The skilled nursing industry is currently facing numerous challenges, but many operators do see long-term opportunities as the growth of the senior population accelerates and skilled nursing properties will be the only option for many higher acuity patients given the current long-term care infrastructure in the country.

Doubtless, the industry faces headwinds including Medicare reimbursement cuts, low occupancy rates, chronic underfunding of Medicaid reimbursement in many states, a staffing crisis, and ongoing elevated inflation including wage rate growth. In addition, Medicare Advantage continues to grow as enrollment in these insurance programs expands for seniors throughout the country and value-based care continues to progress, which requires the industry to continue to adapt at a time when revenues are relatively low, and expenses are growing at a rapid pace.

The government provided relief during the pandemic such as the Provider Relief Fund and the 3-Day Rule waiver, which was implemented by the Centers for Medicare and Medicaid Services (CMS) to eliminate the need to transfer positive COVID-19 patients back to the hospital to qualify for a Medicare paid skilled nursing stay, hence increasing the Medicare census at properties and therefore higher reimbursement.

No Easy Answers

However, going forward there are no easy answers, especially to resolving the escalating, enduring staffing crisis and inflationary pressures that operators are facing. Some potential solutions the industry has discussed to help manage the staffing crisis include increased pay, better reimbursement, creating flexible schedules for current staff, hiring workers from overseas, and reining in staffing agency costs.

Regarding reimbursement, one of the current main concerns is the proposal to claw-back Medicare reimbursement as it relates to the Patient Driven Payment Model (PDPM), which became effective on October 1, 2019. This PDPM recalibration is a surprise to many given the current state of the industry as operations and financial performance have been unclear due to COVID-19. Isolating the impact of PDPM on skilled nursing government spending is difficult and pointing to the reimbursement change as the sole driver of spending growth when COVID-19 was impacting the industry is a difficult analysis. However, CMS is proposing to incorporate a 4.6% rate cut to skilled nursing rates. CMS’s analysis suggests that spending on skilled nursing rose approximately 5% in fiscal year 2020 after the implementation of PDPM. Since the PDPM rule was supposed to be “budget-neutral,” the agency is looking to adjust payments to bring spending back to parity.

The Need Remains

There is, however, some positive news as occupancy has increased since the lows of the pandemic and operational beds continue to decline, which bodes well for the long-term supply/demand dynamic. Many operators have stated that current occupancy challenges are more of a staffing problem rather than a demand problem. Hence, the need to resolve the staffing crisis as noted above. Freestanding skilled nursing occupancy has climbed 380 basis points from its pandemic low (73.5% in 1Q 2021) to 77.6% in 1Q 2022 within the 31 NIC MAP® Primary Markets. Although still low, occupancy has now increased four quarters in a row.

As home health and home care are growing their businesses within post-acute care, the need for skilled nursing is expected to continue as well. The growing need to care for the very frail older adult population that has multiple illnesses, and needs 24-hour care, is where skilled nursing properties must be a solution for years to come. The question is, will the country ensure this need is met with improved staffing, innovation, and operational infrastructure.

For further information and insights on skilled nursing occupancy improvement, please see these recent NIC Notes blogs:

• Skilled Nursing – Keeping the Occupancy Recovery on Track
• Skilled Nursing Occupancy Continues Slow Increase

“It’s a very exciting time in the senior housing industry, as the sector continues to mature and product offerings become increasingly differentiated,” said Beth Mace, chief economist and director of outreach at NIC, kicking off the third Leadership Huddle of 2022. Mace was joined by Melissa Andrews, president & CEO of LeadingAge Virginia; Tom Gaston, EVP of acquisitions and development at Maplewood Senior Living; and Ashley Fitzgerald, principal of Carlyle, to explore the state and future of segmentation in the senior housing industry – and what it means for aging adults.

“For us, this is something that’s personal. We all have family members who fall into the category,” Andrews said of the emerging middle market segment. As the largest cohort of the aging Baby Boomer generation, middle income seniors – those who do not qualify for federal subsidies but do not have the savings to afford private pay options – need affordable housing options. “Your data shows there’s a huge opportunity nationally,” Andrews said, citing NIC’s 2019 The Forgotten Middle study.

Data from the recently released 1Q2022 NIC MAP Vision Actual Rates Report shows that all three care segments (independent living, assisted living, and memory care) hit the recorded highs in the time series to date for year-over-year growth of asking rates in the first quarter 2022. The report includes monthly data of actual rates and leasing velocity through March 2022, including data on rate discounting and move-in/move-out trends. Read on for further key takeaways from the report produced by NIC MAP^® Data Service, powered by NIC MAP Vision.

The first quarter 2022 Actual Rates Report includes segment type data for many more metropolitan markets than were included in previous reports. Prior reports included Atlanta, Philadelphia, and Phoenix, and new metros available in the first quarter 2022 report include Boston, Chicago, and San Diego, among others. NIC MAP Vision continues to work to onboard new data contributors and is dedicated to reporting more metros. It is only with the support of Actual Rates data contributors and officially certified Actual Rates software partners that this expanded reporting is now available. For more information on which metropolitan markets are now available to NIC MAP Vision subscribers, please contact a product expert at NIC MAP Vision today.

Key takeaways from the 1Q2022 NIC MAP Vision Seniors Housing Actual Rates Report are listed below. These key takeaways are from the Segment Type report. Care segments refer to the levels of care and services provided to a resident living in an assisted living, memory care, or independent living unit.

Key Takeaways

• During the first quarter 2022, all three senior housing segment types—independent living (IL), assisted living (AL), and memory care (MC)—experienced the highest recorded growth in year-over-year asking rates since NIC MAP began reporting the data in 2017. Notably, IL had the largest year-over-year increase for asking rates at 8.5% in March 2022, followed by AL (8.3% in January 2022) and MC (8.3% in March 2022).
• Average initial rates for residents moving in were below asking rates for all three care segments in first quarter 2022. Of the three segments, MC had the largest initial rate discounting for a single month of 10.1% ($776) in January 2022. On an annualized basis, this discount is equivalent to 1.2 months. AL segments had the weakest discounting for initial rates of the three segments with a 5.1% ($292) discount in March 2022. Discounting for AL initial rates hasn’t been this weak since November 2020 (5.1% as well). IL segments had an initial rate discount of 8.7% ($314) in March 2022. This was the highest initial rate discount for IL segments since May 2020 (9.9%, $328).

• Move-ins outpaced move-outs in February and March 2022 for all three care segments (IL, AL, and MC). However, move-outs outpaced or equaled move-ins for all three segments in January 2022 (January had a post-holiday Omicron-related spike in COVID infections which may have been a contributing factor to move-outs.)
  • The MC segment had the highest pace of move-ins of the three care segments in the first quarter, with 4.2% of inventory in March 2022. Memory care move-ins have not been this high since June 2021 when it was 4.3% of inventory.

Additional key takeaways are available to NIC MAP Vision subscribers in the full report.

Acknowledging the NIC MAP Vision team. The Actual Rates Data Initiative has been supported by many players behind the scenes over the years, all of whom deserve recognition for their hard work in bringing these data to market. NIC would like to acknowledge and thank Robb Tufts, Dan Mandeville, Raheem Thomas, Aisha Jones, Justin Cassell, Brian Connolly, Rosemary Asquino, Wendy Lazo, Molly McCarter, Leighann Garcia, and Dan Raney of the NIC MAP Vision team for all of their hard work collecting, processing, and reporting the data over the years to achieve this goal of expanding the metro coverage of Actual Rates reporting. Without their continued effort and dedication this increased transparency would not be available to NIC MAP clients.

Arick Morton on the Importance of Actual Rates Data Initiative. Arick Morton, CEO of NIC MAP Vision, discusses the importance of the actual rates data initiative for the company and the senior housing industry at large. Operators can learn more about actual rates by visiting the actual rates page.

About the Report

The NIC MAP Vision Seniors Housing Actual Rates Report provides aggregate national data from approximately 300,000 units within more than 2,600 properties across the U.S. operated by 25 to 30 senior housing providers. The operators included in the current sample tend to be larger, professionally managed, and investment-grade operators as we currently require participating operators to manage five or more properties. Note that this monthly time series is comprised of end-of-month data for each respective month.

While these trends are certainly interesting aggregated across the states, actual rates data are even more useful at the metro level. NIC MAP Vision is continuing to work towards reporting more markets.

Interested in Participating?

The Actual Rates Data Initiative is an effort to expand senior housing data and we are looking for operators who have five or more properties to participate. We have expertise in extracting data from industry leading software systems, such as Yardi, PointClickCare, Alis, MatrixCare, Glennis Solutions, and Eldermark and can facilitate the process for you.

Operators contributing data to the NIC MAP Vision Seniors Housing Actual Rates Report receive a complimentary report which allows them to compare their own data against national, and metropolitan market benchmarks.

In addition to receiving a complimentary report, your organization benefits through:

• More informed benchmarking, strategic planning, and day-to-day business operations,
• Increased transparency, aligning with other commercial real estate assets in terms of data availability,
• Saved time, Actual Rates data is collected electronically directly from operators’ corporate offices, removing the need for telephone calls to individual properties, and
• Enhanced investment and efficiency across the sector.

Learn more

A recent NIC Notes blog titled “Market Fundamentals Amid Challenging Time for Skilled Nursing” published by NIC Analytics, evaluated supply and demand dynamics for freestanding skilled nursing properties within the 31 NIC MAP Primary Markets (Primary Markets) aggregate since 2017, and examined property-level occupancy distribution to get a better understanding of how widespread the effects of the pandemic have been.

This analysis digs further and reviews how select individual skilled nursing markets are faring after two years of the pandemic.

Occupancy Loss and Recovery Varied by Market. During the height of the pandemic, the occupancy loss for freestanding skilled nursing properties across all the Primary Markets was mainly a function of a demand contraction. In fact, inventory across most of the Primary Markets remained somewhat stable over the period from 1Q 2020 to 1Q 2021.

Drilling down into metropolitan markets, Boston’s occupancy fell 17.8 percentage points (pps) from 88.7% in first quarter 2020 to 70.9% in third quarter 2020. As a result, occupied units in Boston fell by nearly 21% in the span of two quarters. This was the largest demand contraction and occupancy loss a market experienced in the first two quarters of the pandemic. New York also experienced a large drop in occupancy. In the early months of the pandemic, New York’s occupancy rate fell 13.4pps from 92.0% in the first quarter of 2020 to 78.6% in the third quarter of 2020.

Notably, all the Primary Markets experienced double-digit occupancy declines, except Dallas (negative 9.6pps) and Kansas City (negative 7.7pps). Additionally, none of the skilled nursing Primary Markets experienced significant inventory growth during the height of the pandemic. Therefore, the skilled nursing occupancy declines were mainly a function of demand contraction whereas the occupancy loss for the private pay senior housing sector was a function of both an increase in supply and a decrease in demand.

On the other hand, the occupancy recovery paths and timelines are also proving to be uneven across markets with select Primary Markets improving more rapidly than others. For example, Orlando is a market that experienced a relatively smaller drop in occupancy during the first year of the pandemic of 10.7pps, from 89.7% in the first quarter of 2020 to 79.0% in the first quarter of 2021. However, Orlando’s occupancy increased by 6.8pps during the second year of the pandemic and stood at 85.9% in the first quarter of 2022. This helped the market recover 64% of the occupancy loss in percentage points and pushed its occupancy ranking from thirteenth to first among the Primary Markets.

The exhibit below shows that occupancy across several markets is recovering relatively fast. These markets include Orlando, Phoenix, New York, and Boston. Notably, 17 of the 31 Primary Markets have recovered at least 30% of the occupancy loss in percentage points, although occupancy across some of these markets is still far below pre-pandemic levels.

While the occupancy improvements across most Primary Markets depict a very welcome positive trend and indicate light on the horizon, the uncertainty bands remain wide in terms of when occupancy rates for skilled nursing properties will return to pre-pandemic levels. A key question is whether obtaining a sustainable level of occupancy and revenue growth will be sufficient to grow NOI and recoup some of the losses associated with the severe downturn in occupancy rates, higher expenses associated with agency staffing, PPE and other costs, Medicare funding cuts, and underfunding of Medicaid reimbursement in many states. Other headwinds for NOI growth include staffing shortages that are effectively restricting admissions of residents into some skilled nursing properties, and broader inflationary effects associated with the pandemic.

For example, a few markets experienced prolonged occupancy pullbacks and the recovery has thus far been elusive. This is the case of Tampa where 1Q 2022 occupancy remained 14.3pps below pre-pandemic 1Q 2020 levels and shifted the market’s ranking among the Primary Markets from fifth to sixteenth. Similarly, Washington and Atlanta are markets that experienced prolonged occupancy declines and remained far below pre-pandemic levels.

We cannot yet know how pandemic-derived challenges will unfold in future months, or when they will be fully behind us, but the skilled nursing industry has weathered this extremely difficult period and begun the path to recovery.

This analysis examined approximately 4,000 freestanding skilled nursing properties within the Primary Markets. Note that combined properties offering at least two types of service and life plan communities (LPCs)/continuing care retirement communities (CCRCs) were excluded from this analysis.

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

The Labor Department reported that nonfarm payrolls rose by 390,000 in May 2022 and the unemployment rate held steady at 3.6%. The report confirms that the labor market remains strong, despite the war in Ukraine and on-going supply-chain pressures. Concerns about rising wage costs and inflation are also supported by this report. Average hourly earnings for all employees on private nonfarm payrolls rose by $0.10 in May to $31.95. This was a gain of 5.2% from year-earlier levels but was less than the 5.5% gain seen in April.

The data shows that the labor market continues to gain momentum and wage growth is strong. The report strengthens the Federal Reserve’s intention of continuing to raise interest rates further following the 0.75 percentage point hike in the fed funds rate that has already occurred so far this year. Another 0.50 percentage point hike is anticipated at the next FOMC meeting.

Revisions subtracted 22,000 to total payrolls in the previous two months. Nonfarm payrolls were still down by 822,000 or 0.5% from their pre-pandemic level in February 2020. The market consensus had been for a gain of 320,000.

In a separate survey conducted by the BLS, the jobless rate was 3.6% for the third month in a row. The jobless rate is only 0.1 percentage point above the pre-pandemic level of 3.5% seen in February 2020, and well below the 14.7% peak seen in April 2020. The number of persons unemployed was essentially unchanged at 6.0 million but was still above the 5.7-million-person level seen prior to the pandemic.

Among the major worker groups, the unemployment rates were 3.4% for adult women, adult men (3.4%), teenagers (10.4%), White (3.2%), Black (6.2%), Asian (2.4%), and Hispanic (4.3%).

The labor force participation rate edged up 0.1 percentage point to 62.3% in May and was below the February 2020 level of 63.4%.

The April underemployment rate or the U-6 jobless rate was 7.1%, up from 7.0% in April 2022. This figure includes those who have quit looking for a job because they are discouraged about their prospects and people working part-time but desiring a full work week.

Employment in health care rose by 28,000 in May. Employment in health care was down by 223,000, or 1.3% from its level in February 2020. Employment in nursing care facilities rose by 1,300 positions to 1.348 million but was 35,600 less than year-earlier levels.

Employment in leisure and hospitality increased by 84,000 in May and were 1.3 million positions below the pre-pandemic level.