Keeping a nursing home running is no easy feat, but it’s an even greater challenge for family-owned facilities to stay afloat.
As nursing homes throughout the state have shut their doors, family-owned facilities have been increasingly selling to for-profit companies.
Data compiled by the industry shows that 15 years ago, 65% of the 87 nursing homes in Rhode Island were family-owned, while 14% were owned by out-of-state companies and 21% were nonprofits. But now family-owned nursing homes make up just 24% of the state’s 78 remaining facilities, while 59% are run by out-of-state companies and 17% are nonprofits.
This isn’t limited to Rhode Island. Around 72% of the approximately 15,000 nursing homes in the U.S. are owned by for-profit companies, according to a study by the assistant secretary for planning and evaluation, which serves as an adviser to the secretary of the U.S. Department of Health and Human Services. Sales of nonprofit nursing homes have also picked up in recent years as for-profit companies have purchased more than half of the 900 nonprofit facilities that have been sold since 2015, according to a report by Ziegler Investment Banking.
John Gage, CEO and president of the Rhode Island Health Care Association, says that when he first entered the industry in 1990, the state was holding tight to the family-owned model. But in the past decade, the industry has taken a turn as facilities are struggling under staffing and financial pressures.
At the heart of these challenges are low Medicaid reimbursement rates and staffing challenges.
State officials are supposed to “rebase” reimbursement rates every three years to make sure nursing homes are receiving enough funds to keep up with patient costs. That has not happened, those in the industry say, so facilities are now being paid based on what it cost to operate a nursing home in 2011 and the annual inflationary index was not included. As a result, rates increased an average of 1% per year.
Also, since the COVID-19 pandemic, the state’s nursing home workforce is down by 15.3%, or 1,500 workers, Gage says.
As a result, many nursing homes have been sold or closed. Most recently, Linn Health & Rehabilitation became the seventh nursing home in the state to announce its closure since 2020 and is in the process of relocating 48 residents.
Akshay Talwar, president of Medical Homes of Rhode Island Inc., which operates Briarcliffe senior care facility in Johnston, says he has friends in the industry who sold their business that had been in the family for generations.
“They grew up running in the hallways of these facilities and they were forced to sell,” Talwar said. “They were all smart people, and they searched for plans for a long time; when they decided to sell, nobody was happy.”
Family-owned nursing homes, which tend to be smaller, face even greater challenges because their overhead costs are relatively higher compared with the revenue they get from patients. Also, the owners tend to be older themselves.
For some, losing family-owned nursing homes is a concerning trend.
Ann Lancellotti, a retired nurse who spent 20 years working in Rhode Island nursing homes, says she noticed for-profit companies would cut back on staffing after acquiring family-owned facilities to save money.
“There was a constant turnover,” Lancellotti said. “In each building, I witnessed the negative consequences of critically low staffing levels.”
While facilities were meeting the minimum staffing mandate, Lancellotti says she regularly saw residents falling andfracturing their limbs, head injuries, medication consistently given upward of two hours late and call buttons going unanswered for 30 minutes.
The cuts also took a toll on staff morale, she says.
“They felt forgotten … and disrespected for the work they provide,” Lancellotti said, noting she noticed the same issues in each of the five nursing homes she worked in.
Others say for-profit companies aren’t all bad.
Gage noted that without the for-profit companies purchasing the struggling family-run nursing homes, more facilities would have likely closed, leaving residents scrambling for a place to live and staff without a job.
“Without them, our crisis would be even worse,” Gage said.
The size of larger out-of-state companies can be an advantage, according to those in the industry, allowing for cost savings from centralized administrative activities such as billing, accounts receivable and human resources. Along with this, larger companies tend to have stronger vendor relationships and more buying power with medical supply companies than a standalone family-owned facility.
Changes to patient care also depend on each facility and the company that buys it, Gage says.
“You can’t paint with a broad brush,” Gage said.
James Nyberg, director of the industry organization LeadingAge Rhode Island, says the topic has come up among the group’s board members, as some have expressed concerns about out-of-state companies buying Rhode Island businesses.
“You lose that community connection that family-owned or nonprofit providers have,” he said.
