Even before the industry was dealing with the COVID-19 pandemic, the average nursing home was operating on a razor-thin profit margin or net loss. That’s because Medicaid reimbursements only cover 70% to 80% of care costs, according to a document released Wednesday by the American Health Care Association / National Center for Assisted Living.
The document referenced a Medicare Payment Advisory Commission analysis shared with Congress in March showing that in 2018, the average total margin – reflecting all payers (including managed care, Medicaid, Medicare and private insurers) and all lines of business (such as skilled and long-term care, hospice, ancillary services, home health care and investment income) – was -0.3%, down from 2017 when it was 0.6%. The analysis also reported that the average non-Medicare margin was -3%, down from -2.4% in 2017.
Many nursing homes only stay in business by subsidizing long-term Medicaid residents with short-term Medicare post-acute care, the AHCA / NCAL document noted. Along with increased labor and equipment costs, COVID-19 has caused a significant drop in occupancy, as few nursing homes are admitting short-term Medicare beneficiaries. In addition, hospitals are not performing elective procedures such as joint replacements, which would ordinarily require post-acute care placements.
The provider group’s document comes on the heels of an announcement by the U.S. Department of Health and Human Services concerning additional distributions from the Provider Relief Fund to eligible Medicaid and Children’s Health Insurance Program (CHIP) providers that participate in state Medicaid and CHIP programs. In releasing Wednesday’s report, the organization sought to showcase the challenges the nursing home industry was facing even before COVID-19 and the many obstacles operators are trying to overcome in response to the virus, said Mark Parkinson, president and CEO of AHCA / NCAL.
“The long-term care industry welcomes the opportunity to work with Congress and the administration on innovative solutions that address the real challenges ahead in terms of providing quality care while preserving and enhancing the vital Medicaid program for millions of Americans,” he said.
This article appeared in the McKnight’s Business Daily, a joint effort of McKnight’s Senior Living and McKnight’s Long-Term Care News.