State of Skilled Nursing Facilities Today, Planning for the Future

Today’s blog post is written by Jillian Martin and Deb Emerson

An American Health Care Association’s (AHCA) report produced by CLA on the state of the Skilled Nursing Facility (SNF) industry was publicly released in March. It highlighted the financial struggles SNFs have and continue to weather in 2022 and beyond. The report gave weight to the concerns many have had since late 2020 – from finances to operations and what the future holds.

Since the start of the COVID pandemic and public health emergency, SNF’s have been dealing with a multitude of financial and operational issues including staffing, occupancy, access to Personal Protective Equipment (PPE), changes to infection control regulations and vaccine mandates. Now that COVID is under tighter control and the world is reopening, it is time for SNF’s to reassess and (potentially) re-position themselves.

While the AHCA report is concerning, we can also view it as an opportunity to look at where the industry is going and how to better align with that. The AHCA press release focused on four key findings, each of which would be stressful but imagine nursing home leaders concurrently weathering all four. That’s our focus for today. What are the four key findings and what can nursing home leaders do today to put themselves on the path of recovery? Some of the answers include strategic planning, operational assessments, and self-evaluation. Nursing facilities should work now to determine changes that can be made – clinically, operationally, and financially – for better or more strategic outcomes.

#1. The first finding is the issue of staffing and the heavy impact it’s having on budgets and costs. Labor costs are increasing as is inflation, neither of which are expected to decline anytime soon. Staffing has been a nursing home struggle long before the public health emergency without a clear long-term solution. For example, existing staffing concerns:

• How do SNF’s recruit and retain, not only Certified Nursing Assistants (CNAs), an ongoing staffing issue, but nurses, dietary staff, and even administration? According to AHCA’s analysis of the Bureau of Labor Statistics data, 15% or some 238,000 caregivers have left the profession since February 2020.
• How can SNF’s survive financially if staffing agencies continue to be the only option to fill staffing holes?
• What is the appropriate way to staff a facility (with or without staffing shortages)? Acuity based? Census based? COVID positive case based?

Add on to this the new focus by the Biden Administration to increase staffing levels. While the simple answer is to hire more staff, the workforce for this does not exist right now, and in many cases, the money to add new staffing positions may not exist either.

In the midst of everything, what can SNF’s do to address short-term needs while also analyzing and implementing long-term solutions?

Operators can work to understand what the “right” staffing model is for their situation. Factors to consider include building layout, patient population (acuity), demographics, building location, census, types of caregivers licensed for care in their state, and how to utilize them correctly (examples include medication technicians and meal aids) based on current situation and for where the industry is going in the future.

#2. The next major report finding is related to margins with an anticipated -4.8% negative margin by the end of 2022. According to the report this “projection is based on maintaining the current Patient-Driven Payment Model (PDPM) through Medicare and state public health emergency (PHE) funding levels.” We know the PHE will end as will the additional funding.

The SNF industry had only recently transitioned to the PDPM from RUGS IV when the pandemic hit. Having had less than two quarters of Medicare claims billed under this system it was quickly sidelined by COVID. Many facilities were and are still learning the intricacies of PDPM and may not be getting reimbursed for all the good care they have been providing. This leaves many facilities concerned for their revenue sources. Practically, a PDPM assessment for best practice and Medicare integrity will be integral to future success under this payment model.

Many states have also adopted the PDPM payment model to determine their Medicaid Case Mix Index (CMI), making accuracy necessary across multiple regulatory and payment agencies. A directed PDPM assessment will look at all necessary and supporting documentation that pertains to each period billed, the UB04, and will evaluate Medicare and Medicaid program integrity and best practices.

Further, actions to take related to margins are to analyze demographic trends, referral sources and populations you may want to newly serve along with modeling out your current and future state scenarios. A market or strategic analysis is an opportunity to determine opportunities in a specific community, potential to focus on hospital relations, or perhaps a shift in the services provided such as home health services.

#3. The next finding showed an increase of facilities at financial risk, which has both financial and quality implications that need to be addressed. The report indicates that facilities can be at financial risk regardless of Five-Star rating. Despite having been in a public health emergency for the last few years, changes to quality oversight have not been sidelined. There have been numerous changes to both the Care Compare website (formerly Nursing Home Compare), and the Five-Star quality rating system. Some of these changes relate to infection control surveys, while others relate to having weekend staffing numbers now being publicly posted. Should staffing shortages continue to be an issue, quality metrics will also remain an issue. Understanding the data behind the quality metric ratings can assist both operationally and financially to avoid unnecessary closures.

#4. The last major finding is the challenge of access to capital. The industry is waiting on CMS’s potential changes to PDPM rates and potential parity adjustment. In addition, many states are analyzing the current Medicaid payment structure. These uncertainties create stress on potential revenues. Some facilities are taking this opportunity to look at Institutional Special Needs Plans (I-SNPs) or other payment arrangements that can be considered which give greater control of revenue to the organization.  

As stated in the beginning of this post, the findings raise concerns, but they are not foregone conclusions. With some focused effort and collaboration, SNF’s can put themselves on better footing financially, clinically, and operationally.

CLA can help

At CLA we have a dedicated team of professionals- consultants, clinicians, accountants, as well as other industry specialists that are poised to assist in the success of the SNF industry. As thought leaders in the post-acute care space we continue to work diligently to find solutions to all the above stated problems (as well as others) that the industry is facing, such as: 

Operational assessments:

• Determining right sized staffing
• Bond covenants
• Expense and revenue cycle evaluation
• Workflow assessment
• Review of clinical policies and procedures
• Admission and discharge review process
• Five-star analysis
• Quality measure analysis

PDPM assessments:

• Assess accuracy of patient billing
• Identification of revenue losses or insufficient documentation
• Assess documentation systems for clarity, best practice, and revenue analysis.
• Monthly claims review and development of a triple check system
• VBP and QRP risk and how to manage
• Benchmarking PDPM rates and case mix groups to state and national averages