By Lauren Coleman-Lochner and Martin Z Braun | Bloomberg
Chippewa Manor beds might be full. The nursing and rehabilitation home is experiencing high demand for potential patients after the recent closure of two nearby facilities. But there is a problem: there is no one to take care of the residents.
Staffing has always been a challenge, but “it’s reached a boiling point” over the past six months, said Jill Gengler, president of the Northwestern Wisconsin facility. The home struggled to find nurses, laundry workers, cleaners, housekeepers and food service workers. Raising the pay of certified practical nurses to $17 an hour from $12 has attracted new hires, but the pay rate is “not sustainable.”
As a result, Chippewa Manor is turning away other potential clients who could increase revenue that would help fund higher salaries.
All of this spells disaster for American nursing homes, an industry that was under financial strain even before the pandemic. Falling enrollment and rising labor and supply costs have forced 327 nursing homes to close since 2020, and more than 400, or about 3% of certified homes in the United States, are at risk of close this year, according to the American Health Care Association, an industry lobby group.
“The industry itself is on the brink of collapse,” said David Gordon, who leads the distressed healthcare practice at law firm Polsinelli.
The coming upheaval will also weigh on the so-called sandwich generation, those caught between caring for their children and aging parents, while often juggling their own careers. More than half of adults over 65 will need care for severe disabilities, government report finds, and US Census Bureau expects older adults to outnumber children here 2034 for the very first time.
The median occupancy rate for skilled nursing facilities, historically around 90%, is expected to be 77% for the year, according to a March report from the AHCA. And most households are losing money, with an expected median operating margin of minus 4.8%.
That’s a huge difference from the financially best-performing retirement homes that saw returns of up to 10% before the pandemic, said John Tishler, who specializes in transactions involving healthcare facilities in struggling and bankrupt at the Nashville law firm Waller Lansden Dortch & Davis.
The pandemic has exposed and amplified longstanding deficiencies in more than 15,000 nursing homes across the United States, such as inadequate staffing, poor infection control and regulatory failures, according to an April report from the National Academy of Sciences. As of last month, more than 150,000 nursing home residents and 2,362 workers have died from Covid-19, according to the Centers for Medicare and Medicaid.
As space buyers come “to think they can build a better mousetrap”, the complexity and economic pressures along with a move towards more home care will likely lead to more restructuring and closures similar to the wave that followed the 2008 recession – with the most problems concentrated in private facilities, said Thad Wilson, restructuring lawyer at King & Spalding.
Even in normal times, experts say, there needs to be a rethink of how facilities are funded.
“All reimbursement systems are inadequate in all areas,” said Suzanne Koenig, a retirement home turnaround expert and head of SAK Management Services, who has served as a receiver and Chapter 11 trustee in bankruptcy cases. The Centers for Medicare and Medicaid Services has proposed a 4.6% reduction in Medicare reimbursement next year, which would affect payments that cover short-term rehab patients, who make up a significant portion of hospital stays. inhabitant. Medicaid, on the other hand, funds most long-term care.
About 70% of retirement homes in the United States are owned by for-profit operators, including large chains, small investor groups, moms and pops and, increasingly, private equity firms , which have played a leading role in consolidating a still fragmented industry.
State-funded facilities – and their creditors – also have their own problems. Municipal bonds issued to nonprofit owners of seniors’ residences, including retirement homes, account for nearly 75% of the $560 million municipal bond defaults this year, according to data compiled by Bloomberg. Last year, $1.1 billion of these bonds defaulted, representing 60% of defaults in the municipal bond market.
The situation is complicated by the dispersed nature of bondholders when state-funded facilities need to be restructured, Polsinelli’s Gordon said, which makes negotiating and reaching a deal difficult even when there are willing buyers. This means that some facilities that could have been saved end up closing.
The goal of bankrupt facilities is usually to sell to a new operator, but that’s not always possible, or a buyer doesn’t want all of the locations.
Exodus of workers
As nursing homes struggle to operate in the dark, proposed White House rules intended to improve care include new staffing requirements that could present another hurdle for an industry that has already hard to find workers.
According to the Bureau of Labor Statistics, about 236,000 caregivers, or 15% of the nursing home workforce, have left the industry since the start of the pandemic through February. Exhausted workers are not tempted by raises. Their salaries jumped 19% between January 2020 and January 2022, according to BLS data. But other industries also raised wages.
“You can go to work at Walmart down the street and get paid more and not deal with Covid all day,” Gordon said.
For rural equipment, the situation is even more urgent. Like rural hospitals, they are often located in areas with stagnant or declining populations.
“It’s going to take more than salaries,” said David Grabowski, professor of health policy at Harvard Medical School. “It’s a matter of working conditions. It is a question of culture.
Experts from the Academy of Sciences say the nursing home industry needs a complete overhaul of emergency preparedness towards new standards for staff and better oversight and enforcement of regulations. A report from the nonprofit also suggests the federal government is exploring a new long-term care benefit. The current system, according to the report, is “ineffective, inefficient, fragmented and unsustainable”.
Until then, operators are simply trying to find nurses and support staff to keep their facilities running. But even with incentives — some centers offer a free vacation day for every three weeks worked, said Kelly Arduino, healthcare practice manager at consultancy Wipfli — job applicants aren’t showing up. .
“We can’t even remember a situation where it was more difficult,” she said.