Nursing Homes in Crisis: Underfunded and Near Collapse

Nursing Home Understaffing - Senior Justice Law Firm

COVID-19 is Not the Only Present Issue at Long-term Care Facilities

As the coronavirus pandemic continues to impact the way people go about their daily lives, nursing homes have struggled to cope. They are, by nature, a communal facility populated almost entirely by vulnerable, immunocompromised people.

However, COVID-19 is just one (admittedly large) factor bearing down on nursing homes that were already struggling to survive. The chronic underfunding that long-term care facilities have faced for years is finally reaching its peak—with potentially disastrous consequences.

If we starve these nursing homes of precious Medicaid dollars, they will continue to provide sub-standard care or close their doors entirely.

Medicaid and Chronic Underfunding

Medicaid is the primary funding source for nursing homes, with more than 60% of all residents covered under the program. It pays between 50% to 80% of all costs for the services and support that long-term care residents need; however, because nursing homes rely so heavily on income generated by Medicaid, the fact that most procedures end up covered only partially reduces the overall profit per patient, especially over the long term. Thus, nursing homes struggle to adequately secure funds, with the primary strategy being to rely on short-term Medicare patients to cover the cost of care for the long-term Medicaid residents.

Not all nursing homes have this issue, but consistent trends can be seen in the ones that do. Nursing homes whose income primarily comes from Medicare beneficiaries are most likely to be in poorer neighborhoods, have fewer resources and more quality problems, face more dire understaffing issues, and are the most likely to close. Additionally, facilities will sometimes try to over-bill or up-code Medicare and Medicaid in order to receive more funds for services that weren’t actually performed, which could result in honest employees filing a whistleblower claim.

Margins and Cutting Costs

Nursing homes frequently report net losses, and if they do have a margin of profit, it is reported as critically small. In 2018, the typical margin for nursing homes was a mere 0.3%—marking a sharp decrease over the previous year’s 0.6%. This accounts for all payers and lines of business (Medicaid and Medicare, as well as private insurers, for long-term care, hospice, investments, and other options). The margin without Medicare was even more dire, with the majority of surveyed nursing homes reporting a net loss.*

In response to this consistent drop in profits, nursing homes are coping by compromising their care. They opt for less labor-intensive care delivery to lower their overall costs. As Medicaid continues to underpay for residents, nursing homes that have a primarily Medicaid-centric resident population struggle to pay their bills. As a result, many locations are forced to close—generating a large displacement of residents. These residents may end up at nursing homes far from their families, and the entire process is traumatic and challenging for everyone involved.

* The caveat to this perceived thin profit margin is that many nursing homes operated ‘related companies’ and siphon money from the nursing home into related companies that provide third party services to the facility (ex: staffing, accounting, linens, food prep, etc.)

The COVID-19 Factor

The coronavirus pandemic has hit nursing homes particularly hard, targeting areas that are already weak and vulnerable in a facility’s profits. Occupancy has seen a steep decline, and costs have ballooned as PPE and overtime pay become critical factors in keeping a community of older residents safe. This also does not speak to the mental and emotional costs that each staff member endures when exposing themselves to the risk of COVID daily.

Costs are up significantly, with labor alone accounting for an 18% increase. The masks, gowns, gloves, and other PPE required due to COVID-19 has increased costs by an average of 103% in communities that have confirmed cases. Even when no active infections have been reported, PPE usage still accounts for a 73% increase in spending overall.

One of the primary drivers of falling profits has been the sudden, precipitous drop in post-acute care. Nursing homes are no longer admitting the short-term Medicare beneficiaries that were previously paying their bills due to the risk of coronavirus. Similarly, hospitals and other facilities are not performing elective surgeries such as joint replacement at the same pace at which they did in the past; with no patients receiving elective care, these same patients are not subsequently moving into short-term assistance following their procedure. This has been the lifeblood for profit in many nursing homes, and the pandemic has crippled this leg of income generation.

Hardest Hit Areas

As nursing homes continue to struggle not only with COVID-19 but also with the overall challenge of netting sufficient income to proceed with their operations, some communities are being hit harder than others. Because Medicaid fails to pay adequately for procedures, nursing homes with Medicaid as their primary income source have fewer nurses, more care deficiencies, and lower occupancy. They are disproportionately located in poorer counties, and shutdowns and inadequate care therefore impact low-income families more often. Medicaid facilities are also more likely to serve African-American residents, and the low standard of care means that African-Americans have a higher incidence of nursing home abuse injuries such as bedsores and aspiration pneumonia.

If you or a loved one was neglected or abused in a nursing home due to understaffing, please chat with us for free on our call us toll free at 888-375-9998.

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