Occupancy in skilled nursing has stalled, and is declining in many marketplaces.
What happens if we just ignore this? The consequences are:
- Loss or deterioration of important assets
- Hyper competition
- Deterring young workers from entering the field
Many advocates in skilled nursing and long-term (a.k.a. “post-acute”) care seem to be unwilling to accept the fact that the market for age qualified services is declining. The reasons are simple, and the appropriate response could mitigate much of the consequences.
The market is shrinking
From 1925 to roughly 1940, the live births in the United States plummeted due to the Great Recession, and the Dust Bowl. It wasn’t until the GIs returned from the war that birth rates began to rise. The average age of relocation to an assisted living residence in the United States is 86, while the average age of admissions to an SNF is over 87. In 2017, individuals born in 1931, will be turning 85. Looking at the live births in the United States from the Census Bureau, it’s clear that the number of live births continued to decline from 1931 to approximately 1940.
Demographics as gravity
This decline started in 2011 – 2012, although, to be fair, my colleagues and I started writing about it more than 10 years ago.
In most markets, when the number of qualified individuals declines, the businesses serving those individuals shrink, go out of business or look for a new model. Many would argue that, healthcare, and long-term care in particular, isn’t a “business” but a public service, an obligation of the government. The dependence of communities on skilled nursing as a source of employment, and the vulnerability of the population being served, makes closing a nursing home disruptive at least and painful at best. Because of the demographic facts, as well as the economic and political environment, more nursing homes will close.
Cost cutting; When costs aren’t covered
The worst kept secret in long-term care is that Medicare and managed care payers have been subsidizing Medicaid, allowing SNF providers to show a profit or remain liquid. Nobody seems to want to talk about this, but Medicaid rates have not been adequate to support the underlying costs in skilled care for decades.
Well over half of the residents of skilled nursing centers in the United States are covered by Medicaid. Nursing home closures represent a particular punch in the gut to these residents and their families. Make no mistake about it, the recent closures of nursing centers, and withdrawal of major provider systems from the markets are only “signals” of more contraction to come.
This, as well as the other consequences of failing to address this decline, will be covered in subsequent posts.