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Nursing Home Investors Must Gear Up for These Major Expenses


Aug 28, 2020 by Maurie Backman

Though COVID-19 deaths have certainly not been limited to nursing homes, the percentage attributed to seniors and healthcare workers in these facilities is overwhelming. Nearly 70,000 nursing home residents and employees have lost their lives to COVID-19, and that these cases represent 41% of all U.S. deaths.

Given that COVID-19 is more likely to be fatal among seniors, especially those with underlying health conditions who tend to need nursing home care, the above numbers aren't completely shocking. But it's also fair to say that nursing homes will, in the coming years, need to change the way they operate to avoid repeat scenarios.

After all, it's not just pandemics that nursing homes need to worry about. Seasonal infections, like the flu, and other ailments can spread all too easily in these environments, especially given the number of healthcare employees who work at more than one facility. As such, in the near future, nursing home operators will have to spend a lot more money to ensure their facilities are safe, and that's apt to impact investors financially. Here are a few specific changes to look out for.

1. Higher wages for employees

It's estimated that 15% of direct-care workers live below 100% of the federal poverty line and nearly half live below 200% of poverty, according to PHI, a healthcare nonprofit. But given the risks associated with working in these facilities, nursing homes may need to up the ante to attract quality workers. And clearly, it's in their best interest to do so.

Furthermore, nursing homes are notoriously understaffed, which often leads to critical errors in patient care (again, not just during pandemics, but in general). That issue, too, will likely need to be addressed in the near term, which could cause nursing homes to incur added expenses.

2. Better sanitation and safety protocols

Proper sanitation is crucial during pandemics and normal times alike. But in light of the COVID-19 crisis, many facilities will likely rethink their protocol and start investing in better sanitizing measures to keep residents and workers safe. And to be clear, we're not just talking about more sanitizing stations in common areas. Part of the process could involve having workers change uniforms or gear more frequently, which will also cost money.

3. Better filtration

Health experts seem to agree that COVID-19 can linger in the air, posing a hazard even in situations where there's no direct contact with an infected individual. As such, nursing homes might seek to improve their air quality and filtration, which could run the gamut from overhauling their HVAC systems to installing air purifiers in individual rooms.

Investors will bear the cost

At the end of the day, nursing home owners and investors should expect to absorb many of the above costs themselves. On a national level, the average yearly price tag for a shared room in a nursing home is $90,155, according to Genworth. For a private room, it's $102,200. Many families can't afford to pay more to house their loved ones in nursing homes, and so facilities that attempt to pass the cost of the aforementioned changes onto residents may find themselves faced with vacancies instead. As such, those who are currently invested in nursing homes should be mindful of what's to come -- and think about how it will impact their bottom line.

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