"This month alone, I took on 70 million won ($53,800) in new debt. I've been doing this for three years. I can't hold on any longer. I feel like dying. Why did I jump into the nursing hospital business?"

A nursing hospital operator, saying he had survived for three years even after being hit by the Covid-19 pandemic, heaved a long sigh of frustration.

He then "warned" that Korea’s elderly care system would be shaken if nursing homes that cannot endure financial difficulties are forced to close their doors like now when the nation is about to enter a super-aging society.

Nursing homes are disappearing. It is due to a serious “financial crunch.” The operational difficulty facing nursing hospitals is no news, but their recent decline is alarming. In the last two years, more nursing homes have closed than opened. The Covid-19 pandemic seems to be over, but its shadow on nursing hospitals remains long.

According to healthcare statistics from the Health Insurance Review and Assessment Service (HIRA), the number of nursing hospitals increased slightly from 1,577 in 2019 to 1,582 in 2020. Still, it began to decline to 1,464 in 2021 when the new Covid-19 cases increased significantly. Last year, the number fell further to 1,435. From 2019 to 2022, 142 nursing hospitals disappeared.

Nursing hospitals were the only medical institution with a rise in closure rate last year. According to data on the opening and shutdown of nursing facilities covered by insurance, 63 new nursing hospitals opened in 2021, while 73 closed. Last year, the gap even widened, as 65 nursing hospitals opened and 94 closed.

Unlike other medical institutions recovering from the pandemic’s decline, nursing hospitals struggle. The total medical fees at nursing facilities grew 10.20 percent year-on-year in 2021, marking an overall recovery. However, that for nursing hospitals grew only 1.31 percent during the period. Considering that the reimbursement rate stood at 1.6 percent, nursing hospitals’ revenue grew only with the increase.

Nursing hospitals said the Covid-19 pandemic has significantly impacted their survival. During the pandemic, many older adults hospitalized at nursing hospitals died of Covid-19, reducing the number of their in-patients. Moreover, the high inflation after the pandemic has pressured nursing hospitals’ operations. The quarantine cost during the pandemic put additional burdens on their management.

According to the Covid-19 death data by age from the Korea Disease Control and Prevention Agency (KDCA), out of 34,953 deaths, 20,844 were aged 80 and older, accounting for 59 percent. More specifically, 7,934 (22.7 percent) were 70-79, followed by 3,969 (11.4 percent) aged 60-69. Overall, 93.7 percent of Covid-19 deaths occurred among older adults.

“In February of last year, the death rate of older adults was very high. At that time, the mortality rate soared due to the lack of treatment for Paxlovid. Moreover, many older adults died four to five months after their Covid-19 infection due to pneumonia as the aftereffect of Covid-19," said Park Seong-baek, general secretary of the Korean Convalescent Hospital Association. "Aside from official statistics, the number of deaths will be far higher.”

Park noted that February and March of last year were the most difficult period for nursing hospitals, explaining that nearly 80 to 90 percent of in-patients were infected by the virus at almost all nursing hospitals. He added that had Paxlovid treatments have been made a little earlier, it could have prevented many deaths of older adults.

“Second, financial costs jumped during the pandemic, and other expenses, such as quarantine and labor costs, grew too heavy,” Park said. “Many nursing homes are struggling to pay their employees' salaries. In many places, the bed occupancy rate is only about 50 percent."

Moreover, nursing hospitals are tied to a flat fee, so their income is fixed, but their expenses increase yearly, Park explained. In the last five years, the minimum hourly wage has also increased by 40-45 percent, but the medical fees at hospital-level institutions rose by only 8.7 percent. Investment is needed to improve medical quality, but it isn't easy to invest in basic facilities in this situation. It's a very frustrating situation, the official added.

One of the causes of difficulties for nursing hospitals is the “flat fee system” implemented in 2008. There hasn't been a single fee improvement in the last 15 years since the policy went into effect.

"Nursing hospitals are stuck in 2008 because of the daily flat fee system. The times have changed, but we are applying data from 15 years ago," said Nam Chung-hee, chair of the association.

Nam explained that 15 years ago, hospitalization fees were around 27,000 won. For a multi-person room, the insurance benefit was 40,000 to 50,000 won. It has remained at that level and has been maintained similarly even though the cost of labor and other prices have risen.

"Consumer prices have risen every year, and the government should have taken care of it once every two to three years, but it has tied up the system all through the period, causing current problems,” Nam said.

The association head said the system needs improvement, breaking away from the present daily flat rate applied, for instance, to ulcers.

“Nursing hospitals will die unless their medical fees go up. We account for about 40 percent of hospital beds in the country but only 7 percent of treatment costs. It is urgent to improve the reimbursement system,” Nam said.