SNF Cost of Care Increases by 28% from 2019 to 2021

Posted on October 13, 2022 by Libbie Chapuran

According to a new report by Clifton Larson Allen (CLA), the total cost per patient day from 2019 to 2021 has increased by 28% or $73 per day. For comparison, the per-patient costs increased by just 3% between 2018 and 2019. Rising prices are significantly impacting margins, regardless of the operator's market.

The report analyzes nationwide trends and states that "the inflationary economic environment post-pandemic has amplified the economic challenges that have faced the SNF industry for decades: labor, tightening reimbursement, financial viability."

While these issues aren't new, they have impacted the financial trends highlighted throughout the report.

Operating Margins
Excluding the impacts of public health emergency (PHE) funding, the median operating margin of SNFs decreased in 2021 to a negative 2.7%. The 2021 median operating margin, including and excluding recognized PHE funding, was substantially reduced from the 2020 medians.

Nursing Contract Labor

In 2021, 5.5% of all nursing hours were filled by contract labor, an 83% increase from the median 2020 contract labor utilization. According to the report, the use of nursing contracts increased by 19% from 2017 to 2018 and 24% between 2018 and 2019.

The hourly rates SNFs pay for pool staff are substantially higher than the average hourly rates of its employees.

• Approximately 30% of SNFs were paying more than $70 per hour for these services in 2021.

Many of the wage increases were funded by temporary COVID money through the PHE. Wages continue to go up even though one-time funding is expiring. This impacts the cost of recruiting and retaining a workforce. According to the report, it also "directly impacts a SNF operator's ability to recapture lost occupancy."

About the Report

This Clifton Larson Allen report provides benchmarks and ratios calculated using annual SNF cost report data released by the Centers for Medicare and Medicaid Services (CMS) as of July 2022. That release included approximately 10,000 cost reports for fiscal years ended 2021, representing about two-thirds of Medicare-certified nursing facilities. For comparability purposes, especially regarding increases and decreases from 2020 to 2021, amounts presented for 2017 through 2020 only include the performance of facilities with a 2021 cost report.

Learn More

You can access the Clifton Larson Allen report through the CLA website. If you have questions, contact Matt Wolken, Principal, Healthcare, at CLA at matthew.wocken@CLAconnect.com.