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Occupancy Rates and Closures

Published on March 23rd, 2020

Howard Gleckman wrote a great article about nursing home closures.  4 percent of nursing facilities closed from 2015 to 2019.  There still are more than 15,000 nursing facilities in the US.  Gleckman argues that nursing homes are shutting their doors at a rapid pace because of growing pressures from payors, rising costs, the need to replace old buildings, increased competition from other forms of residential care, and shrinking demand from older adults who prefer to age at home.

“A new study by the senior services trade group Leading Age reports that more than 550 nursing homes closed over the past four years, and that the trend is accelerating. More than half occurred in nine states—Texas, Illinois, California, Ohio, Massachusetts, Wisconsin, Kansas, Nebraska, and Oklahoma. The Leading Age report was primarily based on government data. It measures closures but does not count new facilities that opened over the period.”

“A separate study by the National Investment Center for Seniors Housing & Care (NIC) ——based on an ongoing industry survey— helps explain the trend: Occupancy rates in skilled nursing facilities have been falling since 2015, though they stabilized over the past year. Medicaid, which pays the lowest average rates, represents a growing share of residents, while relatively fewer patients are covered by traditional Medicare—the most generous payor.”

NIC found occupancy rates have fallen from a peak of about 89 percent in 2015 to about 84 percent today. Leading Age reported the number of occupied beds fell by 16,000 over the same period, to about 1.325 million.

“At the same time, Medicaid residents grew from about 60 percent of volume in 2015 to 68 percent last year, traditional Medicare fell from about 18 percent to 11 percent, and managed Medicare grew slightly to about 6.5 percent. The share of lucrative private pay residents dropped from about 11 percent to 8 percent.”

“For years, the financial model of nursing facilities has been built on a system of government cross-subsidies. The facilities lost money on their Medicaid long-stay beds but made a healthy profit on their Medicare post-acute business. But as Medicaid payments fall further behind costs and Medicare managed care continues to squeeze margins, that business model is at risk.”

 

 

 

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