PUBLIC OWNERSHIP IS THE WAY TO GO
More than half of US nursing homes are unprofitable—and it's about to get a lot worseNursing homes are losing both money and staff, leaving those in need with few options.
By Nate DiCamillo
and Annalisa Merelli
Published February 8, 2023
When the pandemic emergency declarations end on May 11, so too will covid-era government subsidies. And when that happens, perhaps no industry will be more affected than the nursing home industry.
That’s why the American Health Care Association (AHCA) is sounding the alarm. The group, which which represents thousands of nursing homes, warned this week that more than half of all nursing homes in the US are losing money because of rising healthcare costs, low Medicaid reimbursements, and fewer people living in them.
If the government doesn’t do something to help soon, ACHA said seniors could be displaced, families forced to travel farther to see their loved ones, and hospitals overwhelmed with patients they have nowhere to send.
“The current system in combination with the economic and workforce crisis is unsustainable,” Beth Martino, an ACHA spokesperson, told Quartz in an email. “As [covid funding] is being phased out, tragically, we may see more nursing homes close ... Without considerable investments, nursing homes will not be able to compete for the workers they need and rebound from the pandemic.”
Why nursing homes are losing money
Rachel Werner, executive director of the University of Pennsylvania’s Leonard Davis Institute of Health Economics, told Quartz that the pandemic only made worse a crisis that had been growing for half a century, mostly because Medicaid underpays for care in nursing homes.
According to ACHA, more than 60% of nursing home patients are on Medicaid, and it only pays 86% of their costs.
Once the pandemic arrived, nursing homes — facing already stressed budgets — had to spend more on things like personal protective equipment. The homes also lost money on short-term patients who would have stayed in a nursing home facility to recover after elective surgery (which wasn’t available during the height of the pandemic), and on long-term residents who died from covid (more than 160,000 nursing home residents have died because of the virus, according to the US Centers for Disease Control and Prevention).
The pandemic also accelerated a trend toward a preference for receiving nursing home-style care at home. This trend is partially the result of staffing issues, but also because patients realized during the pandemic that they could get a lot of the same care while living in their own homes.
“One of the things we learned about during the pandemic about healthcare delivery is that we can provide a lot of care outside of the four walls of a hospital or a nursing home or even a doctor’s office with remote monitoring, telehealth, and home visits,” Werner said. “That preference persists even as the pandemic wanes in our minds.”
So even while elective surgeries have recovered, nursing home occupancy has not recovered to pre-pandemic levels, Werner said.
The nursing shortage at nursing homes
Staff shortages, meanwhile, have forced reductions in new admissions, cutting revenue even further — which in turn means less money to attract qualified nurses. It is a vicious cycle that predates the pandemic. And it is only getting worse.
Compared to 2020, the nursing home workforce is still more than 280,000 nurses short. Though nurse salaries have gone up by about 30% between 2020 and 2022, a large number of qualified candidates aren’t interested in joining the field. That’s because nurses are in high demand across all healthcare sectors, which means they can make more money elsewhere.
Nursing homes also gained a reputation for being a high-risk work environment since the onslaught of covid. As of Jan. 22, nearly 3,000 nursing home workers have died from the virus. And many of those who survived say they are burned out.
ACHA predicts that at the current pace it will take until 2027 for the industry’s workforce to get back to pre-pandemic levels, if it ever ca
What can be done to save the nursing home industry?
Numerous nursing homes have closed or merged. And about 5% of them have turned to private equity investment — which can come with all kinds of difficult demands on staff and finances — to stay afloat. This would indicate the industry is headed towards a tipping point.
Despite the concerns, however, there’s been little movement by Congress to pass legislation that might alleviate the shortage of healthcare workers in nursing homes. The Biden administration said it would release a staffing mandate in the spring of 2023, but it hasn’t indicated how the government — or the nursing home industry — would pay for such a mandate.
Werner said that Medicaid rates for nursing home care need to be increased, and the benefits should be regulated federally so that the rates paid for nursing home care are uniform across states.
Expanding healthcare coverage for long-term care would also help, she said. Since most private insurance companies don’t cover such care, seniors are often forced to choose between financial independence and getting the help they need. And seniors who have assets or income above the Medicaid eligibility threshold have to spend down their excess cash on medical bills if they want to qualify.
Nursing home workers also need to be paid more, with better benefits, and have an opportunity for advancement within the nursing home industry, Werner said.
Werner also said it remains difficult to see when private equity firms are investing in nursing homes despite the Biden administration’s attempt to increase transparency by releasing ownership data for 15,000 nursing homes.
This makes it harder to hold nursing homes accountable for how they are spending money and easier for private equity firms to take over and implement the kind of cost-cutting strategies that have — according to widespread reporting — increased mortality in nursing homes, both during covid and before it.
and Annalisa Merelli
Published February 8, 2023
When the pandemic emergency declarations end on May 11, so too will covid-era government subsidies. And when that happens, perhaps no industry will be more affected than the nursing home industry.
That’s why the American Health Care Association (AHCA) is sounding the alarm. The group, which which represents thousands of nursing homes, warned this week that more than half of all nursing homes in the US are losing money because of rising healthcare costs, low Medicaid reimbursements, and fewer people living in them.
If the government doesn’t do something to help soon, ACHA said seniors could be displaced, families forced to travel farther to see their loved ones, and hospitals overwhelmed with patients they have nowhere to send.
“The current system in combination with the economic and workforce crisis is unsustainable,” Beth Martino, an ACHA spokesperson, told Quartz in an email. “As [covid funding] is being phased out, tragically, we may see more nursing homes close ... Without considerable investments, nursing homes will not be able to compete for the workers they need and rebound from the pandemic.”
Why nursing homes are losing money
Rachel Werner, executive director of the University of Pennsylvania’s Leonard Davis Institute of Health Economics, told Quartz that the pandemic only made worse a crisis that had been growing for half a century, mostly because Medicaid underpays for care in nursing homes.
According to ACHA, more than 60% of nursing home patients are on Medicaid, and it only pays 86% of their costs.
Once the pandemic arrived, nursing homes — facing already stressed budgets — had to spend more on things like personal protective equipment. The homes also lost money on short-term patients who would have stayed in a nursing home facility to recover after elective surgery (which wasn’t available during the height of the pandemic), and on long-term residents who died from covid (more than 160,000 nursing home residents have died because of the virus, according to the US Centers for Disease Control and Prevention).
The pandemic also accelerated a trend toward a preference for receiving nursing home-style care at home. This trend is partially the result of staffing issues, but also because patients realized during the pandemic that they could get a lot of the same care while living in their own homes.
“One of the things we learned about during the pandemic about healthcare delivery is that we can provide a lot of care outside of the four walls of a hospital or a nursing home or even a doctor’s office with remote monitoring, telehealth, and home visits,” Werner said. “That preference persists even as the pandemic wanes in our minds.”
So even while elective surgeries have recovered, nursing home occupancy has not recovered to pre-pandemic levels, Werner said.
The nursing shortage at nursing homes
Staff shortages, meanwhile, have forced reductions in new admissions, cutting revenue even further — which in turn means less money to attract qualified nurses. It is a vicious cycle that predates the pandemic. And it is only getting worse.
Compared to 2020, the nursing home workforce is still more than 280,000 nurses short. Though nurse salaries have gone up by about 30% between 2020 and 2022, a large number of qualified candidates aren’t interested in joining the field. That’s because nurses are in high demand across all healthcare sectors, which means they can make more money elsewhere.
Nursing homes also gained a reputation for being a high-risk work environment since the onslaught of covid. As of Jan. 22, nearly 3,000 nursing home workers have died from the virus. And many of those who survived say they are burned out.
ACHA predicts that at the current pace it will take until 2027 for the industry’s workforce to get back to pre-pandemic levels, if it ever ca
What can be done to save the nursing home industry?
Numerous nursing homes have closed or merged. And about 5% of them have turned to private equity investment — which can come with all kinds of difficult demands on staff and finances — to stay afloat. This would indicate the industry is headed towards a tipping point.
Despite the concerns, however, there’s been little movement by Congress to pass legislation that might alleviate the shortage of healthcare workers in nursing homes. The Biden administration said it would release a staffing mandate in the spring of 2023, but it hasn’t indicated how the government — or the nursing home industry — would pay for such a mandate.
Werner said that Medicaid rates for nursing home care need to be increased, and the benefits should be regulated federally so that the rates paid for nursing home care are uniform across states.
Expanding healthcare coverage for long-term care would also help, she said. Since most private insurance companies don’t cover such care, seniors are often forced to choose between financial independence and getting the help they need. And seniors who have assets or income above the Medicaid eligibility threshold have to spend down their excess cash on medical bills if they want to qualify.
Nursing home workers also need to be paid more, with better benefits, and have an opportunity for advancement within the nursing home industry, Werner said.
Werner also said it remains difficult to see when private equity firms are investing in nursing homes despite the Biden administration’s attempt to increase transparency by releasing ownership data for 15,000 nursing homes.
This makes it harder to hold nursing homes accountable for how they are spending money and easier for private equity firms to take over and implement the kind of cost-cutting strategies that have — according to widespread reporting — increased mortality in nursing homes, both during covid and before it.
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