Inequity in Healthcare

Skilled Nursing Facilities Are a Critical Option for Long-Term Care

Hopefully, you and your loved ones will age gracefully. But what happens if it isn’t as smooth as you hope?

I previously wrote about why I started my new health-tech company. I was motivated by personal experiences. And along this path, I learned about caregiving — it was a humbling experience.

I am embarrassed to say that it is only then that I began to contemplate some of the health equity issues that I had not previously considered. In my case, we had the benefit of choosing how we wanted to meet the needs of our family members as they endured their health battles. While the choices were daunting, where would we have been without family support, knowledge, network, flexibility, and financial resources? Most people are not fortunate enough to have all these elements align, and our health system should be designed for them — not for me.

Who Are We Solving Problems For?

I am concerned that many of the people who engage in the administration of healthcare and health-tech are more like me than their Residents and Patients. We are well-intentioned and mission-oriented but perhaps a bit detached from the realities of how we deliver and manage care to a very diverse market. It’s much like the reaction my father-in-law had when, as a surgeon who worked at Mt. Sinai for 54 years, he was hospitalized with Congestive Heart Failure. Suddenly, from that day forward, all of the “little things” related to patient care seemed to matter.

While I have spent a lot of time thinking about diversity, I tend to think about age, gender, race and a bit less so with regards to economic and family diversity. For the past several years I have tried to ensure that I am a better steward of the market by working and meeting with an increasingly broad cross-section of the market.

Some of the issues which arise are readily exemplified by Skilled Nursing Facilities (SNFs). But before we get there, let’s identify the goals that many of us have for our lives as we age.

Delivery of Care: It’s All About Individual Preference

The idealized goals of living well may include trying to attain/preserve joy, engagement, connection, security and dignity. Each person defines what these mean very differently, and their perspective likely changes over time.

Today, “aging in place” is all the rage (and my personal preference), but it isn’t the best option for everyone. In fact, in many ways, that choice reflects a lack of understanding of the needs of many. It presupposes that an individual has a home that accommodates their physical needs, some form of engaged support network, access to technology, financial resources, and a health condition that enables quality of life.

As I was writing this article, someone added a comment to my LinkedIn in response to one of my postings and said, “As a …caregiver for my husband with ALS, being a caregiver is the hardest job I’ve ever had. We’ve been allocated 132 hours a week for nursing care through community and home-based care and yet the agency is only…providing about 45–60. So I fill in the rest- and somehow, spouses are not allowed to be paid caregivers. I can’t hold a job because no one can take care of my husband evening-to-morning. I don’t get it. I may not get paid, could end up bankrupt, but it’s the most important job I’ve ever had. Doesn’t seem right.” Although I try, I know that I can’t truly comprehend the totality of stress that this places on the patient, caregiver, and family.

And for many, there is an inability to accept the emotional and financial stress of caregiving. Addressing these issues for those who choose this path, as the current Administration is currently proposing, is critical. However, it is not a panacea.

The often-maligned SNF is a critical part of the care continuum and must be more fully supported.

Existentialism… Why Do SNFs Exist?

In general, the SNF’s role is to safeguard a patient during a step-down from a hospital stay or for prolonged care when a patient requires a high level of ongoing care. SNFs provide medically necessary short-term or long-term care when those needs are best met in a semi-clinical environment. Providing ongoing care post-discharge from a hospital often leads to a higher quality of life as well as a lower lifetime cost of patient care. But the daily cost of a SNF can run from a low of $140 to a high of $700+. The average daily cost is around $250, which is beyond the average American’s reach. Therefore, payment becomes a vital issue.

Who’s In the SNF House?

There are roughly 15,000 Skilled Nursing Facilities (SNF) in the US, providing long-term residential care and short-term post-acute or rehabilitative care to more than 1.25 MM residents. SNF residents, whether short- or long-term, tend to be “old, female, and with multiple impairments in their Activities of Daily Living (ADLs).” Over 35% of residents have severe cognitive impairment, and 25% have moderate impairment. Many of the SNF residents are people for whom at-home care delivery, given their circumstances, would be difficult.

The physical and emotional drain of caregiving for these patients, particularly if the caregivers do not have flexibility in their working hours, financial resources, and the ability for respite care, are dramatic. And the impact on the patient of knowing the stressors they place on others is substantial. While these issues face everyone, those with fewer relationships and resources have less choice on how to manage the process.

The best SNFs can provide the healthcare necessary for the patient. Still, perhaps more importantly, they provide an environment within which there is social engagement, a range of activities, and the individual’s freedom to live within a “safe” environment.

Show Us the Money… We Need to be Viable

The patient composition of a SNF has a tremendous impact on the financial viability of the facility. Because Medicare does not pay for “custodial” (long-term) care, funding for these residents is principally private pay or Medicaid. In fact, just over 60% of all SNF stays are paid by Medicaid, 10% by Medicare, and the balance through some form of private pay (out-of-pocket and long-term care insurance). The large percentage of residents with Medicaid as their payer indicates that for the majority of SNF residents, their financial resources are very limited. SNF facilities are a vital element of the caregiving network.

In 2020, at the early stages of the pandemic, more than 55% of SNFs were operating at a loss, 35% were operating on a total margin of less than 3%, and only 10% were operating with a margin above 3%. With this type of operating performance, most SNFs can do little beyond planning for the next payroll, as opposed to investing for their long-term viability.

In part, some of the financial stress placed on SNFs is due to Medicaid’s low reimbursement rates which, on average, cover only 70% to 80% of the actual cost of care for the patient. Medicaid often provides SNFs with a consistent and relatively predictable revenue stream upon which to build their business, but without the incremental business from the more profitable Medicare and private residents, few SNFs could survive.

Our Healthcare System and Incentives Are Broken

Most would agree that although our healthcare system excels for some of us, it is also plagued by perverse incentives, poor coordination, and great inequity. This truth also translates to the SNF market where historical payment approaches are misplaced, and ratings that reflect the preferences of the Resident and real health outcomes are misaligned. Those with the least influence and power (often they are the Medicaid residents and their families) are likely the most critical voices to hear.

Final Thoughts — Empowering the SNFs

Census fluctuations (resident levels) are likely to continue for the foreseeable future. If these fluctuations are most prevalent amongst the private pay residents, the financial impact on SNFs will be devastating. Therefore, now is the time for owners, operators, and the healthcare system to assess whether there are opportunities with people, processes, and technology to revamp their operations and reconfigure their operations for the future.

From the policy side, can we evolve payment systems to focus on outcomes and bring more SNFs into the value-based payment world? Can we provide the incentives (and perhaps a financial structure) to allow SNFs to revamp their infrastructures to enable greater efficiency, and invest more in the people who are so critical to providing these services and caring for our loved ones?