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By: NIC  |  July 14, 2020

The Skilled Nursing Sector: Where Do We Stand?

Economic Trends  |  Ideas and Discussion  |  NIC Leadership Huddle  |  Seniors Housing  |  Skilled Nursing

Amid a pandemic of historic proportions, skilled nursing properties have borne some of the greatest challenges as they fight to care for the most vulnerable Americans, many of whom are frail and have multiple chronic healthcare conditions that require monitoring and medical attention. The skilled nursing industry responded quickly and aggressively by, acquiring sufficient personal protective equipment (PPE) implementing strict protocols related to sanitation, visitation and move-ins, implementing accurate and timely testing of staff and residents, and by employing new technologies, such as telehealth, to help provide care. In the latest of NIC’s popular “Leadership Huddle” webinar series, held Thursday, July 9th, skilled nursing operators discussed how the sector has changed, and where skilled nursing properties stand as much of the country has re-opened.

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NIC chief economist Beth Mace opened the webinar with a brief presentation of recently released NIC “Executive Survey Insights” data. As Mace explained, “the largest share of survey respondents reported occupancy improvement across all care segments since the survey began.” Specifically, 61% of the nursing care respondents reported an increase or no change in occupancy for the survey period ending the week of July 5. Referring to the increase, Mace commented, “that increase might reflect the fact that we have seen a resumption of elective surgeries in some geographies across the U.S.” Detailed survey results can be found on the NIC Notes blog.

NIC senior principal Bill Kauffman moderated the discussion. In his opening remarks, Kauffman pointed to the importance of contributing and sharing data. “We’re truly grateful to the many operators who continue to provide their data, even during this time of stress. These data contributors are improving transparency, which leads to credibility, and ultimately trust, by educating not just operators and investors, but also policymakers and the general public.”

Kauffman asked panelists BJ Hauswald, Sr. Vice President, Planning & Development, Genesis Healthcare and Ray Thivierge, Chief Strategy Officer, SavaSeniorCare for a brief history of the situation in nursing homes, as they rushed to adapt to the pandemic. Hauswald began her comments with an acknowledgment of the “enormous courage, compassion, and resilience of the American nursing home workers,” pointing out that staff showed up consistently to care for their residents. In response to the question, she reminded attendees that nursing homes house the “oldest and frailest” populations, typically with multiple chronic conditions, and that over 50% of nursing home patients are cognitively impaired. She said, “That makes it particularly difficult for staff to maintain room restrictions and other infection prevention practices, such as masking and frequent hand hygiene.” She also pointed out that, “absent any adequate testing to identify contagious individuals, asymptomatic transmission allowed the virus to spread silently. I think we all know that now to be true.” She explained that swabs and testing capacity were “woefully inadequate” in March and April. Even now, according to Hauswald, turnaround times on results are often 3-5 days, “which renders negative tests for us meaningless.”

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Currently, Hauswald said, “we’re down now to about 700 active cases in about 10% of our facilities.” To date, she said, roughly 20% of the population in her facilities have tested positive or been presumed to be infected with COVID-19, impacting about 60% of the company’s portfolio of properties. “This is not a ‘bad apple’ problem. There are facilities that don’t always practice the appropriate infection control practices, and we can use our surveys and regulations to identify and improve on those, but that ultimately won’t stop the spread of COVID,” she said. “It comes down to community prevalence and the size of the facility itself.”

Thivierge added that “one of the greatest handicaps that society had, but most importantly, our sector, was the great unknown. We had a silent enemy invading our centers…probably way before we even knew it.” He related “that we just simply had no idea (how the prevalence of asymptomatic cases) existed,” which meant that even with policies and procedures in place to screen for COVID-19, workers and essential visitors likely brought the disease in, particularly in hard-hit areas. “We thought we were going to lock down and keep our current residents safe.” He described how, lacking knowledge of how the disease spreads, nursing homes became a “petri dish” despite strict adherence to existing safety protocols.

Today, with greater understanding of COVID-19, things have improved significantly. “Thivierge explained that the industry has come a long way already. “The learning has occurred and the sector has responded…we’ve gotten a lot smarter about how to protect our residents.” Despite these improvements in safety, and signs that business is improving, however, he believes the impact of the pandemic on the skilled nursing industry is far from over. “We also know that the additional impact of the virus on our business is going to sustain itself for quite some time. It’s going to take a long time for us to recover,” he said.

Thivierge shared some data on the impact of COVID-19 on SavaSeniorCare, which has roughly 170 centers across the U.S. The company to date has seen infections in 125 of those properties. Approximately 2,516 of the company’s nearly 10,000 residents have tested positive for COVID-19. In addition, 1,000 staff have been impacted, “that was really devastating to a number of our facilities,” he said. The company has experienced a 20% mortality rate, “but we’ve also seen about 1,500 of those 2,500 folks recover and come back to live in our centers again. That’s a story that the media and the folks who are paying attention right now are not understanding…yes, this virus is really terrible for our frail elderly, but the majority of them are recovering and coming back to our centers to live.”

Kauffman asked how the industry will recover. In response, Hauswald pointed out that the industry is still wrestling with continuing shortages of PPE and testing capacity. She said she welcomes mandatory testing, but pointed out that the U.S. still does not have the capacity for weekly testing of every nursing home resident and front line worker. Further, she pointed out that testing too often takes too long to return a result, and has become very expensive, with prices ranging from $70 to $100 per test. “This really needs to be resolved, and needs to be resolved soon,” she said.

Another issue she highlighted, in terms of making progress, is a lack of a nationwide strategy, resulting in states taking a wide variety of differing approaches. “Right now with everything from testing to PPE to cohorting to resuming visitation, every state has their own flavor and its becoming very difficult to work within that kind of environment.” She also pointed to continuing shortages of PPE and price gouging. “There are rapid increases in the cost of PPE as well…if its not gowns, its gloves. There are constant shortfalls in the supply chain and the availability, generally speaking, from market to market of the PPE we need. We have to get past some of these issues so we can move ahead to opportunities.

To that point, Thivierge added, “We’re also not prioritized. The tests are not necessarily disproportionately being given to those who need them the most.” He called for the sector to bring these issues to the attention of policymakers. “We’ve got a map. We understand what needs to happen to go forward, but to do that is going to require some concerted effort not just on the part of the operating sector, but also those who help control and influence the environment in which we operate.” He went on, saying, “Its easy to sit back and point at things that went wrong. It’s a lot more difficult to point out why they went wrong. To do that is going to require us, as a society, to look at some of things that happened in this period of time, happened because we were set up perfectly to experience what we experienced. If we don’t want to experience it again we have got to work on the way we’re set up.”

Kauffman asked the panelists about the impact of the current environment on their profitability. Hauswald responded that her company is grateful for the federal and state assistance received so far. “We’ve received about $190 million in federal funds, including about $8 million from the sequestration suspension for this year, as well as about $30 million from state FMAP {Federal Medical Assistance Percentages} increases. In addition to that we did access some of the loan programs, the Medicare Accelerated and Advanced Payment Program added about $160 million.” She explained that that program is currently scheduled for repayment to begin in August, and expressed hope for a deferment, similar to that received by hospitals, or potentially forgiveness, “in alignment with what the SBA programs did.” In the long-run, she said, “we need to get our occupancies back up…the good news is that when you’re in such a big hole, the first 5-10% comes back relatively easy. It’s going to be that last 5% that’s going to be a little more difficult.”

For his part, Thivierge pointed to the need for innovation for success in the future, saying, “adversity breeds innovation.” He described changes that have demonstrated potential for future implementation, such as the use of telemedicine. “It was instrumental in helping us ensure that we had consistent practice, and that we were taking care of the residents as best as possible while maintaining isolation and distance.” Technology is also helping residents stay connected to family and friends through mobile devices. He indicated much of what has been learned will improve operations going forward, saying, “they’re going to be head-scratchers, wondering why we didn’t just jump in and do it sooner.”

Thivierge also sees a need for innovation in the design and engineering of skilled nursing infrastructure, such as air handling systems, and other protective technologies now being deployed to combat COVID-19. “The concept of PPE and protective equipment in general has just gotten a lot bigger. In order to create a protective work environment and a protected place to live you’re now talking about infrastructure.” That will lead to increased costs. “To power that infrastructure 24/7 you’re now talking about a significant financial burden. Somebody’s going to have to pay for it…we’re going to have to rethink the entirety of the equation around investment, what it means to invest in our properties, and what the expectations of an investment are.”

In agreement with that point, Hauswald pointed to another factor the industry will have to face. “These facilities were built a long time ago. They weren’t built for this. Now we have to rethink them, not just from a safety perspective, in terms of HVAC systems, but also the configurations themselves. There needs to be reinvestment in this space. If not now, then when?”

During the discussion, both operator executives acknowledged experiencing steep drops in occupancy, as well as higher costs. Thivierge observed that his company was receiving financial assistance in similar amounts to Hauswald’s, and that without that help, “we would not have had the cashflow. There are many other operators out there who would echo that sentiment. At the same time, we know that that’s not going to last forever.”

Looking ahead, he sees long-term impacts. “We’re dealing with an impact to our long-term care base, through this virus, that’s going to take us a long time to come back from.” He described seeing both erosion in the long-term base, and a need to overcome newly stoked fears of the nursing home environment amongst consumers and referral networks alike. “This pandemic has created a mentality in the consumer, and in the referral source, and in some cases even our practicing physicians and others, who are referring people to other locations with the explicit intention of avoiding a nursing home stay. There’s a concern that people in nursing homes will be infected at a higher rate than people who are not in nursing homes. We’ve got a challenge on our hands here, in terms of the perception in the market, and in terms of overcoming the reality of that. Longer-range, those incentives are providing us an opportunity to get through the day and get through this period, but they’re also forcing us to rethink our business model and to rethink what it looks like. How are we going to operate these centers at a lower occupancy and still sustain the level of service we’ve always wanted to and need to provide to our residents?”

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The National Investment Center for Seniors Housing & Care (NIC) is a nonprofit 501(c)(3) organization whose mission is to support access and choice for America’s seniors by providing data, analytics, and connections that bring together investors and providers.

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