Coronavirus: Are We Protecting the Most Vulnerable?

Posted on June 12, 2020

Justin Cheng
Justin Cheng
Senior Associate, Insurance, Real Estate and Asset Management

As the COVID-19 pandemic swept across the globe at the start of 2020, frontline medical care became a top priority in stopping the virus. Contrary to the improvement in case management at hospitals, the number of cases in long term care homes (LTCH) rose sharply. With the situation evolving by the hour at times, the number of infections and deaths rose exponentially in the US.  

In this post, part of the Sustainalytics’ COVID-19 blog series, we examine the link between the management of staffing issues at care homes and COVID-19. Keeping in mind the different factors that can influence the pandemic’s impacts (such as geographical location and government regulations), we review the employee turnover performance of LTCH real estate investment trusts (REITs) using Sustainalytics’ research and take a look at the changes that may help improve outcomes for any future pandemics and quality of regular care.

Legacy Issues in Long-Term Care

Even before the pandemic gripped the world, LTCHs were seen as the weakest link in the healthcare system.[1] For decades leading up to the pandemic, one of the biggest factors in ensuring quality care and infection control revolves around maintaining adequate staffing levels at homes.[2]

However, many years of low wages, poor working conditions (namely the high risk of resident violence and injuries) and a lack of job security have made this increasingly difficult. Benefits such as paid sick leave and medical coverage may not be provided, and precarious work arrangements mean care workers often work in multiple facilities and report for work while sick. Those who don’t show up for shifts are not replaced and colleagues who do show up are expected to absorb their workload,[3] creating situations where care staff are overworked. This leaves them vulnerable to contracting and spreading the virus.

As a result of staff shortages, care staff are often overworked in order to look after residents while maintaining proper hygiene practices; personal protective equipment (PPE) shortages at the start of the pandemic have further compounded the situation, increasing the risks of spreading COVID-19.

Between low wages, precarious work arrangements and demanding workloads, care staff turnover in many LTCHs are high, with some US scholars estimating the rate to be as high as 45% per year[4]. Staff are quickly replaced, creating an environment of revolving doors for care staff, making it challenging to establish and maintain programmes and practices for high-quality care, as high turnover makes it difficult to provide adequate training.

Sobering Statistics

According to the US Centers for Disease Control and Prevention (CDC), approximately 8 out of 10 deaths associated with COVID-19 occurred in adults aged 65 or older[5]. As of May 2020, up to one-third of the total US COVID-19 death toll originated from LTCH facilities; the figure is over half of all deaths in 14 states[6]. Considering seniors account for 16% of the US population in 2018[7] and are the main tenants in LTCHs, these figures illustrate that seniors are a heavily affected cohort in this pandemic. Due to variations in classifying cause of death (were the deceased officially diagnosed or just a suspected case?), the lack of widespread testing implementations and no testing of those who have already passed away, the actual figures could be even higher.

Sector Review

In an analysis of REITs whose core investments are in LTCHs or general healthcare facilities (such as hospitals and medical offices), a subset of 9 companies in the sector were analyzed for employee turnover performance (see chart below); higher score values reflect lower employee turnover rates. This indicator examines how well a company retains its full and part-time employees, as high turnover rates can raise personnel costs and negatively impact employee training, which may disrupt operational effectiveness and points to areas for improvement in managing the issue.  

Employee Turnover Rate - Management Score Average

  • Type of REITS

Source: Sustainalytics

The analysis reveals that REITs on average have weak employee turnover management scores (i.e. scores < 25), calculated as the number of departures divided by the average number of employees at the end of a fiscal year. LTCH REITs have noticeably weaker management performance compared to their healthcare REIT counterparts and the whole REIT subindustry. This shows that there are major opportunities for improvement at LTCHs in terms of lowering their employee turnover rates, in order to maintain a strong level of resident care quality and prevent outbreaks.

As the COVID-19 pandemic progresses, we anticipate that operators of LTCH REITs will review and improve their human capital management practices (such as increasing remuneration, setting minimum staffing standards and improving workplace conditions); this comes as the death toll rises along with the scrutiny from regulators and the public.

Questions have also been raised over how LTCHs have been operating in under-resourced conditions, as nearly 70% of US LTCHs[8] are run by for-profit entities and razor-thin margins are the norm for the industry[9]. Furthermore, private equity firms are increasingly participating in the long-term care sector, adding pressures to cut costs[10]. These changes will be important in the coming decades and beyond, as life expectancies are projected to grow and seniors make up an ever-larger proportion of the population, placing even greater demand for long term care services. 

The Future for LTCHs

While the COVID-19 pandemic is considered a once-in-100-years event, it has exposed numerous vulnerabilities in the current senior care system. Government oversight of LTCHs has been limited, leading to issues such as the lack of federal regulations requiring care homes to notify its staff of any cases[11], putting residents and employees at risk. Reporting and enforcement of care home standards have also raised concerns. Between 2013 to 2017, the Government Accountability Office (GAO) found that state inspectors classified the vast majority of federal nursing home violations as not severe (meaning no actual harm to residents), with only 1% of such violations followed up with enforcement actions[12]. The GAO also found that approximately half of the over 13,200 facilities inspected had multiple infection-related deficiencies in consecutive years. Providing opportunities so part-time employees can become full-time at just one facility can limit the viral spread, as staff move between LTCHs for multiple part-time roles in order to earn a living[13].

By investing in better staff training on resident care best practices, fostering a strong work culture, improving benefits, compensation and providing the necessary equipment to administer care can result in a positive difference in the quality of care and job satisfaction. Stronger government enforcement of violations and oversight, plus the introduction of higher standards in staffing, equipment and regulations can help mitigate issues related to poor quality of care. In addition to helping prevent further infections and deaths, these measures will also reduce employee turnover and help improve the quality of care for residents at LTCHs beyond pandemic times and should be continued long after the threat of COVID-19 has been eliminated.

COVID-19 will eventually subside, but as populations become increasingly older, demand for LTCHs are only expected to grow from here, making the importance of providing proper care to a vulnerable group in society more important than ever.

Sources:

[1] Joshua Chafin, “For-profit US care homes ‘decimated’ by coronavirus”, Financial Times, May 6, 2020, https://www.ft.com/content/69aa80ea-5cce-44c2-9a8d-4b6bc8980025
[2] Kathy Tomlinson, Grant Robertson, “It took a pandemic: Why systemic deficiencies in long-term care facilities pose such a danger to our seniors”, The Globe and Mail, April 27, 2020, https://www.theglobeandmail.com/canada/article-it-took-a-pandemic-why-systemic-deficiencies-in-long-term-care/
[3] Kathleen Harris, “Demands grow for national, universal long-term care in response to pandemic”, CBC News, May 5, 2020, https://www.cbc.ca/news/politics/long-term-care-homes-covid19-1.5556041
[4] Deborah Quilter, “What Some Nursing Homes Do To Retain Quality Staff” Forbes, June 11, 2019, https://www.forbes.com/sites/nextavenue/2019/06/11/what-some-nursing-homes-do-to-retain-quality-staff/#1b5cec66589b
[5] Centers for Disease Control and Prevention, Coronavirus Disease 2019 (COVID-19), https://www.cdc.gov/coronavirus/2019-ncov/need-extra-precautions/older-adults.html
[6] Karen Yourish et al, “One-Third of All U.S. Coronavirus Deaths Are Nursing Home Residents or Workers”, The New York Times, May 11, 2020, https://www.nytimes.com/interactive/2020/05/09/us/coronavirus-cases-nursing-homes-us.html
[7] Statistica, Share of old age population (65 years and older) in the total U.S. population from 1950 to 2050, https://www.statista.com/statistics/457822/share-of-old-age-population-in-the-total-us-population/
[8] Abigail Abrams, “’A License for Neglect.’ Nursing Homes Are Seeking — and Winning — Immunity Amid the Coronavirus Pandemic”, Time, May 14, 2020, https://time.com/5835228/nursing-homes-legal-immunity-coronavirus/ [9] Brett Johnson, “Rethinking elder care: Real estate pros are examining what changes must be made in design of facilities in post-COVID world”, ROI-NJ, May 11, 2020, https://www.roi-nj.com/2020/05/11/real_estate/rethinking-elder-care-real-estate-pros-are-examining-what-changes-must-be-made-in-design-of-facilities-in-post-covid-world/
[10] Abrams, A License for Neglect
[11] Suzy Khimm, “The forgotten front line: Nursing home workers say they face retaliation for reporting COVID-19 risks”, NBC News, May 19, 2020, https://www.nbcnews.com/news/us-news/forgotten-front-line-nursing-home-workers-say-they-face-retaliation-n1209606
[12] Ricardo Alonso-Zaldivar, “Watchdog cites persistent infection lapses in nursing homes”, WJLA, May 20, 2020, https://wjla.com/news/coronavirus/watchdog-cites-persistent-infection-lapses-in-nursing-homes
[13] Eleanor Laise, “Health-Care Workers Risk Spreading Covid-19”, Barron’s, April 9, 2020, https://www.barrons.com/articles/health-care-workers-risk-spreading-covid-19-51586440801