payment for operators.

“We have seen a lot of improvement across our communities with getting agency staff out. I would say most of our communities are out of agency… It’s sweet revenge. So many of our staff [went to agencies] during Covid. We’re finally getting them back,” she said.

Despite these efforts, the overall financial strain remains concerning, and SNFs will need to keep their advocacy efforts up for sustainable reimbursement rates that align with the level of care they provide while also push for easing of federal regulations on staffing, Hennessey said.