by James C. Sherlock

Nursing homes are businesses.

Seventy percent of those in Virginia are for profit. They are run not by doctors but registered nurses with physicians on call. 

Nursing facilities very widely in size in Virginia, from the 300-bed Mulberry Creek Nursing and Rehab center in Martinsville to facilities of less than 30 beds, especially the long-term care units of a few mostly rural hospitals.

They include facilities designated as skilled nursing facilities (SNF), often post-op care and rehabilitation, and others designated as long-term-care nursing facilities (NF). Most nursing homes in Virginia have facilities and certified beds for each.

Insurer mix and staffing costs are keys to profitability.

Many of these businesses are worth what they get paid, but many are not.

Insurance. The vast majority of nursing homes depend on Medicaid and Medicare revenues. SNF services are far less expensive than recuperating in a hospital. So, all insurers want the transfer as soon as it is safe.

Medicare revenues come through the post-acute short-stay residents in SNF beds. Medicaid pays for SNF services for Medicaid clients who are not covered by Medicare or exceed Medicare’s time limits. Private insurance also pays for SNF recuperation and pays far higher rates than government insurance programs.

Medicaid pays for the majority of long-stay NF residents. It’s common for people to pay for nursing home care privately until they’re no longer able to afford it, which is when they can qualify for Medicaid.

One sure thing about Medicare and Medicaid, they demand unbelievable amounts of data. I will use those data to illustrate the issues.

Profitability. The average pre-COVID profit margin for most of these businesses in the U.S. was between 3% and 4%. Those margins in normal times vary widely depending on:

  • the mix of payer sources (which is often dependent upon location);
  • the commitment and ability of the facility to maintain full and qualified staffing; and
  • occupancy rates.

COVID effects on the business. 

Many nursing home businesses are foundering under COVID-related stresses  COVID has brought business pressures, but also federal dollars.

COVID has driven up nursing facility costs and driven down their occupancy rates.

The number of patients in Virginia nursing homes dropped by 13% in the 15 months from the end of 2019 through March 31 of this year. That represents a loss of 3,602 patients. Statewide nursing home occupancy rate dropped from 86% to 75% over that same period.

Yet even with the drop in patient populations that reduce staffing requirements, filling jobs with quality people remains a difficult problem across the system. Nursing homes face the same shortages of skilled and unskilled workers that all businesses must overcome.

The personnel problems for many have proven unmanageable, even if they want more workers. Some prominent chains are reported to have used understaffing as a business model well before COVID to drive higher margins.

The best find good people, but the worst are well known to professionals and quality staff simply don’t want to work there.

COVID Vaccinations. COVID vaccinations for staff remain a big problem.  According to CMS data for the weekly reports dated September 22, 2021, Virginia nursing homes reported:

  • Percent of Current Residents with Completed COVID-19 Vaccinations per Facility — 85.85%, slightly higher than national average of 84.1%.
  • Percent of Current Staff (Healthcare Personnel) with Completed COVID-19 Vaccinations per Facility — 71.98%, higher than national average of 64.4%.
  • Think of the implications when some part of the 28% of unvaccinated caregivers leave instead of getting a mandatory vaccine shot.

COVID Money. 

Nursing homes have gotten federal COVID money, but I can find no reliable data to trace that money to individual homes. 

More money is on the way, but it is hard to tell how the financials will wash out in the near or long term. The process for actually delivering the money to those for whom it is intended through the federal and then state bureaucracies is broken.  

It is more money than the government agencies can handle. Literally.

Once the money helicopter is grounded, the nursing homes will want higher Medicare and Medicaid reimbursements, and will probably need them to meet the new challenges and costs.  

Other business considerations. Some of the best performing nursing homes are part of high-end continuing care communities that feature both assisted living and nursing home care on the same campus. Many make a lot of money on assisted living and can afford to spend some of it on the nursing home side.

Counterintuitively, nationwide, for-profit nursing homes are more likely to be found in poor neighborhoods than are non-profit ones, thus have a larger share of Medicaid patients.

Marketing vs. reality. Unsurprisingly there are major differences between badly performing nursing home marketing and the facts seen in federal nursing home data.

Envoy of Williamsburg is in the government’s data the worst nursing home in Virginia. It is on the CMS “Special Focus Facility” watchlist, a rare designation, and has been cited for patient abuse.

Yet its last full inspection was June 20, 2019. The facility received two different inspections in April of this year in response to specific complaints. Envoy of Williamsburg has 71 health citations. The average number of health citations in in the U.S. is 8.3. The average number in Virginia is 12.1.

Go to that facility’s web page and you will find that “Envoy of Williamsburg is a place to get better, a place for living.” Sort of.

Envoy of Williamsburg, bucking state trends, has actually increased its daily patient occupancy in the past two years. A success in marketing and sales at least.

Perhaps the Health Commissioner could have stopped the nursing home from taking in new patients until it fixed its problems. Didn’t happen.

Perhaps the Attorney General could have sued for violation of the Consumer Protection Act.

That didn’t happen either.

What’s next? Next, I will report on nursing homes in South Hampton Roads.  With some honorable exceptions, they may be the worst in the state.

I will continue the series until readers can view the data for all 286 statewide.

Then you can decide how badly we need regular inspections and assess the impact of the campaign money-driven refusal of successive state administrations  and General Assemblies to fund the inspectors.

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8 responses to “Virginia’s Self-Inflicted Nursing Home Crisis — Part 2, the Business”

  1. Eric the half a troll Avatar
    Eric the half a troll

    This is a good and informative piece, Mr. Sherlock. Thanks very much.

    1. James C. Sherlock Avatar
      James C. Sherlock

      You are welcome.

  2. Nancy Naive Avatar
    Nancy Naive

    I think I can summarize.
    1) These facilities employ nurses and doctors whose objective is to provide care and comfort in the end and near end stages of life.
    2) These facilities are designed to change a mix of your assets and public assets into their assets.
    3) There are State and Federal laws, regulations, and entities that, either by design or malfeasance, prevent you from maximizing one while minimizing the other.

    And yes, you’ve served up an interesting and tasty platter of information.

    1. James C. Sherlock Avatar
      James C. Sherlock

      Check the next one out.

    2. James C. Sherlock Avatar
      James C. Sherlock

      Actually, let me correct a couple of possible misconceptions.
      1. Doctors are on call but not onsite. Registered nurses run the operations.
      2. Skilled nursing facilities are designed to make you well after a trauma – usually surgery – and send you home. At any age. They are supported by insurers to avoid the much higher costs of remaining in the hospital. Some are better at it than others. If you have Medicare, it pays in full for 20 days of SNF and then you owe your copay for the next 80 days, at which point Medicare bows out. One hundred days of SNF requirement happens, but very seldom. If you have private insurance or Medicaid, you need to check on your coverage for SNFs.
      3. Nursing facilities (NFs) are the ones that require self-pay or private long term care insurance until Medicaid kicks in.

      1. Nancy Naive Avatar
        Nancy Naive

        Rehab vs. whatever. Because of the Moms, I am only familiar with facilities with the locks on backwards. Both were 5-star, but you STILL don’t want to be there. AFV II did have great food!

        1. James C. Sherlock Avatar
          James C. Sherlock

          AFV II was an excellent choice.

          1. Nancy Naive Avatar
            Nancy Naive

            Except for JJAS, aka summer. Hell has a lot in common with San Antonio. 10 years from now things will start getting really, really bad. You’re a Boomer premmie. There’s a boatload of bad health coming just behind you.

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