Navigating Financial Challenges in Long-Term Care Facilities
Many nursing homes have been facing financial hurdles ever since the pandemic – let’s review the major accounting issues and how to overcome them.
An article published by Fortune in 2024 reveals that for-profits own over 70% of long-term care facilities (LTCFs) in the US. Many imagine that LTCFs only stand for nursing homes even though this caregiving can also be provided by family nurse practitioners (FNPs) at a patient’s residence. So, what sort of challenges does this industry face?
There are a little over 15,000 such facilities operational in America (as per the latest surveys), a decline from the last-reported number of 15,300 (2020), indicating a downward spiral for LTCFs. Cash flow problems are to be blamed for this decline in the quality and quantity of nursing homes. That’s why the owners in this niche must realize the importance of long-term care accounting for the financial stability of a facility as well as the well-being of elderly clients. In simple words, it involves:
The art of navigating financial challenges in healthcare requires setting clear financial goals and coming up with a foolproof budget. Today I’m going to help you understand the major challenges your facility may face and how to overcome them.
5 Critical Financial Challenges Healthcare
The importance of navigating financial challenges is pretty self-explanatory: When LTCFs lack sufficient funds, they won’t be able to provide quality care services or have enough staffing to meet the needs of their clients. Regrettably, 55% of nursing homes were operating at a loss in 2022. In 2021, every 4th long-term care facility was losing money! Where do these long-term care accounting challenges come from? Let’s review the five major obstacles facing nursing home finances:
1. Accounts Receivable Management
Did you know that one in five nursing homes are burdened with medical debt? In June 2020, LaVie, a notable name in the industry, filed for bankruptcy, largely due to over $1 billion in debt. A significant portion of this debt arises from unresolved claims, particularly in cases involving Medicaid pending status and private pay obligations.
2. Billing, Reimbursement Complexity
In LTCFs, billing/reimbursement systems get complicated due to several factors, such as:
- Patient insurance
- Complex medical conditions
- High-quality services provided
So, denied claims and delayed payments stem from billing/coding mistakes, ruining a nursing home’s cash flow.
3. Trained Worker Shortage
The healthcare industry is notoriously understaffed and 99% of nursing homes are looking for employees as of March 2024! It leads to delays/lapses in billing, coding, collections, and payments. If you struggle with talent acquisition and retention, I recommend reading another blog I wrote on retention strategies in our specific industry. You can also watch my webinar on the topic with Melissa Wallace from Human Interest!
4. Healthcare Regulation Compliance
Long-term care facilities must keep up with the latest regulations if they wish to avoid fines and penalties.
However, the healthcare industry is changing all the time, so keeping up with the latest regulations might not be so easy! Compliance is especially challenging in nursing homes because there are many regulations specific to these facilities.
5. Quality Care Affordability
A decade ago, nursing homes cost $80,000 a year! Today, living a single month in a care facility will set an individual back $10,000 on average. So, the unaffordability of LTCFs may be the most dominant reason why so many nursing homes are operating at a loss.
10 Ways to Overcome Long-Term Healthcare Finance Challenges
In light of the major challenges discussed above, here are a few strategies to help nursing home managers easily navigate the hurdles facing their finances:
- Follow-Up Punctually: You should follow up on any outstanding claims, especially when it comes to Medicaid pending/private payments. Be proactive when collecting delayed payments and your LTCF will reduce bad debt easily.
- Improve the Documentation Process: It’s equally necessary to give responsible parties a proper checklist so they can collect the much-needed documents to prove Medicaid eligibility. Accurate, timely submissions will eliminate payment delays.
- Have Well-Established Written Policies: When it comes to accounts receivable management, you must have well-established, well-documented policies in place. These policies will determine the proper timeline for follow-ups, personnel responsibilities, and regular reviews of aged accounts.
- Understand Billing Complexities: What makes an LTCF billing system prone to complexities? It’s vital to familiarize yourself with the common billing/coding errors that lead to denied claims and cash flow issues.
- Training and Staffing: You can also address understaffing issues by investing in training for your billing and coding staff. A well-trained team of billers and coders will enhance efficiency. That’s how you can reduce errors in the revenue cycle management process.
- Start Planning Early: If you start planning early, then you can avoid rushed decisions later. Also, try to evaluate your financial status and outline care preferences.
- Dedicate a LTCF Fund: It’s vital to create a separate savings account (or investment fund) for long-term care expenses. This proactive measure will make sure that your establishment has access to funds when needed.
- Stay Updated on Regulations: Stay Informed on Regulations: It’s essential for nursing home managers to regularly review updates to national healthcare regulations and reimbursement policies. Staying compliant is critical to avoiding fines and penalties, though it’s important to recognize that financial challenges may persist even when compliance is maintained. Proactively managing both regulatory and financial aspects is key to navigating the complexities of the industry.
- Manage Denied Claims Proactively: When it comes to denied claims, you should learn to manage them proactively. The key is to identify and address the reasons behind denying these claims. So, you can improve recovery by understanding why these claims were denied in the first place.
- Talk to Financial Professionals: Lastly, you should engage with financial advisors who specialize in long-term care. They can assist in integrating long-term care needs into your broader financial and retirement plans, ensuring a cohesive strategy.
Final Words
The gist of this article is that long-term care facilities (LTCFs) must identify the key issues they’re facing. These issues may include high debt levels, insufficient savings, not enough staffing, inadequate retirement planning, etc. However, CFOs can overcome these challenges by assessing their financial situation, such as assets, income/expenses, and liabilities.
As a nursing home manager, partnering with financial planners who specialize in long-term care facility financing can offer valuable guidance. For example, outsourcing elder care accounting services to firms experienced in healthcare finance, such as Knight Home Care Financial, can help you better manage the financial complexities of long-term care operations.
Stay ahead in the evolving LTCF landscape by partnering with the experts at Knight. Our team ensures your healthcare financial records are not just compliant but optimized for efficiency and accuracy, so you can focus on delivering the best care. Get in touch with us today to streamline your financial processes and enhance your facility’s operational success.
