Skilled Nursing to Get Much-Needed Relief From Covid Vaccine

Sharply declining occupancy coupled with the high cost of personal protective equipment, Covid-19 testing and hazard pay has put tskilled nursing under unsustainable financial strain. Fortunately, the prospect of a vaccine for Covid-19 will give this sector some relief.

Without a vaccine, the situation is dire. In a recent survey by the American Health Care Association, 72% of nursing home operators said they will not be able to maintain operations for a year under current conditions, while 40% said they would be unable to last six months.

According to a report by the American Health Care Association and the National Center for Assisted Living, coronavirus cases and deaths are rising in these facilities, reaching levels similar to when reporting began in May. Data from National Investment Center’s Skilled Nursing COVID-19 Tracker shows that nearly half of 1% (0.48%) of residents tested positive for Covid-19 at the end of September. During the week ending November 1, that figure had risen sharply to slightly less than 1% (0.94%).

But as the virus begins its 10th month, there is finally some good news coming out of the Centers for Disease Control. Namely, skilled nursing facility residents and employees will likely receive the coronavirus vaccine in the initial rollout, upon approval by CDC director Dr. Robert Redfield.

These first batches are part of Phase 1a of vaccine distribution. The federal government expects 40 million doses of the coronavirus vaccine or enough for 20 million people to be available by the end of the year. Two doses are required for each person.

This points to credit positivity for the sector, Fitch Rating says. The Fitch-rated skilled nursing facilities have year-to-date total ratings of 20 downgrades, 11 outlook revisions to negative and two credits placed on rating watch negative. There have been no upgrades during this time.

“Significantly lower occupancy and greater operating expenses have created unprecedented challenges for skilled nursing operators,” said Bill Kaufman, senior principal at National Investment Center. “They are bracing for a difficult winter, given the latest surge in Covid-19 cases and no immediate additional government intervention. Due to Covid-19, NIC expects occupancy to remain dangerously low in the fourth quarter before vaccines become available to healthcare workers and skilled nursing residents.”

The distribution of the vaccine would immediately stabilize these facilities from a financial and occupancy standpoint. Occupancy at US skilled nursing facilities was up marginally between the second and third quarter of 2020 to 74% but remained significantly below levels reported in February (84.9%) and March (83.5%) when Covid-19 began impacting the United States, according to data from NIC MAP Data Service provided by the National Investment Center for Seniors Housing and Care. The decline has been more severe in urban areas as occupancy declined 11.8 percentage points since February versus the 8 percentage point decline in rural areas in that same period.

Congress enacted the Coronavirus Aid, Relief and Economic Security Act and Paycheck Protection Program earlier this year, which helped to keep major sectors of the economy afloat during the pandemic. Skilled nursing was also aided by the Centers for Medicare and Medicaid Services waiving its three-day hospital stay requirement, which extended coverage to people impacted by Covid-19.

“Many skilled nursing facilities survived the spring and summer because Congress authorized unprecedented financial aid,” said Beth Burnham Mace, National Investment Center’s chief economist. “But as funds become exhausted and Covid-19 cases rise with little likelihood of immediate government intervention, it will be difficult for many facilities to continue sustainable operations.”

Indeed, the CARES funding directed at these facilities helped offset the effects of lower occupancy on revenues. And, skilled nursing occupancy has shown signs of recovering as referrals increased for post-acute care services as hospitals resumed elective surgeries. The bottom line is vaccinations for skilled nursing facility residents and staff should provide added assistance with financial recovery.