Nursing home closures across New England could portend trouble nationwide as more facilities struggle financially and hospitals face challenges finding post-acute care for patients.
New England has lost about 15% of its nursing homes since 2010, according to a study published last week by the Federal Reserve Bank of Boston. Hospitals are increasingly worried about where to send patients following discharge as nursing home bankruptcies over the last year helped drive law firm Polsinelli's Health Care Services Distress Research Index to a 15-year high in the first quarter. Some of those facilities — especially smaller ones without assets to sell — may ultimately close rather than reorganize after filing for bankruptcy.
Related: Midwest nursing home operator files for bankruptcy
The federal reserve bank found New England lost 150 of its skilled nursing facilities between 2010 and 2023. Researchers blamed rising costs and insufficient Medicaid reimbursements for the financial stress. Maine fared the worst among those states, with 19% of its skilled nursing facilities closing, according to the report.
That stress is reverberating out to hospitals that aren't getting reimbursed by insurers for the extra days patients are spending in the hospital because they can't be discharged to skilled nursing facilities in a timely manner.
The problem cost Brewer, Maine-based Northern Light Health, a 10-hospital healthcare system, $1.8 million in the first quarter, said Lisa Harvey-McPherson, vice president of government relations. The healthcare system also hired extra certified nursing assistants to care for patients who need skilled nursing care at an additional expense, she said.
“If you think about this population, the intensity of care is around activities of daily living. They don’t have IVs, or ventilators or dressings,” Harvey-McPherson explained. “They have a higher personal care component and that is more direct care time at the bedside.”
Things could get worse before they get better for Maine hospitals. The state lost 25 nursing homes in the last decade and three more are slated to close in the next few months, according to a spokesperson from the Maine Health Care Association, a trade group representing nursing homes. The report by the federal reserve bank paints an equally gloomy outlook for the other New England states if they don't increase Medicaid reimbursements to cover rising labor costs.
“At the end of fiscal year 2023, the most recent year for which data are available, the median facility in each New England state was operating at a loss,” the report stated. “If this trend continues, it is likely that more nursing homes will close.”
The American Hospital Association said a shortage of nursing home beds resulted in a 19% increase in the average length of hospital stays in 2022 compared with 2019. The trade group fears hospital stays could continue to rise if the staffing mandate forces more nursing homes to file for bankruptcy or close.
Trade groups representing nursing homes are also concerned the federal nursing home staffing mandate that begins taking effect this summer will result in more nursing home bankruptcies and closures. Earlier this month, the American Health Care Association estimated the mandate will cost skilled nursing facilities $6.5 billion annually to hire additional staff and could prompt some operators to go under.
The nation’s 15,000 skilled nursing facilities have been struggling to recover from the COVID-19 pandemic when occupancy rates plummeted from 86.2% in the first quarter of 2020 to 73.4% in the first quarter of 2021, according to the National Investment Center for Seniors and Care. While occupancy has rebounded, it still remains below pre-pandemic levels.
That is putting increased pressure on the nursing home industry, which suffered one of the worst years for bankruptcies in 2023. Senior living and pharmaceuticals accounted for half of the 79 Chapter 11 filings in healthcare, according to restructuring and advisory firm Gibbons Advisors. The company has not published data for the first quarter.
One large operator filed for bankruptcy earlier this year, but its size could be an advantage as it looks to reorganize. Petersen Health Care, which operates 62 nursing homes in Illinois and Missouri, filed for reorganization in March. The Peoria, Illinois-based company listed between $100 million and $500 million in assets and between $100 million and $500 million in liabilities when it filed for Chapter 11. Petersen secured $45 million in debtor-in-possession financing to fund operations as it restructures.
As Petersen is a large operator with assets to sell, it could successfully reorganize. But smaller operators who face bankruptcy and have few assets to leverage and may ultimately close, said Polsinelli bankruptcy and restructuring attorney Jeremy Johnson.
“If you’re talking about a nursing home that just operates and leases their buildings from somebody else, they don’t have much to sell or restructure around,” Johnson said. “All they have is a lease and the people who are in the building. It’s more difficult for nursing homes [to restructure] than continuing care retirement communities, which are larger investments and usually own their property.”
