The Impact of Recessions on Nursing Home Days, Admissions, Beds, Staffing, and Profitability: Evidence from the Great Recession

Abstract

The Great Recession (2007-2009) has the distinction of being the longest recession since World War II. While government spending on health care (particularly Medicaid) increased during this period, health care providers generally experienced reduced demand for their services, which led to many operational and financial challenges. This analysis examines the impact of the Great Recession on nursing homes—an important segment of the healthcare industry. Using 2005-2012 data from the Medicare Cost Reports, county-level economic and population data, and state-level Medicaid and home and community-based service spending data, this study explores the impact of the Great Recession on nursing home admissions, staffing, and profitability. The analysis focuses on the impact of the recession on nursing homes at the county level rather than the facility level. This focus enables recession impacts to be assessed from the perspective of the population served by the full range of nursing home services offered and provided within the market (county), rather than the experiences of individual facilities, which might not be indicative of the market.The results of the study suggest that while the Great Recession did have an impact on nursing home utilization and costs, its county-specific impact was less noteworthy than might have been anticipated. Specifically, the results of the models suggest that the recession increased the average nursing home days per 1,000 individuals aged 65 and over by about 600 per year (or two-thirds of a day per capita), cost per capita for those aged 65 and over by about 52 cents, and revenue per capita also by approximately 52 cents, resulting in growth in the average overall nursing home margin of about 0.8 percentage point. For the admissions per 1,000 individuals aged 65 and over and the beds per 1,000 individuals aged 65 and over models, while three out of the four recession-related variables were significant for each model, the changes in admissions per 1,000 individuals aged 65 and over and beds per 1,000 individuals aged 65 and over between 2007 and 2009 were so small as to be effectively zero. Overall, the most striking conclusion that can be drawn from this study is the lack of significant impact that the Great Recession had—in terms of county-specific effects—on nursing home costs, staffing and utilization. The counter-cyclical design of the Medicaid program naturally served to mitigate the impact of wealth and income-related declines in the demand for nursing home services. However, Medicaid’s counter-cyclical financing system may not be enough to support the nursing home industry in all economic downturns, and particularly when it is coupled with another seismic event (such as the COVID-19 pandemic). Furthermore, recent changes in the long-term care industry—the continued growth and popularity of nursing home alternatives, the changing acuity and population mix in nursing homes, and the rise of Medicare Advantage—may impact the effectiveness of system responses to future recessions.