Top Takeaways from the Marcum LLP Benchmark Analysis: A Three-Year Nursing Home Statistical Review
Nick Cianci
President, Compass Total Benefit Solutions - I help companies and employees get the most out of their employee benefit dollars
For the first time, Marcum shorted their annual review in 2021 to cover just three years, rather than five (2018-2020), to recognize the change of pace within the nursing home sector.
Here we’ll rundown its most significant findings during a time when COVID-19 became the dominant policy and procedure and rendered profit maximization of secondary concern.
Major Nursing Sector Takeaways 2018-2020
Demographic Changes
?Nursing homes continue to suffer from underoccupancy rates and staffing shortages in 2020, primarily due to the COVID-19 pandemic. This contrasts with the increasing demand for nursing home beds as the population ages.
In 2020, census data shows that nationally 16.6% of the population were over 65, compared to 12.98% in 2010. This proportion of older adults is expected to continue to rise as the youngest of the baby boomer generation enter this phase of life.
?Meanwhile, the proportion of those aged 85 and above is set to triple between 2020 and 2060. Continued improvements in life expectancy will increase the pressure on the nursing home provision in the decades to come.
This is despite the anomalous drop in average life expectancy caused by the pandemic (a 1.5-year drop to 77.3 years from the 2019 average).
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Occupancy and Home Provision?
Meanwhile, removing the CARES Act Provider Relief Fund support could result in further facility closures. In 2021 there were 78 fewer care homes than in 2020, with the Midwest region losing 36 facilities. Only a few states gained homes, including Florida, with six new facilities.?
Average occupancy fell to 74.33% in 2020 from 81.22% in 2019 due to a combination of deaths from COVID-19 and families being hesitant to initiate spells of nursing home care.
An increasing number of patient days were funded by Medicare in 2020. The proportion of Medicare days, as opposed to those funded by other payors, rose from 65.93% in 2019 to 68.11% in 2020.
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Average Length of Stay
While occupancy rates fell, the average length of stay per resident rose. While this remained steady from 2018 to 2019, the following year saw an average increase of 6.24%.?
It is believed this seemingly counterintuitive finding is due to the deferral of elective and other hospital procedures which would take residents out of nursing facilities, as well as a reduction in short-stay patients due to familial fears for residents’ health.
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Rates of Nursing Pay
Rates of pay rose across the board between 2018 and 2020, largely due to facilities trying to recruit and retain more staff to address the current staffing shortages.
2020 was the first full year of the new Patient Driven Payment Model (PDPM), which may in part have resulted in the most considerable recorded pay rise yet. In addition, recognition, both by national and state government, of the increased pressures under which staff had to work during the pandemic has motivated raises.
In 2020, nurses had to become experts in infection control while dietary, laundry, and housekeeping staff had to work harder to maintain social distancing and hygiene measures to protect patients from COVID-19 infection.
These added duties were reflected in across the board in-house pay rises, including:?
The most significant increases were seen in contract nursing rates, as follows:
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This trend is expected to increase in 2022, even as we come out of the pandemic, due to the present scarcity of trained staff creating recruitment challenges.?
Nursing hours per patient day (PPD) increased by 2.82% between 2019 and 2020.
The smallest salary increases were seen in therapy (physical, occupational, and speech), with an average pay hike of just 2.73% in 2019-2020. Therapist hours PPD decreased from 0.43 in 2019 to 0.41 in 2020, a similar drop to that seen in 2018 (0.45). It is not yet known why these hours continue to decline, but in part, it may be due to the adoption of the PPDM.
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Ancillary Staffing Costs
Covid-19 measures necessitated increased costs in dietary provision, laundry, and housekeeping in 2019-2020. This was due to the move from communal to solitary dining, a greater turnover of laundry for improved hygiene, and the need to maintain strict disinfection measures.
Unsurprisingly, the hourly rates of ancillary workers in nursing homes also increased in 2019-2020, with laundry staff seeing a 5.2% increase in wages, while housekeeping staff received 5.2% more pay on average.
Due to the pandemic, the average general service costs of nursing homes, increasing year on year by around 3%, soared by an incredible 13% in 2019.
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Revenue and COVID-19 Funding
Revenue PPD suffered significantly in 2019-20, unsurprisingly, given the increased costs incurred by homes in ensuring pandemic safety measures. PPD proved particularly costly for care homes with supply line scarcity causing significant price hikes insufficiently offset by government support.?
Homes saw an average loss of $11 PPD nationally in 2019-2020 (excluding COVID-19 related financial assistance).?
To counter the effects of COVID-19 on nursing home finances, the government provided an average of $24.98 PPD. However, the rising costs of PPD created an average expenditure PPD of $35.98, generating this $11 PPD shortfall.
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Balance Sheet
The proportion of assets to liabilities remained consistent between 2018 and 2020. The ratio varied from a 0.18-point increase in the Southwest region to a 0.16-point decrease in the Pacific region.
Relief funding from the Department of Health and Human Services ensured that this measure remained largely consistent.
Accounts receivable remained relatively stable during the 2019-2020 year. However, accounts payable ranged widely, with invoices remaining unpaid for an average of 63 days in the northeast region to just 30 days in the southeast.
Overall, however, the number of days in receivable is generally declining year on year across the board, which is a positive trend.
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Summary
The biggest challenges nursing homes will face in the near future, given the data revealed in the Marcum LLP report, are:?
Contact Nick Cianci at [email protected] for more information on how skilled nursing and assisted living facilities are making data driven decisions to develop employee benefit plans that satisfy budgetary concerns and the growing needs of a dynamic workforce.?
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