For the past 18 months, we have been living through an ongoing pandemic that has greatly impacted the senior living field. As we continue to work through the realities of its impact, we need to start developing strategies to position our senior living communities to be financially successful.
As we enter this next phase, we will continue to be challenged with slowing of stimulus funds, staffing issues, and lower consumer confidence. We need to think outside of the box and become innovative to stabilize the financial outcomes of our senior communities. Three key strategies include maximizing existing revenue streams, reducing expenses to our census reality, and developing realistic projections and rebound plans.
As we start to evaluate revenue opportunities, we will need to dig into the areas we often move to the back burner. We tend to look to census to drive our revenue, but with consumer confidence lower, we cannot rely on census as the only revenue driver. According to the National Investment Center for Seniors Housing & Care (NIC), senior housing occupancy declined from 82.0% in the third quarter of 2020 to 80.7% in the fourth quarter. More recent information from National Healthcare Safety Network (NHSN) indicates occupancy rates have dropped to 68% in first quarter 2021.
With census being challenged, leaders will need to capitalize on areas such as case mix, rates, managed care contracts as well as engage in risk-based contracting. We need to be ready to question if we are getting paid for all the services we are providing and educate our staff members on the importance of capturing these services. Strategies need to be developed to assure contract rates are being captured and develop a process to identify when payments are inconsistent with contract language. In addition, we need to think outside of the box when proving post-acute services by developing risk-based relationships with payers and health care systems to drive reimbursement and census.
As we push through the pandemic, we are now developing our new expense structure and may need to absorb additional costs such as PPE or additional cleaning. Unfortunately, as we have seen census numbers decrease, the reality is that labor and other expenses must decrease as well. A fine balance needs to be achieved to provide quality care for our residents, which can cause leaders to question where to make the reductions. Leaders need to be willing to look at every area in the organization to identify opportunities. Some of these opportunities may include combining leadership positions and realigning responsibilities, maximizing technology to provide efficiencies, or re-evaluating supply contracts for a lower price.
As we adjust operations to our new reality, we must develop realistic rebound plans to successfully move us into the next phase. We cannot base the future projections on our past results. Growth and expense management strategies will look very different, as it could be years until census returns to pre-pandemic levels. Be realistic about what can be achieved and target to exceed it.
Last, but not least, communicate with your stakeholders. Owners and lenders are key stakeholders in the recovery of our communities. Given the tight margins in the industry, it is imperative to present a realistic financial projection and cash model to meet the needs of the organization going forward.
HDG is assisting many providers in evaluating new operational realities, developing new strategies, and developing realistic projections. For more information, please contact us at email@example.com or 763.537.5700.
Authored by: Sarah Gustafson, CPA
Executive Vice President, Finance
 Senior Living Occupancy Hit Record Low in Q4 2020. https://seniorhousingnews.com/2021/01/07/senior-living-occupancy-hit-record-low-in-q4-2020/