New Study: Worsening National Recession Severely Destabilizing Skilled Nursing Sector, Access to Needed Investment Capital Constricted

Washington, DC - A new analysis assessing how the deepening national recession is affecting the long term care sector found that cash flow is being used to simply fund operations rather than making critical infrastructure improvements. This comes at a time when demographic trends show a growing need for skilled nursing facility services and additional staff.

According to the report, within the long term care industry, "while there may be vacant positions that could be filled, one third of our respondents spoke of having to freeze jobs in their facilities and forgo filling these positions." Wages for current employees were also not increasing as a result of the economy.

The Dobson DaVanzo & Associates LLC study, designed to present a set of "early warning indicators" as to the severity of current capital access constraints, warns, "It is well known that the nursing home industry has an aging physical infrastructure which will be under considerable stress over the next twenty years. Two emerging trends will exacerbate the stress on this infrastructure: continued growth in the over-eighty-five aged population, and growth in the short-stay post-acute population as baby-boomers are aging."

A central component of the study involved fielding and analyzing a survey of proprietary nursing home senior management and staff to better understand the current financial, managerial, and clinical experiences in regard to how they have responded to the last six months of continuing deterioration in the national economy.

Respondents' managerial experiences included 100% who were forced to renegotiate supplier contracts; 66.7% who deferred improvements to information systems and deferred planned renovations of facilities; 55.6% deferred planned equipment acquisition and failed to award wage increases needed to retain key staff; 44.4% deferred planned therapy additions and 33.3% deferred planned bed additions.

Respondents' financial experiences included 88.9% who found a decreased likelihood of meeting budget targets; 66.7% experienced more restrictive debt terms and increased requirements for new borrowed capital; 55.6% experienced difficulty refinancing debt and a rising expense for existing borrowed capital; 44.4% said they were unable to renew lines of credit.

Respondents' clinical experiences included 88.9% who experienced increased pressure to add staff; 77.8% who experienced increased acuity of patients and increased Medicaid days as a percent of total days; 66.7% reported a decreased number of admissions and increased effort on collections from private payers; 44.4% experienced an increased number of prescriptions and increased physician involvement.

"The survey responses also reflect a diversion of existing capital sources to fund current operations and provide minimal refurbishing," the researchers noted. "These findings suggest that the aging physical infrastructure of the industry is not being updated to meet the needs of the 21st century baby boomer retirement population."

Long Term Care Jobs Have Potential to Boost U.S. Economy

The analysis also finds that despite the rising pressure on existing staff, the long-term care sector can play a role in mitigating the recession's effect on jobs, and contributing to eventual economic recovery. Dobson and DaVanzo say, "First and foremost, the nursing home industry represents an important and stable source of jobs and related benefits, such as health insurance. In some communities, nursing homes are among the largest employers. If these jobs are lost, particularly in rural communities, they are not likely to be replaced. Especially important, some deferred nursing home capital programs can be implemented very quickly. Many projects are 'shovel ready' and could represent an immediate economic boost to communities across the nation."

State Medicaid Funding Crisis Exacerbates Negative Facility, Patient Care Environment

"In usual economic environments," the analysis continues, "we believe that the impact of planned payment reductions and state budget shortfalls might be flat or slightly reduced Medicaid revenues. In the current environment, however, the immediate impact is considerably greater for some nursing homes -- especially those with a significant number of Medicaid residents. Furthermore, stimulus money is not currently being used to restore Medicaid payment cuts, as it is being used for other purposes."

The Complete Report and Methodology Information and Background Available at


The American Health Care Association (AHCA) and National Center for Assisted Living (NCAL) represents nearly 11,000 non-profit and proprietary facilities dedicated to continuous improvement in the delivery of professional and compassionate care provided daily by millions of caring employees to 1.5 million of our nation's frail, elderly and disabled citizens who live in nursing facilities, assisted living residences, subacute centers and homes for persons with mental retardation and developmental disabilities. For more information, please visit

The Alliance for Quality Nursing Home Care ("The Alliance") is a coalition of 16 national long term care provider organizations that care for approximately 300,000 elderly and disabled patients each year in nearly 1,800 facilities across America. The Alliance is dedicated to improving the quality of nursing home care in the United States through measured results and outcomes and to assuring the government resources necessary to provide high quality care and services.

Al Dobson, Joan DaVanzo, Audrey El-Gamil and Greg Berger provided analytic support and assisted in writing the 2009 Patient Data Analysis Report (PDAR).

Dobson | DaVanzo was commissioned by the Patient Advocate Foundation to assist in its annual publication of the Patient Data Analysis Report, which provides analysis of healthcare access and insurance trends at the national and state-specific levels.

For more information on the PDAR, please contact the Patient Advocate Foundation here.