Nursing Home Staffing Mandates to Further Strain Troubled Sector 

A proposed federal rule that would establish staffing requirements at nursing homes across the US could push the already-troubled sector further into distress, even as the pandemic highlighted their failings.

(Bloomberg) — A proposed federal rule that would establish staffing requirements at nursing homes across the US could push the already-troubled sector further into distress, even as the pandemic highlighted their failings. 

The Centers for Medicare & Medicaid Services said that “chronic under-staffing remains a concern,” in a Sept. 1 statement outlining the proposed rule, which includes requiring a registered nurse onsite 24 hours a day, seven days a week. About 75% of US facilities would need to make adjustments under the new rule, CMS said. Nursing homes could receive a hardship extension “in limited circumstances.” 

Labor shortages and their associated costs still plague nursing homes, which in some cases have eliminated beds because of an absence of caretakers. That’s also created a problem for hospitals, which rely on the homes to take patients who need rehabilitation services when they’re ready for discharge.

“I 100% agree that there should be adequate staffing at nursing homes,” but “this is an added cost on an already-strained sector,” said Lisa Washburn, managing director at Municipal Market Analytics. CMS estimates that the costs over 10 years to meet the mandates will be $40.6 billion.

Read More: Senior Living Defaults Far Outpace the Rest of the Muni Market

Four nursing homes that have borrowed in the municipal market have had payment defaults this year, according to data compiled by Bloomberg Intelligence. For the entire senior-living sector, which includes developments that offer a range of care, from independent living to 24-hour care, the number is 26, most of them payment, not technical defaults. 

The sector along with hospitals is also the worst-performing category in the high-yield municipal bond market, with a return of -0.5% this year, according to data compiled by Bloomberg. 

“We’re seeing an uptick in bankruptcies and defaults,” said Washburn.

More Closures Ahead

The American Health Care Association has tallied 579 nursing home closures since 2020. Some struggling homes that are still operating were “propped up” by federal pandemic relief funds that have run out, Washburn said. There is “no shortage of new ones that are making their way into trouble,” she said. 

The proposed rule will “likely force more closures given the low reimbursement rates that have failed to keep up with rising labor costs,” said Dora Lee, director of research at Belle Haven Investments, which invests in the sector. “Never mind whether operators can afford the increased costs, they are already having a difficult time finding qualified people.”

In Wisconsin, the home state of Larry Lester, a principal in the senior-living consulting practice at Wipfli LLP, thousands of beds were lost in the past decade, he said. 

“We’re downsizing at a time when the baby boomers are just outside the window and are going to need services,” said Lester, whose firm forecasts the population of Americans over the age of 85 to double by 2035. 

The large number of deaths at nursing homes early in the pandemic highlighted the need for better care and accountability. It prompted action from federal and state legislators, including a 2022 White House proposal for more staffing, enforcement and ownership disclosure in the sector, where about 70% of facilities are privately owned. A congressional report last year examined breakdowns in care at five for-profit chains.  

Read More: Patients Suffered at For-Profit Nursing Homes, Congress Says

National Consumer Voice for Quality Long-Term Care, a patient-advocacy group, called the proposed rule “dismal,” saying it falls far short of standards needed to ensure adequate care.

The rule, which CMS says would affect more than 1.2 million Americans at Medicare and Medicaid-certified long-term care facilities, now undergoes a 60-day comment period. 

Industry groups, including the American Hospital Association, have already expressed their opposition. In a statement, the head of the American Health Care Association said the rule “requires nursing homes to hire tens of thousands of nurses that are simply not there.” 

–With assistance from Eric Kazatsky and Karen Altamirano.

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