The pressures on the senior living sector only abated marginally in 2023, as operators tried to maintain their balance in a precarious business and economic environment. And any significant reversal in fortunes is unlikely to occur until 2025, as political volatility in 2024 will continue to influence the regulatory and interest rate environment.

Managing against countervailing forces has been an ongoing struggle that’s not going to ease much in the new year.

There’s good news, for example, in that senior living occupancy rates are coming back from the pandemic’s devastation. And in nursing homes, occupancy reached 82.3% in August, topping 82% for the first time since April 2020. Regardless of setting, however, providing adequate resident care is a challenge given severe staff shortages amidst the worst job losses of any healthcare sector.

And although cooling inflation is a positive, it’s still running above the Federal Reserve’s 2% target and has not yet resulted in relief on costs. Interest rates are stubbornly high, and operators should be worried about the impact on the cost of long-term debt coming due, not to mention revolving credit lines.

Plus, unlike other sectors, parts of the industry can’t just offset inflationary costs by raising its fees — assisted living operators that rely heavily on Medicaid, for instance, and nursing homes, most of which depend on Medicare and Medicaid reimbursements, which are based on data two years behind and not adjusted for inflation.

Managing the risks is do-able, if difficult. One area where senior living and care organizations can help themselves in 2024 is by staying open to and leveraging risk mitigation and transfer strategies and solutions.

Meeting the staffing challenge

In early 2023, more than 70% of assisted living communities and 80% of nursing homes reported staffing shortages, and for some operators, the situation only has gotten worse as the year progressed. Providers have been forced to ask current staff members to work overtime or additional shifts, depend on temporary agency staff, or limit new move-ins.

Minimum staffing requirements proposed for nursing homes by the Centers for Medicare & Medicaid Services may further sap the industry given associated costs of some $6.8 billion, according to one study. And the effects of that proposal, if it is implemented, will be felt by assisted living operators and others.

The pace at which the population is aging and pressuring the system suggests that better pay alone is not the answer. Still, many are watching California to see whether its new $25 minimum wage for healthcare workers moves the needle.

Equally important may be balancing out a tough working environment by providing a quality employee experience built around individualized benefits. By offering benefits that respond to where people are in their personal and professional lives, employers can make their work environments stand out.

More than just health benefits, this means those benefits that simplify and improve employees’ lives or help them save money, including auto, home or renters’ insurance. Or that improve their lives, like mental health services or emergency backup services. Or even other benefits that might demonstrate the value that is placed on employees, such as recognition and motivation programs. Such benefits may be no or low-cost but can yield big returns for the investment.

Two coverages to transfer hard and soft risks

The healthcare industry continues to be a top target for cyber intrusions, and the senior living and care sector is just as vulnerable as the big hospital systems. The good news overall is that the number of healthcare data breaches dropped 15% through 2023’s first half. The bad news, though: a new record of 40 million individuals were affected.

The issue is not going away in 2024, and senior living and care providers should take heed. Cyber breaches often stem from human error, which is more likely to occur with the pressures of staff shortages. Plus, most communities and facilities are underinsured for the risk, with policies that leave big exposures. When cash-strapped, they’re not likely to want to think about better coverage against the risk, even with more moderate rate increases of about 10% ahead. That should make improved digital security controls an imperative.

A softer risk, but one that’s no less costly, is workplace violence, and particularly active shooter incidents. These incidents have occurred this year in senior living and care facilities from California to Texas to Florida, involving family members, workers and outsiders. It makes the case for workplace violence coverage, which is a relatively inexpensive business interruption protection.

The Mother Nature effect

A continuing concern for every business sector, including senior living, has been the pressured market environment for property insurance. Building valuations still are escalating on top of pure rate changes.

Blame Mother Nature, and not just for the cost of hurricanes, winds and storms, particularly in coastal areas. Add in scorching heat, which stands to cost the United States $100 billion in lost productivity, even as it causes mortality and disrupts business continuity.

Looking ahead, communities and facilities in more vulnerable regions can expect double-digit rate increases, whereas those less exposed will see rates stay flat.

Moving into 2024…

Now is the ideal time for senior living and care management to enlist its brokerage partners to undertake a thorough assessment of how much risk they are comfortable with and the cost of transferring that risk. That should lead to a better understanding of whether it would make financial sense to put alternative risk structures in place.

When there’s a financial squeeze from the perspective of cash flow, profitability and insurance cost, it’s time to reassess how if dollars spent on insurance are rendering the most profitable outcome. Now is the time to be asking those questions, because status quo no longer works.

Gerald Stoll is the US senior care segment leader with global insurance brokerage Hub International. He specializes in developing comprehensive insurance and risk management solutions for the long-term care industry, including independent living, assisted living, nursing homes, clinics and urgent care centers.

Jordan Parnell is the healthcare practice group leader for Hub International’s Gulf South Region. The practice group consults, designs risk management programs and brokers insurance transactions. He also is involved in the national healthcare team that brokers complex multi-state and international healthcare transactions.

The opinions expressed in each McKnight’s Senior Living marketplace column are those of the author and are not necessarily those of McKnight’s Senior Living.

Have a column idea? See our submission guidelines here.

Operators of senior living communities — just as, if not more, hampered than primary care providers by the shortage — need to be ready to manage the fallout from the Vaught case and all the risks that are intensifying during the staffing crisis.

It’s not just individual errors such as Vaught’s that they have to guard against. It’s being on top of the necessary checks and balances practiced by the staffing agency partners they increasingly depend on, risks that aren’t under the operators’ direct control.

Vaught’s case and the damper on medical professionals

Vaught was stripped of her nursing license and sentenced last May to three years of probation, charged with criminally negligent homicide after administering the wrong medication to a patient at Vanderbilt University Medical Center in 2017. In overriding the electronic dispensing system when she couldn’t find the needed one, she mistakenly grabbed the wrong medication.

Every institution has medication administration policies spelled out, and every nurse is trained in and should be aware of best practice protocols. But the harsh criminal charges made the Vaught case a major issue, intensifying concerns over mounting pressures on nurses and other healthcare professionals at a time when they are leaving in droves.

The average turnover rate among nurses was 27.1% in 2021; 13 million are needed globally over the coming decade to stem the tide. Meanwhile, there’s also a shortage of faculty, staff and budget to train new nurses. In 2019, nursing schools turned away 80,407 applicants. The Vaught case made recruitment efforts more challenging, given the inevitability — and costs — of human error, especially when there are fewer bodies to do more work.

Impact on senior living

Nursing-related occupations, from registered nurses to licensed practical nurses and licensed vocational nurses to nursing assistants and aides, are critical to the senior living and care sector, accounting for about 52% of all employees in 2021, according to the National Investment Center for Seniors Housing & Care.  

The same pressure is on senior living and care to recruit qualified caregivers as is on health systems, having lost 210,000 jobs between February 2020 and December 2022. A return to pre-pandemic staffing levels isn’t expected until 2027.

Increasingly, operators have turned to staffing agencies to fill shortages. By 2021, as the industry was still reeling from the pandemic’s impact, 38% of senior living providers and 69% of nursing homes said in one survey that they counted on agencies to supply their manpower needs.

An expanded perspective of risks becomes that much more critical given the trends as it’s not uncommon for these staffing agencies to not carry insurance on their contracted people, pushing the risk — however unintended — on to their clients.

Assessing clinical staffing firms

Hospitals are required by accreditation organizations to develop tools to determine the competency of nurses provided by staffing agencies, augmenting the ongoing nurse evaluation processes of staff and agency nurses alike. Operators of senior living communities can avoid significant exposure by conducting similar assessment of their clinical staffing agency partners.

Here are areas the evaluation should cover:

1. Agency leadership. This part of the assessment explores how the organization is set up and sets the tone for best practices. An organizational chart, for example, should specify which individuals are responsible for quality of service. Also important is a documented code of ethics that covers conflicts of interest and a methodology for resolving complaints from staff and clients. Written policies and procedures on managing safety risks should be checked, and whether the agency keeps a log of reported accidents, injuries and safety hazards.

2. Human resources management. Written policies should be in place to confirm qualifications and competencies fit job assignments and responsibilities; similarly, they should cover current licenses, certification and registration, along with education, training and experience. Criminal background checks are critical, as are proof of identity and compliance with health screening and immunization requirements.

The agency should provide thorough orientations for clinical staff. Also important are a path for staff members to request reassignment and the agency’s openness to making job modifications to ensure competency. The agency should satisfactorily describe how it establishes and maintains the staff’s clinical competency, whether it facilitates ongoing education and conducts periodic performance evaluations. Along these lines, it’s also important to have a comprehensive plan for improvement that uses client input. 

3. Information management. It’s key to establish the adequacy of the agency’s IT processes for internal and external needs. Similarly, health and HR records for every staff member should be maintained, backed by a written policy to protect the privacy and security of staff and client information. Regular backup and storage to protect against information loss also should be checked.

Gigi Acevedo-Parker is National Practice Leader – Clinical Risk Management, for global top 5 insurance brokerage Hub International. She is a nurse executive with more than 30 years as a healthcare clinician, nursing leader, healthcare consultant and educator with a focus on healthcare risk mitigation and patient safety. She has experience in many diverse aspects of risk management and compliance, including loss prevention and mitigation, patient safety and quality, claims and litigation management, corporate compliance and privacy.

Gerald Stoll is the US Senior Care Segment Leader with Hub International. He specializes in developing comprehensive insurance and risk management solutions for the long-term care industry, including assisted living, independent living, nursing homes, clinics and urgent care centers.

The opinions expressed in each McKnight’s Senior Living marketplace column are those of the author and are not necessarily those of McKnight’s Senior Living.

Have a column idea? See our submission guidelines here.

The higher expenses, lower revenues and reduced cash flows of the pandemic were only aggravated by 2022’s inflationary economy. Interest rate hikes intended to keep costs in check put even more pressure on profit margins as wages (for fewer and much-needed employees) and food and construction costs continue to escalate. Those communities with floating debt rates also are feeling the squeeze.

In addition, although expenses were up due to hyperinflation, the revenue side has not kept pace, as many communities can’t simply “raise their price” or “charge more,” especially if the majority of their revenue is from the federal government. 

On a brighter note, occupancy rates continue to rebound from the pandemic-related decline, and a huge push is likely to gain momentum by the end of 2023.

Operators that have a steady management hand, especially on the manageable and less-manageable risks, will be in the best position to emerge whole, despite the test of their resiliency.

Here are key trends for management of senior living organizations to prepare for in 2023.

Worrisome staffing shortage

Long-term care facilities in the United States have shed more than 300,000 workers since the pandemic began. This isn’t a new situation, just a worsening one made difficult by losing out on two years of immigration.

Now more than ever, operators need to find a way to add value to jobs, to give people a reason to seek them out. The work itself has less than attractive aspects, but better pay and benefits can make it more palatable.

A more robust package of benefits that, importantly, anticipates their needs as individuals, can go a long way — and that doesn’t have to mean healthcare. Voluntary benefits have huge effect and often at a minimal cost. Programs that address financial wellness, for example, have tremendous value; consider employee purchasing programs to put big ticket items within reach.

And getting creative can pay off, too. In lieu of surplus salary dollars, community partnerships can be developed to educate a new workforce. Why not recruit high school graduates for nonclinical work but pay for their in-house nursing training at the same time?

Further, environmental and cultural factors play a role in recruitment and retention. Think collegial atmosphere and safety, not just from the physical stress and strains, but from resident or outside violence as well. People leave for many reasons, but they also stay for many reasons. Leveraging them all can stem the losses.

Prioritizing value-based care

As the senior living and care sector struggles to rebuild its COVID-battered infrastructure to sufficiently care for the fast-growing population of older adults, everyone is concerned about how to provide quality care despite the pressures the industry faces.

The shortage of staff stymies how well care actually can be delivered. As McKnight’s Senior Living sister media brand McKnight’s Long-Term Care News recently reported, skilled nursing providers can be incentivized to provide quality care (whether through pay-for-performance or value-based care) by tying Medicare payments to safety and quality measures.

But do those incentives support staff by improving working conditions, wages and benefits or improving staffing ratios? Historically, they haven’t been adequate against operators’ profit motivation, especially after the financial battering of the pandemic. And what about private-pay senior living, where healthcare increasingly is provided?

This issue will continue to be a top one in 2023 and beyond, as value-based care is viewed as an important route to improved older adult health outcomes. It merits serious attention by the industry in 2023 and beyond, and it is especially urgent for nursing home operators, as CMS intends to have at least the Medicare portion of skilled nursing facilities part of value-based care by 2030.

Blocking, tackling against extraordinary risks

Managers also need to stay on their toes to keep ahead of the risks that keep the pressure on operations as they try to rebuild resiliency.

Violence in residential living and care settings is a huge risk to residents and staff members alike. It’s a risk with a huge cost, not the least is the ability to attract and retain qualified employees. Collectively, assisted living communities and nursing homes typically have had one of the highest rates of nonfatal occupational violence — 6.8 incidents per 100 full-time workers, with nursing assistants at the highest risk.

It’s led the Joint Commission to issue new workplace violence standards for some of the settings it accredits, with updated safety measures and requiring mitigation plans that identify triggers and include the implementation of appropriate physical safeguards. The depth and scope of the problem may affect the cost of general liability and workers’ compensation insurance. Creating a safe environment can reassure underwriters and create a sense of safety and security to the workplace when it’s needed most.

On a different risk front are the intensifying side effects of global warming. Whether it’s hurricanes and the floods they cause, tornadoes or worsening wildfires given drought conditions, disaster preparedness has never been more important. 

Pete Reilly is the practice leader and chief sales officer of global insurance brokerage Hub International’s North American healthcare practice. Gerald Stoll serves as CEO, senior care, HUB Northeast, and Jordan Parnell is healthcare practice group leader, HUB Gulf South.

The opinions expressed in each McKnight’s Senior Living marketplace column are those of the author and are not necessarily those of McKnight’s Senior Living.

Have a column idea? See our submission guidelines here.

Virtual care has a role in addressing some worrisome and converging trends. One is the overwhelming number of baby boomers hitting 65: 10,000 a day through 2030. They are living longer and with multiple chronic health conditions that necessitate their move to senior living communities and skilled nursing facilities. The other side of the equation? The growing shortage of healthcare providers through that period: some 121,300 physicians, not to mention a shortfall in nurses and paid and unpaid caregivers.

Virtual health services are a viable option to help narrow the expanding gap between the number of older adults and the availability of health services they’ll need. But senior living providers need to balance the risks and rewards to make it happen. Here are some considerations to keep in mind.

Quality of care and related issues

Residents of senior living communities generally are fragile. Transporting them to a hospital is hazardous when arthritis or osteoporosis can mean broken bones, no matter how carefully they are lifted. That makes telehealth advantageous in that it helps circumvent travel risks for medical care, especially in rural areas where hospitals are few and far between.

There are downsides to think about, though. For starters, virtual diagnoses of residents with cognitive impairments can be more difficult than in-person ones. And precautions are necessary. Consent agreements for a resident’s medical care need to be double-checked. Those typically extend to care that is provided inside the senior living community. But it’s smart to make sure the agreement doesn’t contain language that might preclude telehealth services.

And providers also need to be on top of public and private reimbursement considerations as they firm up their telehealth strategies.

The three-day qualifying hospital stay, for example, is an advantage to the nursing home in terms of reimbursement, as it triggers a high reimbursement Medicaid or Medicare pay rate for, say, a respiratory failure. It can be argued that with the 1135 waiver for COVID, however, it is not a loss, as the facilities can “skill in place.” Still, especially with the push toward bundle payments, senior care facilities will be focused on reducing re-hospitalizations. Telehealth can be an effective tool for that, plus there are benefits in caring for the resident in the lower-cost setting of a nursing home versus a hospital. With Centers for Medicare & Medicaid Services COVID waivers, facilities that accept Medicare or Medicaid payments don’t lose the higher reimbursement, as using telehealth enables them to “skill in place.”

Another case for cyber security precautions

With or without the provision of virtual health services to their residents, senior living providers need to be very careful with their cyber practices. Many consider the long-term care sector as a whole as being less prepared to manage cyber risks than other healthcare segments; their records are valuable and too easy to hack.

Telehealth’s cyber security implications are greater for healthcare providers, as the platforms provide another opening for criminals. But managers in senior living and care already are well aware of the security risks of their residents’ electronic medical records. But their WiFi gateways become even more vulnerable as they accommodate virtual care.

Potential issues with medical directors and revenue impacts

One concern that could pose a sticky issue to senior living and care providers is the extent to which the use of telemedicine cuts out medical directors (unless they also provide tele-medical services, that is). Medical directors typically conduct several monthly visits to facilities and are paid for diagnosing conditions in residents. Take away their revenue, and there could be a problem. It’s something to think about given the medical director’s role in driving some facilities’ acceptable acuity — especially since the higher the level of need, the greater a facility’s growth in revenues.

The pandemic has pushed virtual health into the spotlight for over a year. It’s been a boon to senior living and care providers for augmenting care options for residents during this time. The extent of their embrace going forward takes careful consideration of all the implications.

The opinions expressed in each McKnight’s Senior Living marketplace column are those of the author and are not necessarily those of McKnight’s Senior Living.

But know this: You can take steps that will equip you to deal with a lot of the short-term pressure — and also put your organization in a much better position from a risk perspective over the long term.

For the here and now, there’s no escaping the fact of today’s constricted insurance market, which is adjusting after years of underpricing despite rising risks. Senior living and care organizations are seeing across-the-board rate increases, especially significant in professional liability and general liability.

You really can’t navigate your way through this environment alone. It makes all the difference to have partnered with a brokerage with deep knowledge of your space and theirs as well as an extensive range of contacts to match. But you have to give them a positive story to take to insurers, because every advantage counts in this environment. Here’s how to make sure there’s plenty to work with.

It’s never too early to start on renewals

The earlier you start documenting your track record on losses and how you’ve addressed them over the long haul, the more effective a case you are able to make for why your risk is different than others in the market. Ideally, you and your broker have been in regular touch about your losses and what’s behind them, so that your exposures aren’t allowed to build and claims don’t remain open too long. This orientation is better for you and better equips your broker to negotiate with insurers.

The short- and long-term ramifications of COVID-19

Insurers are requiring you to complete very detailed COVID-19 questionnaires at renewal. It’s a prompt to be diligent in reviewing your prevention protocols and audit your facilities to ensure measures are in place and being strictly followed, including contact tracing and infection controls. Specifically, the questionnaires ask for your numbers on COVID-19-related cases, deaths and recoveries, details on your visitation procedures, and how you are prepared for future surges of contagion. Don’t be surprised to see exclusions in your policy from the novel coronavirus and other communicable diseases moving forward.

Risk management counts – especially clinical risk management

It says a lot about a senior living and care organization if it has a well-documented risk management strategy in place. This strategy needs to be supported by regular external risk assessments and a claims management strategy where claims are, to the best of your ability, closed out and the history kept comparatively clean. Of particular concern is clinical risk management to ensure that clinical care is up to par, meets, exceeds and improves on quality measures. Effective risk management leads to better outcomes and tell a success story that insurers like.

Think about alternative risk measures.

Your broker should be negotiating hard for you with insurers. But you need to ask questions about your best options for moving forward. Access to carriers and distribution networks can vary dramatically among brokerages. Additionally, there are different ways to manage your risk. More experienced brokers who know your business specifically and the senior care sector generally should advise you on different strategies and how to put them into place. Like? The captive insurance route could be one option.

The senior living and care industry has been hard hit by the events of 2020. But diligence, a strong emphasis on risk management and an openness to solutions you may not have considered can help you carry on through it.

Jordan Parnell and Gerald Stoll are both senior care segment leaders for Hub International. They specialize in developing comprehensive insurance and risk management solutions for the long-term care industry; including independent living and assisted living communities, nursing homes, clinics and urgent care centers.

If anything, the pressures are only intensifying as we move forward, making it imperative for providers across the continuum to sharpen their risk-management capabilities even as they get creative where they can on the problem-solving front. Here’s how it shakes out:

Employers must get strategic on benefits to address mounting worker shortfall.

Employers along the senior living and care continuum won’t find the staffing struggle any easier to deal with in 2020. Both care professionals and minimum-wage staff are difficult to recruit, much less retain, when the economy has translated into full employment and plenty of more attractive work settings are beckoning. Current immigration policies have further stifled the flow of those who once met the need for minimum-sage workers in many regions.

When direct senior care has openings for a record number of jobs and turnover rates can hit as high as 75%, it’s time for employers to get more aggressive – and creative – with solutions. An enhanced menu of employee benefits that addresses distinct needs of specific employee groups will be a big differentiator and go a long way toward encouraging people to stay. Two possibilities: “Mini-med” plans that provide low-cost health coverage to those who might not be eligible for major medical plans, and telemedicine, an increasingly popular way to improve access to care.

As risks mount, so do the costs of protecting against them.

The environment means the industry will be challenged to avoid some costly claims moving forward. Physical abuse and neglect of residents continue to be a major concern; claims are averaging $406,000 in damages, and settlement case values can hit millions of dollars.

Some communities are starting to see reductions in limits for sex abuse coverage. Carriers are pulling out of the market, and some are reluctant to write policies in particularly litigious states such as Kentucky, Illinois and Florida. Professional liability and general liability premiums are increasing by 15% to 30% in a hardening market, and pain is being felt in the property and auto lines, too.

Given the pressures, communities will be well-served by broker-partners who aren’t doing the same old, same old to get their risks covered. Long-term sustainability requires a more thoughtful approach, from placement structures to providing the kind of risk management guidance that prevents claims, and to ensuring that claims are closed effectively. 

The operating environment for operators in the senior living and care sector certainly is not going to get less challenging as the first year of a new decade continues to unfold. Organizations in the best position to succeed will anticipate the risks on the path ahead and develop the tools and the people to make it work.