The aging of the U.S. population and the growing incidence of dementia make understanding the local prevalence of this disease more important than ever for planning senior housing projects.

Data show that degenerative brain diseases such as Alzheimer’s are more prevalent in certain parts of the country than others and understanding these patterns can make feasibility analyses more precise and reliable as well as allow for a better targeting of supply and demand. This blog presents selected portions of a longer analysis that we’ve published as a white paper. Analysis was conducted using NIC MAP Vision data.

Memory Care – Memory care is a senior housing product type that is specifically designed for residents with dementia. Properties where memory care is offered may have a secured/locked environment, design features that highlight sunlight, staff that has specialized training about dementia, spaces where residents can move about safely, and interactive activity stations for residents, among other features. Memory care in this article uses the segment type designation from NIC MAP, meaning that the inventory used in this analysis are memory care units that can be located at any type of property.

Memory Care Medicare Beneficiary Penetration Rate – For this analysis, the memory care Medicare beneficiary penetration rate is calculated as the sum of the number of memory care units in a market divided by the total number of Medicare beneficiaries with Alzheimer’s or dementia in that market.

Total Medicare Beneficiaries with Alzheimer’s or Dementia – The total Medicare beneficiaries with Alzheimer’s or dementia in a market area. These data are sourced from the Medicare Chronic Conditions Data Warehouse. NIC MAP Vision has access to these data from Medicare, and these data points are tied to the geographic location of the beneficiary. These data are accessible at a local level in the Vision LTC portal and are as of 2019, which is the most recent vintage of data available.

The number of people diagnosed with dementia is projected to grow

The number of people in the United States estimated to have Alzheimer’s disease in 2021 is 6.25 million, which is projected to grow to 7.16 million in 2025 and reach 12.73 million in 2050.2 Barring major medical breakthroughs like finding a cure for dementia, this means that the pool of potential residents for memory care is expected to see major increases in the coming years.

Methodology

NIC MAP Vision provides Vision LTC subscribers with data from Medicare in the Vision LTC portal. These data are provided to NIC MAP Vision by Medicare in a process where the individual beneficiaries are kept anonymous. As discussed in a recent NIC Insider interview with Beth Mace and Arick Morton, CEO of NIC MAP Vision, underwriters no longer have to rely on national or state level data on dementia and can utilize local data when planning a product offering or evaluating a market.

This analysis focuses on the 31 NIC MAP Primary Markets. We looked at the number of dementia Medicare beneficiaries as a share of the population over 65 in each of the metro areas to investigate differing rates of dementia in local geographic population cohorts. Although most senior housing feasibility studies typically use older populations as a measure of potential demand, 65 is the current age at which someone can qualify for Medicare. In order to not overestimate the possible number of dementia or Alzheimer’s Medicare Beneficiaries in relation to the population in the selected metropolitan areas, this analysis uses population 65+.

Using memory care segment supply data from NIC MAP and dementia Medicare beneficiaries data from Vision LTC, we also calculate how many memory care units there are per dementia Medicare beneficiaries in each of the metropolitan markets.

Selected findings from the white paper

There are differing levels of dementia incidence by metro area and differing levels of inventory, meaning there may be imbalances in some markets and not in others, and individual markets may have varying levels of need as well as utilization of memory care units (as measured by occupancy rates). This finding may also extend to more granular areas than at the metro level.

Dementia Medicare beneficiaries by metro area

Dementia Medicare beneficiaries are not evenly distributed across the U.S. Some markets have notably higher proportions of dementia Medicare beneficiaries than others. The Miami, FL metro area has the largest share of dementia Medicare beneficiaries as a share of the population 65+ at 16.6%. Detroit has the second highest level of dementia Medicare beneficiaries as a share of the total population 65+ at 13.4%. At the other end of the spectrum are Portland Oregon, Phoenix and Seattle, all less than 8.0%. The white paper provides further information for this portion of the analysis.

Memory care units per Medicare beneficiary

Juxtaposing the need for dementia care by metropolitan market against the supply of memory care units shows that there are supply/demand gaps. For example, while Miami has the highest need for dementia care as measured by its large share of beneficiaries with dementia, it has the second lowest number of memory care units per dementia Medicare beneficiary at 1.52%. Detroit also ranks low in the number of memory care units per dementia Medicare beneficiary at 3.1%, the sixth lowest of the 31 Primary Markets.

Both Miami (72.5% occupancy) and Detroit (72.1% occupancy) face pressured memory care occupancy in the third quarter of 2021. Atlanta has the lowest memory care occupancy of the 31 Primary Markets at 70.9%. Portland has the highest memory care occupancy of the Primary Markets at 84.1%. While occupancy is likely still recovering from pandemic lows, San Francisco (83.7%), San Jose (83.6%), and Minneapolis (82.1%) also have relatively high memory care occupancies among the Primary Markets. The Primary Markets has a memory care segment occupancy of 76.8%, with 16 metros of the 31 metros below the average and 15 metros above.

Additional metros are explored in more detail and additional graphs are reported in the white paper analysis. We encourage NIC Notes readers to download the full paper.

Conclusions

Understanding local incidences of dementia can help inform plans for new projects or expansions. This analysis demonstrates that there are local variations in both the availability of memory care supply and of the dementia Medicare beneficiaries in the Primary Markets.

This analysis also  demonstrates that there are metros where there are higher levels of memory care units available to serve dementia Medicare beneficiaries, and there are other metros where there are many dementia Medicare beneficiaries and proportionately lower levels of supply available. This analysis is at the metropolitan market level, and deeper dives into smaller geographic regions in these metro areas could show more detailed information of local dynamics.

VisionLTC subscribers can use the VisionLTC platform to conduct a more localized analysis, drilling down into smaller market areas.

Selected caveats and limitations

This section provides some of the caveats and limitations of the analysis that the whitepaper explains in further detail. For full description of the limitations, please see the full publication. This analysis does not account for utilization rates of home care services, which may also have differing levels of popularity and utilization between markets. The analysis also does not factor in income assumptions for the dementia Medicare beneficiaries or their children (although the Vision LTC portal does have some income data available to subscribers as well for evaluating local income levels). The analysis also does not account for potential regional differences in availability and involvement of family caregivers.

There is also the possibility that some of the totals of dementia Medicare beneficiaries could have notable declines due to loss of life from the pandemic when the data are updated with 2020 figures, as we know many older people with dementia have been severely impacted by the virus. As a result, some of the penetration rates of memory care units per dementia Medicare beneficiaries may be understated here compared to what the 2020 numbers may be due to declines from loss of life from COVID-19.

The NIC MAP Metro areas and the Vision LTC metro areas may not have the exact same geographic boundaries for all metro areas, though they should generally be the same or very similar. This is because the two services use different years of the Census’ boundaries for metros. Visual inspection of the boundaries for each of the Primary Markets did not illustrate notable differences at time of writing, but this difference may be important for any future analysis on a smaller market outside of the Primary Markets.

Sources

1 Alzheimer’s Association

2 Rajan KB, Weuve J, Barnes LL, McAninch EA, Wilson RS, Evans DA. Population estimate of people with clinical AD and mild cognitive impairment in the United States (2020-2060). Alzheimer’s Dement. 2021; 1-10.

VisionLTC, powered by NIC MAP Vision

NIC MAP, powered by NIC MAP Vision 

“In many parts of the country the occupancy challenge is not a demand issue, but a labor supply issue” – Bill Kauffman

NIC MAP^® Data Service, powered by NIC MAP Vision, released its latest Skilled Nursing Monthly Report on December 30, 2021. The report includes key monthly data points from January 2012 through October 2021.
Here are some key takeaways from the report:

Skilled nursing property occupancy increased 28 basis points in October to 75.4%, reversing a similarly- sized decline in September. The occupancy rate is now 382 basis points above the low point reached in January 2021 (71.6%.) The cautious optimism for a recovery in occupancy at the beginning of 2021 was challenged by the rapid spread of the contagious COVID-19 Delta variant over the summer. Another factor that became more evident as 2021 progressed was the severe labor shortage in the sector, which has continued to cause many properties to limit admissions and subsequently slowed the recovery in occupancy. The question remains as to how fast the industry can increase occupancy to a sustainable level as staffing shortages are likely to remain challenging in 2022. Additional challenges may be on the horizon with the arrival of the fall/winter season and as the new Omicron variant becomes dominant. Occupancy remains very low compared to February 2020 pre-pandemic levels of 85.8% (10.4 percentage points.)

Managed Medicare revenue per patient day (RPPD) resumed its downtrend in October and fell 0.2% to $448.69. It is now down 3.3% from year-earlier levels and has been declining since NIC began reporting this data in 2012. This persistent decline in managed Medicare RPPD continues to result in an expanded reimbursement differential between Medicare fee-for-service and managed Medicare, which has accelerated during the pandemic. Medicare fee-for-service RPPD ended October 2021 at $570.25 and managed Medicare ended at $448.69, representing a $121.57 difference. Pre-pandemic, in February of 2020, the differential was $96. Meanwhile, Managed Medicare revenue mix held relatively steady from September to October at 10.4%. It is down from its 2021 high of 11.2% in February but is up from the pandemic low set in May 2020 of 8.4%. Managed Medicare admissions to skilled nursing properties have increased from pandemic lows when elective surgeries were suspended, but they are likely lower than before the pandemic.

Medicare revenue mix increased from September to October. However, it has also been trending down since January 2021, dropping 455 basis points to 20.2%. This suggests that utilization of the 3-Day Rule waiver fell as COVID-19 cases declined relative to the month of January. The 3-Day Rule waiver was implemented by 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. Medicare RPPD increased from $566 in September to $570 in October. Some of this increase is likely a result of the increase in Medicare rates to skilled nursing properties for fiscal year 2022. However, it has decreased 0.8% from one year ago which is most likely due to less reimbursement needed for COVID-19 positive patients. During the pandemic, there has been support from the federal government to increase Medicare fee-for-service reimbursements for COVID-19 positive patients requiring isolation. Resident COVID-19 cases are now lower compared to October 2020, according to NIC’s Skilled Nursing COVID-19 Tracker. 

Medicaid RPPD increased from September to end October at $249. Medicaid RPPD was trending downward from January 2021 through June but started to increase in July which suggests additional reimbursement for COVID-19 positive patients as the Delta variant spread over the summer. Medicaid reimbursement has increased more than usual as many states acted to increase reimbursement related to COVID-19. This latest monthly data shows a 5.2% increase since February 2020, prior to the pandemic. Covering the cost of care for Medicaid patients is still a major concern as reimbursement does not cover the cost in many states. Nursing home wage growth is elevated, as is inflation as measured by the Consumer Price Index (CPI,) and staffing shortages are a significant challenge around the country. Expectations are that wage growth will remain elevated as staffing challenges persist into 2022.

To get more trends from the latest data download the Skilled Nursing Monthly Report. There is no charge for this report.

The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. NIC continues to grow its database of participating operators to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form. NIC maintains strict confidentiality of all data it receives.

Though rising inflation and a new COVID variant may cloud the recovery, the right borrowers have a variety of financing options. Traditional lenders are cautiously making loans. Government sponsored lenders are dialing back restrictions. And new debt sources are filling the capital gap, which should help boost deal-making activity going forward.

“There will be more transactions next year,” predicted Kelly Sheehy, principal and managing director, healthcare, at Artemis Real Estate Partners. “Debt will be available.”

Sheehy and other lenders discussed debt market trends during a panel discussion at the recent 2021 NIC Fall Conference in Houston. The panel acknowledged the ongoing uncertainty around COVID-19 and its impact on the industry, along with the prospect of rising interest rates. But they were mostly upbeat that lenders and borrowers will continue to work their way through the issues with a better understanding of how to adapt to a variety of changing circumstances.

Lenders are monitoring occupancies carefully. Continuing care retirement communities and independent living properties are performing relatively well because they weren’t subjected to move-in restrictions. The assisted living and memory care segments, which had a fair amount of new inventory, are still catching up.

Nobody planned for the Delta variant which caused an occupancy slowdown. However, regions of the country with relatively high vaccination rates are experiencing higher occupancy rates in the lenders’ portfolios than those with low vaccination rates. The impact of the Omicron variant is still unclear.

Permanent financing from Fannie Mae, Freddie Mac and HUD is available for the right borrowers. HUD lending totaled $3.9 billion for fiscal year 2021, only down slightly from 2020 volume. Current activity is being driven by refinancings, according to Lee Delaveris, vice president, KeyBank Real Estate Capital. He expects 2021 volume at agency lenders—Fannie Mae and Freddie Mac—to be well off 2020 numbers when year-end figures are reported in December. Though the agencies are funding some loans, Delaveris noted growing competition for the best deals from life insurance companies and community banks. “There is not a lack of capital for stabilized properties,” he said.

Panel moderator Aaron Becker, senior managing director at Lument, asked how underwriting has changed.

“The challenge is to figure out whether the properties were performing prior to COVID to determine a new stabilization rate,” said Imran Javaid, managing director at BMO Harris Bank. “We cannot underwrite to current occupancy,” he said, explaining that a new stabilization rate is determined in collaboration with the borrower. “It’s not a hard and fast number,” he added.

In fairness to borrowers, Kelly noted that more than 1,000 new properties were delivered from 2017-2020. “Not every building got to where it needed to be pre-pandemic,” he said. That’s where debt funds have stepped in with capital.

Lenders generally require recourse loans or assurances that the borrower has access to fresh equity as a backstop. “The details are important,” said Javaid.

Experience Counts

Debt for new construction is available for borrowers with industry experience, a good track record and a reliable equity source. A big challenge, though, is the rising cost of construction. “Fewer projects are penciling out,” said Javaid.

Lenders prefer projects in barrier-to-entry markets with good demand. In most of those cases, the developer has already done the hard work of securing new project entitlements to keep the construction timeline on track.

HUD offers funding for new construction but with tighter underwriting standards. “These loans are for the experienced borrower,” said Delaveris.

Bridge loans and mezzanine financing are available, but again for the right borrower. The route to permanent financing depends on performance, noted Delaveris. The prospect of rising interest rates should spur borrowers to seek permanent financing.

New capital flow into senior housing bode well for borrowers. Hedge funds, private equity and pension funds are offering debt, currently at rates of about 3.5-4.5%. That compares to pre-COVID rates of 5-6%, according to Kelly. “There’s been some real compression in the cost of debt for higher leveraged paper,” he said.

Moderator Becker asked how the lenders helped their borrowers during COVID.

“Nobody’s plans worked out,” said Javaid. “Who planned for this?” He explained that every loan needed covenant modifications or extensions beyond the original maturity date. Projections have been recast as needed, for example, when the Delta variant emerged and caused an occupancy slowdown. “We have an ongoing process with borrowers,” said Javaid. “We want them to succeed.” He added that it comes back to the quality of the borrower. Lenders want smart operators that are in the business for the long haul.”

Looking ahead, Kelly expects more investors to jump into the senior housing debt market because it offers good yields compared to the other commercial property sectors. He did, however, warn about the emergence of COVID variants that could hurt the industry. Delevaris said that property performance is likely to dictate financing activity. “Permanent capital is available for deals that work,” he said. Javaid doesn’t expect absorption numbers to return to more normal levels until 2023. But, he added, “We will be doing better in 2022.”

This blog features the NIC Analytics Demand Pulse Metric (DPM) for third quarter 2021 (3Q2021), a measure that examines senior housing demand (occupied units) for the NIC MAP^® 31 Primary Markets and provides a window into the strength of a market based on occupied stock trends. The demand pulse metric pinpoints when 3Q2021 demand levels were last seen before the pandemic began to influence the senior housing sector in 1Q2020 and tracks demand growth and progress across the 31 Primary Markets.

Aggregate Market Demand Pulse

Third quarter 2021 NIC MAP^® data, powered by NIC MAP Vision, showed the largest improvement in demand in a single quarter since NIC MAP^® began to report the data in 2005. For the 31 Primary Markets, 12,318 units were absorbed on a net basis, a 2.3% increase from the prior quarter. This pushed occupied units back to their 2Q2018 level. Said another way, it was 1.75 years (7 quarters) ago – counting back from pre-pandemic 1Q2020 levels – that occupied units equaled the level achieved in 3Q2021. Prior to the 3Q2021 jump in net absorption, occupied units had only recovered to their 2Q2017 levels (2.75 years or 11 quarters, counting back from pre-pandemic 1Q2020 levels). And while a very welcomed improvement, 3Q2021 occupied stock was still 4.7% below pre-pandemic 1Q2020 levels.

The DPM Exhibit below provides a visual of these metrics for the Primary Markets as well as the individual metropolitan markets that comprise the aggregate measure.

Market-Specific Demand Pulse

Based on the positive momentum in net absorption patterns in 3Q2021, the level of occupied units in both Washington, D.C. and Kansas City had returned to 1Q2020 pre-pandemic levels. In fact, the level of occupied units in Washington exceeded pre-pandemic levels by 0.9%, while demand in Kansas City was near 1Q2020 levels and fell short by only 55 units, equivalent to a gap of merely 0.4% compared with 1Q2020 levels.

There were 10 markets where occupied units in 3Q2021 were at levels seen as recently as one year ago or less compared with 1Q2020 levels. This includes Atlanta (3Q2021 demand was the same as in 4Q2019 and remains 1.9% below 1Q2020 levels), Orlando (same as 3Q2019); Minneapolis, Sacramento, Cleveland, Houston and Las Vegas (same as 2Q2019); Dallas, Phoenix and Denver (same as 1Q2019).

Despite the recent improvements in demand across all the 31 Primary Markets, the level of occupied units in 3Q 2021 remains far below 1Q2020 levels. This is the case for Pittsburgh, where the number of occupied units remains below levels reported since at least 2005, when NIC began reporting data. Similarly, the number of occupied units in Los Angeles remains below 1Q2020 levels by almost 10 years and is now at levels seen in 2Q2010, and San Jose remains eight years below 1Q2020 levels and is now at levels seen in 4Q2011. Notably, 3Q2021 demand relative to 1Q2020 levels in Los Angeles stood at negative 9.6%, while 3Q2021 demand in San Jose and Pittsburgh remains 7.0% and 6.9% below 1Q2020 levels, respectively.

This analysis suggests that factors that influence demand are stronger in some markets than in others and that there will be some markets that will return to pre-pandemic demand levels sooner while others will take longer. Separately, and not surprisingly, a recent analysis by NIC Analytics looked at the share of same-store properties within individual metropolitan markets that had reached their pre-pandemic occupied unit levels and found that the demand recovery paths and timelines for properties also varied significantly. Hence as property performance goes, so goes broader metropolitan area performance.

In summary, positive senior housing demand momentum was evident in both the 2Q2021 and 3Q2021 NIC MAP^® data after four consecutive quarters of pandemic-related weak demand. The upcoming 4Q2021 NIC MAP^® Quarterly Data Release on January 6, 2022, will showcase if the demand recovery continued to expand or slowed down, and which other markets have fully returned to pre-pandemic 1Q2020 demand levels and which ones continued to lag.

Exhibit: 3Q2021 NIC Analytics Demand Pulse Metric

Interested in learning more about NIC MAP data? To learn more about NIC MAP data, powered by NIC MAP Vision, schedule a meeting with a product expert today.

Did move-ins continue to outpace move-outs in the third quarter 2021? What were the rate discounting trends by segment? How did asking rates grow on a year-over-year basis? The 3Q2021 NIC MAP® Actual Rates Report, available to NIC MAP subscribers, offers third quarter data trends through September 2021 for actual rates and leasing velocity. We’ve summarized some of the key takeaways from the report below.

The following key takeaways are pulled from the NIC MAP 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

• For the second quarter in a row, move-ins outpaced move-outs for all three care segments (independent living, assisted living, and memory care) in 3Q21. This marks seven consecutive months of move-ins outpacing move-outs, from March 2021 through September 2021.

• The memory care segment had the highest pace of move-ins of the three care segments in the third quarter at 3.9% of inventory in July and August of 2021. This was down from the recorded high of 4.7% of inventory in March of 2021, however.

• The year-over-year growth rate for assisted living asking rates reached the highest recorded level in the time series at 5.2% in September 2021. For independent living, the comparable rate was 2.5% in September 2021 and for memory care the rate was 1.6%. For memory care that was the highest pace since June 2019 when it was 1.7%.

• Average initial rates for residents moving into independent living, assisted living, and memory care segments were below average asking rates, with monthly spreads largest for memory care.

• • • In September 2021, memory care segment initial rates had a discount of 9.3% ($609) from asking rates, which equates to 1.1 months on an annualized basis. This is up from the prior year when the September 2020 discount was 7.5% ($487).

• • • Assisted living segments had an initial rate discount of 8.3% ($431) relative to asking rates in July 2021 and ended the quarter with a discount of 7.8% ($412) in September 2021. September’s assisted living initial rate discount is up from one year prior when it was 4.9% ($246).

Our Software Partners Support this Initiative

At the 2021 NIC Fall Conference in Houston, Texas, Glennis Solutions and Eldermark were proudly announced as being officially certified Actual Rates Software Partners. Glennis Solutions and Eldermark now offer their senior housing operator customers the ability to share their data more efficiently in the official NIC Actual Rates format. To receive certification, a software provider works with the NIC MAP Vision team to develop reports that meet the NIC Actual Rates standard format. They are then required to provide six months’ worth of actual rates data for two or more operators using those reports.

NIC and NIC MAP Vision appreciate the time, effort, and commitment from our software partners. We thank Glennis Solutions and Eldermark for their partnerships and recognize their accomplishments in receiving official certification status.

The Actual Rates Data Initiative is driven by the need to continually increase transparency in the seniors housing sector and achieve greater parity to data that is available in other real estate asset types. Now, more than ever, having access to accurate data on the actual monthly rates that a senior housing resident pays as compared to property level asking rates helps the sector achieve this goal.

About the Report

The NIC MAP^® 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 seniors 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 is even more useful at the metro level. NIC MAP Vision currently reports on the Atlanta, Philadelphia, and Phoenix metropolitan markets, and is continuing to work towards reporting more markets.

Interested in Participating?

The Actual Rates Data Initiative is an effort to expand seniors 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 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.