Whereas these dramatic demographic changes should suggest that demand for facilities such as nursing homes would likely remain strong despite the at-home preference, the number of CMS (Centers for Medicare & Medicaid Services) certified nursing facilities available in the U.S. has continued to contract since 2015. The pandemic accelerated this trend, with families having increasingly negative views on nursing homes given the number of COVID-related deaths stemming from nursing home facilities. Additionally, labor shortages have led to headaches for nursing home operators and ultimately, declining levels of care quality and capacity. As such, the U.S. has over 600 fewer CMS certified nursing homes than it did eight years ago (-4.1% decline since 2015) and over 163,000 fewer residents (-11.9% decline since 2015).
In areas where losses of certified beds are among the steepest (i.e. Massachusetts), hospitals have in turn been impacted as patients have had to wait for openings at post-acute care facilities and nursing homes to be transferred. This has led to delays at hospitals across the U.S., adding to emergency-department backlogs and the number of occupied beds within hospitals. While staffing levels have recovered at hospitals and ambulatory care centers since the worst of the pandemic per Labor Department statistics, notable labor shortages still remain at nursing homes, worsening this aforementioned bottleneck.
With these labor headwinds still persisting, increased safety regulations could require even higher staffing levels at nursing homes, as new and pending policy plans to set a minimum time that nursing home staffers must spend with each resident. According to KFF, an independent health-policy research nonprofit, about seven out of every ten nursing homes don’t have enough nursing employees to dedicate four hours a day to each resident (CMS studies have previously deemed 4.1 hours of direct nursing care to avoid increased risk of harm). As such, we expect hospitals, nursing homes, and other points of care to continue to face difficulties as they sort through the best ways to solve operational headwinds while dealing with increased regulatory scrutiny around care metrics and billing practices, as well as increased patient demand. We do expect that these continued headwinds may be slightly less extreme than in the past few years as the cooling labor market eases staffing struggles, COVID-related supply chain disruptions steadily dissipate, and as interest rates are expected to decline (Fed currently penciling in three rate cuts throughout 2024).
Another bright spot could come with efficiencies realized through healthcare technology and systems that gain increased momentum. We expect more innovation (particularly AIbased) in equipment, devices, robotics, technology, and payments, though recognize that large purchases and undertaking of system transitions will come with significant cost-benefit analysis by existing providers who weigh the upfront costs while simultaneously dealing with tighter budgets. Additionally, when taking an additional step back, another strategy to help ease the strain on the U.S. healthcare system will come from a focus on preventative care. This will likely include more screenings, tests, wearable devices, and even medications (i.e. obesity drugs) to track and prevent more costly diseases and health complications in the future.