BRIDGEWATER, VA — Facing unrelenting staffing and reimbursement challenges, a significant share of life plan communities across the country have shed skilled nursing beds since the start of the pandemic.

But others continue to weigh the decision to downsize or convert their healthcare facilities, both because residents and prospective residents still want access — and because cuts may not actually deliver the intended savings.

“The math behind SNF reductions is bad math,” said Rodney Alderfer, president of Bridgewater Retirement Community. “For two years, we’ve been talking about the solution. What do we do? There doesn’t seem to be a fantastic solution.”

Bridgewater, a nonprofit, mission-based based community, has 127 skilled beds on its campus in the Shenandoah Valley. The nursing houses are operating at high cost due to staffing demands but are “bursting at the seams,” Alderfer said,

While Bridgewater leaders have considered trimming beds to reduce costs, the 5-star facility also brings in needed revenue. Using theoretical numbers, Aldefer questioned the logic of eliminating an entire care setting for a savings of $800,000 annually, when it could conceivably bring in $2 million in revenue.

He also said there may be more value in a successful skilled nursing facility than any budget line can indicate. In rural Bridgewater, where there are only three 5-star providers and five 1-star providers, Aldefer said being one of the 5-stars attracts would-be residents for its entire care continuum.

“We’ve got three beds that don’t have people in them right now, and those are saved for people under contract with me because I have an obligation to them,” he said. “Now, people out in the larger community are thinking, ‘Well, maybe we do need to live there because if I don’t, I don’t have access to that level of care.’”

But a group of executives from around the country who gathered on Alderfer’s campus (below) last week for the Fellowship of Brethren Homes 2024 Forum told McKnight’s Long-Term Care News that the decision to stay in the nursing home business remains a complicated one.

Some who had rehabbed their facilities within the last decade still can’t make them work in the larger organizational context, while others are so excited about the small-home model that they are sinking new cash into skilled care.

Katie Smith Sloan, president and CEO of LeadingAge, acknowledged the ongoing SNF challenge for life plan operators.

“We’re seeing so many members shrink the number of beds, or building new communities without SNF beds, and that puts pressure on assisted living because then you have a higher acuity population there,” Sloan said during a forum session Thursday. “Figuring out how to make all of that work financially, operationally and in terms of your overall strategy is one of the big challenges.”

With the life plan crowd

Anne Tumlinson, founder and CEO of ATI Advisory, said life plan communities’ reevaluation of their SNF operations is pervasive.

“That’s been the biggest part of our work over the last 2½ years,” Tumlinson said. “And that is so disturbing to me. I want to ring a really loud alarm bell with policymakers.”

Certainly, many communities have taken the leap. 

A November 2023 Ziegler CFO Hotline survey of more than 240 mostly nonprofit life plan community organizations found that 37% of respondents had permanently reduced their number of skilled beds in the previous two years. At that time, 6% had made a full exit, while 87% had reduced beds by 50% or less.

The decision can be shaped by an individual provider’s needs or the specific regional or local market.

Matthew Neeley, president and CEO of Hillcrest in LaVerna, CA, said his leadership team is evaluating the feasibility of its 1969-built skilled nursing facility as part of its resident-centered strategic planning process.

He noted that the campus would likely maintain some type of care facility closer to its village center, but is also working to institute step-up supports that delay and ease the transition of residents into that setting over time — reducing demand.

For Neeley, it’s not a financial decision but rather one driven by regulatory hassles and resident desires. He is considering outsourcing skilled services to a few vetted providers in the local area, who could treat post-acute patients whose stays would be covered by private insurance.

But, Neeley acknowledged, that raises questions about residents with long-term care insurance policies, and it introduces other wrinkles, including how to appeal to consumers who still prefer a full continuum of care.

“How is the market going to interpret [outsourcing] … and how will that change the flow into this community vs. others in a competitive market?” he wondered.

Maureen Cahill, administrator at Spurgeon Manor in Iowa, said her community can’t afford to replace its 1971 skilled nursing building. In her state, providers need to have a specific threshold of Medicaid residents to secure any capital funding.

“If I had 50% Medicaid in my building, I’d be bankrupt before I could afford to do a replacement,” she said.

In Ohio, and in many other states that have little to no capital provision in their rate structure, “there’s no advantage to investing in your facility,” added Chris Widman of the Good Shepherd Home in Fostoria. 

LaMonte Rothrock, CEO of the Cedars in McPherson, KS, has reduced licensed SNF beds from 120 seven years ago to 38 today. That’s largely because the provider was unable to compete with high-paying manufacturing jobs to get the frontline staff it needed in a town of 13,000 people. Those other jobs often start at $28 an hour.

But Rothrock supported Alderfer’s insistence that bed reduction isn’t necessarily smart financially. While calculations show the Cedars needs 17 beds to serve its wider community, leadership landed on 38 to try and support the overhead costs of the operation.

Others all in

Still others remain bullish on their nursing component.

At a time when hospitals continued to push more post-surgical patients straight to home care, Londonderry Village in Palmyra, PA, decided to invest in six Green Hous homes with 10 beds each.

“We believed in that culture and that quality of care,” said President and CEO Jeff Shireman. “People have great experiences in that environment.”

When Shireman brought those houses to life 17 years ago, Alderfer went to learn about the resident-centered focus and has adopted many of the tenets, even in a more traditional physical setting.

And Suzanne Owens, president and CEO of the Peter Becker Community, in Southeastern, PA, is working with an architect now on new small house accommodations for skilled nursing residents. That investment comes even as the organization is investing in a new campus to grow its footprint in the broader senior living market.

Sloan said nonprofit communities still must play a key role in maintaining SNF access in their local markets.

“The nonprofit presence needs to be shored up,” she said. “The pressure to have a nursing home in a life plan community is a drag on the overall business model. That said, we need nursing homes. There are people who need 24/7 high-quality nursing care. And as a country, we’ve got to figure out how we preserve the nursing home sector and not think that we can for a minute think that we can replace it with home- and community-based care.”