Accurate data informs better decisions. Owners, operators, and developers want to know what factors drive their business to help it grow.

Now, NIC MAP Vision offers insights on local acuity rates based on Medicare claims data. This invaluable information provides a window into the healthcare needs of seniors in a particular market.

NIC Chief Economist Beth Mace recently talked with NIC MAP Vision CEO Arick Morton. They discussed how Medicare data can help stakeholders make better decisions about which markets are under or overserved. Here is a recap of their conversation.

Mace: Senior living operators looking to enter a market area often simply track age and income eligibility with public census data. This assumes little to no variation in the needs along the care continuum. Is this a sufficient approach? Why or why not?

Morton: The answer to that is a resounding ‘No.’ A rise in acuity and the associated need is really the core driver of the senior housing business these days. Qualified residents are those who need the product and have the ability to pay. Historically, age has been used a proxy for need. But we couldn’t quantify the need. So, we restricted the analysis to ages 75-plus to determine national averages of need rates among that group in a specific market. The major challenge to that approach is that Seattle and Biloxi, for example, have very different acuity rates in their senior population. We’ve analyzed the variations by market and the differences are considerable. The differences also vary within communities. When considering whether to build a new community, not being able to calibrate the need metric at the local level really frustrates the ability to get an accurate picture. That was one of the things we set out to solve. And now, with Medicare claims data, we can see the rate of healthcare needs that allows us to calibrate utilization down to the market level.

Mace: Can you give an example of how NIC MAP Vision is used to assess opportunities in each MSA?

Morton: The Alzheimer’s Association, for example, publishes dementia incidence data on an annual basis. Developers may use those national numbers, which on average are accurate. But the dementia level in any given local market could massively vary. Now we have the data on the local level. Instead of assuming we have an average of a 10% incidence of dementia out of 100 individuals in the 75-plus age group, we know that there are actually 18 individuals with dementia because we have the Medicare claims data. That data is housed in Medicare’s Chronic Conditions Data Warehouse. It includes all claims in a master beneficiary file with basic demographic information about the beneficiary. Their diagnoses can be searched, say, for dementia.

Mace: Medicare claims data can be used to show a market area’s quality measures, such as readmission rate or dollars spent per point of the HCC medical codes. How can operators use this data to tailor services to potential residents?

Morton: There are a lot of benchmarking capabilities that can be leveraged. At the simplest level, operators can look at what the cognitively impaired population looks like. What are the other healthcare characteristics of that population? What does the assisted living and memory care continuum look like? A market may have a lot of healthier individuals with early-stage memory loss. So, does a bridge program make sense? What doesn’t a market have? How do we bend the cost curve? What kinds of clinical programs are in place? That’s where a lot of the chronic conditions data comes into use. Based on the population level incidence, operators can scale up a number of programs to manage conditions such as diabetes, hypertension and fall risks.

Mace: The value of senior living is created by a combination of both the real estate and the services offered within a community. When faced with an aging property or community, how can claims data be used to differentiate it from the competition, despite not having the newest building?

Morton: It depends on the community’s operating segment. In the caregiving segment, as the building ages, it’s difficult to differentiate the community on real estate. So, the focus is on differentiating the care. The data can help inform and guide that strategy. A clear example is an older property that has developed a really thoughtful bridge program between assisted living and memory care that allows a resident in the early stage of memory loss who might otherwise be in a secured unit to have a better quality of life. The resident has more services, but it saves the family a bit of money compared to the secured unit. As we continue to move towards a more integrated experience between senior housing and healthcare, we will see more health management specialization. Risk bearing entities will start to manage conditions, sending individuals to places that best match the clinical profile. That will become more and more of a force in the market. The focus there is on the outcome rather than the real estate. The challenge is to figure out what those programs should be and get them up and running, and well established. The older building may not be as pretty, but the family knows their loved one is getting a higher level of care tailored to the individual’s needs. The claims data can be an incredible asset in that regard.

Mace: Medicare data has historically been lacking in timeliness. Is this beginning to change? How so?

Morton: One of Medicare’s top priorities has been to increase the timeliness of the data. We’re seeing that in a couple ways. A number of different information fields on the claims form are being released more quickly. There will always be a lag because claims data needs a seasoning process. The window is left open for 90 days for the beneficiary to submit data. The file is not complete until the 90-day mark. Claims are about 70-80% percent complete in 30 days. Medicare Advantage files previously had delays of 4-5 years, but that gap is rapidly closing. And we’re seeing that across the board. We’ll never have real time data, but we can expect to live in a world with about only a couple months lag time.

Mace: Is there, or will there be, an ability to see trended Medicare claims data within a time-series format for markets? How would clients access this and how would they use it?

Morton: Yes, that data is available, and the ability to access time-series data is on our roadmap. That will be very important in several years. The COVID-19 outbreak scrambled existing trends and produced new ones. The Medicare claims data base is about as real time as it gets in terms of the acuity of seniors and where they’re headed. So, being able to use that to get real time insights into relocation trends will be incredibly valuable. It will be especially useful given the short-term dislocations and reset that COVID-19 has caused.

Mace: In terms of Medicare claims data, what is the latest update that clients should be aware of?

Morton: It is now possible to access Medicare claims data in a way that allows us to begin to build a full picture of how seniors are accessing healthcare, paving the way for us to finally understand how seniors housing and the healthcare system are serving seniors together.

Mace: Can we obtain the number of current and future estimated Medicare discharges originating in a zip code or collection of zip codes/census tracts (PMA)?

Morton: Yes, we have the beneficiary’s location. We can see the full utilization pattern of those beneficiaries, such as what hospital they go to and what physicians they visit. We can see the whole picture.

Mace: Are clients able to find the percentage of Medicare discharges to skilled nursing facilities in the PMA and the state?

Morton: Yes.

Mace: Can we obtain average Medicare length of stay?

Morton: Yes, we can obtain length of stay and most utilization metrics. The data varies a bit by provider whether for skilled nursing vs. in-patient hospital stays. But the information is highly available.

Mace: Can we obtain the number of hospital discharges to particular skilled nursing facilities by DRG code?

Morton: Yes

Mace: Can we get the trend of discharges over time?

Morton: Yes.

Mace: Can we also get the same for home health and see a comparison?  For example, for a certain DRG, can we see what share home health has taken from a skilled nursing facility?

Morton: Yes.

Mace: What else would be useful for our readers to know?

Morton: We are about two weeks out from being able to include NIC MAP^® rate and occupancy custom metrics in Market Insight analyses. This new functionality will empower clients to get NIC MAP property advisor report-esque data at scale for the first time. In lieu of running individual property advisory reports (PARs), clients with access to both NIC MAP Local and Market Insight will be empowered to run up to 4,000 reports at once on PMAs of varying shapes and sizes. The one thing I’d like to emphasize is how useful it is to look at the variability of chronic conditions across market areas and metros. It’s data that a lot of the market studies don’t consider, but it’s something stakeholders should know to make informed decisions.

Interested in learning more about NIC MAP data? To learn more about NIC MAP data, powered by NIC MAP Vision, and about accessing the data featured in this article, schedule a meeting with a product expert today.

Where does the senior living industry now stand 18 months into a brutal pandemic? Matthew Ruark has a quick reply. “The sector may have been hit hard by Covid-19 , but it’s still standing. The fundamentals of the business are sound,” said the senior vice president of commercial and healthcare mortgage production at KeyBank Real Estate Capital Group.

As a lender, Ruark observed that the pandemic highlighted several industry dynamics: the importance of operations; the advantage of senior living’s needs-based nature; the labor shortage; a shift to short-term borrowing amid occupancy declines; and the necessity for an affordable senior housing option as the older population grows.

Long-term, Ruark said, “We are bullish on senior housing and care.” He added that KeyBank has been committed to the sector for over 30 years, providing a full suite of financing products.

Ruark is among the thought leaders attending the 2021 NIC Fall Conference in Houston. The Conference is NIC’s first in-person convening of leaders in senior housing and care since the pandemic began. Many industry leaders plan to attend the Conference to share ideas with others experiencing the same challenges, while also building relationships to help them succeed in the future.

“The sector may have been hit hard by Covid-19 , but it’s still standing. The fundamentals of the business are sound.”

As occupancies dropped because of the pandemic, project sponsors have been relying on more short-term, bridge financing. “Borrowers are looking for more flexible financing,” said Ruark.

Occupancies have started to inch up again, but are not yet at 90%, the traditional level of stabilization. As occupancies improve, Ruark expects investment sales activity to jump and borrowers to transition to permanent loan structures. “There is a lot of capital on the sidelines,” he said.

Some investors, especially those that had entered the market just prior to the pandemic, didn’t understand the operational intensity of senior living, Ruark noted. He thinks many of those investors will pivot out of the sector. “From a lender’s perspective, the pandemic reaffirmed the importance of a strong operator,” he said, adding that operators are better prepared now to deal with the Delta variant than they were for the initial COVID-19 outbreak.

The sector faces two big challenges: affordability and a labor shortage. A growing number of elders will need an affordable housing and care option. In 2019, NIC conducted a study, The Forgotten Middle, showcasing the need for more affordable senior living options. “If we don’t get out in front of this issue, it could be a real crisis,” said Ruark.

With great respect for the frontline workers and operators who care for the most vulnerable elderly, Ruark noted that the labor crunch has only gotten worse during the pandemic. The industry will need creative solutions that include education, talent development, and retention strategies. “Labor is the number one challenge facing the industry,” he said.

Overall, the needs-based nature of the sector is a big benefit. Senior living weathered the Great Recession and the COVID-19 healthcare crisis because senior housing is need-based driven. Also, senior living hasn’t suffered the pandemic-related rent delinquencies like those seen in the multifamily sector. The elderly typically have stable incomes unlike multifamily tenants who may have lost their jobs due to the pandemic.

Another big plus: the demographics of an aging population will support the industry in the long run. “We are true believers in the sector,” said Ruark.

Summary. The highest performing senior housing properties in 2Q20, as measured by occupancy, generally remained highly occupied a year later, while properties with the lowest occupancies in 2Q20 tended to remain in the bottom.

Properties in the middle of the pack in 2Q20 saw large drops

in occupancy over the one-year course of the pandemic studied in this analysis and had not shown signs of recovery as of 2Q21.

Methodology. We categorized seniors housing properties in the NIC MAP® Primary Markets that were open in 2Q20 and 2Q21 into occupancy cohorts to investigate how properties in different categories performed over the last year. The property count for this analysis totaled 5,072 properties. Notably, some properties closed since 2Q20, some are no longer seniors housing, or were temporarily under renovation in 2Q21. Those properties are captured in the n/a column in the table below. Rows in the table below represent the occupancy band of the corresponding properties in 2Q20 and the columns represent their 2Q21 band.

Highly occupied properties in 2Q20 tended to be highly occupied in 2Q21. Of the group that were 95%+ occupied in 2Q20, 30.0% were in that same occupancy band for 2Q21 and 28.2% were in the 90% to 95% category. This suggests that the high property level performers in 2Q20 tended to be fairly resilient (or did take occupancy hits but still were able to recover). However, even for that 95%+ cohort in 2Q20, 41.6% dropped to below 90% in 2Q21, so that group of properties wasn’t completely protected from pandemic-related occupancy declines with 13.2% slipping into the under 80% occupancy group.

Of the 340 properties that were at or above 95% occupancy in 2Q20 and 2Q21, two thirds of this group were majority assisted living properties, with the remaining one third being majority independent living. The average age of these properties was 26.4 years in 2Q21. The average size of these properties was 126 units, which is nearly the same as the average property size of seniors housing in the NIC MAP Primary Markets (128 units). The top 5 metros in which these 340 properties were located included New York (26 properties, 8.2% of open properties in the New York metro in 2Q20), Portland (23, 12.1%), Los Angeles (22, 6.9%), Minneapolis (22, 8.1%), and San Francisco (21, 13.5%).

Of the 320 properties that were at or above 95% occupied in 2Q20 but dropped to between 90% and 95% in 2Q21, the average property age was 25.1 years old, and the average unit count was 162 units in 2Q21. Of this group 57% were majority assisted living and 43% were majority independent living. The top 8 metros these properties were located in included New York (24), Detroit (22), Minneapolis (20), Chicago (20), and San Francisco, Seattle, and Washington (17 each).

Of the 149 properties in that were in the 95%+ group in 2Q20 but declined to below 80% in 2Q21, the majority were majority assisted living (87%) with only 13% being majority independent living. The average property size was smaller at 91 units and the average age of property was 23 years old. Los Angeles was the metro area that had the most properties that dropped from the 95%+ group to the <80% group at 18 properties. The other four metros in the top five were Chicago (15 properties), Dallas (11), Miami (10) and San Francisco (7).

The middle of the pack in 2Q20 took some hits and haven’t quite recovered yet. For both the 85% to 90% and the 80% to 85% groups in 2Q20, the biggest shifts were into the < 80% category in 2Q21. The average age of property for the 313 properties in the 85% to 90% cohort that dropped into the < 80% group was 24.1 years in 2Q21 and the average property size was 116 units. For the 341 properties in the 80% to 85% cohort that dropped into the < 80% group the average age was 23 years old and the average unit count was 132 units. The 80% to 85% cohort that dropped to < 80% only had a 1% increase in inventory from 2Q20 to 2Q21 and the 85% to 90% cohort had less than 1%, so the declines in occupancy were due to negative absorption as a result from the pandemic rather than inventory growth from expansions.

Properties with low occupancy in 2Q20 tended to continue to have low occupancy in 2Q21. Of the <80% cohort in 2Q20, 80.1% of those properties remained in the under 80% cohort in 2Q21, continuing to struggle. Only a mere 2.3% of the <80% in 2Q20 cohort managed to grow occupancy to 95%+.

Of the 1,145 properties that were in the <80% group in 2Q20 that stayed in the <80% group in 2Q21 had an average age of 18 years, partially reflecting that properties that were still in lease up in 2Q20 most likely fell into this category. The average property size of this group was 115 units. They were also primary majority assisted living (80% of the properties) with only 20% being majority independent living. This group only had a mere 0.3% of inventory growth so inventory growth was not a contributing factor to these properties remaining low.

Removing the group of properties in the <80% group in both 2Q20 and 2Q21 that were under 2 years old in 2Q20 and looking only at the subgroup of properties that would meet NIC’s definition of stabilized in both 2Q20 and 2Q21, the occupancy of those properties dropped from 68.6% in 2Q20 to 64.6% in 2Q21. This shows that this group of properties is continuing to struggle in 2021.

Conclusions. Many of the highly occupied properties in 2Q20 were still highly occupied in 2Q21 and many of the lower occupied properties in 2Q20 still had low occupancy in 2Q21. Many properties in the middle bands for occupancy suffered occupancy declines and have not yet begun to recover.

Despite the challenges of the last 18 months, senior housing still offers investment opportunities. But market knowledge is key to success.

Industry veteran Robb Chapin understands the dynamics of today’s market. Chapin serves as a partner at Bridge Investment Group, a global real estate investment manager with $28.7 billion of assets under management. He is also CEO and Co-CIO of Bridge Seniors Housing Fund Manager, which is invested in 95 senior housing properties and 11,500 units, in 30 states. A third of the properties are operated directly by Bridge Senior Living, a leading senior housing operating company.

Chapin is among the thought leaders attending the 2021 NIC Fall Conference in Houston. The Conference is NIC’s first in-person convening of leaders in senior housing and care since the pandemic began. Many industry leaders plan to attend the Conference to share ideas with others experiencing the same challenges, while also building the relationships to help them succeed in the future.

“We believe there are opportunities to acquire high-quality, newer vintage assets below replacement cost from distressed sellers”

In advance of the event, NIC recently asked Chapin for his investment insights. Here’s a recap of the conversation.

NIC: What investment trends do you see in senior housing?

Chapin: The COVID-19 pandemic yielded the most significant downturn in the sector’s history and has placed a premium on operations. Poorly operated properties were disproportionately affected. While we’re still early in the recovery process, the sector has shown resiliency through a rebound of demand, move-ins, rent growth, and collections. We believe there are opportunities to acquire high-quality, newer vintage assets below replacement cost from distressed sellers. We believe vertically integrated operations are a major advantage to stabilizing staffing, improving quality, and rapidly growing occupancy and NOI. The sector is also attractive because of its “needs-based” character.

NIC: Are there any specific geographies that are more desirable? Property types?

Chapin: We believe target markets for seniors housing are typically in the prime submarkets of the top 100 MSAs where age- and income-qualified demographics are the strongest. Local market demographics, labor availability, health trends, and competitive sets are key to the potential of a particular investment, but we also look to macro trends such as migration patterns, regional trends, economic drivers, and long-term supply/demand factors. We generally seek “modern” buildings with Class A potential, age-in-place acuity mix, desirable unit floor plans, and a full suite of amenities.

NIC: What about new development?

Chapin: In the near term, we believe opportunities to acquire newer-vintage low-occupied buildings below replacement cost can provide attractive opportunities with significantly less risk. However, the demographic trends for the next decade do support supply growth through development. We believe new developments could be attractive opportunities where strategically supported by future demand.

NIC: How has the pandemic impacted investment strategies?

Chapin: As mentioned, we believe the ability to execute on operations is key. Opportunities to leverage our deep relationships with our high-performing operating partners or to take over distressed operations with Bridge Senior Living allow us to optimize value and margins through hands-on operational lift.

NIC: What’s the biggest obstacle for the market?

Chapin: The effects of the Delta variant of Covid-19 on the seniors housing market are not completely known, but our operations are far less disrupted than last year and earlier this year. Achieving stabilized occupancy levels by historic standards will continue to be a primary focus. We’re also still challenged by the peak supply growth of 2017-2018 that pressured occupancy across many markets. Another obstacle is the labor challenge. Although it could be somewhat transitory, recruiting and retaining great staffs is always a significant focus. You have to get that right if you expect to be successful.

NIC: What’s the long-term outlook for senior housing?

Chapin: The age 80-plus population is expected to increase by 49% from 2020 through 2030. Also, construction starts have already decreased by 60% over recent peak levels due to the pandemic, and it will be several years before we return to historical inventory growth. We believe these factors can provide opportunities to invest in a market that is dislocated in the immediate-term but fundamentally sound in the mid- and long-term.

The path to recovery is never a straight line. While the Delta variant has changed the narrative once again and reportedly affected move-in rates in some seniors housing properties, overall occupancy and demand seem to be experiencing positive momentum.

[Note: this blog was updated as of September 17, 2021 to reflect revised data.]

Seniors Housing Intra-Quarterly Occupancy

The recently released NIC Intra-Quarterly Snapshot report shows that the overall occupancy rate for seniors housing increased to 79.9% in the August 2021 reporting period (June-July-August 2021) for the NIC MAP Primary Markets on a three-month rolling basis, according to Intra-Quarterly NIC MAP Data, released by NIC MAP Vision. This was an eight-month high and placed the all-occupancy rate 1.2 percentage points above its record low of 78.7% in the June 2021 reporting period. Notably, it was 7.5 percentage points below its pre-pandemic level of 87.4%, however.

Exhibit 1 below shows that between the reporting periods of April 2020 and March 2021, seniors housing occupancy decreased across most of the NIC MAP 31 Primary Markets, if not all. However, and similar to the annual absorption trend depicted in Exhibit 1, the pattern reversed in April 2021, when seniors housing occupancy measured higher or stable compared with the prior month (reporting period) across most of the NIC MAP 31 Primary Markets.

Unexpectedly, the pattern changed in June 2021 but quickly skewed towards markets with increasing occupancy rates in July 2021. This change in June 2021 was largely due to new supply outstripping demand across some of the NIC MAP 31 Primary Markets. The most recent data show that in the August 2021 reporting period, occupancy increased or was unchanged in 27 of the 31 Primary Markets for seniors housing compared with July 2021, while only four markets saw a decrease in occupancy over the same period.

To learn more about inventory growth and how select NIC MAP metropolitan markets have performed in August 2021, download the August 2021 NIC Intra-Quarterly Snapshot Report.

Exhibit 1 – Seniors housing intra-quarterly occupancy distribution

Interested in learning more about NIC MAP data? 

To learn more about NIC MAP data, powered by NIC MAP Vision, and about accessing the data featured in this article, schedule a meeting with a product expert today.