By David Coppins, CEO, IntelyCare.
Throughout 2020 and much of 2021, as the pandemic raged, nursing home staff fled their jobs amid the unsafe and poor working conditions, unfair compensation and the lack of work-life balance due to unrelenting overtime.
While staffing shortages have been commonplace in nursing homes for decades, the pandemic made it extremely hard to retain nurses in post-acute care/skilled nursing homes. U.S. Bureau of Labor Statistics data shows that the nursing home industry has lost approximately 235,000 jobs since the onset of the pandemic in March 2020 , representing a 15% loss in industry staffers. While some workers are shifting to healthcare jobs in hospitals or other types of facilities, many are leaving the industry entirely.
Nor is the staffing shortage expected to get better anytime soon. For example, a recent American Health Care Association/National Center for Assisted Living (AHCA/NCAL) survey finds that nearly every nursing home operator has trouble finding qualified workers. At the same time, a record three-quarters of facilities may close due to persistent staffing issues.
Our recent study confirms this trend. IntelyCare commissioned global management consulting leader Oliver Wyman to dive deeply into the after-effects of the pandemic on staffing and occupancy rates within post-acute care.
The ongoing shortage of nursing staff in the U.S. is causing a projected $19.5 billion in unrealized revenue by the end of this year. With organizational funding and reimbursement tied to patient volumes, every unoccupied bed equals a missed revenue opportunity and declining profitability. Without the necessary staff to increase patient volumes, nursing home operators nationwide are punting the organizational funding and reimbursement they need to thrive.
Using industry benchmark data from Mercer, the study found that average occupancy rates in skilled nursing facilities dropped precipitously in 2020. While census has improved from 2020 and 2021, the study confirms that profitability is still not at pre-pandemic levels.
This year, the after-effects of that drop have created a 6%-14% gap between the current state and optimal (pre-COVID) occupancy rates. And despite slight rebounds towards pre-pandemic norms in 2022, there is still a significant gap from baseline occupancy. An average facility is expected to lose anywhere from $2,300 to nearly $5,900 per day due to understaffing in 2022. In the Northeast, the most affected region, this represents up to $2.1 million a year in lost revenue.
The AHCA/NCAL report projects that more than 400 nursing homes could close this year due to the staffing crisis and financial instability.
Bringing post-acute facilities to profitability requires a multi-tier approach involving:
- Higher Medicare reimbursement rates that more accurately reflect the cost of care
- More pragmatic financial modeling that includes budgeting for full-time and contingency staff
- Higher wages and better benefits for staff to compete with rising wages across a multitude of industries
- Increased training and education opportunities to ensure a more robust pipeline
- Solid pathways for career advancement
Implementing these initiatives will require bold initiatives from government agencies, nursing home operators and educational institutions. However, even if all the stakeholders commit to implementing new initiatives tomorrow, it could take years before we see a foundational change in the nursing home industry.
How will nursing homes resolve immediate staffing shortages in the near term? It may require more reliance on contingent workers, which many facilities want to avoid because of cost and consistency challenges. However, planning for contingent workers in annual budgets can offset spikes in staffing costs and help ensure adequate staffing to meet CMS requirements, enabling more vacant beds to be filled and revenues bolstered.
We know that one thing is certain. Not taking any action will ensure the nursing home crisis remains status quo.