(Daily Montanan) In the past six months, Montana has lost approximately 10 percent of its nursing home beds throughout the state as seven nursing homes have announced they are closing because they can’t continue to sustain a loss of more than $100 per day on each resident.

The problem, which has been most pronounced in rural communities, is creeping into some of the state’s largest cities. Bozeman has seen its largest nursing home provider close, leaving just one facility with a maximum capacity of 69 beds to serve the community, which is experiencing explosive growth, averaging 3 percent per year, or adding nearly 3,000 people annually.

Even the future of that nursing home is questionable as Gallatin County seeks a mill levy to keep those beds available.

Experts in the field say the problem could and likely will get much worse before it improves because the two factors fueling the closures – low reimbursement rates and high staffing costs – don’t have quick-fix solutions.

However, those same officials have said Gov. Greg Gianforte and the state’s Department of Public Health and Human Services seem indifferent to the crisis, and have told nursing homes that a failed business model and lack of innovation are to blame for these facility closures.

Moreover, more than a half-dozen administrators and industry leaders who spoke to the Daily Montanan confirmed that the Governor’s Office and DPHHS officials have met with nursing home and skilled-nursing administrators repeatedly, only to be told the state expects the closures and believes a better private business model should emerge.

Both Gianforte’s office and DPHHS explained to the Daily Montanan that even as the population of the state ages, how people age continues to change. They also said that only half of the capacity of the beds is being used, proving that demand continues to decline.

In fact, they said state leaders have been trying to engage skilled-care facilities in exploring ways to change the business model.

Gianforte’s office issued this statement to the Daily Montanan:

Considering the toll of the pandemic on health care providers and the steadily declining occupancy in nursing facilities over the past decade, the governor directed DPHHS to work closely with nursing home administrators and stakeholders to find solutions and ensure the skilled nursing needs of Montanans are met.
This has included prioritizing nursing facilities in the administration’s provider rate study, exploring ways to support nursing home facilities with long-term care modernization efforts, and providing technical assistance on developing sustainable business models.

Yet nursing home officials have explained that only half the capacity is being used for a variety of reasons including the switch to single-occupancy rooms because residents refuse to share rooms, COVID-19 made it essential to keep residents isolated, and many facilities don’t have enough staff to maintain mandated staff-to-patient ratios.

“We still have to take care of those generations who helped build the state,” said Wendy Soulek.

Soulek is the chief operating officer of Lantis, the parent company of Bridger Rehab and Care Center, which is closing in Bozeman. It is also the company that has closed Cedar Wood Villa in Red Lodge. She has described the pain of telling residents they’ll be moving and then helping them find new places to live, sometimes hundreds of miles away.

She said her organization has tried to be innovative, including carving out living space in their facilities to help reduce living costs for employees, but converting nursing home space to residential space is awkward. It also limits the number of residents.

“And who wants to live where they work? And it’s not the same as housing,” Soulek said.

The Bozeman Real Estate Group pegs the median single-family house at nearly $900,000.

“How can you expect employees at that cost?” Soulek asked.

Officials told the Daily Montanan that the Gianforte administration has advocated for more in-home healthcare and assisted living facilities, but Rose Hughes, the executive director for the Montana Healthcare Association, the trade group that represents nursing homes as well as assisted-living and in-home healthcare, said that disregards an important link in the healthcare continuum.

In-home care demands financial resources that not all people have. Assisted living facilities don’t provide around-the-clock care for patients who need it, like those suffering from stroke or dementia. And both of those models can pick and choose their clients, Hughes said. Nursing homes are still necessary for a segment of the population who need more care and aren’t flush with resources.

“The beauty of assisted living is that they can assign the right level of care,” Hughes said. “But when chronic illness gets to a certain point, you’re going to need skilled nursing.”

She said that many people fight against the idea of nursing home, but it doesn’t necessarily mean they can avoid it.

“No one says, ‘I see myself in a nursing home.’ But then again, no one says, ‘I see myself in a hospital,’ either,” Hughes said.

Yet state officials said a natural business model switch is happening, leaving older models, like nursing homes in decline.

“DPHHS has observed a gradual shift where more people are aging in place longer, and utilizing congregate settings/nursing homes less. As this shift has occurred, Montana has found itself to have among the lowest census rates in the country. With our only about 50 percent of the licensed beds currently utilized, DPHHS is confident there is sufficient capacity to meet the skilled nursing needs of Montanans,” said department spokeswoman Megan Grotzke.

Economics, COVID and closures

Understanding the timing of the closures cannot be done without understanding the impacts of COVID-19.

Prior to 2020, nursing homes, long-term skilled-nursing facilities, were already teetering on the edge of financial failure. Many were depending less and less on private-pay insurance companies and more on Medicaid, which has the lowest rate of reimbursement. Most nursing staff was employed by the nursing homes themselves, and was still expensive, but nothing like the cost during COVID.

However, COVID-19 changed the landscape dramatically, at first for the better, but in the long term, in devastating ways that had little to do with a virus that began in China.

After COVID started its rapid spread in early 2020, the Steve Bullock administration had given a temporary daily bump of $40 per day per resident. Later, funds from COVID relief and ARPA, the American Rescue Plan Act, would help bolster bottom lines and keep the nursing homes afloat. That was positive.

However, with the disease spreading, many residents were isolated. Fewer people went into nursing homes. Meanwhile, healthcare officials burned out or fled to more lucrative contract work, where they moved around to serve those willing to pay the highest price for their services.

That’s when the cost of all medical staff from nurses to nursing assistants soared. Most healthcare facilities had to turn to expensive contract care, hiring nurses and doctors who traveled but were not tied to any specific town or institution. Federal and state funds helped infuse the nursing homes and other healthcare facilities with enough cash to stave off closure during the pandemic.

Still, because of COVID’s spread and changing expectations, nursing homes were also paradoxically forced to reduce the number of residents in order to accommodate quarantine areas and single-bed rooms to help keep the disease contained.

Hughes said that most facilities are licensed for double-occupancy rooms, but customer demand has forced many to switch to private rooms, effectively cutting capacities in half.

Another factor was the increased reporting and oversight that was implemented during and after COVID. Hughes and other administrators told the Daily Montanan that while federal funding helped managed the financial losses, it also increased reporting and oversight requirements, adding to the staffing costs. Though federal funding has dried up, the federal rules and reporting requirements have not.

“COVID reporting that used to be every week is now daily,” Soulek said. “It’s ridiculous. It takes us two to three hours of staff time just to file the reports for that. And that’s just one report.”

Fewer people, higher staffing costs, more regulations and now state and federal assistance drying up have led to the closures.

While some administrators have been critical of state government for not doing more, DPHHS said it’s being responsive and the long-term care division maintains a facility closure team that assists families affected by closures.

Previously, nursing home administrators told the Daily Montanan that nursing homes were on the brink of collapse. Interviews early in 2022 conducted by the Daily Montanan predicted that many would close when the COVID-19 relief funding dried up, sometime in the summer.

Hughes said that forecast wasn’t hyperbole, it was accurate.

“It was very predicted,” Hughes said, “and we gave them more than fair warnings to the powers that be. We told them that what is happening is not sustainable. We told them that we’re not going to last until the next Legislature.”

The matter boils down to simple economics, and most nursing homes lose thousands of dollars per month. Some organizations are able to weather the storm because they’re part of a larger business or corporations that have other lines, like assisted living.

Hughes estimates that nursing homes require more than $300 per day per resident in costs. However, Medicaid and state funding only cover $212, leaving most facilities to scramble to make up the difference.

Soulek broke the numbers down a different way: At $212 per day, it translates to taking care of patient for $8.83 per day. But nursing staff can cost as much as $150 per hour, making the economics impossible.

As a comparison, the emergency situation at the state hospital in Warm Springs has led state officials to complain that they can’t afford to care for residents there at $600 per day. Hughes said she doesn’t know how the Gianforte administration expects nursing homes to survive on one-third of the amount of what they pay to keep state facilities running at a substandard level.

“They have to do something before it collapses,” Soulek said.

The Gianforte administration said it’s studying the problem and looking for solutions. It also pointed out the problem has been persistent for years, and the solution may also take time.

“With occupancy in nursing facilities trending downward over the last decade, DPHHS continues its efforts to look for ways to enhance revenues, modernize the industry, and provide technical assistance as market factors play out,” Grotzke said. “In addition, nursing home rates are the subject of the ongoing rate study being conducted by Guidehouse Consulting on behalf of DPHHS. DPHHS will analyze the provider rate study to inform the budget request for the next biennium.”

Hughes also said that the state has only increased the reimbursement rates to nursing homes in minuscule increments. In 2019, the daily reimbursement rate was $211.42 and today – three years later – it’s $212.57. That’s an increase of just 0.5%.

Soulek and Hughes pegged inflation in their industry at around 30 percent in the past two years, with the cost of nursing having tripled.

“With double-digit inflation, how are we supposed to sustain that when they’ve given us a 1 percent increase during the last two years?” Hughes asked. “It absurd. That can’t possibly work.”

Entering 2022, Montana had 70 facilities with 6,274 beds, according to a federal database. However, that number also includes state-run facilities. Hughes said the number of non-state beds was closer to 5,000 in 2022. And even that number is deceptive because that’s the maximum occupancy, but the truer number may be half that level because residents and facilities have mostly converted to single-occupancy rooms as a means of controlling COVID and because residents demand privacy.

Montana, by comparison, is a vast state with 147,000 square miles. Yet in terms of nursing homes, it’s lean. Iowa, a third of the size has 430 nursing homes, more than seven times the number of Montana for a population that’s barely three times as large.

As Montana’s nursing homes continue to close, the number of elderly residents, age 65 and older, continue to increase, a trend that’s not likely to reverse anytime soon. According to the Population Reference Bureau, Montana ranks No. 6 in population older than 65. Nearly 20 percent of the state’s population is 65 or older, translating to 213,000 people. Montana is the only Western state in the top 10 of highest percentage of “gray” residents.

The future looks a lot like the present

With federal and state funding evaporating, Hughes warns that more closures aren’t just possible, they’re probable. She said that nursing home officials and state leaders have been warning the Gianforte administration for months that this would happen without an increase in reimbursement by the state and soaring labor costs.

“It brought tears to my eyes. When we told them that without help, you can expect more closures, they said they expected that,” Soulek said of meeting with Gianforte and DPHHS officials.

Hughes said that in their meetings with state officials, the Gianforte administration has suggested that nursing homes are a relic of the past, and more efficient business models are needed, which include facilities with more residents to help with the economy of scale.

“They don’t realize the more residents we take, the more we lose,” she said.

Among the models that may show promise include small, niche facilities which have fewer residents, not more, Hughes said. But even that model in Montana is uncertain.

“They think that this is necessary and normal and that it needs to happen, as if we were doing something wrong and that we’re not figuring out how to provide services in a sustainable way,” Hughes said. “But we’re not asking the state to sustain us, we’re just asking for a fair rate.”

Yet any relief is likely at least a year away. The state’s budget cycle to be determined by the 2023 Legislature won’t go into effect until July 1, 2023 – and by that time, other facilities may fail.

“DPHHS still has limited funding and is navigating a Medicaid shortfall, largely driven by the continued health declaration that artificially keeps enrollment high. Further, the Legislature has not authorized additional supplemental funding to DPHHS for nursing homes over the course of this biennium,” Grotzke said.  “Again, DPHHS recognizes the Medicaid rates will need updates and do not cover the full cost of providing care (in nursing homes and most other service areas). DPHHS will continue to engage in open and transparent communication with relevant stakeholders.”

The nursing home problem isn’t just confined to the rural areas, either. The closures are beginning to rise up to Montana’s urban areas, which have often been the communities where residents are sent if a rural facility fails. For example, Hillside Health and Rehabilitation in Missoula has announced closure plans with a 95-bed capacity. Nearby facilities in Ronan and Hamilton have also closed, resulting in more than 200 beds closing in the region. Hardin, the county seat of Big Horn, lost its only nursing home as Big Horn Senior Living spools down. And maybe most acutely, Bridger Rehab and Care Center is losing 103 beds, leaving the sprawling Gallatin Valley with just 69 Beds.

Not sustainable

Talk to any Montana nursing home operator and it won’t take long to hear the word “sustainable.” Not only are nursing homes figuring out how to manage taking a loss on nearly every patient, but they talk about soaring labor and housing costs for nurses and nursing staff.

Soulek said it’s not just a matter of losing money or residents, but it’s also about the cost of labor. She said out-of-control housing prices make hiring staff for her facilities in Bozeman and Red Lodge impossible.

Soulek said that some facilities are losing $200,000 per month and that’s not sustainable. She also said that supply-chain shortages, staffing increases and housing costs have all created an acceleration of closures.

Several years ago, nursing homes could pay better than minimum wages. Certified nurses assistants, or “CNAs” usually made slightly better than entry-level wages in other sectors. But Hughes warned that the physical and emotional stress often took a higher toll on those employees, leading to more turnover.

“But now, you can make $15 or $20 per hour at any job. Why would you be a CNA in a nursing home when you could just work in fast food,” Hughes said. “Before this, we were not competing with restaurants for labor.”

Soulek has been on both sides of the equation – from opening facilities to closing them. What also concerns her is that facilities cannot open as quickly as they close. She said even if organizations have the money and the plans, it takes 18 months to two years in order to get a facility prepared to open.

The millions of dollars question

With nursing home closures and more expected, the question becomes: Where do elderly Montanans go for care? The answer seems to be somewhere else. But where that “somewhere” is, is not clear.

For now, Soulek said she’s confident that the closures in Bozeman can be absorbed. But many of the residents who had lived in Bozeman will be forced to move to communities far away. She said several of her residents have been placed in the Flathead – nearly 300 miles away, a five-hour car ride.

“Nursing homes provide a very important part of the system for older people,” Hughes said. “Although they may not care about them until they need them, you need to pay attention to them so that they’re there when you need it.”

Soulek tears up and speaks haltingly while talking about that. As she continues to help staff place residents across the state, many family members and even spouses are left behind.

“They ask,” she said. “Who is going to take care of us? The ones who are left. And I don’t know.”