Research: COVID-19 Public Funding’s Impact on Nursing Homes

A recent study, Loss of Public Health Emergency Funds Challenges the Financial Viability of Nursing Homes, Especially Not-For Profit Facilities, published in the journal Health Affairs, analyzes financial and facility data from Medicare Cost Reports to assess how COVID-19 public health funding, including the Provider Relief Fund and the Paycheck Protection Program, allowed nursing homes to remain profitable through 2021.

Authors examined financial performance metrics from 2018 to 2022 to track trends in the financial viability of for-profit and nonprofit nursing homes both leading up to and during the early pandemic years. Financial measures calculated included net operating income, overall net income with public health emergency funds, and overall net income without these funds. To better understand the challenges nursing homes face, the researchers also evaluated occupancy rates, Medicaid payer mix, and nursing staff metrics. They noted concerns about related-party transactions, which they said could potentially bias financial performance results downward.

Despite some limitations, including incomplete ownership information and variations in fiscal year reporting, the findings showed that nursing homes experienced declines in net operating income, which worsened during the pandemic. For-profit facilities generally reported smaller financial losses than did nonprofits, the researchers found. Before COVID-19, for-profit nursing homes typically generated sufficient revenue to cover their operating costs, while nonprofits often relied on donations and other non-patient funding sources. Public health emergency funding helped stabilize nursing home operations through 2021. However, by 2022, as this funding was reduced, for-profits reported a modest net income of $1.68 per resident day, whereas nonprofits reported losses of $31.18 per resident day.

The study also examined trends impacting nursing homes' financial performance, such as occupancy rates and staffing levels. Nonprofit nursing homes consistently maintained higher nurse staffing levels than for-profits, although both increased reliance on agency staff from 2018 to 2022. Researchers emphasized that staffing remains a significant financial challenge that could affect future viability.

While there may be opportunities to improve efficiency, establishing a sustainable long-term care financing system will be critical for nursing homes' continued solvency. Long-term care financing has long been a policy goal for LeadingAge, and the findings underscore the current financial instability within nursing homes. Without policy intervention to address funding issues, access to high-quality nursing home care could be significantly reduced.

The LeadingAge policy platform includes long-term services and supports financing reform-including the goal of promoting equitable LTSS financing reform to ensure that people at all economic levels (including "middle income") are able to access services when they need them. We will continue to advocate for financing reform with the incoming Trump administration and new Congress.