Nursing Home Residents Getting Younger
By Liz Liberman, Health Care Analyst, NIC
The population of younger nursing home residents is on the rise, according to the National Center for Health Statistics. This population includes young adults with disabilities and adults between the ages of 65 and 74. In fact, the latter population has grown from 13% of all nursing home residents in 2000 to 14.9% in 2013, the McPherson Sentinel reports. This rise is mostly due to the increase in short-term stay residents. The American Health Care Association estimates that 22% of nursing home residents need short-term care, which covers stays under 100 days.
Skilled nursing properties have been ramping up their efforts to attract this short-term care population because the residents’ care typically is paid for by Medicare, which pays a higher per diem rate than Medicaid, the most common payor for long-term residents. According to the NIC Skilled Nursing Data Report, the difference in per diem rates is significant: $501 for Medicare compared to $198 for Medicaid and $247 for Private Pay, as of March 2016 (the most recent public quarterly update of the report). Medicare-paid short-term residents include those patients who need higher levels of care, which means skilled nursing providers have been scaling up the level of therapy that they can provide within their facilities. Skilled nursing properties also have to work more closely with hospitals and health systems to attract more residents of this type. (See Bill Kauffman’s blog post on hospital/nursing home relationships.) Volume is still important in this changing atmosphere because short-term residents do not fill the beds for as long as long-term residents. To keep occupancy up, skilled nursing properties have to work harder to bring more short-term patients in the door. So-called “through-put” increases with greater volumes of short-term care patients.
A recent study published in the Annals of Surgery confirms that skilled nursing use increases as potential short-term care patients become eligible for Medicare. The difference between rehab utilization among potential patients with the same condition between age 64 and 65, the age at which Medicare eligibility kicks in, is 9.6%, with the greatest increase seen in patients going to skilled nursing properties. This study confirms how vital Medicare is as a payment source for skilled nursing and how Medicare drives more young patients into institutional care following high acuity events.
Though Medicare does pay more per day for skilled nursing care than Medicaid or private pay, MedPAC recently announced its recommendation against raising the Medicare rate paid for short-term stay. In a letter to CMS, MedPAC (which advises Congress and CMS on Medicare rate setting) argued that Medicare margins in skilled nursing properties have been above 10% for the last 15 years, reaching 12.5% in 2014. These margins indicate to MedPAC that Medicare more than adequately compensates for the cost of care. The skilled nursing industry argues that although Medicare rates exceed costs, Medicaid rates do not exceed costs. In many states, the rate Medicaid pays is well below the cost of care, so nursing homes lose money on every Medicaid resident. NIC data shows that 64.5% of residents nationally were Medicaid residents as of March 2016. In states where a Medicaid shortfall exists, that patient day mix could translate into narrow margins.
Interestingly, another other young population growing in nursing homes includes people under the age of 65. This population usually includes adults with disabilities or without any type of support system needed to recover following an acute medical event. For example, according to the Associated Press, Montgomery County in Pennsylvania reported that the share of young people in nursing homes increased from 5% in 2000 to 18% in 2016. Very young people in nursing homes face the challenge of affordable rental housing, an issue the Bipartisan Policy Center argues also plagues seniors. Nursing homes may not be the most appropriate setting for low-need seniors or for low-need adults with disabilities, but that’s where these residents end up because of the lack of appropriate housing options. These low-need patients are most often Medicaid residents—which, for skilled nursing properties, can mean these patients are taking the place of a potential high-need, high-reward Medicare patient.
Whether or not Medicare rates for skilled nursing increase, properties still will seek younger, short-term patients. To attract these coveted patients, skilled nursing operators have to market themselves as the best care setting for high-acuity patients. Capturing the market share of short-term care patients means making adaptations to facilities that younger patients seek: higher therapy and treatment options, high-tech environments, private rooms, and other amenities. With half of the nursing homes in the U.S. having been built before 1980, it is likely that many facilities will consider making these upgrades—or risk losing out on young residents and their high Medicare reimbursement rates.
Download the 1Q2016 Skilled Nursing Data Report