The pandemic has thrown the long-term care industry into a tailspin.
Fearful of contracting the virus, patients have stayed away from nursing homes, causing a plunge in census numbers for facilities that rely on long-term care residents, short-term rehabilitation referrals and transfers from hospitals.
“Is the industry going to downsize? Yes,” said Andy Edeburn, a principal at Premier, a group purchasing and consulting organization. “Not all nursing homes are going to come back.”
Nursing home occupancies are at an all-time low and facilities are struggling to stay open. Nursing home occupancy dropped 16.5 percentage points to 68.5% in January 2021 from 85% in January 2020, according to the American Health Care Association/National Center for Assisted Living. In addition, 143 facilities closed or merged with other organizations in 2020 and 1,670 are projected to do so in 2021, AHCA/NCAL estimated.
But therein lies an opportunity for nursing homes to reinvent themselves. Edeburn believes facilities can become “super SNFs,” employing more physicians and nurse practitioners, innovating how they care for patients, deploying new technology, and managing more complex cases.
As more patients opt to receive care at home, nursing homes can pivot to compete with long-term care hospitals, instead of relying on therapy patients, he said. But that also could mean less of a need for therapists, who saw their hours and pay cut during the pandemic. It also could be a challenge for an industry that struggles to find and retain staff.
“I don’t know that the nursing home industry will ever go back to the way it was. … It’s an industry in crisis for a number of reasons,” Edeburn said. “We’re always going to have a need for SNFs. What they do and how they do it is going to change.”
Even before the pandemic, major changes were occurring in the post-acute space. Months before the first COVID-19 outbreak in the U.S., in October 2019, CMS changed Medicare reimbursement for therapy services in skilled-nursing facilities. A patient-driven payment model known as PDPM replaced the long-standing Resource Utilization Group payment system, or RUG, which paid facilities based on the number of therapy minutes provided every week.
Under the RUG system, a skilled-nursing facility received $438 per day, on average, for a typical Medicare patient needing assistance with six to 10 activities of daily living, according to an American Journal of Managed Care 2020 report. The change was a big deal for nursing homes because Medicare payments typically subsidize the Medicaid care nursing homes provide.
“If you were a nursing home, the way to make money was to max therapy services if they wanted to survive under (the prospective payment model),” Edeburn said. “PDPM turns that 180 degrees. … They still provide therapy services but therapy is not really the driving force anymore; it is managing medically complex patients.”