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  • Writer's pictureWilliam Miller, MD

US Nursing Home Crisis: A Perfect Storm

This is the first in a two-part series in which we will examine the national picture for US nursing homes and then next week turn our attention to the specific challenges faced by some of our local nursing homes in Mendocino County.

Let’s start with some definitions. A Skilled Nursing Facility (SNF, sometimes pronounced “sniff”), is meant to provide a higher level of medical care than a nursing home. Often the SNF is a transitional step between hospitalization and going home. As the name implies, there must be a skilled healthcare need such as complicated wound dressing changes, intravenous antibiotics, or physical therapy to qualify for being in a SNF. A Rehabilitation Unit is basically a SNF that focuses on physical therapy (PT) and occupational therapy (OT). PT helps recovery of large motor functions such as walking and climbing stairs while OT involves fine motor functions like buttoning a shirt or writing one’s name. Examples of typical patients in a SNF or rehab unit would be people recovering from major orthopedic surgery, an acute stroke or perhaps a major accident/injury.

Nursing home (NH) refers to a facility where the person is likely to remain as a long-term resident and requires only “custodial care” such as assistance with “activities of daily living” (ADLs) like feeding oneself, dressing, bathing and taking ones pills. A typical nursing home resident might be an elderly, frail individual who for reasons of physical debilitation or mental decline is unable to care for themselves at home. It is not uncommon for a facility to offer both SNF and NH level care. In 2019, it was reported that there were 15,600 nursing homes in the US providing around the clock care for about 1.4 million people.

Assisted Living Facilities are similar to nursing homes with the residents generally able to function at a higher level, needing only some minimal assistance, a more protective environment or to have someone check in on them periodically.

The problem is that many nursing homes across the country are closing at a time when the number of people needing them is rising. This was happening even before the pandemic, but COVID has made the situation much worse. According to a 2020 survey of US nursing homes conducted jointly by the American Health Care Association (AHCA) and the National Center for Assisted Living (NCAL), 55% of nursing homes report operating at a loss and 89% operating a profit margin of 3% or less. These are not sustainable figures.

We have an aging population due to improved medical treatments leading to longer life spans and the wave of baby-boomers heading into older age. Meanwhile, payment by Medicaid and insurances that do cover long-term care are decreasing at the same time as costs of providing that care are rising. Further, as all of healthcare faces a national staffing shortage, nursing homes are feeling the pinch particularly hard.

Gabriel Barraza is the administrator of Redwood Cove Health Center, a 68-bed skilled nursing facility and nursing home in Ukiah. I asked him what he sees as the greatest challenge facing nursing homes today. “Staffing!”, he said. “Without question, that is the biggest problem across the entire country.” The healthcare staffing shortage is particularly severe in nursing homes since salaries tend to be lower than for other healthcare jobs and turnover of staff is higher. Stress and burnout caused by COVID have made this worse. “COVID has been a really big blow to our staffs’ moral,” Barraza says. “We have lost a few staff over the last year who quit because they didn’t want to be around COVID, but most have stayed on. When you lose staff, it makes the job all that much harder for those who remain.”

So, who pays for nursing home care in the US? A common misconception is that Medicare covers long-term nursing home care, it does not. Medicare Part A only pays for up to 100 days of skilled care in a SNF and only after a 3-day qualifying hospital stay. Medicaid pays for long-term, custodial care in a nursing home, but only if the patient has limited financial resources. If the person is disabled, that also helps qualify for Medicaid. Some private insurances cover nursing home stays, but most do not. You need to carefully read your policy which should specify whether or not long-term care is covered and with what limitations.

It turns out that a little over 60% of all nursing home care in the US is paid for by Medicaid. However, that payment only covers about 70% of the costs, leaving nursing homes to rely upon commercial insurance and private pay to make up the difference. According to Leading Edge, a national nursing facility research and advocacy group, this underpayment can cost nursing homes as much as $23,000 per resident per year.

Nursing homes in rural communities may have a particularly difficult time as their payor mix tends to be more heavily weighted towards Medicare, Medicaid and self-pay, making it more financially difficult for rural nursing homes. Additionally, as we discussed in a previous Miller Report on the national healthcare staffing shortage, rural communities tend to have greater difficulty attracting staff. As a result of these combined challenges, closure of nursing homes in rural areas has been greater than in urban centers in some parts of the country. Leading Edge reports that 440 rural nursing homes closed in the US over the past decade with Kansas, Nebraska and Montana being hardest hit.

Closure of a rural nursing home likely has a greater impact on the community than an urban one as there is less likelihood of another nearby nursing home being able to accept those residents. As a result, such residents may have to be dispersed to nursing homes far away from family and loved ones.

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