Pandemic Changing Landscape of Nursing Home Business

Nursing Home

The high death toll that we’ve seen in nursing homes from COVID-19 has shocked people, but this goes on every year. This time around, people have really taken notice.

Nursing home residents only represent 0.4% of the American population, but they have accounted for 40% of deaths attributed to the COVID-19 pandemic. While a large part of this is due to the frailty of nursing home residents, who are the most prone to these things, some of this also has to do with the practice of herding these folks who are so highly prone to infectious disease together like we do.

40,000 people in nursing homes dying of the coronavirus so far is a number that a lot of people see as startling, but it’s only because people don’t really pay attention to how many people in these care facilities die of infectious diseases each year, and in spite of the ravages of this pandemic, the number this year is not very remarkable.

Several infectious disease experts, people who do know how many lives are taken by these diseases year after year, have told us that if not for our singling out this particular virus with testing, all of this would have gone by unnoticed. We certainly don’t notice the half a million people that die from the flu each year, or the 2.5 million on average that die of pneumonia, or the millions that get taken from other infectious diseases every year, including the escalating problem of antibiotic-resistant bacteria that are killing off our elderly population more and more.

While this total does dwarf the roughly 375,000 people whose lives have been lost from COVID-19, this should certainly not serve to have us discount the significance of these deaths, but to instead wake us up to the fact that we need to be paying a lot more attention to how much of a problem this is overall, and in particular, seek out better ways to protect our elderly patients.

Just as keeping people in nursing homes exposes them to a higher risk of dying from COVID-19, it also places them at a much higher risk of infectious disease in general. The media whipping people into such a frenzy over this particular coronavirus may serve as a launching pad for us to wake up more to what actually goes on in these facilities, and how we may better protect the alarming number of people who die out of the public eye year after year.

Just like you can’t prevent people from dying of old age, you can’t really stop infectious diseases from killing a certain number of people, as their immune systems decline to the point where they can no longer fend off common diseases even with the best treatment and their deaths become inevitable.

We also cannot completely defend them against being exposed to infectious agents without completely isolating them from human contact, and more elderly patients die of complications from the common cold than any other agent, where they can catch it from people who have it but aren’t even symptomatic yet.

This doesn’t mean that we cannot do more to keep these diseases from spreading in facilities that contain large numbers of these more prone elderly patients, progressing from not even bothering to pay attention to these things to at least paying more attention and perhaps cutting down on the number of these deaths.

This extends beyond just the elderly though, and we have plenty of data to show that the risk of dying from infectious disease goes up remarkably while under medical care, including in hospitals, elderly care facilities, and even at doctor’s offices. Where the sick congregate, it should not surprise us that the rate of infection and death from these diseases goes way up.

The Alliance for Aging Research tells us that about 100,000 Americans die each year from infections that they get at our medical facilities, and this number may actually be on the low side if anything due to the tendency to underreport such things. The great majority of these people are elderly, and when you combine this with the little amount of attention that we pay to this, there is certainly some real potential for improving this situation.

As we move on from this current pandemic, we can only hope that this will serve to open our minds more to the great number of people who die of these things all the time, and perhaps rethink the way we manage this risk.

Even just the fear of COVID is serving to have people think more about the risks that they are placing their loved ones under by putting them in nursing homes. We can only manage the feelings of regret that so many people have now by sending Mom or Dad to one of these care facilities and seeing them die of COVID while there, and among this demographic, being in a nursing home has increased the probability of dying of this coronavirus dramatically.

They may not notice how many of them continue to die from pneumonia, influenza, antibiotic resistant bacteria, and other infectious agents, but the fear of another one that we’re actually told about like COVID-19 may be enough in itself to promote real change in the way they view these care facilities, and spur them to take this into account more when they choose the type of care that these loved ones will receive.

Nursing Homes Will Be Taking a Real Hit from This

This is all definitely bearish for nursing home stocks, when people become so much more scared of what they have to offer, and are also calling for substantial change. This will not only lead to a loss of business, it will also increase their costs as they look to improve things enough to try to win back some of the public confidence that they have lost due to the ravages of this particular viral outbreak.

While we may think of the handling of this outbreak overall may have been excessive, with the draconian measures we have taken to seek to quarantine healthy people who are not even under a meaningful risk, let alone one that is so high that we need to shut down the economy over, no one will argue that those who actually do need this sort of protection need to be getting it.

The fact that this heroic attempt to stem this outbreak hasn’t stopped 40,000 nursing home patients in the U.S. alone from dying of COVID-19 should be a real wake-up call, as the spread of this disease in these facilities has not been well contained at all by any measure, and instead, has been rampant. The U.S. has had more nursing home COVID deaths than the total amount of any other country, which does speak loudly of the fact we do need to be doing a better job protecting them. Rather than just throw our hands up, or worse, pat ourselves on the back, we need to think harder about how we may have been able to at least reduce these numbers.

This is an enormously challenging task, and involves more than just having people with symptoms self-isolate, deny visitation, or have staff wear face masks, because we’ve already seen that this does not work very well. Keeping so many of these high-risk patients together in institutions that act as breeding grounds for infection is something that is now being seriously looked at much more seriously now though, orders of magnitude more seriously in fact, and this is what those who make money from these things really need to be aware of.

Nursing homes already have a reputation for unacceptable care with all the stories of abuse that takes place there, and while it may not be fair to paint them all with such a wide brush, the issue of the greater risk of dying with segregating so many of these folks in one place is a problem that is much more widespread.

These patients also merit a much higher level of attention and care than normal, and we really didn’t see enough of that during this crisis, with our even sending patients back to nursing homes who were suffering from COVID-19 to infect others, which did not end up working very well and caused some nursing homes to be overwhelmed with this disease and lose a lot of people to it.

They may tell us that they will have their people wear face masks, limit visitors, screen their staff, and so on, but given that they already did that and the number of deaths still ended up so high that people have become terrified of these nursing homes won’t serve as any consolation. The changes that are needed and the ones that people will demand need to be more substantial than this, even if this involves moving away from nursing homes and toward other venues to care for these patients.

The admittance of these infected patients does serve to illuminate the greater risk involved generally with nursing homes. If you send the patients home to be quarantined, they may affect their families, but their families aren’t the sort that are prone to risk. Send them to a nursing home with hundreds of very high-risk people, and this one infected person can end up doing a lot of harm indeed, as we have seen.

This is not as simple of a matter as people staying at home versus institutionalized, as this simply is often not an option, but among those who do have this choice, it’s expected that many more will avoid being put in a nursing home if possible. There are other options in between, the assisted living facilities, and their business is expected to really pick up now, and they will be taking business away from nursing homes directly.

There is talk out there already about how we need to restructure the way we provide elderly care, and the restructuring has nursing homes as we know them playing a lesser role, which is not good at all for business.

Welltower, a major player in the nursing home business, saw their stock take an unusually large dive from the selloff caused by this outbreak, down 73% from their February highs at the worst of it. This tells us now much the market is worried about the aftereffects of this pandemic upon them, and while they have come back since, they haven’t rebounded in a way that would suggest any real confidence going forward, still being down 44% after the comeback that they saw.

The 44% loss represents the residual concerns of the market after the panic has waned, meaning that these are not just temporary concerns caused by the shutdown, they are long-term worries. Nursing homes didn’t shut down or lose business other than from the residents who died under their watch, and the stock being down this much this far along is a serious concern indeed.

These concerns aren’t misplaced, as it is estimated that the new normal will require that nursing homes hire a lot more staff to manage a given number of patients, which will increase their operating costs significantly. This is on top of whatever other extra costs that are expected, the additional cleaning and other supplies required. They also need to worry about not being able to pack in as many patients as they used to.

There’s also the need to consider adding new sections dedicated to quarantining the sick, while at the same time facing the challenge of quarantined seniors experiencing both mental and physical declines from being placed more in isolation, and we’ve already seen this happen with the COVID distancing measures put in place.

Nursing homes rely on insurers to pay for all of this, as few patients can afford the $90,000 per year that people pay on average for their services. Most residents are covered under Medicaid, with others being covered under their long-term care policies, and insurers are never that eager to pay quite a bit more, especially Medicaid.

There is also the issue of more flexibility being required from insurers to allow other options to be selected for those who may need full-time care but would prefer other arrangements outside of nursing homes. This will require all programs to strive to deliver what the people want in a manner that is efficient enough for insurers to agree to pay the costs and still leave enough profit to make these changes worthwhile to the providers.

This all certainly has the potential to create a real mess in the nursing home industry, and major providers have already taken steps to move away from nursing homes and diversify their company’s holdings more. Occupancy rates at senior care facilities were already on the decline before the pandemic, and are expected to really decline now.

9 out of 10 people already preferred staying at home versus being put in a facility, and although many of these folks ultimately choose institutional care, which is often required, there are many who actually can choose the stay at home option but end up choosing an institution for various reasons. These are the ones that the increased reluctance to be put into a nursing home that the pandemic has caused may end up affecting, reducing the number of patients in nursing homes considerably.

Patients are also demanding more interaction and entertainment, and like the need to restructure living conditions to do a better job at controlling community transmission of infections, this does cost money. For the great majority of patients who do not have the means to pay for all this themselves, the opposite of this, where nursing homes become even more of a warehouse for the aged and infirm, due to increased segregation, may end up being the new reality, in an industry that already gets a lot of complaints about this.

Even though our elderly population, and especially those who require special care, continues to increase, this does not appear to be a business that is in any sense bullish and we may even wonder whether it may be able to even mostly survive post-pandemic. We may even end up increasing regulation and not increasing payments to the point where many may no longer be able to stay in business, which could create a shortage of beds that cannot be easily addressed and may even require government intervention, and government run facilities are not particularly known for their quality of service.

The nursing home business is plenty sick right now in any case, and this may not end up being a place where we want to send our parents, but it’s especially not a place where we should want to invest our money in right now.

Monica

Editor, MarketReview.com

Monica uses a balanced approach to investment analysis, ensuring that we looking at the right things and not confined to a single and limiting theory which can lead us astray.