The existential threat to nursing homes is real; Chicken Little was an optimist. Nursing homes do close. Many of my colleagues and friends are exhausted by the drubbing that the sector is taking. The skilled nursing sector is at the lowest occupancy level in years, maybe decades. Several years ago, I set up a Google Alert for “nursing homes close” and initially there were only a few, every other month or so. Now, they’re arriving almost every day. There have been too many chaotic closures, and far too few orderly retreats. I will be moderating a discussion about survival for The Long Term Care Finance Association.
Chaotic Closures
When nursing homes close, there is a painful dislocation to the families of the residents, disruption to the employees who depend on those jobs, and economic loss to the local municipality where the nursing center is based. The further challenge to the healthcare system and society is that if we allow the number of nursing home beds (supply) to decline too far, the supply will be inadequate when the demand returns (which it surely will).
As Easy as One, Two, Three
There are three reasons why nursing home occupancy is so poor. First, the number of age qualified individuals in most marketplace areas in the United States (and Western Europe) is declining, not increasing. Second, no one, absolutely no one, wants to go to a nursing home. To put this in proper “marketing speak” nursing homes have an extraordinarily negative metaphor in our culture. Third, nursing homes have been progressively deselected by intermediaries.
Each of these reasons can be supported by facts, data and empirical evidence from the markets. But arguing about why the market has declined doesn’t address the problem today, and align the sector for the inevitable demands that will begin to materialize in the next 10 to 15 years.
An Orderly Retreat
Because nursing centers serve extraordinarily vulnerable individuals and their families, communicating closures and supporting the residents, patients, families and employees is critical for an orderly retreat. The principles of an orderly retreat in nursing center closures are the same as in other closures or market withdrawals. Planning must be done, first quietly and then publicly. A “crisis communications” system should be in place for dealing with angry and upset families, as well as with healthcare and social services providers, the local press and the broader community. This is not extremely difficult, but given the history of the sector not familiar territory.
Failure to Plan = Planning to Fail
The same first-cause of the decline in nursing home occupancy is the same reason that demand will return – demographics. In 10 years, (2028) the leading edge of the baby boom will turn 80, and demand for residential nursing care services will begin to increase steeply. By 2033, college dormitories and Holiday Inns will be filled with mobility, vision and hearing impaired 80 to 90-year-olds, because there will not be enough nursing home beds. The SNFs will have closed, while everyone was finger-pointing.
Many of my colleagues look to state government and particularly the Medicaid program for additional money to help solve the problem of nursing homes closing. This is a mistake at two levels; first because the Medicaid program can’t prevent nursing homes closing and second because it ignores the root cause.
My fervent prayer is that the leadership in the sector will stop being supplicants to the state Medicaid programs, start organizing an orderly retreat, and planning for the extraordinary demand looming on the horizon.
Please contact me – istackpole@stackpoleassociates.com – to learn about orderly retreats, and how (if possible) to survive.