Health leaders explain why hospitals are pulling away from managing nursing homes

Nov. 15—One of the region's largest health systems recently sold off one of its nursing homes it had been operating for years and turned over the management of another.

It's part of a trend in Ohio and nationally as hospital systems look for more profitable avenues for their bottom line, local health professionals told the Dayton Daily News.

SpringMeade Health Center in Tipp City will be sold to Otterbein SeniorLife, Premier Health said in late October, and the operations of Koester Pavilion on the UVMC campus will go to to Vancrest Healthcare Centers.

"Hospitals are trying to get out of the nursing home ownership business," said Dr. Glen Solomon, professor and chair of internal medicine and geriatrics at the Wright State Boonshoft School of Medicine.

Premier Health's decision to sell SpringMeade and transfer operations of Koester Pavilion will allow it to focus on its core business in other areas of health care, including its hospitals, Premier Health said.

"It always has to do with money," Solomon said. "That's the reality of why they got into the business in the first place and why they're getting out of the business now."

Other hospital systems that have done this in Ohio include: — Memorial Health―which is mostly based in Marysville in Union County but also has locations in Urbana in Champaign County―in September announced a new owner for its long-term care facility Memorial Gables in Marysville following a four-month selection process. — ProMedica in Toledo announced new ownership and management of its skilled nursing facilities in late 2022, citing ongoing operating losses within its senior care division. — Aultman in Canton announced last year it was ceasing operations at two skilled nursing facilities, also citing financial and staffing challenges.

Hospitals likely got into the nursing home business as a way to move people out of hospitals more quickly, according to Solomon, based on how hospitals get paid, which is generally through a patient classification system called diagnosis related groups (DRGs).

"Hospitals are paid a fixed sum of money based on a diagnosis for a patient, so if you can get a patient out of the hospital more quickly, you're reducing the hospital expenses, but you're still getting the same amount of money from the insurer, whether that's Medicare, Medicaid or commercial insurance," Solomon said.

Getting people out of the hospital quickly was a benefit for the hospital.

"So initially, hospitals took the attitude of buying nursing homes or skilled nursing facilities to expedite the movement of patients, and that was fairly lucrative for a time, and it certainly helped hospitals with moving patients through the system," Solomon said.

Then when the COVID-19 pandemic hit, nursing homes took a hit and a large number workers at those facilities left the field. Nursing homes lost 210,000 jobs over the course of the pandemic from February 2020 to December 2022, or about 13.3% of that workforce, according to the American Health Care Association.

"Nursing homes are highly regulated, and so you can't just accept a decrease in your staffing. You still have to somehow find ways of staffing your nursing home to take care of the people who are there, and that was very hard with the pandemic," Solomon said.

Nursing homes are also paid differently than the way hospitals are paid. While hospitals make more money from commercially insured patients, nursing homes make most of their money from Medicare fee-for-service patients who tend to be some of the people who pay less the least in the hospital, Solomon said.

"You have this total disconnect with the types of patients that hospitals want versus the types of patients that nursing homes want," Solomon said.

Nursing homes are also generally for-profit businesses with low profit margins and high expenses.

"It requires a large staff of medical professionals to provide 24 /7 around the clock care," said Scott Nelson, managing principal of SpringParker, a consulting firm based out of Springfield focused on health care needs.

"They have to do things like medication management. They're assisting with daily living activities like bathing and dressing. A lot of these patients are going to have specialized medical treatments," Nelson said.

Difficulty finding workers, the different ways they make money and higher administrative costs for hospital systems made owning nursing homes a less than feasible option for hospitals.

While hospitals may step away from owning nursing homes, some hospital systems are still pursuing agreements with nursing homes that make transferring patients to those facilities easier, Solomon said.

There are resources for patients looking for a nursing home or long-term care facility or who want to scope out new owners.

"People need to be aware of things as they change, as the laws change, as the policies change," Solomon said.