Care Center Financial Survey Results Show Continued Improvement

Posted on August 12, 2020 by Jeff Bostic

The results of the Long-Term Care Imperative’s annual nursing facility financial indicators survey were recently prepared by CliftonLarsonAllen. The 2019 data shows that financial performance continued a trend of improvement

that started in 2016, largely due to the new value-based reimbursement (VBR) system that began on January 1, 2016. Whether improvement continues depends in large part on how the COVID-19 pandemic plays out and the federal and state response to it.

Below are some key findings of the 2019 study:

• Revenue per day increased 6.2% from 2018 to 2019, showing more than 2% improvement from the previous year. This could partially be due to the implementation of the new Medicare case mix system, PDPM, on October 1, 2019.
• Expenses per day increased by 5.6% from 2018 to 2019, slightly higher than the last two years but much less than the almost 10% increase in the first year of VBR.
• Median operating margin increased a full percentage point to 1.9%. Margin has improved slowly each year since VBR was implemented although it is still short of the 3-5% needed for ongoing stable operations.
• Medicare Advantage days increased in the second year data has been collected. The median payment per day for Medicare Advantage was almost $60 less than the median for fee-for-service Medicare.
• Days in Accounts Receivable increased by more than two days to 44 days. That increase may be the first sign of an impact from the increase in Medicare Advantage days and the associated billing complications.
• The positive impact of VBR can also be seen in improved debt service coverage ratio which was at 1.5 in 2019 after being at 1.0 in 2015.

Somewhat overshadowing the positive results of this survey is the impact of the COVID-19 pandemic in 2020. As we have already reported, average occupancy dropped 7% from the first quarter to the second quarter of this year, creating a significant loss in provider revenue while providers are dealing with increased costs for personal protective equipment and staffing. Both the state and federal governments have put in place relief programs to address these issues, but depending on how quickly occupancy can recover and the ongoing ability of the state and federal governments to maintain adequate reimbursement, future financial survey results may not be as positive.

Full results of the 2019 financial survey can be viewed here.