A new study confirms just how much Covid-era government funding has provided America’s nursing homes with a boost and, two years later, how little extra cash they have left ahead of a major staffing mandate that threatens their financial strength.

An influx of COVID-19 public health emergency funding, including Direct Provider Relief Fund and Paycheck Protection Program payments, has enabled many nursing homes to remain profitable through 2021.

But researchers at Miami University in Ohio and Georgia Southern University found that after this pipeline is shut down starting in late 2022, nonprofit nursing homes’ net revenues drop to $1.68 per resident day, while nonprofit providers’ net revenues drop to $1.68 per resident day. He found that it went negative. $31.18 per resident day.

They reported that without public health emergency funds, for-profit and for-profit nursing homes would have suffered losses of $7.47 and $42.35 per resident day, respectively, in 2022. Health Affairs study It was released Monday afternoon. The report predicts that “the long-term financial sustainability of nursing homes, particularly non-profit organizations, will be severely 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 pretty profitable,” said John R. Bowblis, a professor of economics at the University of Miami and a research associate at the Scripps Center for Gerontology. , said McKnight’s Long Term Care News Monday.

“What we show in the data is true, but it’s all thanks to COVID relief funds,” he added. “What this did was mask the underlying trend, which was that costs were rising, mostly because the labor market was tight in 2018 and 2019 and Medicaid payment rates and Medicare payment rates did not increase enough to make up the difference.”

In late 2020, for-profit nursing homes received an average rate of about $18 per patient day from COVID relief support; At nonprofit facilities, it’s down to about $15 per patient day. The following year, that rate increased to about $25 per patient day for nonprofits and nearly $20 per patient day for for-profit companies.

This temporary profitability has been used by many to justify federal staffing authority. However, these views did not take into account the inflation rates of 7.0% and 6.5% in 2021 and 2022 and its specific impact on the workforce, which already consumed 33.9% in 2019, according to the study.

Here’s how the belief that nursing homes can maintain margins under a mandate estimated by the Centers for Medicare and Medicaid Services to cost $43 billion over a decade is proven wrong: COVID dollar Bowblis and his co-authors show that they have been eliminated.

“Once you started getting the COVID relief money, they were no longer profitable. “It turns out the industry is getting worse,” Bowblis said.

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

“We see these trends are essentially parallel whether you have related-party transactions or not,” he said. “Related party transaction is a bit misleading.”

What influenced the outcome? Staff recruitment.

In the study, nonprofit organizations “consistently” had higher levels of registered nurses, nurse aides, and total staffing compared to for-profit organizations over the entire time period. Bowblis said nonprofit providers “try to match their staffing levels with what government payers are willing to pay; Other studies have shown that nonprofits often try to maintain higher staffing levels than necessary.

Due to this situation and the significantly increased use of agency staff between 2018 and 2022, more nonprofits are being pushed to the brink.

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

He predicted Monday that more freestanding nursing homes that do not have these offsets will close as margins deepen into the negative. Who to sell to, or whether they will find a buyer, should be the focus of policymakers pushing for higher staffing levels without private financing.

More closures expected

“If you’re not making a fair return or you’re losing money, these businesses can’t stay in business for long,” Bowblis said. “There are two things you can do. You can close, or secondly, you can be willing to sell to another operator who might be willing to minimize staffing levels or other costs.

As the study finds: “The higher staffing levels observed at nonprofits are a significant contributor to operating losses and appear unsustainable under the current financing model. … So it is no surprise that a disproportionate share of nursing homes exiting the market in 2021 are nonprofits.”

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

Bowblis’ co-authors include Robert Applebaum, Scripps senior research scientist and director of the Ohio Long-Term Care research project at Miami University; and Christopher Brunt, professor of economics at Georgia Southern.