Daily Briefing

Why might 400 nursing homes close this year?

More than 300 nursing homes have closed during the pandemic, according to a new report from the American Health Care Association and the National Center for Assisted Living (AHCA/NCAL)—and an additional 400+ are expected to close this year unless they receive more financial support.

Resource library: Caring for America’s seniors

Report details and key findings

For the report, AHCA/NCAL analyzed data from CMS' Survey & Certification's Quality, Certification and Oversight Reports to determine the number of nursing home closures between 2015 and 2022.

Overall, the report found that more than 1,000 nursing homes have closed since 2015, with 776 closing before the pandemic and 327 closing during the pandemic so far. Because of these closures, 44,459 residents were displaced, with 12,775 residents affected since the beginning of the pandemic.


According to the report, the facilities that closed were usually smaller, with fewer than 100 beds, and in urban areas where most residents relied on Medicaid. Among the facilities that closed during the pandemic, nearly half received four- or five-star ratings from CMS, more than a quarter were in rural communities, and a growing proportion were not-for-profit nursing homes.

In addition, AHCA/NCAL predicted that more than 400 additional nursing homes could close in 2022 based on current financial conditions. Across the industry, facilities have a median operating margin of -4.8% and occupancy rates of 77%.

Despite these financial challenges, CMS has proposed potential cuts to skilled nursing facility (SNF) payment rates for fiscal year (FY) 2023. Under a proposed rule, SNF payment rates would be reduced by 4.6% or $1.7 billion to achieve budget neutrality in the Patient Driven Payment Model. Overall, the payment policies in this proposed rule would result in a decrease of approximately $320 million in Medicare Part A payments to SNFs in FY 2023 compared with FY 2022.

To highlight the potential impact of these proposed payment cuts, AHCA/NCAL highlighted findings from a recent CliftonLarsenAllen (CLA) study that modeled what could happen if Medicare was cut by 5% and the Medicaid public health emergency funding ends in 2022.

According to CLA, these payment cuts would put 33% to 38% of nursing homes at financial risk, affecting between 32% and 40% of all nursing home residents—or as many as 417,000 people.


Marc Zimmet, CEO of Zimmet Healthcare Services Group, said the Covid-19 pandemic has worsened conditions for nursing home across the country, and even states that have traditionally been considered "stable" are now seeing significant closures.

For example, in New Jersey, the nursing home bed count has been steady for years, but Zimmet said now "legitimately 25% of SNFs" in the state will likely close within 24 to 36 months without additional aid.

"The Medicare cut is important for broader reasons, but the reality is rates will go down only about $6 PPD on average," Zimmet said. "That said, it has ripple effects on Medicare Advantage payments — plans will attempt to use the recalibration to reduce their rates or refuse increases — even though MA plans are getting an 8.5% increase."

Mark Parkinson, president and CEO of AHCA/NCAL, called for policy changes to prioritize long term care and provide resources and support to reduce both financial and workforce challenges in nursing homes.

"Every closure is like a family being broken apart, with the lives of residents, staff and their families impacted in the process," Parkinson said. "With hundreds of nursing home closures looming now and thousands more anticipated if government funding is cut, state and federal policymakers need to step up to support our social safety net."

"We need to do better than just keep nursing home doors open—we need to make significant investments to better support our frontline caregivers and transform facilities for a growing elderly population," he added. (Brown, McKnight's Long-Term Care News, 4/22; Gleeson, Becker's Hospital Review, 4/25; AHCA/NCAL report, 4/22; ACHA/NCAL press release, 4/22)

Advisory Board's take

Do nursing home closures signify a move towards aging in place?

By Blake Zissman and Lauren Rewers

In addition to the devastation of the pandemic, the report reflects the impact of several recent proposals by CMS, including potential cuts to skilled nursing facility funding in fiscal year 2023 and a proposed staffing minimum set to be announced within the next year.

Because of the growing interest in home-based care innovation, leaders might be tempted to see this news as a positive one—a sign that the industry is aligned with surveys suggesting widespread interest to age in place. But this dream is far from reality, for the following reasons:

  1. Despite industry assumptions, consumers are split on where they would like to receive long-term care. While there is widespread desire to receive short-term rehab care at home, consumers preference is more even for long-term care. Results from Advisory Board's 2021 Post-Acute Consumer Survey show 37% of respondents prefer to receive long-term care in a facility (due to dementia or another cognitive impairment), in comparison to 33% who say they prefer to receive long-term care in the home.


  2. The United States doesn't have the social or political infrastructure to adequately care for seniors at home. Medicare does not currently reimburse for ADLs, meaning many seniors or their families must pay for such care out of pocket. And even those who can pay for home-based long-term care are often willing or unable to make necessary accommodations to do so. The Consumer Survey indicates nearly 30% of consumers would be unwilling to make changes to accommodate home care such as moving closer to family or quitting paid employment to be a caregiver, even if they would prefer to receive care at home.


  3. There is not enough home health staffing in the industry to accommodate existing demand for Medicare-certified home health, let alone rapid growth. Like many health care employers, post-acute organizations are grappling with a shortage of clinical staff. Nearly 8 in 10 home care leaders cite staffing shortages as the primary driver of declining client growth rates.


  4. Home health care access is inequitable for seniors of color. Even prior to the pandemic, literature indicates that many groups referred to home health after discharge do not receive care in a timely manner, including Black and Hispanic patients, individuals enrolled in both Medicare and Medicaid, and residents of high-poverty, high-unemployment zip codes.

Because home health will be unable to accommodate increased demand, SNF closures will result in the displacement of residents, potentially forcing them to choose facility-based care further from their loved ones. Closures will also be felt across the care continuum, as hospitals will be hard-pressed to discharge patients for rehab care—gumming up patient flow permanently.

[an error occurred while processing this directive]







Don't miss out on the latest Advisory Board insights

Create your free account to access 1 resource, including the latest research and webinars.

Want access without creating an account?


You have 1 free members-only resource remaining this month.

1 free members-only resources remaining

1 free members-only resources remaining

You've reached your limit of free insights

Become a member to access all of Advisory Board's resources, events, and experts

Never miss out on the latest innovative health care content tailored to you.

Benefits include:

Unlimited access to research and resources
Member-only access to events and trainings
Expert-led consultation and facilitation
The latest content delivered to your inbox

You've reached your limit of free insights

Become a member to access all of Advisory Board's resources, events, and experts

Never miss out on the latest innovative health care content tailored to you.

Benefits include:

Unlimited access to research and resources
Member-only access to events and trainings
Expert-led consultation and facilitation
The latest content delivered to your inbox
Thank you! Your updates have been made successfully.
Oh no! There was a problem with your request.
Error in form submission. Please try again.