Even though the Lake Minnetonka Care Center has not experienced a single case of COVID-19, the coronavirus pandemic has raised its labor costs.
A skilled nursing home for people with mental illness in Deephaven, Minnesota, the center houses 21 residents. Jeff Sprinkel, the administrator, said that early on, he had his staff stay home at the slightest sign of illness, such as a cough or the sniffles.
“Back then, there was no testing, so the employee would be off for 14 days, but you still have to pay them,” Sprinkel said. “Then, you have to find somebody to replace them, which generally involves paying another employee overtime or a bonus because you are short-staffed. Almost all nursing homes, at least in Minnesota, are struggling with staffing.”
Indeed, a recent survey from the American Health Care Association and the National Center for Assisted Living found that 94% of nursing homes nationwide have had to offer overtime to staff during the pandemic. Additionally, 86% have provided bonuses or hero pay, and 68% have had to hire more staff.
Sprinkel said he considers his facility to be one of the more fortunate ones.
“We haven’t struggled as much because we have not had a case of COVID,” he said. “But I’ve spoken with administrators who have had cases of COVID in their facilities, and they are paying some of their staff double.”
Many long-term care facilities, which include both nursing homes and assisted living facilities, are struggling financially, having experienced both increased costs and declining revenues during the pandemic.
The AHCA/NCAL survey shows that almost two-thirds of the estimated 15,600 nursing homes in the United States would be able to operate for less than a year at their current pace, while 38% would last six months or less. Additionally, 65% were operating at a loss.
Staffing has been the biggest increased expense during the pandemic.
“It’s a combination of a couple of things,” said Mark Parkinson, president and CEO of the AHCA. “First, it’s hero pay. It’s challenging to get people to work in skilled nursing facilities during the pandemic because of the risk they face.”
Keeping staff has also proved challenging. A recent report released by the consulting firm Altarum found that nursing homes lost 153,000 jobs since last February.
“To say the sector has been hard hit has been an understatement,” Anne Montgomery, co-director of Altarum’s program to improve eldercare, told Modern Healthcare recently. “It’s now a more dangerous place to work, and people understand that. I’m not surprised people are worried about going into nursing homes.”
Staff quitting or getting sick with COVID-19 leads to additional costs. When that happens, nursing homes have to reach out to agencies that provide temporary workers.
“Agency is very expensive,” said Parkinson. “You may pay your regular workers $15 an hour, but agency can cost up to $40 an hour.”
Testing for COVID-19 has been another expense that nursing homes have had to incur. The Centers for Medicare and Medicaid Services requires nursing homes to test staff regularly and to offer testing to residents. Although the federal government released $7.5 billion to help with testing expenses, 12% of nursing homes said testing was a top expense during the pandemic, according to the AHCA/NCAL survey.
The roughly 29,000 assisted living facilities in the U.S. are not required to test staff and residents. That may be one reason they are faring slightly better than nursing homes, according to the survey. Nevertheless, many are still struggling. About 56% can last a year at their current pace, and 34% will last six months or less. Fifty-five percent are operating at a negative margin.
While costs have gone up, revenues have declined due to a sharp drop in occupancy.
Nursing homes struggled with declining occupancy in recent years due to Medicare Advantage plans requiring shorter stays for patients and a move toward home-based recovery in the healthcare industry. From 2015 to 2018, average occupancy nationwide dropped from nearly 90% to less than 85%.
But it seemed to stabilize in 2018, according to Bill Kauffman, a senior principal at the National Investment Center for Seniors Housing and Care.
“With aging of the population, and not just the baby boomers but also the silent generation, the cohort of those aged 83 and up began growing,” Kauffman. “That’s a population that requires nursing care outside of the home because they have multiple illnesses. So, there was some stabilization. And then the pandemic hit, and occupancy dropped off a cliff.”
Nursing homes averaged about 85.4% occupancy in February 2020, based on data from the National Investment Center for Seniors Housing and Care. By October, that had plunged to 74.7%.
During the pandemic, many hospitals suspended elective surgeries, which meant fewer patients being discharged to nursing homes. Additionally, nursing homes in some areas were not accepting new patients.
Kauffman pointed to one other factor contributing to the occupancy decline.
“We had deaths as well,” he said.
According to CMS, over 107,000 residents at long-term care facilities have died from COVID-19.
Congress allocated about $21 billion for nursing homes in the CARES Act in March. That was a lifesaver for Lake Minnetonka Care Center.
“Our bottom line stayed about the same because of the federal money,” Sprinkel said. “Otherwise, it would have been a loss three times bigger than the biggest loss we’ve ever had.”
But other facilities have seen their finances deteriorate to the point they had to close their doors.
In August, Sanctuary at the Park, a nursing home in Muskegon, Michigan, closed down. The facility had 99 beds, but the number of occupants had dwindled to 43.
“This decline in residents and reduced hospital referrals due to COVID-19 make it unsustainable to continue operations,” facility administrator Julie Winkle said in a statement at the time.
