The Grim Post-COVID-19 Future For Nursing Homes

Someday, most of us will return to life before COVID-19. Nursing homes will not.

The deaths of more than 16,000 of their residents from COVID-19 has profoundly disrupted senior living facilities—especially nursing homes— and will drive historic change in the industry. Robert Kramer, president of the consulting firm Nexus Insights and a long-time observer of nursing home finances, told me, “There never will come a time when we will return to the old normal.”

Operators are being crushed by higher costs and shrinking revenues. The values of publicly-traded nursing home firms have collapsed. The share price of nursing home Genesis Healthcare fell from $1.77 in late February to $0.82 on May 4. Share prices of real estate investment trusts that lease senior facilities to operators have similarly plunged by half.

A dual business model

To understand the future of nursing homes, it is helpful to understand their unusual business model. Like defense contractors, nearly all of their revenue comes from government and is highly sensitive to changes in payment rates. And most operate two vastly different businesses in the same building—skilled nursing facilities (SNFs) and long-term care.