A worker shortage is driving US nursing homes to the brink of collapse

Lauren Coleman-Lochner, Martin Z Braun, Bloomberg News on

Published in Business News

Even in normal times, experts say, there needs to be a rethinking of how the facilities are financed.

“All of the reimbursement systems are inadequate across the board,” said Suzanne Koenig, a nursing home turnaround expert and head of SAK Management Services who has served as a receiver and Chapter 11 trustee in bankruptcy cases. The Centers for Medicare and Medicaid Services’ proposed 4.6% Medicare reimbursement cut next year would affect payments that cover shorter-term rehab patients, who account for a significant portion of nursing home stays. Medicaid, meanwhile, funds most long-term care.

About 70% of nursing homes in the U.S. are owned by for-profit operators, including large chains, smaller investor groups, mom-and-pops, and increasingly, private-equity firms, who have been a driving force in the consolidation of a still-fragmented industry.

Publicly financed facilities — and their creditors — have their own issues, too. Municipal bonds issued for nonprofit owners of senior living facilities, including nursing homes, make up almost 75% of the $560 million municipal bond defaults this year, according to data compiled by Bloomberg. Last year, $1.1 billion of those bonds defaulted, accounting for 60% of defaults in the municipal bond market.

Complicating the situation is the scattered nature of bondholders when publicly financed facilities need to restructure, Polsinelli’s Gordon said, making negotiating and reaching an agreement difficult even when there are willing buyers. That means that some facilities that might have been saved end up closing.

The goal for bankrupt facilities is usually to sell to a new operator, but that isn't always possible, or a buyer doesn't want all the locations.

Worker exodus

As nursing homes struggle to operate in the black, proposed rules from the White House meant to improve care include new requirements on staffing levels that could present another obstacle for an industry already struggling to find workers.


Roughly 236,000 caregivers, or 15% of the nursing home workforce, left the sector since the start of the pandemic through February, according to the Bureau of Labor Statistics. Burned-out workers are not being tempted by raises. Their wages jumped 19% between January 2020 and January 2022, BLS data show. But other industries have raised pay, too.

“You can go work at the Walmart down the street and get paid more and not deal with COVID all day,” Gordon said.

For rural facilities, the situation is even more urgent. Like rural hospitals, they’re often located in areas with stagnant or declining populations.

“It’s going to take more than wages,” said David Grabowski, a professor of health-care policy at Harvard Medical School. “It’s about working conditions. It’s about culture.”

Experts from the Academy of Sciences say the nursing home industry needs a complete overhaul from emergency preparedness to new standards for staff and better oversight and regulatory enforcement. A report from the nonprofit also suggests the federal government study a new long-term care benefit. The current system, according to the report, is “ineffective, inefficient, fragmented and unsustainable.”

Until then, operators are just trying to find nurses and support staff to keep their facilities running. But even with incentives — some centers are offering a free vacation day for every three weeks worked, said Kelly Arduino, head of the health-care practice at advisory firm Wipfli — job applicants aren’t coming forward.

“We just can’t even remember a situation where it’s been harder,” she said.

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