The median operating margin for skilled nursing facilities in 2020 was 1.5% lower when compared to the previous year and COVID-19 relief funding was removed, according to a new report released by CliftonLarsonAllen Tuesday.
The findings demonstrate a more difficult operating environment SNFs are facing that could prevent them from surviving the pressures of the pandemic. By comparison, SNFs realized a 3.1% increase in median operating margin for 2020 when including relief funding.
“Unfortunately, the operational reality is masked by a variety of factors, most notably the benefit of [public health emergency] funds,” report authors Stephen Taylor, Matthew Wocken and Seth Wilson wrote in CLA’s 36th Annual SNF Cost Comparison and Industry Trends Report.
“By excluding the impact of PHE funds from the calculation, we see something more representative of the challenging operating environment: a median net operating margin of -1.5%,” they added.
Occupancy, another strong indicator of SNF financial performance, fell below 80% for the first time in 2020, CLA’s analysis confirmed. It found the median SNF occupancy rate was 77.5% for 2020, well below the 85% rate found in 2019.
“The earliest we can hope to report a median occupancy rate above 80% is for 2022,” the authors stated. “We are seeing a disproportionate recapture of occupancy among operators in markets, which is creating a wide gap between the haves and the have-nots. Three consistent themes arise: market(s) you operate in, quality, and staffing.”
The rising cost structure, along with labor and infection control costs, are also apparent trends operators must consider, CLA said.
“While the effects of COVID-19 have dramatically impacted the market, and financial and operational issues persist, understanding the data can provide perspective and support your ability to forge a financially viable path forward,” Taylor, Wocken and Wilson concluded. “Get organized around what you are going to measure and what actions you are going to take.”
The full report can be found here.
