At the upcoming 2018 NIC Fall Conference, the “Innovations That Work” session will share ideas on innovative technologies and tools that are changing the way operators and investors care for residents. Rapid-fire, seven-minute presentations on five key topics and moderated by Arnold Whitman, Founder and Chairman of Formation Capital, LLC, will address real-world examples of innovative solutions to some of the most pressing challenges in the industry today. Topics include how to:

• reduce staff turnover
• decrease re-hospitalization rates
• use artificial intelligence to help memory care patients
• apply predictive analytics to achieve 5-star rating and advance patient care
• implement cloud-based software to improve quality at the end of life

Further descriptions are below:

Jayne Keller, vice president of operations at Capella Living Solutions, will share ideas to reduce staff turnover that include how to use innovative thinking to develop a sense of community between staff and residents. Keller will tell us how high staff turnover impacts residents and will explain how the implementation of new perspectives has helped to decrease staff turnover at her properties.

Tim Reilly, vice president of human resources at Benchmark Senior Living, will also address how to reduce turnover rates in his lightning round talk. Reilly will share newly collected data from an analytics software package that can help predict the tenure of job applicants as Benchmark works to attract and retain staff.

Allen Pindell, senior vice president of information services and analytics at Lexington Health Network, uses telehealth solutions for after-hours management of unnecessary hospital readmissions. Pindell will share the win-win approach this innovation has had on patient experience, relationships with hospitals, physicians, and, most importantly, the bottom line.

Paul Liistro, managing partner with Arbors of Hop Brook, has also implemented artificial intelligence and predictive analytics to achieve 5-star ratings and improve patient care.

Alan Fox, executive director of WindChime of Marin, will share how memory care patients are most likely to suffer from falls and have a high rate of hospital admissions. Advanced artificial intelligence has allowed staff at WindChime to monitor resident falls and alert staff to assist in making quicker decisions on how to best care for memory care residents.

And finally, Phil Fogg, CEO of Marquis Company, will share cutting-edge, cloud-based software solutions used to help improve the quality of life at the end of life for patients and family alike.  Fogg will share how this software can help by providing regular patient updates and tutorials for difficult conversations.

If you will be attending the conference, we invite you to participate in this innovative and thought-provoking session on Friday, October 18, from 9:45 AM to 10:45 AM. Join us and learn how your peers are tackling everyday issues by incorporating innovative technology.

To learn more, please visit the NIC Fall Conference website.

The Labor Department reported that there were 201,000 jobs created in the U.S. economy in August, above the consensus expectation of 190,000.  However, revisions subtracted 50,000 to the prior two months as June was revised to 208,000 from 224,000 and July was revised to 147,000 from 157,000.  Payrolls have averaged 207,000 per month so far this year, up from 182,000 last year.

The unemployment rate was unchanged at 3.9% in August and was down from 4.4% one year ago. The jobless rate remains well below the rate of what is generally believed to be the “natural rate of unemployment” of 4.5% and continues to suggest that there will be growing upward pressure on wage rates.  The jobless rate is calculated from a different survey than the survey used to calculate the number of new jobs (the household versus the establishment survey, respectively).  Among major worker groups, the unemployment rate for adult men was 3.5%, adult women 3.6% and teenagers 12.8%.

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—fell to 7.4% in August from 7.5% in July and was down from 8.6% in August 2017.  Last month’s U-6 rate was a 17-year low.

In August, employment in health care rose by 33,000. In the past year, health care has added 301,000 jobs.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work fell 0.2 percentage points to 62.7%, near its cyclical low of 62.5% in October 2015.  The low rate at least partially reflecting the effects of an aging population.

Average hourly earnings for all employees on private nonfarm payrolls rose in August by ten cents to $27.16. Over the past 12 months, average hourly earnings have increased by 77 cents, or 2.9%.  This was a nine-year high.  Last year, they averaged 2.6%.

The August jobs report and the acceleration in average hourly earnings will provide further support for increases in interest rates through 2018 by the Federal Reserve. As widely expected, the Fed increased the fed funds rate by 25 basis points at its June FOMC meeting, the second increase in 2018.  The Fed has raised rates by a quarter percentage point seven times since late 2015, and most recently to a range between 1.75% and 2.00%, after keeping them near zero for seven years.  The June projections by the Fed now show a total of four increases in the fed funds rate are anticipated in 2018 (two of which have already occurred), up from an earlier expectation of three.  This would bring the benchmark rate to a range of 2.25% to 2.5% by year end.  The Federal Reserve also upgraded its view of the economy by substituting the word “strong” for “solid” in the statement that policy makers released after its meeting.  Further increases in the fed funds rate are anticipated in 2019.  Their projection for the fed funds rate in 2020 is 3.4%.  Hence, it is likely that there will be another 25-basis point increase announced by the Fed at its September meeting in two weeks and another one at its December FOMC meetings.

Popular NIC Talks series returns to fall conference

Today’s disruptive innovations often determine the future. Uber has upended the transportation business. Amazon changed retailing.

The same holds true for the concept of aging. Disruptive innovations will change the future of the aging experience and drive how society responds to the needs of an aging population in the years ahead.

With this in mind, the future of aging will be highlighted this year at NIC Talks. The popular series of 12-minute TED-style talks returns for a fourth time to the 2018 NIC Fall Conference, Oct. 17-19, Sheraton Grand Chicago.

Over the course of two days, NIC Talks will feature eight thought leaders, primarily from outside the industry, who will address the topic, “How Am I Changing the Future of Aging?”

NIC Talks will be presented during sessions on Thursday afternoon and Friday morning. NIC Founder and Strategic Advisor Bob Kramer will moderate the program.

Speakers will not specifically focus on seniors housing, noted Kramer. “Instead, they will present the innovative trends that will disrupt the future of aging and aging services.”

NIC Talks will address several broad themes: culture and workforce issues; artificial intelligence and applied technology; and quality of life and caregiving. Here’s quick preview of some of the topics and speakers.

Culture and workforce issues

As the industry grapples with a shortage of workers, several speakers will provide new insights into the issue. As Kramer noted, “It’s not just the lack of caregivers.” The industry needs to connect with workers on a deeper level in order to recruit and retain talent.

NIC Talks speaker Dwayne J. Clark will spotlight the importance of company culture. As co-founder and CEO of Aegis Living, Clark has created a culture of innovation based on its most important asset: its workers. He will detail his successful approach, which has led to innovative architecture, a nonprofit that supports employees in need, and fun and unusual ways they reward employees.

Chinwe Onyeagoro will provide insights into how to create a high-trust, high-performing workplace culture. Onyeagoro’s analytics firm, Great Place to Work, studies more than 10,000 organizations a year. She’ll present new research on workplace trends in the senior living industry and share the impact of high-performing cultures that inspire a sense of purpose.

Speaker Kelly Leonard from The Second City—Chicago’s famed comedy/improv theater—will share current research using improv techniques to improve interactions with people with dementia and Alzheimer’s. Leonard will share how learning this application improved his end-of-life interactions with his brother Kyle, showcasing the power in caregivers applying these techniques.

Artificial intelligence and applied technology

Technology has the ability not only to provide a better quality of care, but a better quality of life, noted Kramer. He foresees a time when technology will allow medical practitioners and caregivers the opportunity to spend most of their time interacting with residents instead of on administrative work. “Technology will have a huge impact on frontline workers,” said Kramer.

As Chief Technology Officer at NEST—Google’s smart home technology company—Yoky Matsuoka is one of the nation’s thought leaders on advances in intelligent home automation. At NIC Talks, she will highlight the challenges of building technology that seamlessly blends into people’s lives, and discuss specifically how this technology is being adapted to assist elders.

Renowned tech consultant Chetan Sharma will explore the idea of aging in place amid a significant technological shift to connected intelligence. He will describe how sensors are providing tremendous amounts of data on daily life and how intelligent software is helping us understand that data. This combination of sensors and software is dramatically altering industry after industry, and will shape aging and care in the coming decades.

Quality of life and caregiving

“Quality of life involves much more than just good quality of care and good health outcomes involve much more than good medical care,” noted Kramer. “We need to think about the social determinants of health.”

Two speakers will address quality of life issues and their impact on health and healthcare costs.

Lisa Marsh Ryerson is president of the AARP Foundation and a noted expert on social isolation. She will discuss loneliness—which from a health impact standpoint is the equivalent of smoking fifteen cigarettes a day. Loneliness leads to depression, and depression leads to the worsening of chronic conditions—all of which can be helped by community engagement.

Speaker Susan Dentzer will talk about the key trend of hospital at home, which will have major repercussions on the role of seniors housing in elder care. Dentzer is CEO of the Network for Excellence in Health Innovation, a nonprofit organization seeking intelligent ways to advance healthcare at reasonable costs. She will provide a look at healthcare without walls, how seniors housing can prepare and participate, and the impacts on health outcomes with this approach.

“Healthcare and eldercare will be understood differently in the future,” noted Kramer. He added that NIC Talks is a provocative forum where conference attendees can get a glimpse into the future and challenge their own thinking about aging and aging services. “These ideas will transform the aging experience,” he said.

Learn More

As challenges persist in both skilled nursing and seniors housing fundamentals, pricing trends have differed over the past couple years. We have seen a decrease in the price per bed in the skilled nursing sector.  But at the same time and even with today’s more challenging operating environment, seniors housing price per unit has been relatively steady which shows that buyers are bidding at relatively high pricing levels for seniors housing properties.

In the second quarter of 2018, seniors housing price per unit increased to $175,600, returning to the levels seen in the first quarter of 2017. The price per unit was up 4.3% from the first quarter of 2018 when it was $168,300, and up 1.7% from the same period last year in the second quarter of 2017 when it was $172,600. It is now up 200% from the time-series low, set in the second quarter of 2010, representing a 14.7% annual growth rate in price per unit since that time.  For seniors housing, it has been quite a good run in terms of price appreciation, not unlike the runup experienced with most asset classes since 2010.

Skilled nursing trends over the past couple of years (“nursing care” in chart below), have been different than the trends seen in seniors housing trend.  The price per bed for skilled nursing stood at $84,200 as of the second quarter 2018 which was a 8.7% drop from two years ago when the price per bed was $92,200 in the second quarter of 2016.  Over the past quarter, skilled nursing saw a slight uptick from $83,700, but when compared to a year ago in the second quarter of 2017, price per bed is down 12.1% when it was $95,800.  However, it is up 73% from the series low of $48,700 in the first quarter of 2009.

Switching gears and looking at the buyer composition through the second quarter of 2018, the total dollar volume closed across all buyers was $5.1 billion. The private buyer has been the most active participant so far, representing almost half of the closed volume (45%), at $2.3 billion through the second quarter of 2018 and averaging more than $1 billion a quarter. For comparison purposes, the private buyer represented 34% of total volume in 2017, registering $5.5 billion. However, the private buyer volume did decrease 42% from the first quarter to the second quarter of 2018 from $1.5 billion to $800 million.  Private volume for the second quarter of 2018 decreased 38% from the second quarter of 2017, when it totaled $1.4 billion.

For more information on transactions activity, please look at the September NIC Insider.

In addition, to hear more about valuations and the buyers in the market, please come to our NIC Fall Conference session “What’s It Really Worth?”.  To find out more please visit the NIC Fall Conference website.

Seniors housing is a multifaceted property type in commercial real estate, in part, because it is comprised of several different housing and care products designed to meet the diverse needs and desires of the older consumer. Product segments range from independent living, which focuses on hospitality and lifestyle services for healthy, active seniors, to assisted living for residents who are not fully independent and need help with daily activities, to memory support and nursing care units, which provide residents round-the-clock licensed, supervised medical care.  Any of these product segments may be found as a stand-alone building, and they are frequently combined in one or two buildings or clusters of buildings to form a campus of continuing care.

The following analysis details care segment performance in the Primary Markets since the most recent market cycle peak that was reached in the fourth quarter of 2014. The analysis looks specifically at the changes in occupancy, average annualized asking rent growth, and inventory growth for the independent living, assisted living, memory care and nursing care segments. Care segment-level data is available in the CBSA Trends report in Batch Data Files through the NIC MAP® Client Portal.

Seniors housing fundamentals: recent peak

For context, the chart below shows seniors housing fundamentals in the Primary Markets since the first quarter of 2006 through the second quarter of 2018. Seniors housing is defined as majority independent living and assisted living property types (the latter includes memory care but excludes nursing care). “Majority” property types are designated by the segment that comprises the largest share of a property’s inventory mix. For example, a 100-unit property with 60 independent living units, 20 assisted living units and 20 memory care units would be classified as majority independent living. Peak and near-peak occupancy rates were reached in the quarters leading up to the Great Recession, and more recently, in the second half of 2014, when the occupancy rate hovered around 90% for several quarters. In the beginning of 2016 the seniors housing occupancy rate began a 10-quarter decline as inventory growth outpaced absorption, falling to 87.9% as of the second quarter of 2018. This was the lowest occupancy rate in seven years.

Segment performance

So how have seniors housing and care segments performed since the recent market cycle peak? While all segments saw declines in occupancy from the fourth quarter of 2014 to the second quarter of 2018 due to inventory growth outpacing absorption, the independent living segment performed the best in terms of occupancy and average annualized asking rent growth. The memory care segment had the weakest comparative performance, overall, with the strongest change in inventory, which put pressure on the segment’s occupancy rates and rent growth.

• The independent living segment had comparatively moderate inventory growth (5.7%), and largely sustained occupancy growth (-0.3 percentage points, from 91.0% to 90.7%), which allowed average annualized asking rent rates to rise faster than at the other segments during the period (3.2%). Independent living also had a significantly higher level of occupancy at 90.7% in the second quarter of 2018 than did the other segment types.
• The memory care segment had the highest inventory growth (33.6%), the largest decline in occupancy (-5.1 percentage points, from 87.8% to 82.7%), and the lowest average annualized asking rent growth for the period (2.5%). It is worth noting, however, that the inventory base of memory care is relatively small, which can partially explain the large inventory growth rate of 33.6%. Compared with the other segments, memory care had the lowest overall occupancy rate in the second quarter of 2018 (82.7%), falling to its lowest level since NIC MAP began reporting the data in the fourth quarter of 2005.
• The assisted living segment experienced higher inventory growth than independent living but lower inventory growth than memory care (11.5%). Occupancy declined 3.5 percentage points (from 90.2% to 86.7%) for the segment (also falling to its lowest level in the time series), but average annualized asking rent growth for the period (3.1%) was similar to independent living.
• The nursing care segment had the weakest inventory growth (-0.4%), a 2.0 percentage point decline in occupancy, and an average annualized asking rent growth rate of 2.7% for the period.

This analysis has provided a broad overview of the relative performance of the different seniors housing care segments in the Primary Markets. However, it just scratches the surface of the analytics that can be developed for market area, regional, metropolitan and county-level insights. Further analysis on this topic is available to NIC MAP® clients in the NIC MAP client Insights Newsletter.