The nursing home industry has been on a wild ride this past year, with major regulation up in the air and a flip in the White House leaving operators unsure of whether they should applaud or brace for impact.

Rhetoric surrounding the federal minimum staffing mandate has changed drastically throughout the year, with leaders condemning the move as “an extinction event” and “a nightmare” if it becomes a reality for operators.

Once lawsuits started piling up, and the Chevron doctrine was overturned, leaders in skilled nursing deemed the staffing mandate a non-issue, especially given the New Year will begin with the operator-friendly “Republican trifecta.”

Meanwhile, eroding margins, tightening regulation, ever-present staffing challenges and inflationary pressures this year felt like “death by 1000 cuts,” being too much to bear for many operators as evidenced by a string of closures and bankruptcies throughout the year.

Medicare Advantage was “one of the most profound’” disruptors for operators this year, both operationally and financially. In terms of staffing challenges, leadership said you ‘can’t be on your game’ when nursing turnover is happening still, with the most upheaval coming from staff changes among Minimum Data Set (MDS) coordinators.

Leaders saw survey changes and Medicare revalidation processes in the remaining months of the year, among other Biden-era regulations, as a “last gasp from the outgoing administration.”

The incoming administration will, no doubt, bring its own challenges to the sector, with a promise to cut federal spending.

‘An extinction event’

The Centers for Medicare & Medicaid Services (CMS) in April unveiled the finalized minimum staffing standards for nursing homes, drawing sharp – and deeply apprehensive – responses from leaders in the sector.

This is all prior to any sort of legislative or legal action from nursing home associations, or state attorneys general. It’s been a wild ride for operators in wrapping their heads around a seemingly impossible staffing goal to now facing the possibility of the mandate being “dead in the water,” just a few months later.

At the time, Sabra Health Care REIT (Nasdaq: SBRA) CEO Rick Matros told Skilled Nursing News the rule was “unacceptable,” while New Hampshire Health Care Association CEO and President Brendan Williams compared the rule to Star Wars’ “Death Star.”

“This news is Christmas in April for predatory staffing agencies,” Williams told SNN. “For many nursing homes, it’s an extinction event.”

‘A nightmare’

The federal minimum staffing rule promises to be “a nightmare” for operators were it to come true, the American Health Care Association said in its lawsuit filing against the rule, just a month after CMS and HHS finalized the rule.

The mandate exceeds statutory authority and creates impossible-to-meet standards that will harm thousands of nursing homes and the residents they serve, AHCA said in the filing.

“We had hoped it would not come to this; we repeatedly sought to work with the Administration on more productive ways to boost the nursing home workforce,” Mark Parkinson, former president and CEO of AHCA, said in the press release. “Unfortunately, federal officials rushed this flawed policy through, ignoring the credible concerns of stakeholders and showing little regard for the negative impact it will have on our nursing home residents, staff, and the larger health care system.”

In addition to AHCA, 21 states in October sued CMS over the mandate, having much the same reasoning as the initial lawsuit.

‘Death by 1000 cuts’

Eroding margins for nursing home operators have this year felt like “death by 1000 cuts,” in a sector that also has the highest regulation and the lowest bounce back in labor, said Erin Shvetzoff Hennessey, president and CEO of Health Dimensions Group (HDG).

Financial and operational challenges amid a climate of ever tightening regulation intensified this year to the point where industry leaders were continuously adapting but bleeding profits. As of February, the nursing home industry witnessed an uptick of abrupt closures across a number of states, displacing residents and threatening future access, while bankruptcies including LaVie Care Centers and Petersen Health Care were announced this year.

The staffing rule felt like “the final kick when we were down,” Hennessey said, even as operators saw changes in reimbursement, namely underfunded Medicaid in select states like New York. Meanwhile, Medicare Advantage spend per beneficiary was only $448 compared to $841 per Medicare Fee-for-Service beneficiary.

This wide payment spread meant that nursing homes lost $274.9 million for every percentage point MA plans grew, according to Zimmet Healthcare president Marc Zimmet. Along with an increase in managed care and push from the hospitals to take more complex patients, an ongoing staffing shortage and inflationary pressures dragged down margins as well, industry leaders said.

‘One of the most profound’ disruptors

Medicare Advantage was seen as “one of the most profound” disruptors to the nursing home industry in the last five years, said Stephen Taylor, principal of senior living and care segment leader for CliftonLarsonAllen (CLA).

CLA collected cost reports for its 39th report on the matter, which showed a shift in operating margins with more facilities struggling financially as a result of MA. The program, which grew drastically during Covid, significantly reshaped SNF payer dynamics

Taylor named labor costs, Medicaid reliance, demographic shifts and industry consolidation as other influencing factors in the nursing home industry this year. MA enrollees made up more than 50% of all Medicare beneficiaries in many states this year, and MA organizations were strategically growing. Taylor said this growth created “a bit of a chess match” within the industry.

“While Medicare Advantage is comprising more and more of enrolled Medicare beneficiaries, at the same time [MA is] navigating patient flow within SNFs, reimbursement rates, utilization, and administrative cost,” said Taylor.

‘Can’t be on your game’

A high turnover of nurses close to the survey process caused a breakdown among operators, with this year’s newly hired Minimum Data Set (MDS) coordinators struggling to keep up while learning the RAI manual at the same time.

“In the last four years, and especially in 2021 and 2022 we saw a huge exodus generally. Turnover was just awful,” Cascadia Healthcare Chief Legal Officer and Executive VP of Corporate Affairs Steve LaForte told SNN. “Not having a sustainable workforce and not having retention creates imperfect milieus which take away from quality. The team is not as strong, the culture is not as strong, and you can’t be on your game.”

Operators urged CMS to provide concessions through changes to the survey process, which have proven to be a stumbling block for acquisitions particularly of distressed properties, including those on the Special Focus Facility (SFF) list.

Nursing turnover, especially MDS coordinators, was so pervasive to every facet of the industry including not only surveys but day-to-day operations too.

‘Last gasp from the outgoing administration’

With Donald Trump winning a second term in the White House, nursing home providers were quick to hope regulatory burdens placed on them during the Biden administration as part of its reform initiatives would go by the wayside.

Obviously the staffing mandate was top of mind, but other changes including those related to surveys and Medicare revalidation were being thought of as a “last gasp from the outgoing administration,” Fred Bentley, managing director for post-acute and long-term care and senior living practice at ATI Advisory, told Skilled Nursing News.

In 2026 and beyond, it’s anticipated that a lot of the Biden era regulation will be “ditched or scaled back,” he said.

Survey changes due to be added in 2025 in particular are a reflection of the Biden administration’s broader policy priorities in health care, and include a focus on the safety of Covid vaccinations and infection control, antipsychotic medication reduction and ownership transparency.

‘Republican trifecta’

Operators are hopeful that a Republican-controlled Congress and White House under Trump will mean less regulation and the federal staffing mandate become a non-issue, given the party’s tendency to be more business-friendly.

The federal staffing mandate is likely to be on the chopping block, as Republicans eye $22 billion in savings if it is delayed or stopped, Michaela Sims, founder of Sims Strategies and member of ADVION Policy Council, told SNN.

However, operators should also expect to balance this potential win, among others, with the incoming administration’s declarations surrounding federal spending.