How the nursing home industry can make it through COVID-19

Yahoo Finance’s Brian Sozzi and Julie Hyman speak with American Health Care Association and National Center for Assisted Living CEO Mark Parkinson about the crisis that the nursing home industry is facing amid COVID-19.

Video Transcript

JULIE HYMAN: Well, a new "Wall Street Journal" analysis found that occupancy in US nursing homes is down by 15%. That's 195,000 residents since the end of 2019. That's as families are more reluctant to put their loved ones in long-term care facilities with the spread of coronavirus, which has been rampant in those facilities. It's among the worst tolls.

Mark Parkinson is joining us now. He's the former governor of Kansas and now the CEO of the American Health Care Association and National Center for Assisted Living. Mark, thank you so much for being here. Obviously, the industry is really stressed right now by these dynamics. What are you hearing from your members right now? What are they doing? What can they do, if anything, to try to reassure people?

MARK PARKINSON: Well, it's a great question. And, you know, this has been a clinical disaster. The numbers are just staggering and heartbreaking about what has happened with older people in facilities and in the general population. It's been horrible. It's also been a business nightmare.

As you've indicated, there's been a 15% drop in census, and in long-term care, that's catastrophic. Fortunately, the federal aid that's been provided has helped the sector get through this. But we can only last as long as the federal aid lasts. We're a little disappointed that only $3 billion was added to the Provider Relief Fund in the most recent stimulus action.

And we're hopeful that when Congress comes back in 2021, more will be added. In the long run, though, the good news is the vaccine's out there. Buildings are getting vaccinated as we talk right now. The vaccine obviously works quite well. The side effects have been pretty limited. And we're hoping that once everyone's vaccinated in these buildings, which we think will be about 60 days from now, people will once again recognize them as safe places for their parents and grandparents and we can start building our businesses back.

BRIAN SOZZI: Mark, what is the longer term solution with these? Once we get beyond COVID with these longer term care facilities, do they have to-- how do they get their finances back in order? Do they have to merge? Will we see more close? Will that help the situation? How do you think about it?

MARK PARKINSON: It all depends on how long it takes census to come back. The federal aid will only last so long. And if we can get the federal aid through the first quarter, first half of 2021, get all the folks vaccinated by, our goal is March 1 of 2021 for them to have their second vaccine, then we believe that census can rebuild. It's not going to snap back overnight.

We think it's about 0.5% a 1% a month. So we're looking at 12 to 18 to 24 months. But we think the sector can make it through that as long as the federal aid continues through the first half of 2021. I don't think you'll see a ton of mergers. I do think that without additional federal aid, though, you will see additional closures occur.

JULIE HYMAN: And Mark, in that same "Wall Street Journal" story, you put that number. You were quoted of putting that number is 10% to 20% of the companies in your industry that could file for bankruptcy if there's not additional aid. Is that still your base case here? And even if there is aid, what could that number look like?

MARK PARKINSON: Yeah, the worst-case scenarios are very bad. 60% of buildings are operating at a loss right now. So if there were no federal aid at all, we'd be looking at much greater than 10% to 20% of the sector closing their doors. With federal aid, there will be closures. We would anticipate several hundred to 500 buildings or so closing in 2021.

But the sector, for the most part, will be able to hold intact. But again, it's all about continued federal aid and then recovery of census post-vaccine

JULIE HYMAN: Mark, I imagine at the same time that the industry needs aid. It also is needing to take a hard look at itself, right? It seems like there were failures of procedures, not just at the homes themselves, but also on a government level. And so vaccine or no vaccine, it seems like there are going to have to be some changes instituted in the industry. What's the work look like on that front?

MARK PARKINSON: Well, I think you're absolutely right. What happened with COVID is that it's a virus like one we've never faced before because it's spread by people that don't have symptoms. All of our infection control protocols, and every building in the country already had an infection control protocol, but they were all based upon viruses that showed symptoms. So when employees would be sick or have a fever, we would send them home.

That didn't work here because people, as we now know, can have COVID and have absolutely no symptoms at all. And that's really what allowed it to spread like wildfire. Now that we know that, we're really going to, as you state, have to take a really hard look at our infection control procedures, figure out if we now need to assume that there are asymptomatic viruses out there, and then really change our behavior to prevent them from occurring.

But as we sit here today, assisted living facilities and nursing homes are continuing to fight. They're doing everything they can to keep COVID out of their buildings. And they just need more help in order to be able to continue.

JULIE HYMAN: Mark, thank you so much for giving us this update. We hope to check back with you going into 2021 and get a check on how the industry is doing. Mark Parkinson, former Kansas governor and CEO of the American Health Care Association and National Center for Assisted Living, thank you so much.

MARK PARKINSON: Thank you.