More than 400 nursing homes are projected to close this year, according to a recent report from the American Health Care Association (AHCA) and National Center for Assisted Living (NCAL).
The projection is alarming given the rate of aging Americans and the potential number of residents displaced by closures. Before the pandemic, nursing homes faced numerous challenges, and 1,000 have closed their doors since 2015.
However, closures have accelerated during the pandemic. By comparison, there were 776 closures in the five years from 2015 to 2019. In 2020 and 2021, there were 327 closures. The 400+ closures projected for 2022 are nearly double the next highest year, when 220 nursing homes closed in 2019.
Unfortunately, most nursing home closures are among smaller organizations with less than 100 beds in urban settings with a mostly Medicaid population, the report noted. In addition, the nursing homes that have closed over the past few years have varied in their quality rankings, with roughly half of those that have closed with four- and five-star ratings from the Centers for Medicare and Medicaid Services (CMS).
As a result, the average bed size of nursing homes has increased from 72 before COVID-19 (between 2015-2019) to 77 since 2020 to present day. Average Medicaid population has also fallen from 62% before the pandemic to 60% since 2020. Average operating margin has remained the same, at -12%. At the same time, not-for-profit nursing homes make up a higher share of all nursing homes, rising from a 25% share pre-pandemic to 29% since 2020.
While nursing homes have faced low and negative margins for years, the lingering impacts of the COVID-19 pandemic along with higher workforce costs are hitting nursing homes already struggling. The median operating margin in 2022 is -4.8%, with a 77.3% occupancy, the report found.
Worse still, things aren’t looking up for the nursing home industry, and organizations could be facing even more financial constraints.
“Despite these current challenges, federal policymakers are considering potential cuts to nursing homes in 2022—such as a reduction to Medicare payments and by ending the public health emergency (PHE), which offers enhanced Medicaid funding,” the report stated. “These cuts would further exacerbate the economic crisis, putting more than one-third of nursing homes at financial risk.”
Should Medicare be cut by 5% and Medicaid PHE funding end in 2022, as many as 32%-40% of nursing home residents, or 417,000 residents, would be living in nursing homes considered at financial risk.
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Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."