33rd SNF Cost Comparison Report — An Industry in Transition
In this 33rd edition of the Skilled Nursing Facility Cost Comparison Report, it is clear to see that the skilled nursing facility (SNF) environment is in the midst of a monumental transformation. In last year’s report, our data exposed sweeping declines in financial performance, as measured by operating margins, and that trend continues as we analyze the 2017 data. Factors such as lower occupancy, a less desirable payor mix, and a higher cost structure put into question the ongoing financial viability of some SNFs.
A number of other factors are shaping the behavior of SNF operators, including changing referral patterns, the proliferation of Medicare Advantage, narrowing post-acute networks, preparing for the transition to the patient driven payment model, and increased regulatory scrutiny.
Changes will either pose a threat or create opportunities
As the industry rapidly moves forward, the magnitude and pace of these changes poses a great threat to some SNFs, while creating opportunities for others. While there are certainly a number of high performing SNFs, the data shows that even the top quartile of performers are under financial stress.
Earnings before interest, depreciation, and amortization (EBIDA) and operating margins are lower than previous reports for all quartiles. High performing SNFs, on the whole, are not performing as well as prior years, but this subset of SNFs continues to see EBIDA greater than 15 percent and operating margins in the 5 percent range. The lowest quartile performers, by contrast, are seeing EBIDA under 4 percent and operating margins at -6 percent, which questions the sustainability of the lowest performing organizations.
We believe that strong performers will survive, and providers willing to accept risk-based alternative payment models have the opportunity to flourish in an environment that will reward high quality outcomes provided at a reasonable cost. But we also believe this trend of increased pressure on lower performing SNFs will continue, which will likely result in consolidation as successful providers look to grow while others seek an exit.
How we can help
This 33rd Skilled Nursing Facility Cost Comparison Report can help inform your strategic decisions. CLA’s decades of experience provides us with a sophisticated and unique perspective on the changing health care industry. We can help your organization understand its financial and operational challenges, so you can improve your performance as the industry transitions.