Right-sizing is crucial and tricky for nursing home operators, as demographics are driving demand but also contributing to labor shortages. Ultimately, providers must weigh several factors in order to create businesses that are successful today and sustainable for the future.

“It’s about the right service offerings, which sometimes means shrinking your physical footprint and asking, ‘Are we the right size?’” said Jim Stradiot, principal at Plante Moran, speaking at the recent LeadingAge IL conference near Chicago.

However, many operators tend to focus on short-term issues due to financial constraints and often overlook simple, practical solutions that, with patience, can yield long-term benefits.

Stradiot and Joe Donovan, senior manager at Plante Moran, discussed ways to enhance margins, revenue cycles, and operational efficiencies for continuing care retirement communities and skilled nursing facilities (SNFs).

“We’ve had clients with 350 skilled nursing beds at 90% occupancy who say, ‘This is our right size. I want to rehab the whole building,’” Stradiot said.

But he cautioned that refurbishing buildings based on current needs can be problematic due to unpredictable labor conditions.

“Sometimes you’ve got to take a step back and align your goals, asking, ‘Will I be able to staff that 350-bed nursing facility 10 years from now?’” Stradiot said.

A culture of empathy

Estimates show that about 9.3 million direct care workers will be needed in the next decade, Stradiot said.

“As we strategically position ourselves to be the right size [we have to] make sure that we can build the jobs to deliver quality care within our organizations as well.” So it’s a coupling – there is not only a demand for services, but demand in the workforce as well, said Stradiot.

By catering to the needs and helping to address the everyday problems of their workers, operators will improve retention. That’s particularly true given that one main hurdle to a better, bigger workforce is low compensation from a wage perspective.

Stradiot highlighted an MIT-based study that compared wages to the cost of basic living expenses, noting that long-term care workers struggle to meet their financial needs with their current wages. For instance, in Illinois, a certified nurse aide (CNA) earns $20 per hour. However, when considering the costs of daycare, food, housing, and other essentials, especially for single mothers with one or two children, this wage is insufficient to cover their basic living expenses.

“It’s balancing the understanding that all of our employees have different issues that they’re facing at home, and how do we alleviate some of those stressors,” Stradiot said, advising that operators could perhaps offer daycare and meals to staff on their premises as a way to attract and retain employees.

And this in turn promotes a certain culture of positivity and collaboration that an organization should always promote, he said.

“[Identify] what are some of the things that we can do to help build a culture of cohesiveness that will help with those retention, recruitment and turnover issues,” he advised. 

Also, a golden rule not to be overlooked: managing labor and financial resources should not ignore an organization’s mission and financial goals. And certainly empathy with employee needs doesn’t mean that their performance should be ignored.

The experts emphasized that many organizations struggle with timely and accurate data collection. A regular measurement of key performance indicators (KPIs) and holding staff accountable for these metrics are essential for driving performance improvement and achieving financial stability, Stradiot said.

A shared mission for financial strength

Staffing for the future, right sizing campuses and considering consumer preferences are key to strategic planning, but should be taken up side by side with good fiscal planning. And the quest for financial strength and stability also should be part of an organization’s shared mission.

“Financial sustainability, growth and diversification of revenue is something we should always be considering,” Stradiot said.

Embracing financial discipline within SNFs is important and Stradiot said organizations must hold themselves and their employees accountable for cash preservation and future growth.

This is even more relevant as the leniency once offered via pandemic-era loan practices has diminished.

And as the baby boomer generation continues to age, there is an increased demand for integrated community services. This shift means that SNFs must consider diversification to include other asset classes and even ancillary services.

Donovan and Stradiot emphasized that exploring new business lines, such as home care or pharmacy services, could provide additional revenue streams.

This is not a new message, and providers that have already embarked on the path of diversification can provide models for others that are starting on this journey.

For example, Touchstone Communities pursued diversification even in the midst of Covid-19, COO Leslie Campbell explained at Skilled Nursing News’ CLINICAL conference last year. And in the wake of the pandemic, these new business lines have proven crucial.

“So we’re responding to Covid. And then meanwhile, we’re launching a home health company. We’re launching a hospice company. We had our pharmacy, and now we are just realizing, coming out of the pandemic, that if we were the same company, we would not survive,” Campbell said.

Likewise, Cantex Continuing Care Network went through a “long journey” from a multi-facility SNF operator to become a network of integrated services that include pharmacy, home health, hospice, therapy and a Medicare Advantage Institutional Special Needs Plan (ISNP), Principal and Managing Partner Peter Longo said at CLINICAL.

“All of our ancillaries right now – pharmacy, home health, hospice, I-SNP, primary care – they are literally carrying the 40 SNFs because the inflation that’s taken place in the [operational expense] per patient day has just gone through the roof,” Longo said.