COVID-19 The Future of Nursing Homes

Posted by GVT Admin on Jun 17, 2020 1:17:00 PM


With 88% of 15,400 Medicare and Medicaid-eligible nursing homes reporting as of May 31, Medicare officials rolled out a federal database showing that the nation's nursing homes had 95,515 confirmed COVID-19 cases, 58,288 suspected cases, and more than 31,782 deaths among residents and staff. The Kaiser Family Foundation quickly amended the government’s admittedly incomplete statistics reporting more than 43,000 deaths, over a third of the nation’s known coronavirus deaths.

Industry Devastation

COVID-19 has profoundly disrupted senior living facilities—especially nursing homes— and will drive historic change in the industry. Nursing homes are likely to see a massive ownership shakeout, a recent Forbes article noted, with some analysts predicting that as many as half the current operators, unable to find capital, may go out of business.

The values of publicly traded nursing home firms have collapsed. The share price of nursing home Genesis Healthcare fell from $1.77 in late February to $0.82 on May 4. Share prices of real estate investment trusts that lease senior facilities to operators have similarly plunged by half.

Industry analysts disagree on whether this will result in ownership consolidation or a net decline in beds, but Robert Kramer, president of consulting firm Nexus Insights said in the article, “There never will come a time when we will return to the old normal.”

The Aging Tidal Wave

This devastating blow could not have hit the nursing home industry at a worse time. In my book, The Aging Tidal Wave (Create Space, November 2015), I predicted how America’s aging demographic was about to overwhelm our long-term care industry:

“The Baby Boom Generation looms over the long-term care industry like a tidal wave. Every year, for the next twenty years, 3 million of the 75 million baby boomers born between 1946 and 1964 will hit retirement age (Barr, 2014). By 2029, when the last round of "boomers" retires, the number of Americans 65 or older will climb to more than 71 million (Colby & Ortman, 2014). In other words, we are looking at a tidal wave of more than 30 million additional retirees in the next fifteen years.”

A Struggling Business Model

Most nursing homes operate two vastly different businesses in the same building—skilled nursing facilities (SNFs) and long-term care. Like defense contractors, nearly all of their revenue comes from government and is highly sensitive to changes in payment rates.

  • Short-stay skilled nursing is mostly paid by Medicare. For many facilities it is quite profitable. Traditional fee-for-service Medicare pays about $500-a-day,
  • By contrast, Medicaid pays only some costs for about 80% of long-term care residents of nursing homes. Medicaid payments vary widely by state but average about $200-a-day—often less than the cost of care.

Then Came COVID-19

  • Now, eight in ten senior living executives report that residents are moving out faster than others are moving in. Consumers likely are responding to at least three trends: the risk of COVID-19 in facilities, the inability of family members to visit patients during a lock-down likely to last for months, and high costs at a time of widespread economic distress.
  • Expenses are exploding. Nursing homes, redesigning interior space to maximize infection control, are cutting capacity, in some cases, in half. Labor costs, already under pressure, could increase substantially as facilities have to both increase staffing and raise pay.
  • Even as costs increase, overall, per patient revenues from current sources are likely to continue to fall. Financially stressed states will cut Medicaid payments to nursing homes. For those who still require a SNF stay, traditional Medicare payments are likely to shrink, as federal budget deficits skyrocket.

Heroes Needed

Covid-19 has been a devastating blow to our already vulnerable elderly population. Rethinking and refinancing our entire elder care system will be a daunting task. Only heroes need apply.


Topics: Elderly/Aging Long Term Care, healthcare, Covid-19/Pandemic

Subscribe Here!

Recent Posts





Search the Blog

  • There are no suggestions because the search field is empty.