COVID-19 Pandemic’s Impact on Smaller Operators

The COVID-19 pandemic impacted businesses across the globe no matter how big or small. Skilled nursing operators were no different. Now as the pandemic is slowly ending, occupancy rates in nursing homes are gradually returning to pre-pandemic levels reports Skilled Nursing News.

In January 2021, all nursing homes were underperforming with occupancy rates below 80% as reported by CliftonLarsonAllen. Texas had the lowest occupancy rate at 56% and New York had the highest rate at 80%.

Smaller nursing homes have been hit the hardest during this pandemic. Joshua Rosen, Senior Vice President & Managing Director of Walker & Dunlop stated “mom-and-pop operators were previously struggling to adjust their models based on the new The Patent-Driven Payment Model (PDPM) reimbursement, and once COVID hit it became evident that the smaller, less resourceful operators were likely to exit the business rather than retool their way of thinking.” Smaller and localized operators have been severely impacted during the pandemic.

Funding from the federal government has provided some relief to these smaller operators through the Payroll Protection Program (PPP), the Provider Relief Fund as well as funding from local and state organizations, says Betsy Rust, Partner at Plante Moran. As funding slowly dwindles, these operators will continue to face struggles.

In the future, Rust states it is likely that these smaller operators may be sold for real estate investment. Additionally, none of the states with Medicaid nursing home payments cover all costs. Reimbursement rates vary across different states.

Nursing homes in rural communities have three to four beds per room. This can cause an additional challenge to the smaller operators as the demand for private rooms has increased over the course of the pandemic. Single occupancy also aids in infection control by preventing the spread of the virus.

Another cause of concern may be the way nursing home buildings are financed. According to Rust operators should not be “overpaying their landlords” and she foresees “more tenant-landlord discussions and negotiations going on in an effort to lower rent.”

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