Skilled care has been absorbing a lot of body blows lately. The latest was delivered Friday, and it’s going to leave a mark.
For that’s when Genesis Healthcare officially gave up the ghost on its old business model. The firm announced it is clearing out the C-suite in pursuit of a future where revenues top spending.
Lord knows the past few years have been trying for this once proud industry leader. And before we give the old guard an indecent burial, let’s ask ourselves this: Are their old, bad habits really so out of step with the rest of the herd? The obvious answer: hardly.
And that really concerns me. For while we have been hearing much lately about rebounding occupancy levels and spring shoots, this field is not exactly on the exit ramp from perdition. Far from it.
For clear evidence, consider this barometer: While construction for assisted living (or to use the more recent vernacular, senior living) continues at a robust pace, it has all but vanished for skilled care.
Or this: Virtually all of the American Health Care Association’s new members are assisted living operators. New skilled care joins? Not so much.
Or more fundamentally, this: The skilled care model is kinda fractured. Skilled care operators have not generally survived by providing best-in-market services. (Yes, some have. But a sizable percentage? Nah.) Most operators have kept the lights on by maximizing Medicare and Medicaid payments, while paring costs to the bone. And that practice has not been limited to the for-profits.
To be sure, COVID-19 made a tough operating environment even worse. Many thousands of residents were infected by the virus and died. Hundreds of thousands or workers have left, many to never return. And competition from other players is getting fiercer by the day. But let’s not pretend things were rolling along nicely prior to 2020.
It’s a safe bet that the coming months will be larded with SNF-acquisition announcements. Why is that? Two reasons. One driver will be bored capital looking for a date. The other, far bigger catalyst? Operators who want to get off the skilled care Tilt-A-Whirl.
I’ll say this for Genesis. At least they had the guts to admit their old ways of doing business no longer cut it. It’s an epiphany that more and more operators may soon experience — if they haven’t already.
John O’Connor is Editorial Director for McKnight’s
