Skilled Nursing Industry…cup half full or half empty?
The skilled nursing industry is going through a period of change, but really when hasn’t the industry been going through change. The 30th edition of the “Skilled Nursing Cost Comparison Report” by Clifton Larson Allen provides cost metrics for the industry going back 30 years. If you look at the changes in some of the cost metrics since 2010 you will notice a decline in certain cost metrics such as occupancy rates and current ratio. It is easy for one’s initial reaction to be negative with a less than favourable outlook for the industry. Cup half empty?
However if you look at other metrics within the report you may have a more positive outlook on the industry. Of note, EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) increased along with net operating margin. Both metrics are vital to long-term sustainability of the organization and increases in both of these metrics demonstrate that “operators are continuing to find ways to manage profitability despite challenges in reimbursement and declining occupancy.” Cup half full?
All industries go through continual change and the difference from industry to industry is the magnitude and speed of the change. The skilled nursing industry is no different. Some people may argue that the magnitude and speed of the change is greater than other industries and this may be true. Regardless, what seems to be common place when industries go through change is that some organizations win and some lose. The organizations that win are typically the organizations that continue to find ways to manage profitability despite the challenges they face. For me, the challenges the skilled nursing market faces present great opportunities for business leaders….the cup is half full.