Long-term senior living spaces have been disproportionately affected by the COVID-19 pandemic. The high proportion of older adults (many with underlying conditions) in these settings led to increased infection prevalence and symptom severity, resulting in high mortality rates. Despite heroic efforts made by staff and management at these facilities, the pandemic contributed to at least 200,000 fatalities among residents, patients and employees at nursing homes, skilled nursing facilities and assisted living communities across the United States.
In addition to the tragic loss of life, the pandemic has also profoundly impacted the operations of senior living facilities. Specifically, occupancy, infection control and workforce composition have all been affected by the pandemic. What’s more, analysts continue to predict challenging operating margins for most of the nation’s 14,000 nursing homes and long-term care facilities.1
Staffing shortages have challenged the senior living sector for decades, partly driven by the growing demand for long-term senior care. Nearly 10,000 Americans turn 65 each day, and life expectancy is increasing by 2.5 years every decade. At this rate, the senior population will double in eight years.2 One pre-pandemic study estimated that—to keep pace with demand—nursing homes would need to add 1 million new employees by 2025.3
“We have been keeping our eyes on staffing levels at Nursing Homes in our underwriting for years. Prior to 2020, no Federally-mandated minimum staffing levels existed for Senior Living Facilities and there was very little guidance from the states, either. Fortunately, now we have seen many states pushing legislation to address an area so critical to resident care and also members of Congress trying to take action.” – David Catanuto, Vice President and Underwriting Manager – Pro-Praxis Senior Living Underwriters
The pandemic has only made staffing matters worse. For starters, it’s causing workers to exit the industry in large numbers. Between February 2020 and January 2022, nursing homes lost 15% of their staff, while assisted living facilities lost 6.7%. For comparison, in the same time period:
- Physicians’ offices gained 2.2% additional staff
- Outpatient care facilities gained 1.1% additional staff
- The home health care industry lost only 1.7% of their staff
- Hospitals lost only 2% of their staff
Despite these fields facing many of the same pandemic-related dangers and emotional stressors as the senior living sector, other health care industries managed to retain far more workers.1 Although it does bear mentioning that the dangers and stressors confronted by senior care staff almost always exceeded those presented at other workplaces.
Such staffing issues have led to upward pressure on wages, especially among skilled employees. Hourly nursing pay rose 5.3% in 2020 and 8.1% in 2021. Temporary nursing contracting, which businesses are increasingly turning to as a stopgap measure amid labor shortages, has also seen exponential cost growth. Between 2017 and 2019, temporary nurse contracting fees grew 3.4%. However, during the pandemic years, those fees nearly tripled to 9.2%.1
Compounding concerns, employee turnover is a common and costly issue for senior living communities, with average turnover rates ranging from 40% to 70%. The estimated cost of replacing an employee is $3,000 to $5,000, meaning senior living facilities with 100 direct-care employees could be spending up to $375,000 per year on turnover alone.3
To help address this issue, the Biden Administration has pledged to work with states to create and publicize free employee training programs, demonstrate ways Medicaid payments can be tied to adequate compensation, and collaborate with stakeholders to recruit and provide training to those interested in transitioning to nursing careers.4 However, because such efforts will likely be tied to sweeping new minimum staffing requirements, it’s unclear whether they will be a boon or a burden to the senior living industry.
Financial and regulatory pressures
According to a white paper commissioned by the American Health Care Association (AHCA) and the National Center for Assisted Living (NCAL), occupancy among skilled nursing facilities—most of which are licensed for both acute and long-term care (e.g., nursing homes)—sank to 77% capacity in 2020 and then further to 73% in 2021. Considering increased labor costs, pandemic-related expenses and other economic issues (e.g., rising inflation), the white paper forecasts negative median operating costs for facilities throughout 2022. The study concludes that even if occupancy recovers to 77% this year, which is less than certain, the median negative operating margin will end up close to -5%.1
Furthermore, analysts stress that this outlook depends on the continuation of the federal Public Health Emergency (PHE) funding, as well as Medicare and Medicaid reimbursement rates remaining the same, both of which are not guaranteed.1
The report goes on to predict that as many as 417,000 residents and patients may be living in nursing homes in imminent danger of closure, including many with Five-Star ratings.1
On top of financial woes, increased regulatory and legislative action may be on its way. In February, the Biden Administration announced its intention to implement new rules to improve safety, accountability, oversight and transparency in the senior living industry.
Among them, the federal government plans to propose minimum staffing requirements for nursing homes within the next year. Currently, the only staffing requirement stems from vague language in the 1987 Nursing Home Reform Act, which states facilities must provide 24-hour licensed nursing services that are “sufficient to meet resident needs.” Given the existing workforce shortages, legal experts anticipate this rule will likely be the most significant—and burdensome—policy priority outlined in the Biden Administration’s proposal.5
Another federal initiative outlined in the Biden Administration’s announcement that could impact operating costs is the promotion of single occupancy rooms and the phasing out of rooms with two or more residents. The government might pursue this end through incentive payments or caps on multi-occupancy rooms.5
Several state legislatures are also debating and passing new geriatric care guidelines, including New Jersey, California, Florida and Illinois. For example, in October 2021, California passed the Corporate Transparency in Elder Care Act, which requires operators to report their finances to the state and the public.6 Looking ahead, it’s possible additional states could enact similar legislation.
The pandemic provided the senior living sector with a number of valuable lessons as it pertains to mitigating ongoing public health risks. As such, infectious disease protocols will likely remain an industry priority going forward, even as the pandemic subsides. Some of the stricter public health measures initially introduced at the onset of the pandemic may be relaxed, but experts believe many others will remain in place.
“Over the last two years we are fairly confident Nursing Home operators have gotten really good with COVID-19 related infection control…The protocols are now strong and their resources for the materials are there. Some state Survey inspectors have broadened their focus to include items in the Medicare Infection Control handbook like the facility’s Dietary and Housekeeping departments.” – David Catanuto, Vice President and Underwriting Manager – Pro-Praxis Senior Living Underwriters
These measures—which senior living facilities may consider implementing as part of their normal operations to help control infections in the future—include enhanced cleaning procedures, vaccination requirements among residents and staff, visitor restrictions, respiratory hygiene standards (e.g., the use of masks), and symptom screening and testing rules.7
- Enhanced cleaning procedures—Dedicated medical equipment should be used when caring for a patient with suspected or confirmed infection. All nondedicated, nondisposable medical equipment used for that patient should be cleaned and disinfected according to the manufacturer’s instructions before use on another patient. Routine cleaning of frequently touched surfaces should include using cleaners and water to pre-clean surfaces prior to applying an EPA-registered, hospital-grade disinfectant.
- Vaccination requirements—Unless contraindicated—for example, by an allergic reaction—all staff and residents should be vaccinated against infectious diseases (when possible), even those previously infected. In particular, influenza vaccines should be prioritized, especially among staff, because residents often fail to have a robust immune response to vaccinations.7
- Visitor restrictions—Many indoor visiting restrictions are being lifted within senior living facilities. Yet, it may be beneficial for visitors to remain barred from entry if they have a fever or other infectious disease symptoms, were recently diagnosed with such a disease or had prolonged close contact with an infected person within the last 10 days. Visitors should still keep their distance from other residents and staff. For residents who share a room, visits should occur outside the room whenever possible.7
- Respiratory hygiene standards—Masking is now all but universally required in the senior living setting, the only exception being residents in dementia units who may not have the cognitive capacity to maintain proper mask wear.7
- Screening and testing rules—Residents should be screened for infectious disease symptoms daily, and more frequently when outbreaks occur. New or returning residents should undergo viral testing, but beyond that, viral testing of asymptomatic residents need only occur after outbreaks.7
Positive advancements in senior living
One of the few positive impacts the COVID-19 pandemic had on the health care industry was the widespread adoption of telemedicine, which is the remote diagnosis and treatment of patients by means of electronic and digital technology (i.e., medical visits that are completed via video conferencing or telephones). The medical field as a whole had long been dragging its heels in exploring new technological tools to assist with patient care. Only when the government granted emergency pandemic waivers that cut through red tape and streamlined reimbursements did greater telemedicine adoption occur. Many of these waivers are expected to become permanent going forward.
Telemedicine is particularly valuable in elderly care because it saves frail and/or cognitively impaired patients from having to be moved around as much in order to receive medical attention or treatment, thus granting them simplified access to care providers.
Another potential upside to be salvaged from COVID-19’s aftermath is that it may have given health systems a better appreciation for the senior living sector’s position as an important part of the overall health care continuum. During the worst of the pandemic, nursing homes forged new bonds with local public health departments and helped hospitals maintain emergency capacity.
Some providers hope that the increased policy scrutiny brought on by the pandemic will ultimately lead to better health system relationships and possibly enhanced industry stature, along with additional public funding.9