Rocked by pandemic, long-term care facilities face financial crisis

"Staff stress, costs and shortages have multiplied," says an industry executive.

March 18, 2021, 11:29 AM

After months of battling the deadly coronavirus that claimed the lives of 17 residents, St. John's Retirement Village was forced to close its doors in the middle of the pandemic.

The 48-bed nursing home in Woodland, California, could not keep up with rising expenses, including the protective equipment, testing costs and payroll necessary to maintain round-the-clock care. The dire situation forced Sean Beloud, the executive director, to make the "devastating" decision to close the nursing home in September in an effort to save the assisted living facility located on the same campus.

"The numbers were just not adding up," Beloud said. "We were losing money and it was the only way to save the rest of the campus."

St. John's is among the hundreds of long-term care facilities, from large chains to small independent businesses, that are facing a financial crisis due to the skyrocketing costs of fighting the pandemic -- with some closing their doors and others struggling to survive.

Overall, the industry is expected to lose $94 billion over a two-year period, according to a recent report by the American Health Care Association and the ​National Center for Assisted Living (AHCA/NCAL), which represents more than 14,000 long-term care facilities.

Despite receiving COVID-19 relief aid and protective gear from the federal government, nursing homes spent roughly $30 billion on protective equipment and additional staffing in 2020 alone.

"After a year struggling with COVID-19, extraordinary and continued pandemic-related expenses for critical supplies, coupled with census declines and reduced revenues, are pushing providers to the edge," said Katie Smith Sloan, president of LeadingAge, which represents more than 5,000 nonprofit service providers.

"As the pandemic exploded, staff stress, costs and shortages have multiplied," Sloan said.

In Florida, the Florida Health Care Association reported that nursing centers in the state lost $651 million over a one-year period, resulting from a 15% decline in resident occupancy brought on by COVID-related restrictions that limited new admissions.

"Even with a boost from federal COVID funding, nursing centers [in Florida] lost more than $30 million in 2020, and pandemic-related expenses continue to cause losses as beds remain empty," Florida Health Care Association CEO Emmett Reed told legislators at a congressional hearing in early March.

An elderly person sits in a wheelchair.
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Last year, long-term care facilities received about $21 billion from the Coronavirus Aid, Relief and Economic Security (CARES) Act, in addition to $165 million in Paycheck Protection Program loans plus state-specific support that some facilities received. But the coronavirus relief bill recently signed by President Joe Biden only includes $200 million for nursing home infection control and vaccination support, and an additional $250 million for states to establish "strike teams" to combat COVID-19 cases among residents and staff.

Kim Klockenga, the vice president of finance at John Knox Village, a 430-bed nursing facility in a Kansas City suburb, told ABC News that the long-term care industry will struggle without additional government aid.

"Going into this next year there won't be any of those COVID relief funds that really helped us," Klockenga said. "And that's where the struggle is going to be."

Others, however, are wary of long-term care facilities getting more aid. Toby Edelman, a senior policy attorney for the Center for Medicare Advocacy, a nonprofit that provides legal assistance for the elderly, told ABC News that there was a lack of transparency from facilities on how they spent the first round of coronavirus relief.

"We don’t know how facilities spent the COVID money," Edelman said. "The money was given out without regard to quality of care, [or the status of ongoing] lawsuits by the federal government. There’s not a lot of accountability for the money."

Edelman cited a report by the Washington Post that Genesis HealthCare, a large U.S. nursing home chain, gave its CEO a $5.2 million bonus in the middle of the pandemic, months after the company had received money from the CARES Act. In response, Genesis said at no time did the company ever limit or reduce spending on measures to protect residents and staff for any reason, including to fund executive compensation.

A Genesis spokesperson told ABC News that the company is struggling financially and is taking steps to reduce debt by approximately $256 million.

"This has been a difficult year for all," said spokesperson Lori Mayer. "The pandemic dramatically impacted our patient admissions, revenues and costs, and we are looking ahead to a path of recovery fueled by our recently announced restructuring plan, along with encouraging signs of increases in admissions and the positive effect of the vaccination rollout."

Industry advocates say government support is still needed.

"Nursing homes are people's homes," said Terry Fulmer, president of the John A. Hartford Foundation, a nonprofit that works to improve care for older adults. "It's really, really serious and it will take government intervention to decide how to take this on."

"We are in a position where some parts of the sector may not survive," said Matthew Barrett, CEO of the Connecticut Association of Healthcare Facilities.

For residents, Barrett said it is "nothing short of an eviction" when a facility closes.

"Nursing home residents are displaced from their homes," Barrett said. "They're separated from their caregivers and separated from their homes, and the consequences for residents can be so severe because the trauma impacts their health."

Beloud said that more needs to be done to ensure that other long-term care facilities don't suffer the same fate as his facility.

"It's traumatic," Beloud said. "Seeing the facility experience such a horrific outbreak and then having to close the doors on our residents ... it was so hard."