A new study confirms how much COVID-era government funding has sustained America’s nursing homes — and how little extra money they have on hand two years later, ahead of a major staffing rule that threatens their financial viability.

An influx of public health emergency funding due to COVID-19, including direct payments from the Provider Relief Fund and the Wage Protection Program, has allowed many nursing homes to remain profitable through 2021.

But researchers at Miami University in Ohio and Georgia Southern University found that after that pipeline shuts down in late 2022, for-profit nursing homes saw their net income drop to $1.68 per resident day, in while nonprofit providers were plunged into the negative in a rate. of $31.18 per resident day.

Without public health emergency funds, for-profit and not-for-profit nursing homes would have lost $7.47 and $42.35 per resident day, respectively, in 2022, they reported in a Health study published Monday afternoon. It predicts that “the long-term financial viability of nursing homes, especially non-profits, will be seriously challenged.”

“There are a lot of people who look at the profitability of these nursing homes in 2020 and 2021 and say, look, they’re very profitable,” John R. Bowblis, a professor of economics at the University of Miami and a researcher at the Scripps Gerontology Center. , he said McKnight Long Term Care News Monday.

“What we show in the data is that it’s true, but it’s all because of the COVID relief funds,” he added. “What that was doing was masking an underlying trend, which was that costs were going up, especially because the labor market was tight in 2018 and 2019, and Medicaid payment rates and Medicare payment rates weren’t going up enough to make up the difference. “

At the end of 2020, for-profit nursing homes earned an average rate of about $18 per patient day in COVID relief support; which came to about $15 per patient day in nonprofit facilities. In the following year, that flip-flop came to about $25 per patient day for nonprofits and nearly $20 per patient day for for-profits.

That temporary profitability was used by many to justify the federal staffing mandate. But these views did not take into account inflation rates of 7.0% and 6.5% in 2021 and 2022 and its particular effect on the workforce, which has already consumed 33.9% in 2019, according to the study.

The belief that nursing homes can maintain margins under the pressure of a mandate estimated by the Centers for Medicare and Medicaid Services at $43 billion over a decade proves false when COVID dollars are stripped, Bowblis and his coauthors illustrate.

“Once you started taking the COVID relief money, it was not taken advantage of. It seems like (the industry) has deteriorated further,” Bowblis said.

While CMS targeted the use of related-party transactions, common among for-profit chains, as a symbol of corporate greed, Bowblis noted that his team’s research did not confirm the idea that corporate entities are “siphoning” revenue.

“Whether you have related party transactions or not, we find that these trends are basically parallel,” he said. “The related party transaction is a bit of a red herring.”

What affected the outcome? Personal.

In the study, not-for-profits had “consistently” higher levels of registered nurse, nurse practitioner and total staffing levels compared to for-profits over the entire time period. For-profit providers “try to match staffing levels with what government payers are willing to pay,” Bowblis said, while other research has shown that nonprofits typically try to maintain staffing levels higher than necessary.

Between that and the agency’s staff utilization increasing substantially between 2018 and 2022, more nonprofits are being pushed to the brink.

“They’re focused on keeping staffing levels the same, and in many cases they have continuing care retirement communities where they can use independent or assisted living to supplement to subsidize the staffing costs or the losses they’re making. their nursing home,” Bowblis said.

More freestanding nursing homes that don’t have those offsets will close as margins fall deeper into the negative, he predicted Monday. Who they sell them to, or whether they find a buyer, should be the focus of policymakers pushing for higher staffing levels without dedicated funding.

More closures expected

“If you’re not getting a fair rate of return or if you’re losing money, those businesses aren’t going to stay in business for long,” Bowblis said. “There are two things you can do. You can close, or number two, you might be willing to sell to another operator who might be willing to cut staffing levels or other costs to the bone.”

As the study states: “The higher staffing levels seen in non-profits are a major contributor to operating losses and appear unsustainable under the current funding model. … Therefore, it is not surprising that in 2021, a disproportionate share of nursing homes exiting the market were non-profits.

“While there may be ways to make nursing homes more efficient, finding a sustainable long-term care financing system will be critical to achieving persistent solvency in the nursing home industry,” the authors wrote. “If policymakers do not address current funding challenges, access to high-quality health care could be severely restricted.”

Bowblis’ co-authors were Robert Applebaum, director of the Ohio Long-Term Care Research Project at the University of Miami and Scripps Senior Research Fellow; and Christopher Brunt, professor of economics at Georgia Southern.