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Skilled nursing occupancy hits new low: What providers can do about it now
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Category: skilled nursing, Medicare, Medicare Advantage, Medicaid

Skilled nursing occupancy hits new low: What providers can do about it now

09.14.18

The occupancy rate for America’s skilled nursing facilities has hit a new low, placing continued pressure on center operators.  The occupancy rate in the second quarter of 2018 fell to a record-low 81.7 percent. That’s down 1.4 percent from the same quarter a year ago and continues a downward trend that the industry has seen over the last four years, according to statistics from the National Investment Center (NIC) for Seniors Housing and Care.

The sector has been hit by two marked trends:

(1) more patients are bypassing nursing facilities in favor of in-home care; and

(2) government payors – especially Medicare Advantage – have put pressure on reimbursement rates and lengths of stay. 

“Overall, we see occupancy trends persist downward,” said Bill Kauffman, a senior principal at NIC. If there is a bright spot in the report, the Medicare patient day mix has stabilized over the past year, “which is different than the upward pressure we have seen over the past few years.” 

In the most recent quarter, while the impact was felt in all geographic areas, such impact was especially pronounced among rural providers. The overall rural occupancy rate was 79.4% for the quarter, down about 57 basis points from the previous quarter.

Overall, Medicaid patients remain the dominant group of patients at skilled nursing facilities at 66% percent of the total patient mix, but that reimbursement is the lowest at $208 per day, according to the report. That means that Medicaid patients represent about half of a facility’s overall revenue mix.

Medicare (in its original form) remains the second largest group at around 12 percent, but that percentage has been decreasing in recent years as well. Medicare has the highest daily reimbursement rate at $521 per day (more than double the Medicaid rate), and those patients represent about 23% of total revenue. Managed Medicare represents 6.4% of the overall population of skilled nursing facilities with a heavy concentration of such percentage in urban markets. The overall Medicare Advantage percentage in rural markets (3%) is less than half of such percentage in the overall market (6.4%). As Medicare Advantage grows, it creates continued pressure on prices as the reimbursement rate is nearly 20 percent below the standard Medicare rate. Given these continuing market trends, it’s important for operators and owner/operators to consider the following:

  • Focus on top-notch care for existing residents and consider specializing to focus on specific types of recovery as a means to differentiate the facility in its market.
  • As Medicare reimbursement rates to SNFs are set to increase in October of 2019, consider those potential increases and potential effect of same on the facility’s revenues.
  • Ensure that management is educated as to the new patient-driven payment model to be implemented by CMS tying reimbursement to patient conditions and care.


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