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Long Term Care Strategic Planning During a Pandemic

Strategic planning during this COVID-19 pandemic can feel like a daunting task as revenue streams continue to be constrained with significant declines in census and expense pressures increase related to staffing, infection control, and testing. Understanding the current state of this sector on a national and state level will help to understand some areas that should be an immediate focus as there are real opportunities to remain sustainable.

Nationally, as of January 2021, 36% of COVID-19 deaths were nursing home residents and occupancy in nursing homes has dropped significantly. Staffing costs are through the roof and 66% percent of nursing home operators report that they are not confident that they will last a year without running out of cash reserves. Staffing shortages nationwide were prevalent prior to the pandemic and COVID-19 has only added to the stress of not having enough human resources and the additional costs required to retain adequate staff levels by paying bonus pay, overtime, and needing additional staff to meet various national and state mandates.

On a state level, occupancy levels tend to be higher in New York than the national average; however, most operators have reported significant declines in occupancy, particularly in the downstate area where the pandemic ravaged through nursing homes very early on. This resulted from an early mandate from the Governor to take COVID-19 positive patients and was compounded by a lack of ample PPE and readily available testing. The NYS Attorney General released a report in January 2021 on New York State nursing homes’ response to the COVID-19 pandemic. The report indicated many areas where residents may have been at increased risk of harm which included, but was not limited to, the following: lack of compliance with infection control protocols, low CMS staffing ratings, insufficient PPE, insufficient testing, and government guidance requiring the admission of COVID-19 patients into nursing homes. Additionally, the report was critical of reimbursement models that incentivizes for-profit operators to direct funds to related parties versus investing in supplies and staffing.

At a time when stimulus payments or PPP loans are fully expended and cash reserves are low, operators are barely seeing the light at the end of the tunnel, but with vaccines rolling out, cases are finally starting to decline, the consideration about future sustainability is possible. Some key items providers should focus on:

  • Fully understand your eligibility for the three key federal funding streams.
    • HHS funding- under the most recent stimulus package there is the availability to apply for phase IV funding.
    • PPP- PPP2 is now available if you have expended all PPP1 funds. If you did not take advantage of PPP1, and your entity is eligible it is not too late to apply.
    • Employee Retention Credit- the eligibility requirements and benefits have changed for 2020 and 2021. There are opportunities to take advantage of this program if you are eligible.
  • Understand your legal responsibilities and vulnerabilities as lawsuits are expected to increase.
    • The Emergency Disaster Treatment Protection Act, enacted April 6, 2020, and effective March 7, 2020, provided broad immunity to facilities and personnel. The State narrowed that immunity on August 3, 2020 to permit litigation about the spread of COVID-19 within facilities.
    • Consult an attorney as needed to ensure insurance policies are adequate.
  • Monitor cash reserves carefully.
    • Manage lines of credit and or restructure debt if there is the opportunity to do so.
  • Analyze accounts receivable aging and annual bad debt expense. Bad debt expense of even 1% of revenue suggests significant cash flow opportunity.
    • Is there an opportunity to greatly reduce your AR by billing more effectively?
      • Denial management
      • NAMI collection
      • Streamline Medicaid pending process
  • Consider merging or affiliating with another organization. Your organization may not be able to sustain and merging may make sense or consider other ways that partnering with another organization maybe mutually beneficial.

Utilizing a consultant may be advantageous during these tumultuous times to help provide more specifics around the strategies discussed above. This topic was recently part of a webinar series and can be accessed below. Please reach out as our team is ready to help.

The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We, therefore, make no warranties, expressed or implied, on the services provided hereunder.