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The COVID-19 pandemic is plunging U.S. nursing homes into a major financial crisis and many of them could go out of business, says a survey released by the industry’s trade association, the American Health Care Association/National Center for Assisted Living, or AHCA/NCAL.
80% of older Americans can’t afford to retire – COVID-19 isn’t helping
In a poll of nearly 500 nursing home operators, 72%, said they couldn’t keep going for another year under current conditions while 55%, said they were running at a loss. As politicians on Capitol Hill grapple with another rescue package, nearly all nursing home operators—92%—say they’ve received financial aid during the crisis, and 58% say they’ll face “significant” financial problems when it ends.
University of Alabama Health Administration professor Robert Weech-Maldonado, an expert in the field of nursing home economics, says the findings of the survey are credible and even unsurprising. The pandemic has forced homes to spend a lot more money, especially on extra staff and personal protective equipment.
“Nursing homes operate with low profit margins, so a crisis like this can really upset the whole industry,” he said. “This can be particularly the case for high Medicaid nursing homes, [many of which] were struggling financially even before the pandemic. Many of these nursing homes happen to be located in minority communities, which are also being disproportionately affected by COVID-19.”
The effects are felt all the way up the chain as well. Welltower WELL, +1.81%, a $24 billion REIT that owns nursing homes and senior living facilities, has seen its stock collapse by a third since the start of the year, even counting the rebound. Since the crisis broke it has rushed to raise more than $2 billion cash to shore up its balance sheet. The stock of most other REITs in the nursing home business are down significantly for the year, many by a third or more.
Nursing homes have been ground zero for the COVID crisis. The disease is particularly lethal to the elderly. Preliminary data from the federal government estimates that through July 26 nursing homes had accounted for 43,000 or 30% of all U.S. COVID-19 deaths. But some of the figures are disputed and many say the true toll is higher.
The question is going to be where this leaves the industry and indeed the aging population. The over-75 U.S. population is forecast to double over the next 20 years to about 5.5 million, which is more than three times the current number of nursing home beds. Meanwhile costs have already been rising sharply and at the moment it costs on average about $100,000 a year to stay in a nursing home.
How many elderly Americans can afford that? Yet even at those prices, the industry can’t make money.
