Challenges and opportunities for skilled nursing in 2023

What does 2023 hold for skilled nursing facilities? As the new year is underway, many questions still linger. Record low unemployment could continue to constrict an already tight labor market.  While inflation is easing, overall expenses could remain up for the foreseeable future. Both disruptions are set against a backdrop of changing government policies and new legislation. All that spells significant challenges for skilled nursing facilities this year, but where there is challenge, there is also opportunity.

Consider the major healthcare trends in 2023 skilled nursing facilities can expect throughout the year.

Occupancy rates are ticking up but still lagging

With Baby Boomers eschewing the idea of nursing homes, we were already experiencing a decrease in occupancy rates, but the COVID-19 pandemic has caused an even more significant drop. According to KFF analysis, the number of residents living in nursing facilities decreased by 13 percent during the pandemic, with more people choosing in-home care and other factors contributing to the dip.⁴

Still, we are seeing some signs the rates will bounce back. Occupancy is at 82.2 percent, up 4.3 percent from a pandemic low in 2021 and reaching the halfway point for a full recovery, according to the 2022 3Q NIC Map. That is a positive sign, and facilities should see it as an opportunity to act now to attract new residents and prepare to care for them when census is up again.

Operational costs are impacting profit and operational margins

Rising inflation and interest rates have driven up costs and squeezed operating margins and ROI. Skilled nursing facilities and assisted living centers who treat COVID-19 patients have experienced a 1,064 percent increase in costs for required personal protective equipment since the beginning of the pandemic.⁶

Beyond PPE, the price of food and other goods have increased, and even as inflation is expected to continue to decline through 2023, another positive sign, long-term care and senior living facilities can expect to spend more in the near term.

Trimming the fat, however, can’t come at the expense of providing quality care. Organizations have an opportunity to evaluate how they can better allocate their budgets so they aren’t sacrificing the experience and care that will attract new residents and retain current ones.

Government funding may no longer provide a safety net

So far, support received through Public Health Emergency (PHE) resources has helped many skilled nursing facilities weather the economic impact of the pandemic, but they can’t count on that help forever. The Department of Health and Human Services (HHS) has officially extended the PHE through April 11, 2023, and when it does officially expire, skilled nursing facilities will need to once again operate without waivers.

Additionally, the Medicare parity adjustment for 2023 is set to cut payments to skilled nursing facilities to offset its new payment model.

While with a change to a Republican House majority, questions swirl about the future of Medicare, some states are increasing rates and investing in nursing homes. For example, before ending his term, Pennsylvania Governor Tom Wolf approved an historic Medicaid reimbursement increase of 17.5% for the state’s nursing homes. Illinois permanently increased Medicaid rates last year, and others, such as Texas and North Carolina have also continued percentage increases for now. Experts expect more states will follow suit. Still, this could impact already-thin operating margins, and organizations will be looking for opportunities to simplify, automate, and cut costs.

Staffing will continue to be a top priority

700 caregivers since the beginning of the pandemic, according to the Bureau of Labor Statistics, representing the worst job loss and slowest recovery in the healthcare sector, says the AHCA/NCAL. In fact, according to AHCA/NCAL reports, even as other healthcare sectors have reached or surpassed pre-pandemic levels, skilled nursing is still down 14 percent. Even more startling is that the organizations predict that if hiring remains at its current pace, the sector may not fully rebound to pre-pandemic levels until 2026.

The challenge is prompting the federal and state governments to act. Last year, the Centers for Medicare & Medicaid Services (CMS) strongly encouraged states to allocate Medicaid dollars specifically toward staffing. And some states are listening. Florida, for example, requires providers enrolled in the Florida Medicaid program to pay their entire staff a minimum of $15 an hour.

While wages can go a long way toward addressing the shortage, organizations also have a golden opportunity to build a culture that attracts and retains talents. Creating a workplace environment where employees feel engaged, heard, involved in decision making, and respected will be critical to hiring and retention. That will mean boosting communication and transparency, as well as protecting their mental and physical health.

New opportunities emerge

Although skilled nursing facilities will face challenges in 2023, the months ahead offer opportunities, too. Nursing homes and long-term care facilities can use the lessons learned from the previous three years to rethink their workforce management processes, simplify how they operate, and optimize their existing staff.

The new year presents an opportunity to take action to strengthen workplace culture, drive engagement, and reduce burnout and turnover. It’s an opportunity to provide incredible patient care and drive up occupancy rates.

We’d love to show you how Inovalon’s Workforce Management technology can help you maximize those opportunities. Speak with an expert.

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