Majority of nursing homes are operating at a loss, survey finds

• A survey found 55% of nursing homes are operating at a loss.
• Among respondents, 72% can’t sustain operations for another year at the current rate of increased costs and revenue loss.
• The federal government expects to deliver testing kits to more than 14,000 nursing homes by the end of September.

Most nursing homes are operating at a financial loss while getting buffeted by higher costs amid the COVID-19 pandemic, shrinking patient populations and increased safety-related penalties.

Finance-related findings of a recent national survey of 463 nursing homes by the American Health Care Association and National Center for Assisted Living (AHCA/NCAL) include:

• 55% operating at a loss
• 34% operating on a total margin of less than 3%
• 10% operating with a margin of 3% or more

Nearly 60% of funding for nursing homes comes from Medicaid, which covers only 70% to 80% of the actual cost of care, according to AHCA/NCAL.

Among respondents, 72% said they won’t be able to sustain operations for another year at the current rate of increased costs and revenue loss. Additionally, 40% said they can continue for less than six months.

Hospitals and health systems operate about 750 skilled nursing facilities, according to the American Hospital Association.

On Aug. 7, HHS announced the distribution of $5 billion in Provider Relief Fund grants for nursing homes and long-term care facilities to mitigate the impact of COVID-19. About $2.5 billion was distributed in mid-August for upfront funding to support increased testing, staffing and PPE needs, according to HHS. An unspecified amount was set aside for nursing homes that are establishing COVID-19 isolation facilities. The remainder of the $5 billion will be linked to nursing home performance and will be distributed “throughout the fall,” an HHS release states.

“Almost 40% of all U.S. COVID-19 deaths, totaling tens of thousands of Americans, are nursing-home related, and the intent of the performance-based distribution will be to ensure the federal government is paying for better outcomes,” the release states.

According to the AHCA/NCAL survey, 96% of nursing homes have received government funding to help address COVID-19-related costs. But respondents said more help is needed to cover the continuing costs, with state budgets being squeezed as tax revenue declines amid various state-imposed shutdowns. Nearly 60% said they will experience “significant problems with increased costs and lost revenue” when federal funding ends.

“While this funding is a significant step forward, it is equally important for Congress to provide an additional $100 billion for the HHS Provider Relief Fund, which is accessible to all health care providers impacted by COVID-19, and that a sizeable portion of the fund be dedicated to helping both nursing homes and assisted living communities​ to cover the enormous costs associated with protecting vulnerable residents and staff from the virus,” Mark Parkinson, president and CEO of AHCA/NCAL, said in a written statement.

Respondents say they have incurred numerous costs from trying to adequately respond to the COVID-19 pandemic, which has disproportionately affected the elderly and chronically ill.

For the remainder of the pandemic, most nursing homes expect to continue to incur “significant expenses,” including:

• PPE supplies (95% of respondents)
• Additional pay for staffing (78%)
• Testing of residents and staff (74%)
• Cleaning supplies (70%)
• Hiring of additional staff (60%)

Enforcement push adds to financial concerns

Nursing homes’ precarious finances also have been affected by a recent infection-control enforcement push by the Trump administration.

CMS on Aug. 14 announced more than $15 million in civil money penalties for more than 3,400 nursing homes during the public health emergency for “noncompliance with infection control requirements and the failure to report coronavirus disease 2019 (COVID-19) data,” according to a release.

“Now more than ever, nursing homes must be vigilant in adhering to federal guidelines related to infection control to prevent the spread of infectious disease, including COVID-19,” Seema Verma, administrator of CMS, said in the release. “We will continue to hold nursing homes accountable and work with state and local leaders to protect the vulnerable population residing in America’s nursing homes.”

Since March 4, CMS and state survey agencies have completed infection control inspections at more than 15,276 (99.2% of) nursing homes.

The inspections turned up more than 180 immediate jeopardy level findings for infection control, which is triple the rate found in 2019. Immediate jeopardy situations are when the facility “caused or is likely to cause serious injury, serious harm, serious impairment, or death to a resident.”

The average fine was $55,000.

Testing remains a concern

According to AHCA/NCAL, nursing home leaders are most concerned about the lack of reliable and rapid-result testing.

This week, Admiral Brett P. Giroir, MD, assistant secretary for health with HHS and lead for COVID-19 diagnostic testing, told reporters that by the end of the week of Aug. 17-21 more than 3,500 kits would be delivered for nursing homes to provide more than 1.3 million point-of-care tests.

Giroir said testing kits were expected to be delivered to more than 14,000 nursing homes by the end of September.

The federal government plans to provide “the first tranche of tests and then nursing homes will be able to order” more using the $2.5 billion recently provided, Giroir said.