The state-by-state comparisons of financial and operational metrics provided by CliftonLarsonAllen offer a glimpse into the wide regional variation in post-pandemic economic factors that are influencing the business performance of nursing homes across the U.S.

Released Tuesday, the new additions to CLA’s 39th Cost Comparison report titled, “The Great Divergence,” which was issued last month and provided a general overview of skilled nursing sector trends for 2024, focus on data specific to each state.

Authored by analysts Stephen Taylor, Matthew Wocken, Seth Wilson, and Paige Potaracke, CLA’s annual report pointed to occupancy rates varying significantly across different states and markets, as well as among facilities with different margin levels. Moreover, disparity was also market driven, they said, as states like Oklahoma, Texas, and Missouri continued to report occupancy percentages well below the national median, while states like New York, Connecticut, and Florida remained higher than the national median, the analysts said.

Among the items CLA tracked in the state-by-state comparison were data on operating margins, days’ revenue in accounts receivable, contract labor, nurse expenses by source, wages, benefits, and wage trends.

“Between 2019 and 2023, the skilled nursing industry experienced significant disruptions, widening the divide between operators with healthy operating margins and those struggling financially. The COVID-19 pandemic was a primary focus, with skilled nursing facility (SNF) operators dedicating extensive resources to crisis management,” the analysts noted in the annual report. “This singular focus often deferred attention from other critical industry changes, which are now contributing to a noticeable operational divide.”

The disparity among nursing home operators in the U.S. can be attributed to several key factors, the CLA report noted. One is the growth of Medicare Advantage plans, which reimburse at lower rates than traditional Medicare, squeezing revenue for many skilled nursing facilities (SNFs). Operators with strong relationships and value-based care capabilities have been able to navigate these changes more successfully, while others face tighter financial margins.

The growing reliance on Medicaid reimbursement is another critical factor. Since Medicaid often serves as the largest payer, disparities in state reimbursement rates are causing significant financial strain for facilities in states with lower reimbursement levels, while those in states with higher rates are in a stronger financial position.

When comparing the four states of Texas, Florida, Ohio, and California, Medicaid was the largest payer in Texas, with its payer mix standing at 65.4%. In California and Florida, Medicaid’s payment contribution was similar, at 60.4% and 60.5%, respectively. Occupancy levels in these two states were also close, with California at 88.1% and Florida at 88.3%.

In Ohio, however, Medicaid’s contribution was much lower, at 44.1%, compared to the other states, although Ohio’s occupancy rate was not far behind at 82.6%.

Overall, California had the highest net margins among these states at 3%, compared to Florida’s negative 2.4%.

And, Texas, which had a 63.7% occupancy rate in 2023, had net margins of 2.5%. Contract labor for Texas stood at 5%.

CLA’s online tool for comparing various cost metrics across states also provides a quick glimpse for a particular state under the “snapshot” category. For Texas, for example, the snapshot appears as follows:

Other reasons for disparity

Another factor for disparity among nursing home costs and margins among states are demographic shifts, particularly the uneven growth of the senior population over 85 and a shortage of caregivers. Facilities located in regions with more favorable demographics or better workforce strategies are better able to manage occupancy and labor costs, while those in other areas are seeing declining occupancy and higher expenses.

Industry consolidation has also played a role by reducing the number of beds and facilities. This has benefited larger, more resilient operators, but smaller facilities face increased competition and financial challenges, deepening the gap between operators.

Workforce and regulatory challenges further contribute to the disparity, with rising labor costs and the need to comply with new regulations increasing operational expenses. Facilities that have managed these challenges effectively are better positioned financially.

Finally, the quality of care plays a significant role in financial performance. Facilities that provide high-quality care tend to see better occupancy, stronger reputations, and the ability to negotiate favorable contracts, which leads to healthier margins and reduces reliance on costly contract labor.

Those who can adapt by managing costs, diversifying revenue streams, and focusing on quality care have maintained healthier margins, while those less prepared face financial strain, the CLA analysts caution. The growing reliance on Medicaid reimbursement, amid varying state policies, further underscores the importance of strategic planning and adaptability for success in the skilled nursing sector, they said.

The report presents benchmarks and ratios derived from annual SNF cost report data released by the Centers for Medicare & Medicaid Services (CMS) in July 2024. This data includes approximately 11,700 cost reports for fiscal years ending in 2023, covering over two-thirds of Medicare-certified nursing facilities. To ensure consistency, figures for 2019 through 2022 are limited to facilities that also submitted a 2023 cost report.

Additionally, the latest trends and cost report by CLA incorporates data sources beyond fiscal year 2023, including the Payroll-Based Journal (PBJ) for contract labor usage and Claritas for population data.