Residents and Their Families Are Not Abandoning These Communities

Contrary to speculation that families are removing their elderly loved ones from senior housing and care properties, a new survey reports that 79 percent of operators saw no significant changes in move-outs last week and no significant changes in occupancy. Activated Insights, the senior care group of Great Place to Work, conducted this survey of private pay senior housing operators representing 1,078 buildings and 100,899 units.

Several U.S. operators noted that sales and marketing activities including all move-ins have been halted completely in this COVID-19 pandemic. Other operators continued to allow pre-scheduled move-ins to occur, though with extra steps and screening. 

Moreover, 21 percent of operators reported increased occupancy. Some operators attributed this increase to how families often realize they are not in a position to take care of an elderly or disabled loved one at home. Moreover, as one CEO commented, “they are much safer with us since we are cleaning and screening like mad.” Many of these move-ins are from pre-scheduled moves or families who have toured and were in sales consideration. Nearly all are heavily screened.

“The data reflect how quickly senior housing operators have adapted lessons learned in Washington state to protect our nation’s vulnerable elders and frontline staff by upholding the highest standards of care,” said Robert Kramer, Founder and Strategic Advisor at the National Investment Center for Seniors Housing and Care. “The results from this survey are especially timely since the investment community has been starved for data in this time of uncertainty.” 

The methodology for this study was based on phone surveys conducted on Wednesday, March 18 and Thursday, March 19 by Activated Insights. The 100,899 units represent close to 8 percent of the overall senior housing and care inventory. Moreover, the majority of the 19 operators are companies that have applied for Great Place to Work certification, an indication that they strive to be leaders in their field. Wharton and London Business Schools have published longitudinal, peer-reviewed studies concluding that Great Place to Work companies across a variety of industries perform better on key business indicators.

When asked why this survey was undertaken, Dr. Jacquelyn Kung, CEO of Activated Insights replied, “We were seeing new reports of families and their elderly loved ones fleeing senior housing and care properties but had not heard the same – so we thought it was strange. We conducted this survey to check the facts of what is actually occurring.”

While the COVID-19 pandemic is developing quickly and occupancy could change, this survey of senior housing operators by Activated Insights indicates that senior housing continues to serve an essential role in meeting the housing and care needs of frail older adults who are most at-risk in this pandemic.

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Medicare just announced that it will − temporarily − reimburse for telehealth-provided services, opening an opportunity for seniors housing providers to provide residents with access to vital health services without exposing them to pathogens circulating at hospitals and clinics as a result of the coronavirus outbreak.

A very timely panel discussion at the NIC Spring Conference on “Telehealth: Boon or Threat to Senior Care?” offered an overview of telehealth options, as well as concrete suggestions for seniors housing companies wanting to get started.

Panel moderator Kelsey Mellard, CEO of Sitka, laid the groundwork by clarifying that the general concept of “Telehealth” includes very different services.  Many people assume that telehealth describes remote monitoring of patient vitals, with smart devices transmitting health data to providers automatically and securely for analysis. The NIC panel, however, focused on another service category getting a lot of attention recently: virtual consultations by medical professionals, whether RNs, primary care doctors, or specialists; via phone, secure messaging, and/or video conferencing. Sitka and Doctor On Demand, whose president and chief commercial officer Robin Glass was also represented on the panel, both fall into this category.

Panelist Michael Kurliand, director of telehealth and process improvement at West Health, a non-profit focused on lowering health care costs for seniors, pointed out that telehealth is not new – it has been around since the 1960s – and that peer-reviewed and anecdotal evidence show up to a 40% reduction in hospital admissions with the deployment of telehealth practices in post-acute care settings.

Glass described the services of Doctor On Demand, where people consult via video and online chat with their care team. They can develop a relationship with a specific doctor, scheduling appointments in advance with him or her, or get help at any time from any doctor available. Doctor On Demand also supports multi-party calls so family members can join the conversation.

Sitka facilitates secure consultations with specialists, if the primary care physician needs a second opinion from an expert, and creates video messages from the specialist with specific instructions for patients, said Mellard.

Seniors housing staff members can assist residents with appointment scheduling online, or with using conference calling or messaging technology, keeping frail seniors from being exposed to dangerous viruses in doctors’ waiting rooms. Plus, as Kurliand points out, virtual visits can reduce the chance of a staff member getting infected.

During the question period, several operators asked about using telehealth for remote patient monitoring. Kurliand said this can be problematic because as soon as you get involved, you incur responsibility and liability.

For seniors housing operators wanting to explore telehealth, Kurliand said his team at West Health offers a free guide to getting started, available on the West Health website. Kurliand also suggests engaging with your regional Telehealth Resource Center. These government-funded centers offer connections and state-specific advice to organizations wanting to explore telehealth. You can find your local center at telehealthresourcecenter.org.

While the current CMS ruling applies only until the end of the healthcare emergency that the U.S. Department of Health declared on January 31, legislation pending in Congress could extend some or all of the provisions of the bill into the future. For more information, see the Medicare Telemedicine Health Care Provider Fact Sheet available on CMS.gov.

“There are a lot of good things in this ruling, and I commend Seema Verma and her team. It will give people a running start in implementing telehealth services, but it doesn’t really go far enough and will probably get revised,” Kurliand commented after the CMS ruling was announced.

Of the 99 NIC MAP^® primary and secondary metropolitan markets that the NIC MAP^® Data Service reports on across the nation, 11 are in California.¹ Within these metropolitan markets, NIC tracks 937 seniors housing properties with 107,500 units, or nearly 12% of the seniors housing properties within the 99 markets. By coincidence, this share is comparable to California’s 12% share of the total U.S. population (39.6 million people live in California versus 327 million in the U.S. as of 2018). Within the state, performance measurements vary considerably.

California Markets – Seniors Housing | 4Q2019

No Two Metropolitan Markets are the Same.  Of the 11 California metropolitan markets in the NIC MAP 99 markets, 6 ranked in the top 22 best performing markets for occupancy as of the fourth quarter of 2019. These include top ranking San Jose, with an occupancy rate of 95.7%, the highest in the nation, Ventura at 92.2% (seventh of 99 markets), Modesto at 91.2% and San Francisco, San Diego and Fresno, all with occupancy rates above 90%. Three of the 11 had occupancy rates below the national average of 87.9% in the fourth quarter: Bakersfield and Riverside both at 87.3% and Stockton at 87.1%. Los Angeles and Stockton were in the middle of the pack.

Similarly, there is wide variation among penetration rates within California’s largest metropolitan markets. NIC defines the penetration rate as total inventory divided by the number of households older than 75 years of age. On average, the penetration rate among these Californian metropolitan areas is lower than the 99 Primary and Secondary markets average: 9.8% versus 11.2%, respectively. Within these 11 metropolitan markets, Bakersfield, Riverside and Los Angeles had penetration rates below 8% in the fourth quarter of 2019, while Stockton and San Diego exceeded 12%.

Construction Ebbs and Flows.  Three of California’s 11 markets have relatively much construction underway—Riverside, Sacramento, and Ventura. Construction as a share of inventory stood at 14.1%, 18.3% and 10.2%, respectively, in the fourth quarter, above the 99 Primary and Secondary markets pace of 6.2%. On the other hand, six of these California markets have virtually no construction underway—parts of the Central Valley (Bakersfield, Fresno, Modesto and Stockton) and the Bay Area (San Francisco and San Jose). Los Angeles and San Diego have 6.4% and 5.9% shares of inventory under construction as of the fourth quarter 2019, respectively.

Difficult zoning regulations and entitlement rules, and the subsequent barriers to entry imposed on new development, often mean that California’s construction activity remains relatively low for many of its metropolitan markets. While this is bad news for those trying to get into the market, it is decidedly good news for incumbents in those markets as well as those developers and operators that currently have projects underway.  

Asking Rents.  Coastal California’s higher cost of living and of doing business, as well as higher home prices, means asking rents for seniors housing in these markets (Los Angeles, San Diego, San Francisco, San Jose, and Ventura) were 30% higher, on average, than the 99 Primary and Secondary markets average asking rent, with San Francisco a full 43% higher and San Jose 36% higher as of Q4 2019. However, except for Sacramento which was 11% higher, the more centrally located Central Valley metropolitan markets in California (Bakersfield, Fresno, Modesto, Riverside and Stockton) had asking rents that were 8% less than the national average.   

What’s Ahead?  Looking ahead, it’s likely that San Jose will retain its title as among the highest occupied markets for some time. Construction as a share of inventory remains low at 3.3% (200 units). While more projects may be in the pipeline at this time, they have not yet broken ground. Given that the time from groundbreaking to opening has lengthened and assuming California’s construction cycle is similar to that of the nation, it will likely be two years or later for new competition to significantly affect incumbent operators. In addition, San Jose is a high-barrier-to-entry market which will limit the threat of new competition. 

In contrast, construction as a share of inventory totaled 18.3% (1,916 units) in Sacramento in the fourth quarter, the highest share in the nation. The completion and opening of these units will put downward pressure on Sacramento’s occupancy rate which has already been pushed lower by the completion of more than 1,000 units since 2016. Since then, the occupancy rate has fallen more than three percentage points from an all-time high of 94.0% in the third quarter of 2016 to 90.3% in the fourth quarter of 2019. For perspective, it has taken the market since mid-2012 to absorb on a net basis the equivalent 1,930 units. 

In summary, California is a big state. If it were a stand-alone nation, it would rank fifth in the world, with a “GDP” of more than $2.7 trillion. It is a state of multiple dynamics in terms of development and growth opportunities, population and demographic subtleties and lastly, consumer preferences. This is perhaps nowhere as evident as in the performance of its myriad seniors housing properties.

¹ Note that NIC MAP also tracks seven additional smaller California markets that are not included here. The data time series for these additional markets is not as long.

More than 1500 industry leaders gathered in San Diego last week for the 2020 NIC Spring Conference. Under calm blue skies, attendees engaged in three days of active networking, deal making, thought-leadership, and discussion of critical trends. A focus on disruption and new partnerships in senior care augmented the annual event’s established focus on real estate debt, equity capital flow, valuations, market trends, and investments.

Educational Program

Building on the conference theme of Investing in Seniors Housing and Healthcare Collaboration, speakers and sessions highlighted the increasing role of healthcare in the seniors housing value proposition.

The first of two general sessions, “Join the Disruption: Convergence of Healthcare and Seniors Housing,” provided real-world examples of healthcare and seniors housing disrupting current models in an increasingly value-based world. The presentation focused on the opportunities that now exist to break down old silos, adapt, and partner to improve outcomes. NIC’s Bob Kramer noted that “In the future, a system focused on prevention and wellness will keep people out of hospital and acute care settings. We are moving from a curative model to a preventative model.”

Growth strategist Andy Waldeck presented a thought-provoking luncheon keynote titled, “Positioning for the Long Term: The Opportunity for Integrating Senior Care.” Waldeck argued that the unsustainable cost of the U.S. healthcare system has left it ripe for disruption, and that the seniors housing and care industry has an opportunity to reframe its role in the healthcare continuum, saying, “We are in the early innings of the industry transitioning to a new vision.”

With educational programming organized along three tracks − Real Estate Strategies, Healthcare Strategies in Real Estate, and Senior Care Collaboration − attendees could easily find sessions aligned with their interests.

Real Estate Strategies

Sessions in the Real Estate Strategies track offered insights on deal structuring and what to look for in a partner, managing margin compression across property types, rising costs of labor, cap rate drivers, capital flow into the sector and more − with all discussions run by leading operators, debt providers, and investors in the field.

Healthcare Strategies in Real Estate

In the Healthcare Strategies in Real Estate track, attendees heard how PDPM is working five months in, learned about care integration models, explored real-world vertical integration strategies, and were updated on key drivers for valuation. One session featured newly released data by ATI Advisory indicating that integrating healthcare services, such as primary care and nurse practitioners, into seniors housing can reduce costly ER visits and hospital stays by as much as 50%.

Senior Care Collaboration

Kicking off the conference, a panel of experts weighed in on the unsustainable cost of healthcare and trends impacting the senior living industry. Sessions offered thought-provoking evidence of the looming changes in the way healthcare is accessed and delivered. Attendees walked away understanding that changes in healthcare delivery, from telehealth to new models of risk sharing and new partnerships with healthcare providers are likely to have a lasting impact on their industry.

Other News

During the conference, NIC announced the certification of its fourth Actual Rates Software Partner. Clients of Medtelligent, the maker of ALIS software for assisted living, memory care, and behavioral health communities, can now use the software for automated, efficient participation in NIC’s powerful Actual Rates Initiative.

Stay Tuned

2020 NIC Spring Conference highlights will be available on nic.org in the coming weeks. In addition, video and audio recordings for most of the sessions will be made available to conference attendees.

Join us for the 2020 NIC Fall Conference, October 7-9 in Washington, DC.  

The Labor Department reported that there were 273,000 jobs added in February.  This was more than the consensus estimate of 175,000 and marked the 113th consecutive month of job gains. For all of 2019, average monthly gains were less at 178,000. For 2018, monthly gains averaged 193,000 and for 2017, monthly gains averaged 176,000.  The latter data points were revised from prior estimates.   

Revisions also added several jobs to the prior two months.  The change in total nonfarm payroll employment for December was revised up by 37,000 from 147,000 to 184,000 and the change for January was revised up by 48,000 from 225,000 to 273,000.  Combined, 85,000 jobs were added to the original estimates.   Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.  After revisions, job gains have averaged 243,000 over the last three months. 

Health care added 32,000 jobs in February and has added 368,000 jobs in the past twelve months.

The January unemployment slipped back to 3.5% in February from 3.6% in January. The underemployment rate was 6.9% from 6.7%.

Average hourly earnings for all employees on private nonfarm payrolls rose in February by nine cents to $28.52. Over the past 12 months, average hourly earnings have increased by 3.0%. For 2018, the year over year pace was 3.0% and in 2017 it was 2.6%. Reasons why wages are not growing faster include the retirement of highly paid baby boomers and relatively weak productivity growth.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work inched up to 63.4% in January from 63.2% in December, which had been the highest since August 2013.

Combined, the significant upward revision to the December and January jobs figures plus the strong February employment gains place the economy in a position of strength ahead of the potential and likely negative economic impacts associated with the Coronavirus. Despite the relatively good news on the job front, the market paid little attention to the report, with all eyes on the spread of illness across the globe. The Federal Reserve is expected to lower rates again as it shores up the economy, after the surprise 50 basis point decline announced earlier in the week. The timing is uncertain, but some expect another cut prior to the next FOMC meeting scheduled for March 17 – 18, 2020.