In the world of long-term care, profits can be razor thin. Or worse.
That has a little something to do with the competition, and a lot to do with the nature of account receivables.
For as loathe as we are to admit it, long-term care is essentially a welfare business. As is any enterprise where the government pays 60% or more of the freight.
There’s no shame in that. Plenty of industries and firms are similarly dependent. And in many ways, that can be a good thing. States and the federal government may not always be prompt payers, but they do provide a reliable revenue stream. That’s not so bad.
What can be bad, however, are the rates. Medicaid has a notorious history of demanding champagne service on a beer budget. And anyone who thinks Medicare Advantage insurers are not similarly inclined may soon be in for a rude awakening. Medicare is probably the fairest third-party revenue source of the bunch, but it can be prone to fiscal peccadillos as well.
Put another way, money is always tight.
That’s one reason why seemingly minor developments can have an oversized impact on post-acute care settings. Especially if that seemingly little thing happens to be a mandate to pay employees a bit more.
That’s basically what just happened on Jan. 1, when minimum wage hikes took place in 27 states. That’s not counting Florida and Hawaii, which raised their minimums in the fall.
We can debate whether the federal minimum wage is fair. Actually, we can’t. The amount is laughably low. To expect an adult to survive on that amount — much less a single Mom with children — is absurd.
But on the other side of the ledger, staffing is already the highest operational cost at facilities. In the zero-sum game of nursing home economics, every requirement for additional outlays means that much less money is available elsewhere. It’s a harsh reality that can breed outcomes of the strange, ruthless and occasionally tragic variety.
Moreover, like a rising tide that lifts many boats, minimum pay rate increases must often be tacked on to other wages that might be higher, but in the neighborhood.
To state the obvious, nursing homes are not going to win a PR war claiming that a hike in the minimum wage might break their backs. Even if it’s true.
Which leaves operators with their usual default option: Find a way to meet yet another mandate by trimming costs or services, and soldier on as best as possible.
That ingrained response helps explain why this sector is so universally resilient. And why people who think this is simply a money-grubbing business should take a closer look.
Or better yet, perhaps such critics should open a facility and see just how easy it is.
John O’Connor is editorial director for McKnight’s.
Opinions expressed in McKnight’s Long-Term Care News columns are not necessarily those of McKnight’s.
