WASHINGTON, D.C. – The American Health Care Association (AHCA) today released a new report that dives deeper into the economic crisis faced by nursing homes across the country. Conducted by accounting and consulting firm CLA (CliftonLarsonAllen LLP), the report assesses the potential impact on access to care and health equity, especially among racial and ethnic minority groups, as thousands of nursing homes may be considered “at financial risk” (operating with a margin of negative 7.5 percent or lower) in 2022 if cuts to Medicare and Medicaid are implemented and nursing costs continue to increase.
Key findings from CLA in the report include:
- Potential Impacts on Access to Care: Assuming a Medicare cut and loss of public health emergency funding in 2022, the percentage of residents in financially at-risk nursing homes jumps from 16 percent in 2019 to 47 percent in 2022. This represents approximately 417,000 residents who may be displaced should their nursing home be forced to close.
- Increased Fixed Costs Escalate Risk of Closure: General inflation for nursing home goods and services increased to 8.5 percent between March 2021 and March 2022. Between February 2022 and March 2022 alone, inflation increased by 1.3 percent. Economists expect continuing increases, but as nursing homes are almost entirely reliant on government payers with fixed rates, these increasing costs will put more nursing homes at financial risk.
- Soaring Labor Costs Due to Increasing Wages and Contracted Nurses: Hourly wages for all nurses (certified nursing assistants, licensed practical nurses, and registered nurses) have increased by 28 to 34 percent from 2020 to 2022. Other jumps in labor costs include the use of temporary or contracted nurses, which has more than doubled among all nursing categories in the same time frame.
- Disproportionate Impact on Minorities and More Clinically Complex Residents: Nursing homes considered financially at-risk tend to reside in counties that serve a higher percentage of racial and ethnic minority populations (20.4 percent) compared to nursing homes in counties not at financial risk (13.7 percent). Additionally, nursing home residents in counties home to financially at-risk facilities have a somewhat higher average clinical risk score (2.71) than residents in counties with no facilities at financial risk (2.52).
The new report is a follow-up to CLA’s “State of the Skilled Nursing Facility Industry” report released in March, which found increasing costs for nursing homes (due to labor and inflation) could result in negative operating margins, increased risk for nursing home closures, and challenges with access to capital.
“The data continues to raise serious concerns about the ability of nursing homes to weather this economic crisis, especially as federal policymakers consider devastating cuts to the sector,” said AHCA President and CEO Mark Parkinson. “There are hundreds of thousands of residents, particularly minorities and those with complex care needs, whose access to care is in jeopardy should more facilities be forced to close their doors. At this critical moment, we need government investments—not cuts—to ensure residents can continue getting the care they need.”
“This report helps us better understand the local, real-world impact related to the ongoing economic challenges facing nursing homes,” said Deb Emerson, Principal at CLA. “Erosion in financial performance creates the potential for a greater negative impact on hundreds of thousands of residents, especially racial and ethnic minority populations. The entire industry will be faced with the difficult task of balancing available capacity while maintaining health equity and serving the health needs of nursing home residents.”
The full CLA report is available here.