The nursing home industry, as we know it today, is diminished and may be disappearing. Starting before the pandemic, nursing home utilization was declining. Plante Moran, an accounting and business consulting firm, reports a 32% decline in utilization of nursing homes from 2015 to 2022.[1] It writes that it does “not expect utilization [of nursing homes] to recover to pre-pandemic levels.” Plante Moran suggests that “nursing home rightsizing” is occurring and describes older people choosing independent living, assisted living, memory care, continuing care retirement communities, and affordable senior housing instead of nursing homes.
The so-called institutional bias in the Medicaid program – which made nursing homes a mandatory service and limited payments for non-nursing home care – has been gone for a decade, as Medicaid has paid more for home and community-based care than for nursing home care since fiscal year 2013.[2]
Nursing facilities blame their problems today on their inability to recruit and retain staff, leading to the lowest staffing levels in years, and on low reimbursement rates. But these arguments do not withstand scrutiny.
Nursing facilities have been understaffed for decades. Understaffing did not start with COVID-19. Moreover, other health care providers have been able to return, largely, to pre-pandemic staffing levels as staff have returned. People don’t want to work for nursing facilities, and for multiple understandable reasons – inadequate, often poverty-level, wages for nurse aides, limited benefits, poor working conditions, lack of support, lack of respect.
As for reimbursement, if facilities really lost, for years on end, more than the $38 per Medicaid resident per day that Plante Moran claims is the daily average underpayment, they would not still be in business. No business could withstand such daily losses.
More plausibly, facilities are responding now to the loss of billions of dollars in extra payments they received from federal and state governments during the public health emergency. With those payments now ended, facilities may be unable to meet expenses with low occupancy rates.
Even with the increasing availability of alternatives to nursing homes, however, there will always be some people who need a congregate living situation. There will always be a need for new settings to provide high quality care. Whether these congregate settings will be called nursing homes, however, is an open question.
April 13, 2023 – T. Edelman
[1] Plante Moran, 2023 Senior Living Industry Pulse, https://go.plantemoran.com/rs/946-CTY-601/images/PMLF-2023-Senior_Living_Industry_Pulse.pdf
[2] CMS, Medicaid Long Term Services and Supports Annual Expenditures Report, Federal Fiscal Year 2019, p. 13(Dec. 9, 2021), https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltssexpenditures2019.pdf