Focused on the theme, “Investing in Seniors Housing & Healthcare Collaboration, the 2019 NIC Spring Conference kicked off on Wednesday afternoon. The Conference drew more than 1,500 attendees, including investors, seniors housing and care operators, and healthcare providers.

A reception was held for first time attendees. “Our company has six projects coming out of the ground,” said first time attendee Gary Elam of Carefield Living. “We are here to find capital.”

The afternoon included three well-attended educational sessions.

Meet Mary.  She’s 86 years old, with arthritis, osteoporosis, hypertension, and COPD.  Her story gave the NIC Conference opening panel “Underwriting Health Care in Private Pay Seniors Housing” a platform to illustrate how the broader health care system is starting to impact seniors housing net operating income (NOI).

Mary’s care cost Medicare over $60,000 during her time in assisted living.  Seniors housing operators on the panel described how their staff traditionally handled medical episodes, cooperating with medical professionals but receiving no financial consideration for the care they provided (other than standard monthly care charges).

The panel then fast-forwarded five years, playing out the same scenario in a community offering a Medicare Advantage plan.  As a member of this plan, Mary stays healthier longer, so pays less in monthly care charges.  But Mary increases her length of stay, and by providing medical services in a lower-cost setting compared to the emergency room, the company is able to keep an average of $500 per month in “gain sharing” – receiving some of the money Medicare might have had to spend on hospital care, but didn’t. Overall, the community realized a 20% increase in net operating income with Mary participating in the medical services revenue model.

How realistic is this? John Rijos of Chicago Pacific Founders, and Chris Winkle of Sunrise Senior Living, shared their real-world experience with Medicare Advantage plans, and said it is very realistic.  Jerry Taylor, of Solera, had not yet implemented a MA plan, but agreed with the concepts.  And all panelists agreed that communities risk being “disrupted out of the business” if they’re not on board. 86-year-old Mary has a typical profile, but her experience, and that of her eldest daughter, Sue, changes with coordinated care. Using two scenarios, one from today and one from 2025, the panel, moderated by Joel Mendes of JLL, got specific and detailed in order to illustrate key points that investors should be considering as the healthcare system increasingly influences how communities operate – and perform financially. Coordination of care will make a big difference for Mary, but it will also drive new revenue streams and improve NOI.

In “Equity in Senior Care: Understanding the Players” NIC injected some levity with a “Dating Game” format, complete with the famous game show’s theme music and a healthy dose of tongue-in-cheek dating references. Underlying the fun, however, was real insight into how capital seekers and providers find a match in the real world. In two different “games” two very different capital seekers asked tough questions of three potential suitors, eventually choosing a partner, but not before attendees made their wishes known with an instant poll.

The session yielded some fun moments, too, such as when John Stasinos, in the role of an investment management platform, said of a rival suitor (a private equity firm), “she’s gonna want to buy you and change you. I’m different because I’ll understand you. You’ll be comfortable with me. I won’t bring an investor to the table that doesn’t share your time horizon.” The session delved into numerous considerations, and many good questions that capital seekers should ask, before they commit to a new relationship.

The last session of the day, “I-SNPs: Why Providers are Becoming Payors in a Value-Based World” addressed the question: Is setting up a Medicare Advantage plan for residents the right strategy for your company? A panel of experts, already involved in that process, discussed I-SNPs, or Institutional Special Needs Plans. These programs provide Medicare coverage for residents of long-term care facilities.

“The process is complicated,” noted panelist Steve Fogg, CFO at Marquis Companies, a provider based in the Portland, Oregon, area. Marquis already has 500 long-term care residents in its program, not all of whom live in Marquis buildings. Panelist Lynne Katzmann, CEO of Juniper Companies is putting together a plan for assisted living residents that will be rolled out next year. Peter Longo, principal & managing partner, Cantex Continuing Care Network, commented: “Find a good insurance partner. That’s key to success. “

The 2019 NIC Spring Conference is just getting warmed up. Tomorrow will feature remarks from Paul Ryan, the 54th Speaker of the United States House of Representatives (2015-2019), and a full schedule of educational sessions. Follow NIC on Twitter for live-tweets of every session, and more.

Former Speaker of the U.S. House of Representatives Paul Ryan will offer insight on what to expect from the new Congress and the impact on America’s seniors

Paul Ryan, the 54th Speaker of the United States House of Representatives (2015-2019), will address the 2019 Spring Conference of the National Investment Center for Seniors Housing & Care (NIC) on Feb. 21 in San Diego. At the Opening General Session, scheduled from 8:00 AM – 9:30 AM PT, Ryan will deliver keynote remarks and participate in a “fireside chat” with John J. Kelliher, managing director, Berkeley Research Group, and former chief counsel of the Committee on Ways and Means of the U.S. House of Representatives.

Ryan is expected to share his views on entitlement and regulatory reform, the continued shift to private management of Medicare and Medicaid, and labor and immigration issues, including their impact on unemployment and wages. As a veteran Capitol Hill leader who has influenced national policy and legislation impacting seniors, Ryan’s remarks will be of keen interest to conference attendees comprised of decision makers in seniors housing and skilled nursing, as well as healthcare leaders who are exploring new partnership opportunities in the sector.

“As we embark on a new Congress, there are new players and dynamics that will shift the policy landscape. The seniors housing and care sector will be paying close attention to what Mr. Ryan has to say,” said Brian Jurutka, NIC president and CEO. “His timely perspective from the leadership seat on the sector’s most important policy, regulatory, and economic issues will be invaluable as attendees develop strategies to succeed in this time of change.”

Immediately following the Opening General Session, Kelliher will moderate a discussion featuring Republican and Democratic perspectives on Ryan’s comments.  The panel will feature Chris Jennings, who served at the White House in health policy under both President Obama and President Clinton, and Jennifer B. Young, who served as Assistant Secretary for Legislation at HHS as well as Senior Counselor to Secretary Mike Leavitt in the George H.W. Bush administration.

The discussion will cover what Americans can expect from a divided Congress and from the Trump Administration, in terms of further action on healthcare payment and delivery reform, and initiatives to address the housing and care needs of seniors.

The 2019 NIC Spring Conference will take place February 20-22, at the Hilton San Diego Bayfront in San Diego, California.

Last week’s post on NIC’s data group introduced some of the teams and processes involved in collecting the most accurate and reliable data available on America’s seniors housing and care properties. This second half of the story delves into processing and reporting on the data.

A team of three full-time analysts is responsible for processing the data from the Quality Assurance team and completing quarterly reporting on it. The team also produces specialty reporting throughout each quarter, such as the Seniors Housing Actual Rates Report and the Skilled Nursing Data Report. They also support all of NIC’s presentations and webinars with accurate, current data, analysis, and visualizations.

Working in collaboration, the Quality Assurance and the Data and Analytics teams jointly execute each quarter’s data finalization process. Data and Analytics Manager Leighann Garcia explains, “The two teams bring two different perspectives to the data. In the Quality Assurance department, they tend to have a property-level expertise, while the Data team looks at it from a higher level, looking at broader trends over time and at the aggregate, rather than at individual properties. Combining those perspectives works well when we’re finalizing the data before reporting on it. From there, we produce about 45 different reports each quarter.

Research Manager Brian Connolly added that, “the delineation between the Quality Assurance team’s property-level view and the Data Team’s aggregate view is deliberate. It frees up the Data Team to view the data without any bias that might come from looking at a particular property. On the flip side, the QA team can look at the property level without any bias that comes from the aggregate. We put that in place on purpose. That’s why the partnership between the teams works so well. Both teams find important nuggets, and, as a group, we are better able to direct our data collection efforts as a result, particularly as we identify long-term trends that might need clarification. When the Analytics Team looks at the finalized data for publishing and reporting, they know it’s reviewed and as clean as possible. When they see trends, they can be confident they’re not just seeing something that was missed in the QA or data collection process.”

Connolly’s team conducts regular audits, to further ensure nothing is overlooked. “We review the entire database, auditing each market individually versus state data. We’ll go to a given state’s department of health, for example, and find all their lists and compare them to our database. That’s one way for us to proactively research each of the markets outside our normal process of data collection and make sure our database is as complete as possible.

With clean data in hand, Garcia’s team generates reports throughout every quarter. “Reports fit into one of several categories,” she explained. “The first of these is reports that go to clients who have requested a customized report. We also generate reports that get uploaded to the NIC MAP^® Client Portal. Some reports are for internal use. For example, we provide our marketing department with data for their content and generate a few specialized reports for our senior leadership. We also work very closely with our Outreach Team, providing data for their webinars and presentations. We’re closest to the data, and often call out trends from the very beginning of the process.”

NIC is careful to spread out the collection of data points for each metropolitan market throughout the quarter. The way they structure their agreements with data providers – and execute their own collection processes – ensures that no metropolitan market’s data is collected within a single month, for example. All of NIC’s data collection occurs as evenly as possible throughout time and across markets.

Partnerships with leading software vendors in the space have streamlined processes by which NIC receives data. Customized reports, designed to automatically feed data to Connolly’s team, have significantly boosted efficiency, while helping to reduce human error. Because NIC either talks to or receives data from nearly every property in its database, every single quarter, accurate and efficient data collection processes are essential.

Reports are generally built in three different ways. Some are custom developed in SQL, others use the data tools in Excel, while still others are coded in a programming language called R. Using these tools, the team generates reports, some of which are complex and very time-consuming. Once generated, every report goes through a quality assurance process to be validated.

“One key role we play is subject matter expertise on our data,” added Garcia. “While we don’t advise on strategy or make predications, we can help clients if we know what they’re trying to achieve with our data. A client that’s running 14 reports manually in every one of their subscribed markets might come to client services and ask if we can save them time, for example. We’d be able to help them with a custom report.”

Looking ahead, the data group plans to expand the database to include, among other things, seniors housing financial benchmarking data. NIC’s Seniors Housing Financial Benchmarking Initiative will create a time series database that allows for consistent financial benchmarking of select property-level operational revenue and expense categories. “This will be another way our clients can benchmark their communities,” said Connolly.

Through everything they do, NIC’s data teams share a passion for accuracy. “NIC is really focused on getting the numbers right,” said Dan Raney, Director, Product Solutions & Technology. “It’s personally offensive to us if the numbers are wrong, even for a single property. I really believe that the care we invest on data accuracy at NIC is second to none.”

“And also, our transparency in the event that we have an oversight,” added Garcia. “Those things do happen. There have been errors, but we’re very forthcoming and transparent when that happens. I believe our customers appreciate that.”

New initiatives, new sources of data, and new reporting products will all be executed by NIC’s dedicated data group, on top of the considerable effort that goes into daily, weekly, and quarterly data collection, QA, analysis, and reporting output which NIC clients have come to rely on, year after year.

A key topic of conversation among seniors housing investors and operators is the impact of inventory growth on occupancy rates and the ability to grow rents and revenue. Related to inventory growth are rising costs of construction, which may be one factor influencing a slowing of construction activity. This blog highlights some recent data to support those discussions.

Seniors housing construction may be plateauing. NIC MAP^® data from the fourth quarter of 2018 continues to suggest that construction activity may be slowing. There were roughly 37,000 units under construction at Seniors Housing properties (Majority Independent Living (IL) and Majority Assisted Living (AL)) for the NIC MAP 31 Primary Markets. That figure is down from the record high of 43,826 in the fourth quarter of 2017 or by nearly 6,500 units. Moreover, construction as a share of inventory slipped back to 6% of open inventory in 4Q2018, down from the recorded high of 7.3% in 4Q2017.  

Construction starts (units that have newly broken ground) for both Majority IL and Majority AL are also trending lower. In the fourth quarter, AL starts totaled nearly 1,552 units, the fewest starts since the first quarter of 2012. On a four-quarter aggregate basis, starts totaled 9,393 units, the fewest since 2014. As a share of inventory, this amounted to 3.3%. The last time it was below 4% was 2012. IL starts, on a rolling four-quarter basis, totaled 7,287 units in the fourth quarter. As a share of inventory, this equaled 2.2%. The last time it dropped below 2.5% was 2014. 

It is important to note, however, that construction data sometimes is restated—both up and down. Construction starts are some of the most commonly restated data points as they are particularly difficult to capture, so these numbers are likely going to see some changes. We occasionally find out that a project has broken ground after it has done so or that a property indicated ground break pre-maturely. Part way through a project, a property manager may adjust their plans for unit mix based on pre-leasing patterns, unforeseen challenges, or other factors. Changes to unit mix can also mean changes to a property’s majority property type designation. 

Construction costs are increasing. The Weitz Company is a major architectural/engineering/construction firm in the United States. Based on data they collect from seniors housing projects they work on and cost estimates from RSMeans, Weitz produces estimates of construction costs for seniors housing by metropolitan area. Larry Graeve, Senior Vice President at The Weitz Company, and Amy Burk, Estimator, prepare Special Issue Briefs for the American Seniors Housing Association (ASHA) focused on construction costs of Seniors Housing.

Their recently released special brief on Winter 2019 Seniors Housing Construction Costs indicates costs rose by 6 to 8 percent year over year. Weitz cites tariffs and labor challenges as contributing factors to the rising costs. As the Weitz reports highlight, geographic variations in cost are notable. The data in the graphic below present figures on a city index of 100, with an example of Wichita, KS (city index 85.6) in the furthest right two columns, demonstrating local variability by product type. For example, there is a cost range of $134 to $159 per square foot for independent living in Wichita, while Philadelphia, which has an index of 115.2, translates to a cost rate of $180 to $214 per square foot.

Local variation exists in seniors housing construction. Not only do costs differ by region, but construction activity also varies due to local development cycles and broader macroeconomic factors. The heatmap below shows local market variation.  Although many markets are “cooling” (as evidenced by the blue tones), some metro area markets still have heightened activity. One case in point is Atlanta, which of the CBSAs in the Primary Markets, had the highest level of construction as a percent of its inventory for 4Q18 at 14.8% (it was 6% for the Primary Markets). Close behind Atlanta is Sacramento, which remained at its record high level of construction as a percent of inventory (12%) for the second consecutive quarter.

Conclusion: many factors could be at play. Construction activity for seniors housing appears to be slowing—by both measurements of starts and active construction underway. While this would be good news for many operators and investors who have been facing the consequences of new supply and competition, we remain cautious until several more quarters of data validate this trend. The slowdown, should it stick, may reflect rising costs, as showcased by the Weitz data as well as other cost and wage data not discussed in this blog. Other factors impacting construction activity may include a tighter lending environment by many of the larger banks and lenders, a more competitive employment environment for retaining construction workers, more cautious investment attitudes at this stage of the development cycle, and possibly concerns about the broader national economy. Additionally, markets experiencing declining occupancies may be discouraging developers from pursuing new projects in potentially challenging areas.

Hundreds of businesses, including capital providers, developers, owners, operators, service providers, and others, rely on the NIC MAP^® Data Service as they research, analyze, and assess their markets and prospects across the country. Clients know they can trust the accuracy of the data NIC makes available, as they leverage the ever-expanding utility of NIC’s online platform; but they may be unaware of what happens behind the scenes in order to produce such quality data. There’s a lot going on, so we’re breaking this into two parts, and will post the second half next week.

In fact, NIC has invested heavily, since its earliest years, in its data collection and quality assurance practice, to achieve its mission for improved transparency into the seniors housing and care property markets. NIC’s efforts have helped propel the sector to its current status as a leading property type in the commercial real estate industry. Quality data has increased access to capital, lowered costs, and, ultimately, helped improve access and choice for America’s seniors.

Today, NIC supports a talented and experienced in-house data group dedicated to producing the finest quality data available, and enjoys close, long-term alliances with some of the industry’s leading vendors of data collection services. In 2018, 22 people, employed both in-house and by vendors, produced four quarterly data releases, two Seniors Housing Actual Rates Report releases, all of the data for the Fifth Edition of the NIC Investment Guide, and many custom data requests, both for internal and external clients. All the while, the group worked daily to collect thousands of data points, assure quality across its entire platform, add new data from new sources, research and analyze trends, streamline processes and develop new reports and new features.

To shed light on what it takes to produce the quality and volume of data that NIC offers, NIC convened the leadership of its data group to discuss their approach – and share how NIC’s data investments are providing value to clients – and the sector overall – every day.

Dan Raney, Director, Product Solutions & Technology, started off by explaining that NIC collects data from a number of sources: “Many of the larger contributors are able to give us detailed reports from their property management systems, but we also work closely with the ProMatura Group, who gets information directly from properties over the phone. They have a team of 15 people dedicated to data collection for NIC, and don’t work on anything else. “

The in-house group that manages NIC’s data is divided into several distinct teams. There is an internal research and data collection team that focuses just on construction data. Three team members are responsible for researching projects in the pipeline, from the early planning stages through construction starts. They comb through a complex collection of resources to identify and track proposed and planned construction in 140 U.S. metropolitan markets. Once a project breaks ground, the ProMatura Group tracks the property through its opening day.

NIC’s systems have built-in checks designed to flag and block any data that sits outside given parameters. The three-person Quality Assurance team looks at thousands of records daily, in order to assess whether the data has errors in it – or whether indeed they point to actual shifts in the market. “Our teams are constantly reviewing quality assurance reports throughout each quarter.  They are very detailed in their inspection of the data, diligently examining the nuances of each data set (skilled nursing, actual rates, etc.). Although each data set is unique, we’ve put together a common quality control process that ensures the accuracy of all data before it is reported to our clients.” said Raney.

Research Manager Brian Connolly’s group is responsible for initial data collection and quality assurance. Many sources provide data constantly, while others provide periodic updates. Some data sources are one-time downloads. In the case of ProMatura’s contribution, Connolly says, “ProMatura is calling the same properties in the same markets every quarter. They’ve been able to build relationships with these communities and have built a lot of trust with the people they’re talking to provide the detailed data points that NIC requires for its reporting. They’re speaking the same language. Every quarter they call about 13,000 properties. This past quarter they finished 96% of those calls, meaning they’ve entered all the relevant data reporting into our survey instrument and submitted it for our review and publishing. Again, should any data they report fall outside our thresholds, it is flagged for review. We review those records every day, as they come in.

“ProMatura has worked with us for over ten years. They understand how this data is used in the industry, and how important it is to everyone out there that it is accurate and complete. We have an excellent partnership with them. They also manage data that some of our corporate contacts enter into workbooks, which they then enter into our system, which then can be reviewed for quality along with all the other data.

“We also get data directly from corporate partners at the property level, which is now a somewhat automated process. There’s a separate QA process for this type of electronic data submission. The systematic computerized process makes it much easier for these partners to submit their data to us and reduces the strain on our own resources as well.”

All property data is collected by Connolly’s group, and combed and checked for accuracy. He explained the purpose of NIC’s multiple checks prior to analysis: “The point is to have some redundancy in the way we review all the data. It means we have numerous eyes on every data point, with numerous checks throughout each quarter. The thresholds we use are based on historical trends for that property. We can use them to benchmark the data we’re collecting and make sure there are no surprises sitting so far out of the trend that we need to look at it more closely and clean it up. After the collection period ends, in the data finalization process we run all of our checks repeatedly to make sure the data is clean before it is turned over to our analysts for reporting.”

Data collection is far from the end of the story. Next week’s post will delve into the analysis, quality assurance, and reporting efforts of NIC’s data group.