The Labor Department reported that there were 130,000 jobs added in August, below the consensus estimate of 160,000.  About 25,000 of the jobs added were temporary positions associated with the 2020 census.  For the eight months through August, the average monthly increase in total employment has been 158,000, below the average monthly gain of 223,000 in 2018. The private sector added 96,000 jobs in August, weaker than the monthly year-to-date pace of 145,000 and down from an average monthly gain of 215,000 in 2018.

Revisions subtracted 20,000 to the prior two months.  The change in total nonfarm payroll employment for June was revised down by 15,000 from 193,000 to 178,000 and the change for July was revised down by 5,000 from 164,000 to 193,000.   Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.

The August jobs report has garnered special attention since there are broad-based concerns about a slowing national economy amid signs of a weakening manufacturing sectors, slowing business investment and trade-related weakness associated with rising tariffs.  In fact, the Fed lowered interest rates on July 31st for the first time since 2008 as it reacted preemptively to concerns of a potential economic slowdown.  For several months, concerns about trade wars and slowing growth in Europe, China and the U.S. have been on the radar screen of the Fed.  Federal Reserve Chair Jerome Powell said the cut was “intended to ensure against downside risks from weak global growth and trade tensions.” The move is being labeled an “insurance cut” because it is meant to keep the economy’s engine pumping.  The fed funds rate is now targeted at a range of 2% to 2.25%, down 25 basis points from its prior target range. Until July and since late 2015, the Federal Reserve had been gradually raising rates following six years of virtually 0% interest rates (2009 through 2015).  The August jobs report is likely to add pressure to the Fed to lower rates further at its upcoming September 18^th FOMC meeting.

The August unemployment rate was unchanged at 3.7%.  This is still close to the lowest rate in 50 years.  A broader measure of unemployment, which includes those who are working part time but would prefer full-time jobs and those that they have given up searching—the U-6 unemployment rate—rose to 7.2% from 7.0%, reversing a July drop.

Average hourly earnings for all employees on private nonfarm payrolls rose in August by eleven cents to $28.11. Over the past 12 months, average hourly earnings have increased by 3.2%.   For 2018, the year over year pace was 3.0% and in 2017 it was 2.6%.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work was unchanged at 63.2% in August, very low but up from its cyclical low of 62.3% in 2015.  The low rate at least partially reflecting the effects of an aging population.

The NIC MAP® Data Service recently released national monthly data through June 2019 for actual rates and leasing velocity. The NIC Actual Rates 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. Having access to accurate data on the monthly rates that a seniors housing resident pays as compared to asking rates helps NIC achieve this goal.

Key takeaways from the 2Q2019 Seniors Housing Actual Rates Report include:

• Average initial rates for residents moving in were below average asking rates for both majority independent living and majority assisted living properties, with monthly spreads generally larger for majority assisted living properties dating back to April 2015.
• As of June 2019, initial rates for majority assisted living properties averaged 8.3% below their average asking rate, which equates to an average initial rate discount of 1.0 months on an annualized basis, the same as in May and back to the December discount.
• The average discount for majority independent living properties was larger at the equivalent of 1.2 months, which was as high as it has been since NIC began reporting the data in April 2015. This was also notable because the discount has been smaller for independent living than assisted living for nearly the entire time series that began in April 2015. The larger independent living discount began in January 2019.
• Average asking rates for majority independent living properties have exceeded in-place rates since May 2018 and the gap between these rates reached a new high in June 2019 of 4.2% or $136.
• For majority assisted living properties, average asking rates have consistently exceeded average in-place rates.
• In June, the average majority independent living asking rate was 4.9% above its year-earlier level, more than in June 2018 (3.2%), but less than in December 2018 (5.8%). The annual pace of growth for majority independent living in-place rates was less at 1.4% from year-earlier levels, while initial rates fell 1.0% from year-earlier levels, marking the first decline since April 2018.
• For majority assisted living properties, annual growth was strongest for initial rates as of June 2019, at 3.6%. This compares with 3.1% for in-place rates and 2.7% for asking rates.
• The rate of move-ins has exceeded the rate of move-outs for five of the past twelve months for both majority assisted living and majority independent living.

This Seniors Housing Actual Rates Report provides aggregate national data from approximately 300,000 units within more than 2,500 properties across the U.S. operated by 25 to 30 seniors housing providers. Note that this monthly time series is comprised of end-of-month data for each respective month. 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 5 or more properties.

While these trends are certainly interesting aggregated across the states, actual rate data will be even more useful when it is available at the CBSA level. As NIC continues to work towards growing the sample size to be large enough to release data at the CBSA level, partnering with leading software providers like Yardi and MatrixCare makes it easier for operators to contribute data to the Actual Rates initiative. NIC appreciates our partnerships with software providers and our data contributors and their work in achieving standardized data reporting.

If you are an operator or a software provider interested in how you can contribute to the Actual Rates initiative, please contact Brian Connolly at bconnolly@nic.org.

Welltower’s Tom DeRosa discusses how the game-changing deal is taking real estate to the next level  

In July 2018, a groundbreaking partnership provided further evidence of the industry’s quickly changing trajectory.

In a $4.4 billion deal, the big healthcare REIT Welltower and ProMedica, a large nonprofit healthcare system, formed an 80/20 partnership for the real estate linked to HCR ManorCare, the nation’s second largest post-acute long-term care provider.  ProMedica purchased HCR ManorCare’s operations in a separate transaction.

The anniversary of the deal represents an opportune time to check in on the partnership’s progress. NIC recently spoke with Tom DeRosa, chairman and CEO at Welltower about the alliance of healthcare and housing, and what it means for the industry going forward.

Here’s a recap of the conversation:

NIC: Why was Welltower originally interested in forming a joint venture with nonprofit ProMedica to acquire HCR ManorCare?

DeRosa: The partnership demonstrates how a health system can further vertically integrate across the heatlhcare continuum. Prior to the joint venture, ProMedica was an acute care system with ambulatory care that also owned a payor, Paramount Health Care. As an insurance company, Paramount offers Medicare Advantage and managed Medicaid plans, and dental and vision plans. The acquisition of HCR ManorCare with Welltower more deeply vertically integrates ProMedica into post- acute care, rehab, skilled nursing, home health, hospice, memory care and assisted living. ProMedica is one of the best examples of a fully vertically integrated health and wellness delivery ecosystem. Welltower was excited to have a role to demonstrate the viability of our platform to facilitate a landmark healthcare transaction.

NIC:  What is the status of the integration of ProMedica and HCR ManorCare?

DeRosa: The integration is multi-leveled and going quite well. One of the things we’ve seen is that ProMedica has done a very good job of assessing the talent pools at both ProMedica and HCR ManorCare and has chosen the best people to run respective functions. For example, ProMedica’s CFO Steve Cavanaugh had been CEO of HCR ManorCare. The acquirer has demonstrated that they will go with the best people. It’s not just “my way or the highway” which often derails business combinations.

NIC: Are the business systems integrated?

DeRosa: It’s still in process. ProMedica is vertically integrating as their business is evolving. This requires management to be very nimble because so much is changing as we speak. It’s hard to put a timeline on that. Welltower is evolving everyday too. Management has to be able to change direction based on where the market may go in the future.

NIC:  Is HCR ManorCare now a nonprofit entity?

DeRosa: Yes, that was the first milestone after the closing. They have achieved a nonprofit status. It’s very beneficial to ProMedica from a financial standpoint but also beneficial in that there may be potential opportunities for ProMedica with HCR ManorCare to provide services to other health systems on the post-acute skilled nursing side. In certain cases, the fact that HCR ManorCare is a nonprofit makes them a preferred provider.

NIC:    Does HCR ManorCare’s nonprofit status impact your ownership structure?

DeRosa: Not at all.

NIC: Are the financial results what you expected so far?

DeRosa: They’re on track. This is a long-term investment for us. We have a master lease with ProMedica for the properties.

NIC: Is the partnership driving meaningful integration that leads to better care and outcomes for seniors?

DeRosa: Definitely. I have two observations. ProMedica’s protocols from the acute care business are being shared with the post-acute skilled nursing and senior living businesses of HCR ManorCare. Also, ProMedica is probably the first major U.S. health system to have an operating and strategic focus on the social determinants of health. ProMedica CEO Randy Oostra has had a lot of foresight to build resources around that. I think this is a space where other health systems are playing catch up.

Experts say 80 percent of health, especially for seniors, is determined by factors other than healthcare, such as where you live, the broader environment, and socio-economic circumstances. ProMedica is improving outcomes by implementing successful strategies around these factors. Take the area of nutrition. When you’re dealing with a population of people being discharged from the hospital to skilled nursing, you’re trying to treat them in a lower cost setting to get them back into their home as soon as possible. They don’t need to be in a hospital bed, but they need a certain amount of rehabilitative care before their physicians believe they can be living independently again. One of the areas we know is so important to prevent that individual from bouncing back into the acute care system is food. A huge issue is food insecurity. It’s not always about having the money to buy food, but knowing how to eat well to control various health conditions.

For example, a hospital patient might be a type 2 diabetic, arthritic and have COPD. If the person is eating a high salt, high fat, high sugar diet, like many people in this country do, the diet is working against whatever benefit he or she may have received from the hospital stay. ProMedica understands this. They’ve done everything from working with individuals to understand how they can eat better to the fact that they were the first health system to introduce food pharmacies. Physicians can write prescriptions so patients can get fresh fruits and vegetables and higher quality proteins from a food pharmacy. That’s a game changer.

NIC: Can you comment on the importance of the physical structure of the building as a way to deliver improved outcomes?

DeRosa: A good example is HCR ManorCare’s Arden Courts business, which provides specialized memory care. These buildings are designed for people with memory impairments and that makes a difference. Research shows people who suffer from dementia are comfortable when they don’t run into dead ends, so the facilities are designed on a circular racetrack-type model. We know this helps to soothe an unquiet mind.

People are living longer, so there are more people suffering from memory loss. Hospitals today are unprepared for the influx of older patients with dementia. A health system with a competency in memory care like ProMedica has with HCR ManorCare will be better able to manage this population. It’s an example of a how to create a broader ecosystem of care.

NIC:  Any lessons learned so far from the partnership?

DeRosa: Bringing three parties together has created an opportunity for innovation. Welltower has a skill set in residential care. We’ve combined that with ProMedica’s acute care system and HCR ManorCare’s post acute, home health, and hospice services to form a collaborative culture. That’s exciting. We’re looking at new ways to manage the aging population more effectively.

NIC: What is the size of the market opportunity with nonprofits?

DeRosa: There are hundreds of millions of dollars in real estate sitting on the balance sheets of nonprofits that was built under a very different fee-for-service model. The whole profitability structure of the nonprofit health system has changed over the last 10 years. These were double-digit margin businesses and today they are low single-digit margin businesses. Given all the places nonprofits need to invest in a more competitive market, the question is whether they have the ability to continue to control all that real estate. Some of it needs to be phased out. We have developed a strategy at Welltower around that thesis. The joint venture with ProMedica is a perfect example of how a real estate healthcare infrastructure platform like Welltower can help a nonprofit health system grow, and develop an advantage, in a much more competitive business going forward.

NIC: Will this be a driver for Welltower’s growth? If so, what kinds of partners will Welltower be seeking?

DeRosa: There will be many opportunities that come from the integration of residential care concepts and nonprofit healthcare systems. We’re very optimistic about how these types of joint ventures actually capture another layer of value for the senior living sector. For so long, values have been based on the real estate alone. But there is a growing recognition of the role real estate plays to drive lower costs and better outcomes in healthcare.

Building off the momentum, enthusiasm, and focus of NIC’s recently released Middle Market Study, NIC will open and close the 2019 Fall conference with two sessions dedicated to this topic. The study, funded by NIC and conducted by NORC at the University of Chicago, revealed there is a substantial market that private-pay seniors housing currently is not serving. This is the cohort who do not qualify for Medicaid but may not have sufficient resources to pay for private seniors housing as it exists today. More than half of these individuals are projected to have mobility limitations by 2029 and other health care needs.

In the first session to be held on Wednesday at 3:15 PM CT, “hackers” identified ahead of the event will have worked in small groups to design care and housing solutions for the nation’s middle-income cohort. This so-called “hackathon” event will focus on the practical elements of designing a property to suit this cohort, while meeting business goals. Their resulting proposed solutions will be presented to those in attendance at the session.

In the second session to be held on Friday at 9:00 AM CT, practical solutions from Wednesday’s Forgotten Middle hackathon session will be discussed and debated in a town hall format that will encourage a roundtable discussion among thought leaders and session attendees. Entrepreneurs with imagination and passion are encouraged to attend.

Meeting the care and housing needs of “forgotten middle” seniors will require practical solutions, in the design and construction of new properties and their associated services, as well as in financial structures and the capital stack. Both public and private sectors will need to work together to successfully bring solutions to this challenging opportunity. New thinking may assume greater flexibility from government—on both state and federal levels—on zoning, regulatory restrictions, and potential subsidies. Other factors may include technological cost-savers, more affordable designs, entrepreneurial approaches to public-private partnerships and financial incentives for capital providers. 

Expected discussion topics include:

• How big is the opportunity?
• How can the private sector provide care and housing to this growing cohort?
• Can the private sector do it alone or does it need government assistance?
• What are practical solutions to providing care and housing to this growing cohort?
• Will investment returns need to be adjusted to attract capital to this cohort? Is this a more or less risky opportunity?
• Do underwriting standards need to be adjusted to accommodate this evolving investment prospect? 

Sessions:

• The Forgotten Middle: Understanding a Growing Opportunity
  September 11, Wednesday at 3:15 PM CT
• A Growing Opportunity: Partnerships Working Together for The Forgotten Middle
  September 13, Friday at 9:00 AM CT

To learn more, please visit here.

In mid-July 2019, I had the pleasure of attending the 10th Annual NELS Summit in Washington, DC. NIC is a proud co-sponsor of the three-day event, where emerging leaders in health and aging services can connect with peers, develop their leadership skills, learn about advocacy, and network with industry leaders. The majority of NELS attendees hold Executive Director or Administrator positions at skilled nursing facilities, assisted living and independent living communities, CCRCs, rehabilitation hospitals, affiliated organizations, and home- and community-based services.

I was struck by the candor, professionalism, and dedication of attendees, organizers, and presenters. Their enthusiasm for improving the lives of residents, staff members, and families was truly moving and representative of the ideals that draw people to careers in health and aging services.

On the first day of the Summit, Dr. Kevin Hansen, Assistant Professor at Bellarmine University, and Director of NELS, introduced the history of NELS, the purpose of the summit, and data from a pre-summit survey. Michael Muetzel, President, Author, Leadership Development at Mx Marketing Management Solutions, provided insight focused on generational differences in the work force and the strategies and benefits of leading diverse teams and creating positive workplace culture. Attendees also shared best practices and perspectives on a range of topics like regulatory environments, staffing pressures like recruitment and retention, and culture in small round table discussions. These presentations and conversations provided attendees with new, practical strategies and ideas they could implement in their communities after the Summit.

On the second day of the Summit, attendees listened to a panel presentation and discussion of NELS alumni moderated by Dr. Douglas Olson, Professor at the University of Wisconsin Eau Claire, and Senior Advisor for NELS. The panel discussed what NELS meant to them and provided valuable lessons in their journeys in leadership— not only as leaders in their respective organizations, but also in their professional organizations and advocacy efforts.

Liz Liberman, Senior Analyst Manager at Bulletin Intelligence, and Dr. Kevin Hansen discussed legislative policy advocacy. Liberman detailed how NELS attendees and others can comment on potential legislation from the executive branch to make their experiences and voices heard on topics impacting their communities. Hansen also discussed advocacy strategies that NELS attendees can implement with the support of their communities to impact potential legislation. NELS attendees finished the day by traveling to Capitol Hill for a meeting with Wisconsin Congressman Ron Kind and his staff.

On the final day of the Summit, attendees met leaders of several major partnering organizations including LeadingAge, Argentum, NAB, ACHA, and ACHCA. The group of leaders presented a panel discussion covering topics including their paths to their current positions, what their respective organizations do and offer members, valuable resources and research for leaders, and current issues affecting health and aging services. Attendees also had the opportunity to speak with leaders in small breakout group sessions to learn more details about their organizations and membership.

Interspersed between the presentations over the three days were group exercises designed to develop attendees’ connections with each other and areas of interest, culminating in final teams. Teams developed ideas for projects for the coming year with the support of Dr. Hansen, Dr. Olson, Mr. Muetzel, Dr. Keith Knapp, Associate Professor, Bellarmine University, and Lindsey Creapeau, HCAD Practicum Coordinator, Health Care Administration Program at the University of Wisconsin – Eau Claire. The attendees of this year’s summit will work in teams throughout the year on the projects— all with the goal of “developing solutions to enrich lives.” Summit proceedings, outcomes, and key conclusions from each year are published in a white paper that is available for download on the NELS website.

If you are interested in attending or know someone you think would be a good candidate, applications for the 2020 NELS Summit will be open on nelssumit.org starting in the Spring. We highly encourage you to send your best and brightest to this excellent opportunity for leadership and professional development in 2020