Following a long regulatory reprieve, the end of the Public Health Emergency means hospitals and nursing homes now face urgent strategic decisions that will have a profound effect on their symbiotic relationship.
Skilled nursing facilities (SNFs) are one of the most critically endangered resources in the entire healthcare ecosystem. The combination of staffing challenges, an evolving payor mix, and changing regulatory requirements has created a “perfect storm” that threatens the viability of many facilities. On average, across the U.S., a nursing home closes almost every other day, which puts growing strain on acute care providers who find themselves with fewer options for discharging patients.
The American Health Care Association and National Center for Assisted Living (AHCA/NCAL) reports that more than 1,000 nursing homes have closed since 2015. In just the first two years of the pandemic, nearly 13,000 residents were relocated as more than 300 facilities shut down.
Without the regulatory relief offered by the Public Health Emergency (PHE) the numbers likely would have been even worse. In addition to enhanced Medicaid funding, the PHE suspended regulatory requirements affecting acute care stay rules and training and staffing mandates, helping to keep expenses down at a critical time. The chart below illustrates post-PHE regulatory shifts that may amplify operational challenges for SNFs.
It was probably inevitable that healthcare regulation would revert to pre-COVID levels, but SNFs could face additional regulatory pressure now that the Biden Administration has proposed a new rule for minimum staffing levels. Even if SNFs were given the resources to hire more staff, there simply aren’t enough trained caregivers to go around.
The effect of all this is devastating. According to AHCA/NCAL: “Over the course of the pandemic, nursing homes have disproportionally lost more workers than any other health care sector—over 200,000. As a result, more than six in 10 nursing homes say they must limit new patient admissions, and nearly three-quarters are concerned their facility may have to close entirely due to staffing shortages.”
Every type of healthcare provider has experienced staffing shortages, but SNFs also face unusual payor issues due to their bifurcated patient population. Because Medicare typically covers no more than 100 days of skilled nursing, long-term SNF residents most often rely on Medicaid, which offers lower reimbursement to providers. As a result, SNFs are heavily dependent on income from their short-term, post-acute care beds to make ends meet. Many short-stay patients are covered by Medicare, which represents the second-largest payment source for SNFs.
According to a 2019 MedPAC study, nursing homes reported an aggregate 11.2% margin on Medicare patients, while the average non-Medicare margin was -2.4%. Unfortunately for the industry, traditional Medicare is quickly losing ground to Medicare Advantage, which now covers 51% of eligible seniors and tends to pay SNFs significantly less, according to MedPAC.
Furthermore, a 2022 Office of the Inspector General report concluded that Medicare Advantage plans restricted access for nursing home care that met traditional Medicare criteria, resulting in premature discharges or outright coverage denial. This has resulted in a double blow: Even as nursing homes admit fewer patients due to staffing concerns and coverage restrictions, they are seeing lower margins among the patients they do admit.
Key Strategies for Acute Care Providers
This crisis for the post-acute industry comes at a particularly bad time for hospitals and health systems, which are seeing a rise in uninsured patients as states use the end of the PHE to trim their Medicaid rolls. Hospitals can’t refuse to treat these uninsured patients, nor can they move them to other sites without a safe and orderly discharge plan.
As a result, hospitals are getting stuck with a larger bill for patients who simply have nowhere to go. Working with one large health system on its bed planning needs, Ascendient found that average length of stay had increased by roughly a full day – at a cost of $2,000 per day – due largely to a shortage of staffed beds in nearby SNFs.
The instability in the post-acute landscape heightens the need for hospitals and health systems to identify preferred partners with an optimal mix of clinical quality, capacity, coordination and support staff, and financial durability. Strong, strategic relationships will benefit both partners and could mean the difference between success and failure for a struggling SNF.
Hospitals can take steps to ensure care coordination and quality outcomes after discharge by pairing with operators of SNFs and other intermediate care facilities. Together these organizations can create a communication structure for tracking pending hospital discharges and the availability of post-acute capacity. Hospitals can also team with post-acute facilities to train SNF staff on documentation requirements and authorization policies to reduce delays or denials.
Collaboration between hospitals and post-acute providers is essential for ensuring comprehensive and coordinated care for patients. This close communication is a necessity to maximize the timely and accurate sharing of information across care settings, as well as ensuring the patient’s plan of care is successfully followed and optimal quality outcomes are achieved.
Kim Meymandi and Nikki Murdoch contributed to this report.
