As the skilled nursing industry faces ongoing challenges like labor shortages and financial gaps, operators anticipate repositioning services or facing closures. Despite positive signals, such as increased Medicaid reimbursement in certain states, rural closures are creating 'nursing home deserts,' posing a risk for up to 450,000 residents due to staff shortages.
During Health Dimensions Group's (HDG) recent webinar, experts discussed the looming trends. They highlighted how hospitals view their nursing home assets as financially unsustainable, potentially leading to divestment—a trend previously observed by Skilled Nursing News.
Financial constraints have affected nursing homes and senior housing deals, compounded by the Federal Reserve's consecutive rate hikes to tackle inflation. Challenges like low occupancy rates, rising operating costs, and difficulty finding staff have made post-acute care less attractive to investors.
Closure Concerns and Adapting Skilled Nursing Strategies
Data from the American Health Care Association (AHCA), shared by HDG, revealed that 579 facilities have shut down nationwide since 2020. Surprisingly, closures affected low-rated and high-performing sites, challenging the belief that only poorly rated facilities shut down.
Operators are now urged to take on more risks and specialize in services tailored to their market's needs. Instead of focusing solely on traditional procedures, there are opportunities in specialized care for complex conditions like comorbidities.
Challenges with Hospital-Owned Facilities
According to data collected by MedPAC, skilled nursing facilities owned by hospitals face profitability challenges due to consistently negative Medicare margins. Differences in payment sources between hospitals and nursing homes worsen the issue, with Medicare and Medicaid offering lower reimbursements than commercial payers.
Administrative costs often surpass nursing home revenue, making investments in renovations unprofitable. Additionally, outsourced ancillary services in hospital-owned nursing homes contribute to higher expenses.
In a labor-strapped environment, seeking third-party support for tasks like Minimum Data Set (MDS) or revenue cycle management can ease pressures and improve operations.
Looking Ahead: Planning for Growth
In this evolving landscape, skilled nursing facilities must conduct market studies and align with regional teams to strategize for growth. Understanding their position in the market and setting future goals is vital for sustained progress.
While the industry remains crucial with growing demand, attracting capital requires revisiting operations and adopting forward-thinking approaches that align with evolving market needs.
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