Massachusetts nursing homes losing money, report finds

Nursing homes in Massachusetts are becoming less profitable.

Advocates for seniors have been warning for a long time that nursing homes are at risk of closure because they do not have sufficient funding to keep operating.

Now, a new report by the Center for Health Information and Analysis puts a figure on the extent of nursing homes’ financial challenges.

According to CHIA, an independent state agency, across all the state’s nursing facilities, the median operating margin declined from -0.8% in 2013 to -3.9% in 2017. That means nursing homes were slightly unprofitable in 2013 – but now are losing far more money each year. The operating margin measures operating revenues compared to expenses.

Some of this is likely due to fewer people entering nursing homes. According to the report, use of nursing homes declined by 5.4% over the same time period. Occupancy rates declined from 87.8% to 86.4%. Facilities with the highest vacancy rates unsurprisingly also made the least money.

“Utilization is really declining, and it’s declining increasingly each year,” said CHIA’s director of analytics, Caitlin Sullivan.

Some of the loss may also relate to who is paying for the care. Operating revenue for nursing homes is generated by fees paid by MassHealth, Medicare, private insurers and self-paying residents. According to the CHIA report, Medicare pays the highest rate, because its patients often have the most acute medical needs, but there has also been the biggest drop in Medicare patients. This is likely due to changes the federal government made to Medicare to reduce unnecessary hospitalizations, resulting in less need for post-hospital care.

Sullivan said in addition to the federal changes, people also have more choices for care today, with insurance becoming more likely to pay for services like in-home nurses or community-based adult day services.

Facilities with large numbers of Medicaid patients tended to be the ones losing the most money, while facilities with higher numbers of Medicare patients did better.

Financial instability can result in lower quality care.

In March, Attorney General Maura Healey announced that her office had reached settlements with seven nursing homes over substandard care that endangered residents, in some cases leading to injury or death.

While it is not clear how much funding contributed to these problems, the CHIA report found that in 2017, around one-third of nursing home care in the state was being provided at a facility rated at below or much below average, compared to all nursing homes in the country.

In 2017, nursing homes with a five-star health inspection rating spent a median of $115 on nursing expenses per resident per day, while one-star facilities spent $107.

Average staffing rates in nursing homes were above national averages and slightly below recommended standards.

“There is definitely an important relationship there between the profitability of a facility and the ability of the facility to meet different performance benchmarks and maintain quality of care,” Sullivan said.

The Jewish Nursing Home of Western Mass., in Longmeadow, which was required to temporarily freeze admissions in 2017 after improperly installed bed side rails led to the death of one resident and serious injury to another, reported an operating margin of -15.9% in 2017.

All but one of the nursing homes that reached settlements with Healey’s office in 2019 lost money in 2017, according to data published by CHIA.

The Massachusetts Senior Care Association has been pushing for legislation that would provide more money to nursing homes.

Three nursing homes in Massachusetts closed in 2017, 18 closed in 2018, and 11 so far in 2019.

At a hearing in April, the Massachusetts Senior Care Association, which represents nursing homes, warned that up to 35 nursing homes were at risk of closure this year due to financial struggles. According to the association, there is a gap of $38 a day between the amount the state pays for nursing home care through MassHealth and the cost of providing care.

In this year’s budget, the Legislature allocated an extra $50 million to help struggling nursing homes. It also appropriated $200,000 for a new “nursing home sustainability task force” that will look at ways to ensure the financial stability of skilled nursing facilities, consider the role of nursing homes with the spectrum of elder care and address workforce challenges. Its report is due in February.

Tara Gregorio, president of the Massachusetts Senior Care Association, said the CHIA report “provides a transparent analysis of a sector in extreme distress.”

Gregorio said inadequate MassHealth funding is “a key contributor to the sector’s financial crisis.”

To see how profitable a particular nursing home is, visit CHIA’s website.

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