Over the years, many family members, when seeking nursing home placement for a loved one, have approached me in absolute shock after learning the cost of nursing home care. And they have almost always demanded to know why the costs are so steep.
The answer is related to the nature of the nursing home as a business and the regulatory world in which it exists.
According to Genworth Financial, Inc., the 2020 national median cost for a nursing home private room was $105,850 per year or $290 per day. Nationally, the daily rate ranged from $189 in Missouri to $1196 in Alaska. Based on my career experience, I’m not surprised to hear any of this. In fact, I believe that the costs, which have already been on the rise dramatically, will continue to rise.
So the question is why? Well, I’ve already mentioned that nursing homes are a business and experience the same problems as any business. But unlike many businesses, the nursing home industry is by far one of the most heavily regulated operations on the planet.
There’s a standing joke among nursing home administrators that nursing homes in the U.S. have more regulations that the former Atomic Energy Commission. I wonder sometimes if that isn’t right. And for those of you that think that this heavy regulation is a good thing in helping protect the nursing home residents, I can assure you, it’s not.
I’m not against regulation if it’s reasonable and effective, but the regulatory requirements in this country are down-right oppressive and not effectively or fairly reimbursed. And now adding the impact of COVID costs and new regulations just adds fuel to the fire. I’m not surprised at all in hearing that the number or failed nursing homes in on the rise.
Let’s look at some specific facts that are driving this problem. Nursing homes are a “Labor Intensive” business. That means you need a lot people to operate them. Here’s a list of the key positions required in a nursing home:
Physicians Physical Therapists Business Officer
Registered Nurses Occupational Therapists Billers
Directors of Nursing Speech Therapists Payroll Staff
Educators Maintenance Directors Admissions Director
MDS Nurses Maintenance Workers Reception Staff
Unit Managers House Keeping Managers
Infection Control Housekeepers
Licensed Practical Nurses Laundry Aides
Certified Nurse Aides Social Workers
Unit Secretaries Administrators
Dietitians Medical Records Staff
Dietary Managers Activities Directors
Cooks Activities Aides
Dietary Aides Human Resource Directors
How would you like to be responsible for the payroll costs of this group? And then add in all of the payroll taxes and employee benefit costs for these necessary positions. Okay, how about the non-payroll and benefits costs? Add to this the costs for building up-keep, utilities, food, medications, medical equipment, grounds, multiple insurances, workers comp., and a myriad of other expenses.
This should give you a pretty good idea of why the cost of nursing home care is so high. We should also keep in mind that many nursing homes, even with the high charges, continue to struggle for survival.
Private pay rates, private insurance, and Medicare reimbursement faire positively with nursing home costs, but they only represent a small percentage of revenue payer mix. The bulk of nursing home residents are covered by Medicaid, or similar coverages. These often times don’t effectively cover the cost of resident care.
This isn’t a fair situation, but as for now, I don’t see any immediate way out.
Unfortunately, residents of nursing homes are some of the sickest and neediest citizens of our land. If the nursing home industry ever collapses, what will happen to these people? America is becoming demographically older. I’m quite concerned as to where we’re going.
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