A new snapshot of the skilled nursing industry finds that operators with a good track record should have abundant opportunities, as long as they embrace and engage in changes in the market.
That’s according to the 33rd annual Skilled Nursing Facility Cost Comparison Report, released Friday by CliftonLarsonAllen. Much like last year, SNFs continue to grapple with “monumental transformation,” including narrowing post-acute networks, shifting referral patterns, the growing popularity of Medicare Advantage and intensifying regulatory scrutiny.
“As the industry rapidly moves forward, the magnitude and pace of these changes poses a great threat to some SNFs, while creating opportunities for others,” report authors state.
CLA notes that factors such as lower occupancy, a less desirable payer mix and higher-cost structures are straining the bottom line for skilled nursing. With that, even high-performing SNFs are not faring as well as previous years, with average earnings before interest expenses, depreciation and amortization at 15%, and operating margins at 5%.
Meanwhile, operators in the lowest quartile of performers are tallying average earnings at less than 4%, and operating margins of -6%, CLA notes.
“We continue to see a trend of the ‘haves’ and the ‘have-nots,'” said Cory Rutledge, managing principal at CLA. “The top-quartile of SNFs, while experiencing diminished financial results when compared to prior year, are still in an overall favorable position. The data suggests that the bottom quartile of SNFs, on the other hand, are losing money and are approaching a dire situation.”
The firm contends that there is hope and room to excel for those who embrace change, but the laggards may get left behind.
“We believe that strong performers will survive, and providers willing to accept risk-based alternative payment models have the opportunity to flourish in an environment that will reward providers for producing high-quality outcomes at a reasonable cost,” the report states. “But we also believe the trend of increased pressure on lower-performing SNFs will continue, which will likely result in consolidation as successful providers look to grow while others seek to exit the business.”
The analysis was created using more than 10,000 cost reports from the Centers for Medicare & Medicaid Services.