The future economics of post-acute care will probably look nothing like we’ve seen before.
COVID-19 of course has “changed everything”, but this is just the beginning of an era of post-acute financial adjustments that nursing home and skilled nursing leaders will need to prepare for as soon as possible. The following four trends, as curated by Reta A. Underwood, RAC-CT, C-NM, QCP, CPC, can serve as a useful and actionable guide for understanding the economic changes that you’ll be adapting to in the near future.
1. Pandemic Money is Running Out
The U.S. Department of Health and Human Services (HHS) allocated $9.5 billion in pandemic relief directly to nursing homes, and while that distribution has been critical to keeping post-acute facilities open and safe, the funds can’t account for everything.
The cost of personal protective equipment (PPE), for example, increased 1,064% since the beginning of the pandemic, with the increase being as high as 1,084% for anyone shifting to nitrile gloves from vinyl because of shortages and allergies. IntelyCare clients have seen the price of a box of 100 gloves almost double from $6 to $11—an increase that is compounded by staff needs for glove changes to maintain standards of care. A nursing professional can change gloves two to three times during one incontinence episode alone. Reta explains what this means for leadership; “post-acute leaders are being forced to balance usability and practicality against supply costs. It’s been a difficult process for staff, and executive leadership is very aware. CFOs in particular are battling inflation costs, but operationally there isn’t an easy or sustainable solution.”
At the same time, the Medicare parity adjustment for 2023 looms as a payment reduction. The 2023 Medicare Proposed Rule for Skilled Nursing Facilities includes a negative 4.6% parity adjustment that offsets any announced payment increases. Reta has seen what amounts to about a $26K reduction per provider, which can quickly turn into $50K-$100K depending on a facility’s size and patient mix.
2. Medicare Patient Ratios are Decreasing
While the trend of Baby Boomers turning away from nursing homes for care later in life has been going on for years, it’s recently picked up speed. COVID, of course, has been a major contributing factor, with the median occupancy rate for nursing homes dropping from 85% in January 2020, to 68% just one year later. By September of 2021 occupancy had only rebounded to 74%. With nine out of every 10 COVID deaths now in people over the age of 65, post-acute leaders can expect suppressed rates to become the norm. According to Reta, “our partners are now seeing more patients who would rather be in a community re-entry program, but access to funds have largely been shifted to Medicare programs by CMS. Overall, occupancy rates are improving, but not as quickly as they need to.”
Underlying the overall drop in occupancy, though, is general consumer awareness and concern with the nursing home environment. Patients and caregivers increasingly see nursing homes as a “last resort option”, in part due to how COVID exposed pre-existing weaknesses and faults in the nursing home system. This has also encouraged calls for stricter accounting of how public money is being used, even as funds are stretched.
3. Staffing Costs Will Stay Elevated
Shortages of nurse professionals have caused costs to skyrocket, with many agencies across the country bumping up against price gouging laws. And while the demand for primary cost drivers like travel nurses is decreasing, post-acute leaders should get comfortable with the state of elevated costs in nursing labor, especially as 50-60% of nursing and allied health professionals have shared a desire to exit the profession completely.
These factors have created a labor cost dynamic in which nursing home leadership must prioritize an understanding of their true cost of post-acute labor to make accurate comparisons between full-time and contingent staff—keeping a clear perspective on the impact of costs for recruitment, health benefits, continuing education, taxes, PTO, and retention and retirement benefits.
4. Inflation Will Continue to Push Operational Costs Upward
As the world braces for a recession, nursing home leaders should expect inflation to become a common topic of conversation. Post-acute has largely been seen as “recession-proof”, especially in terms of labor. This remains true to an extent, but with low unemployment, staffing will remain challenging. At the same time, even as the Federal Reserve is trying to calm demand through increased interest rates, the cost of goods and services will be a pressing concern. The prices of PPE and food, for example, are going to trend upward. Reta explains how these costs are trickling down to post-acute providers. “We’ve seen food budgets increase as much as 10-20% for our partners, pushing them to step down in the quality of food they’re offering, and residents are noticing. Leaders are dealing with similar trends in supplies and containers, adhesives, etc. Part of the issue is the connection to international markets where handling and service charges have increased, but regardless, the facilities are left absorbing these increases.”
Nursing home leaders will find that they need new tactics and a fresh perspective to ride the wave of post-acute economic trends in 2023. Since labor can run upwards of 70% of nursing home costs, refining your approach to staffing can be an excellent place to start. That’s why we want to invite you to learn more about how to address staffing shortages while balancing cost and quality using an approach to contingent labor that fits the challenges of a changing post-acute labor landscape. You can start that process here.
Megan is a business writer with over 15 years of experience in healthcare enterprise technology. She holds an MBA and B.S. in Healthcare Administration. She now keeps an ongoing eye on the latest developments and successes in healthcare admin technology and the people who use it to build a better world for providers, patients, and their care communities.