Why AHCA’s Parkinson Predicts a Nursing Home Sector Recovery — And How to Get There

Nursing home leaders have largely steered clear of making predictions given the events of the last two-plus years, but the head of the sector’s largest trade group confidently made one Monday. 

“One thing that I am sure about, and that I see very clearly is my prediction, and that is that you and your team and your company are going to survive this pandemic. You are going to make it,” American Health Care Association/National Center for Assisted Living (AHCA/NCAL) President and CEO Mark Parkinson said to a room full of long-term care providers.

Sector-wide recovery will require three things from its leaders: Keep going, commit to those who already are or become a top performer and fight against upcoming hurdles.

Parkinson shared his sentiments during the opening general session at the AHCA/NCAL Convention & Expo held in Nashville this week.

The government’s “unspoken commitment and agreement” to fund the sector is a big reason why it has remained standing, he said.

Parkinson did acknowledge that the downside to the government paying for the industry’s services means that it will likely never be a sector with large margins — but it will be enough.

Before the pandemic, the average industry margin was 2%, with providers doing both better and worse, he said. Once the pandemic hit, that margin took a dive and those who were considered average were now losing roughly 4%.

Had the government not stepped in and simply allowed the trend to continue, the industry “would’ve gone broke.”

“But the government didn’t do that. They provided us tens of billions of dollars at the federal and the state level. Again, not enough that we’re suddenly having a bunch of money, but enough to keep our doors open, and I believe the government will continue to provide those funds,” he said during the presentation.

He also highlighted the reality that the additional government support tied specifically to Covid will eventually come to an end, some of it already has, but he still believed the industry could recover.

While skilled nursing occupancy remains roughly 5% below pre-pandemic levels, according to Parkinson, 30% of the sector has reached or is above its pre-Covid census.

Additionally, Parkinson acknowledged certain staffing successes, including the fact that 30% of providers were not using agency staffing at all.

“We are at … A 20 mile marker of a 26 mile marathon and we just have to keep going,” he said.

Leadership the difference maker for successful providers

When it comes to determining how certain providers succeed amidst myriad challenges facing the industry, Parkinson ultimately points to one primary factor: Leadership.

“These companies and buildings that are doing great have great leaders who are committed to developing … In fact many of them tell me that patients and residents come second because employees come first,” he said.

Parkinson used The Ensign Group as one example, pointing to a comment former CEO Christopher Christensen made during a conference call that while Ensign is a nursing home operator, it is really a leadership company.

Ensign’s portfolio has grown to 268 health care operations across 13 states, and it could soon be the largest nursing home operator — if it isn’t already following recent transactions.

While Ensign continues to balloon, analysts believe the operator’s current path is exactly what has made it so successful.

“The whole entity is doing well because the interests are all aligned,” Stifel analyst Tao Qiu told Skilled Nursing News earlier this month. “They standardize the way the business is run in terms of how we measure performance, how we align incentives, how we make sure that each facility in the same cluster can help each other out and really leverage on that scale.”

Ensign is perhaps the most obvious example of a decentralized market model focus proving successful, but they are not the only ones.

The regional and local market model has been embraced by other operators as well, with the top 50 largest providers on average operating in six states. Of those 50 providers, many tend to focus on one or two states in terms of local density, according to Stifel’s analysis of recently released Centers for Medicare & Medicaid Services (CMS) data.

‘We have to fight’

Parkinson said one of the bright spots during the pandemic was that the industry largely stuck together and, when it came time to advocate for the sector and make their voices heard, government leaders have so far listened.

Most recently operators across the country wrote to CMS to share their concerns over the SNF final rule and payment rates related to the Patient-Driven Payment Model (PDPM). CMS received roughly 4,717 comments during the 60-day feedback period.

CMS provided relief in the form of a phased-in PDPM parity adjustment and a 2.7% pay bump. 

Parkinson urged audience members to be ready to do so again in the next few months as the industry awaits the proposed federal staffing standard. He has previously said an unfunded mandate would be “lights out” for providers across the country.

More specifically, implementing a staffing minimum of 4.1 hours per resident day would require 94% of nursing homes to increase staffing levels just to be in compliance, according to data from accounting and consulting firm CliftonLarsonAllen in partnership with AHCA.

Ultimately, if providers can hang on and set their sights toward achieving these three goals, Parkinson believes the nursing home industry controls its own destiny.

“We’re at a point of recovery and I am completely convinced that if you don’t quit, if you commit to either staying or becoming a top performer and if we stay united and fight, we’re going to get through this thing — and I’m counting on you to make that prediction come true,” he said.