@bethmace

The Labor Department reported that there were 103,000 jobs created in the U.S. economy in March, below the consensus expectation of 185,000.  This followed an upwardly revised and very large gain in February of 326,000 and marked the 90^th consecutive month of positive job gains for the U.S. economy.  Over the past year, nonfarm payrolls are up 1.5%.  Through the first three months of the year, job gains have averaged 202,000, stronger than the monthly pace of 182,000 in 2017.  Revisions subtracted 50,000 jobs to the prior two months.

The unemployment rate remained unchanged for the sixth consecutive month at a 17-year low of 4.1% in March. This is below the rate of what the Federal Reserve believes is the “natural rate of unemployment” and suggests that there will be upward pressure on wage rates.

Average hourly earnings for all employees on private nonfarm payrolls rose in March by eight cents to $26.82. Over the past 12 months, average hourly earnings have increased by 71 cents, or 2.7%.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.3 million and accounted for 20.3% of the unemployed.  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 8.0% from 8.2% and was down from 9.2% as recently as December 2016.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work fell by 0.1 percentage point to 62.9%, but was up from 62.4% in 2015.  Nevertheless, this remains quite low by historic standards, at least partially reflecting the effects of retiring baby boomers. The employment to population ration held steady at 60.4%.

Health care added 22,000 jobs in March to reach 15.9 million jobs or 10.7% of the U.S. job base.

The March jobs report will provide further support for increases in interest rates through 2018 by the Federal Reserve. Already, the Fed increased the fed funds rate 25 basis points at its March 20/21^st FOMC meeting.  The Fed has raised rates by a quarter percentage point six times since late 2015, and most recently to a range between 1.50% and 1.75%, after keeping them near zero for seven years.

What strategies can be used to mitigate today’s tight labor markets? Below are some ideas that I hope will stimulate conversation and dialog about a topic that is here to stay.   Collectively, let’s keep adding to this list and generate additional ideas about practical and implementable solutions to the ever-growing challenge of today’s tight labor markets.

These ideas fall into three general categories: work environment; recruitment; and collaboration with educational institutions.

Work Environment

1. Improve employee retention by providing a culture and work environment that makes staff want to stay in place. The added benefit of this of course is that it will also enhance long-lasting relationships with residents. Steady, consistent and predictable staffing improves quality of life for residents.
2. Reduce turnover and create long-term commitment from staff by providing a benefits package, competitive pay, financial incentives, and a work environment that encourages employees to stay for elongated periods. This applies to frontline caregivers, middle managers, and senior executives. Offer training and educational programs. Offer scholarships to staff family members. Provide healthcare to staff. As Richard Branson, founder of the Virgin Group, has said, “Train people well enough so they can leave, treat them well enough so they don’t want to.”
3. Create an environment that encourages opportunity for community-based involvement, including programs for staff with young adults and children. Generate a family-oriented environment for staff where family members periodically come to work. Offer complementary meals to staff and consider offering child care services.
4. Take away any stigma associated with working in the seniors’ care and housing sectors. Improve the narrative about working in the sector.  Emphasize the “care” component of the industry and the sense of purpose that comes from doing work that enhances the lives of others.
5. Employ technology to improve work efficiencies so staff can spend more time with residents to improve quality and quantity of care.
6. Create teams of excellence composed of staff members that work well with each other, share experiences, and become professional colleagues. Use these teams as role models throughout the organization. Create programs where employees nominate each other for awards and recognition.
7. Listen to your staff. Understand what motivates them. Engage with staff. Find out why employees leave.
8. Generate a flexible scheduling process for staff and guarantee a standard set of work hours for proven employees.

Recruitment

9. Think marketing. Create a job recruitment program that is comparable in marketing scale to new-resident sales recruitment.
10. Create a corporate brand and reputation that makes staff proud and braggadocios. Provide a bonus to existing staff for recruitment of new staff and create an employee referral network.
11. Train senior management on talent management and recruitment of appropriate candidates in terms of corporate culture, requisite skills, and personalities. Consider industries in the retail and hospitality sectors as well as other industry groups as competition in your staff recruiting and retention challenges. Foster employee loyalty with an effective on-boarding program.
12. Consider demographics and where the future workforce is coming from. Recruit older workers and create an environment where the old take care of the older and the older take care of the oldest.
13. Create succession planning models and redundancy plans for key staff positions. Implement systems that can mitigate a single source of failure in the operation. The creation of assistant executive director programs, for example, is one solution being implemented to help protect the operation from the loss of an experienced and well-regarded executive director, a position often viewed as an operator’s single most important and critical resource for a property’s success.
14. Optimize social media opportunities for staff recruitment. Use the latest search engines and job websites to generate applicant flow.
15. Expand the geographic radius from which to draw staff and consider helping staff get to work with ride-sharing services such as Uber or Lyft.

Collaboration with Educational Institutions

16. Identify and advertise specific career tracks for the sector and within organization structures. Debunk negative myths about the sector. Re-shape the narrative of working in seniors housing and care as being a promising and exciting field with myriad career paths.
17. Continue to create awareness campaigns such as Connect the Ages and through group initiatives such as Leading Age’s Center for Workforce Solutions and Argentum’s Workforce Development Initiative.
18. Collaborate with universities to create and expand undergraduate and graduate educational tracks and degrees for operations and management in the seniors’ care and housing sectors. A number of these programs exist today, but more are needed.
19. Reach out to high schools to create training and hiring programs for students, as well as internship opportunities. Create programs for graduating seniors who have worked in seniors housing and care to choose aspiring undergraduate high school replacement workers.

A change in immigration policy that would welcome workers in the caregiving and healthcare professions could also help to alleviate the sector’s growing hiring challenges.  This needs to be vocalized among policy makers in Washington. And lastly, I wonder if there is a way to “uberize” select staff positions in the seniors housing and care industries. There are many boomerang boomers out there who want to provide service and “give back,” while earning money and having flexibility in their schedules.

And as I said at this beginning of this blog, please, let’s keep this conversation going.  I welcome your suggestions and ideas as we further build this list out.

As the seniors housing and care industry’s leading data provider, NIC tracks occupancy, asking rents, demand, supply and construction data for independent living, assisted living, memory care, skilled nursing and continuing care retirement communities (CCRCs)/life plan communities (LPCs). The following narrative describes CCRC/LPC occupancy and supply and demand trends in the combined primary and secondary markets, which represent the aggregate of the data collected from 99 of the largest core-based statistical areas (CBSAs).

Supply & Demand Fundamentals

CCRC/LPC occupancy was flat in 2017

A review of the current fourth quarter 2017 data for the combined primary and secondary metropolitan markets tracked by NIC MAP® shows that CCRC/LPC occupancy was flat in 2017, fluctuating only as much as 20 basis points during the four quarters. Current all occupancy is 91.1% and stabilized occupancy is 10 basis points higher (91.2%).

Despite relatively wide variations in inventory growth and absorption reported in the first and third quarters of 2017, on a net basis, absorption exceeded inventory growth by about 800 units, allowing occupancy to remain relatively stable.

CCRC/LPC construction is concentrated in a few markets

Compared to other types of seniors housing, CCRC/LPC construction activity is generally subdued, with about 2.6% of existing inventory currently under construction (9,347 units). Rental CCRC/LPC construction is 3.8% of existing inventory compared to 1.9% entrance fee CCRCs/LPCs.

The map below illustrates where CCRC/LPC inventory growth has been strongest as indicated by the size of the circles. In addition to absolute growth, the color of each circle represents the percentage of CCRC/LPC inventory in relation to total inventory.

As of the fourth quarter of 2017, the largest number of CCRC/LPC units under construction were located in Philadelphia (785), Kansas City (706), Los Angeles (633), Dallas (587) and New York City (566). The greatest percentage of CCRC/LPC units under construction as a share of inventory were reported for Knoxville (44%), Memphis (23%), Riverside, (18%), and Hartford (13%). Half of the primary and secondary markets (51 out of 99) had no CCRC/LPC units under construction.

Occupancy by Profit Status

Not-for-profit CCRCs/LPCs occupancy spread still hovering around 5%

The fourth quarter of 2017 saw an uptick of 10 basis points in occupancy for not-for-profit CCRCs/LPCs (currently 92.4%), while for-profit occupancy remained unchanged since the prior quarter (87.4%).

The occupancy spread for not-for-profit and for-profit CCRCs/LPCs in the combined primary and secondary markets has hovered around 5% since the third quarter of 2015.

Occupancy by Market Cohort

Primary and secondary market occupancy rates continue to trend upward

As of the fourth quarter of 2017, CCRC/LPC occupancy was up 10 basis points to 91.6% for the secondary markets and 90.8% for the primary markets, respectively.

CCRC/LPC occupancy in the primary and secondary markets has been tracking relatively closely since the first quarter of 2015, with the narrowest spreads observed in the first quarter of 2015 and 2016, and the second quarter of 2017.

CCRC/LPC Supply & Demand by Payment Type

Entrance fee CCRCs/LPCs continue to outperform rental CCRCs/LPCs in terms of occupancy but rentals are trending upward

While entrance fee CCRCs/LPCs occupancy has been flat for the past nine quarters, rental CCRC/LPC occupancy has trended upward 60-basis points since reaching its cyclical low in the third quarter of 2016.

As of the fourth quarter of 2017, entrance fee CCRC/LPC occupancy was 92.0% and rental CCRC/LPC occupancy was 89.4%.

The spread between entrance fee and rental CCRC/LPC occupancy in the combined primary and secondary markets accelerated between early 2015 and mid-2016 and has since narrowed, albeit slightly. The occupancy gap is currently 2.6 percentage points, down 20 basis points from the prior quarter and equal to the first quarter of 2017.

CCRC/LPC Rental annual inventory growth and absorption is positive for the first time in five quarters

As of the fourth quarter of 2017, both entrance fee and rental CCRC/LPC inventory growth and absorption is positive, however entrance fee communities have trended lower since the first quarter of 2017.

Although entrance fee CCRCs/LPCs reported an uptick in annual inventory growth beginning in the third quarter of 2016, rental CCRCs/LPCs trended downward, reporting negative figures following two quarters of peak or near-peak annual inventory growth. A net figure, negative growth may be a result of units being taken off line, or may reflect units being combined into larger residences or shifted to other community types.

Key Takeaways from the Fourth Quarter 2017

• As of the end of 2017, CCRC/LPC community occupancy remained high at 91.1%, just 10 basis points below its most recent peak reached in the second quarter.
• Not-for-profit CCRCs/LPCs lead for-profits in occupancy, and the occupancy gap has been hovering around 5 percentage points for 10 quarters.
• Primary and secondary market CCRC/LPC occupancies continue to track closely and both were trending upward as of the fourth quarter.
• Entrance fee CCRCs/LPCs continue to outperform rental CCRCS/LPCs in terms of occupancy, and rental occupancies were trending upward as of the fourth quarter.
• Compared to other types of seniors housing, CCRC/LPC construction activity is generally subdued, with about 2.6% of existing inventory under construction.
• About half of the top 99 CBSAs that NIC tracks had no CCRC/LPC units under construction, while more than a third of the construction was located in five markets: Philadelphia, Kansas City, Los Angeles, Dallas and New York.
• As of the fourth quarter of 2017, both entrance fee and rental CCRC/LPC inventory growth and absorption was positive.

Medicaid Reimbursement Rates Draw Attention

At around $200 per day, Medicaid is the lowest priced payor source for skilled nursing properties. The American Health Care Association (AHCA), a trade association representing skilled nursing providers, has been calling on policy makers to address Medicaid reimbursement rates for years. Until recently, this concern did not draw significant attention from outside the industry. Within the last month, however, the issue of funding levels from public sources for long-term nursing home stays has entered the spotlight.

Let’s break it down: Medicaid as a payor source for skilled nursing providers

According to the 4Q2017 NIC Skilled Nursing Report, Medicaid reimburses skilled nursing properties at an average national rate of $206, less than half the rate paid by Medicare and Managed Medicare, $503 and $433, respectively. For private payors, the reimbursement rate was $257 at the end of the fourth quarter 2017. The Medicaid rate stems from an increase of $4 from year-end 2016.  In December 2016, the year-over-year increase was $3 and in 2015, the year-over-year increase was $1.

Revenue Per Patient Day (RPPD) only tells a part of the story, though. Even as the year-over-year growth rate for Medicaid RPPD increases (albeit slowly), the margin of increase ($1-$4) may not offset declines in patient day mix for the higher Medicare and managed Medicare payor sources payor sources.

To better understand how RPPD and patient day mix impact skilled nursing properties, NIC has recently introduced a new metric to the Skilled Nursing Report: Revenue Mix. Indeed, as the charts below indicate, Medicaid revenue, as a share of overall revenues, is on the rise. As Medicaid becomes increasingly more important to overall skilled nursing revenues, more attention may be drawn to Medicaid RPPD. Indeed, the New York Times, citing NIC data, recently published an article highlighting the gulf between Medicare and Medicaid RPPD.

Another addition to the Skilled Nursing Report is the inclusion of urban and rural trends. As a recent Skilled Nursing News article pointed out, urban and rural providers have different challenges and opportunities, and those differences are evident in Medicaid mix, RPPD, and revenue mix. For example, Medicaid RPPD is lowest for rural properties, averaging only $193 as of the fourth quarter, compared to $209 for providers in urban areas.

The big question: Is it enough?

According to AHCA’s research, the rate paid by Medicaid for long-term care of nursing home residents may be inadequate. In some states, AHCA contends, the rate is actually less than the cost of care, leaving providers to leverage the other payor sources (Medicare, managed Medicare, and Private) to offset losses. AHCA is not alone in this sentiment. On March 13, a group of concerned citizens in Missouri lobbied in the state capital to advocate for proposed legislation that would reform Medicaid to “bridge the gap” between the cost of care and the state’s Medicaid reimbursement rate, according to the Missourian. And in Washington state, a bill narrowly failed that would create a payroll tax to offset the cost of long-term care for seniors to help low-income nursing home residents avoid spending down all of their assets before qualifying for Medicaid. The New York Times reported that the failed legislation is indicative of a national trend, stating, “legislators are increasingly worried about the growing number of older residents, many of whom don’t even have enough money saved for a comfortable retirement, let alone nursing home bills that can sometimes top $100,000 per year.”

Now what?

Because Medicaid is a program funded and regulated by both the states and the federal government, reform impacting the daily reimbursement rate could occur at either the state or federal level. Federal Medicaid reform could impact the available budget for states’ Medicaid programs, which could have an impact on the Medicaid reimbursement rate. Furthermore, the current administration has stated its desire to grant states more flexibility to use Medicaid dollars to provide care in lower-cost settings through home-and-community based services. The attempt in Washington state to make more funds available for long-term care would be an example of how state reforms could impact the skilled nursing industry. Keep an eye on the NIC Skilled Nursing Data Report, released quarterly, as we track these national trends in Medicaid reimbursement.

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Focused on the themes of collaboration, innovation, and how to navigate current market realities, the 2018 NIC Spring Investment Forum drew nearly 1,800 attendees to the Omni Dallas Hotel last week.

The busy three-day meeting provided a wide variety of networking opportunities, several NIC-hosted receptions, and 17 educational sessions.

In the media briefing on Wednesday, Brian Jurutka, President and CEO of NIC stated: “NIC has always evolved to meet the needs of the industry.  This conference represents our recognition that the collaboration and partnerships between traditional seniors housing operators and senior care enablers will ultimately provide value to residents.  We think that, in the future, instead of senior residents going to healthcare healthcare will come to the seniors.”

Jurutka opened the general session by introducing the Forum’s theme, “Unlocking Value in Senior Care Collaboration.” He noted three drivers of industry change: a change in the wants and needs of baby boomers relative to previous generations, changes in healthcare payment models and delivery pathways, and technology.

Jurutka opened the general session by introducing the Forum’s theme, “Unlocking New Value in Senior Care Collaboration.” He noted three drivers of industry change: a necessary shift in approach needed to care for the coming wave of baby boomers, changes in healthcare payments and delivery systems, and new technology.

“Seniors housing and care operators can create value through partnerships with senior care enablers, whether non-real estate based care providers or hospitals and health systems,” said Jurutka. He noted that quite a few of the educational sessions were devoted to evolving partnerships between healthcare enablers and seniors housing and care communities.

A panel of healthcare policy experts followed Jurutka. They offered their candid observations about the growth of Medicare Advantage plans, value-based purchasing for healthcare, and how senior living companies can position themselves for success.

The luncheon general session included a lively discussion on investment strategies. Panel moderator Kurt Read, RSF Partners, asked panelist Rick Matros of Sabra REIT and Arnold Whitman of Formation Capital about a number of timely topics: interest rates, care delivery, the dangers of over leverage, and the critical issue of labor shortages.

Educational sessions were held over the course of the three days. Here’s a recap of some of the sessions:

“Integration of Care Services: How to Partner with Places People Call Home.” Several providers offered their experiences of partnering with healthcare services. Tony D’Alonzo of Bayada Home Health Care noted that 25 percent of its clients are living in seniors housing. In another example, Brandywine Living uses healthcare coordination as a differentiator.

“Operators and Investors… So Who is Going to Take Care of All Those Boomers?” Panelists addressed the labor shortages facing the industry and the need to recruit and retain good staff. Some of the solutions included hiring older workers and using new technologies to increase efficiency.

“A Fireside Chat with Equity Players in Senior Care.” A diverse panel of senior care stakeholders discussed the outlook for real estate and non-real estate assets. Moderator Ben Firestone of Blueprint Healthcare noted the strength of market headwinds; but added that property performance always comes back to the operator. A rapid fire round of questions produced an outlook of rising property and non-real estate asset prices and continued shortages on the labor front.

“What Seniors Housing and Care Investors Need to Know about Healthcare and Why It’s Important.” Moderator Anne Tumlinson provided a backdrop of the intersection of healthcare and senior living. In short: all senior living residents are covered by Medicare and many are in the Medicaid program. These seniors account for a large amount of healthcare spending. Two senior living providers described their programs to offer care coordination and how the programs have increased census and made for happier residents.

“The Path to Healthcare Risk: Do You Have a Decent Map and Proper Footwear?” Panelists discussed taking on risk for healthcare. Several provided insights into how they insure their own residents. They agreed that the insurance route isn’t for everyone.

“Local Markets Performance in Seniors Housing and Care” took a deep dive into market metrics and how NIC MAP data tools can be used to determine which markets offer the best opportunities.

NIC Chief Economist and Director of Outreach, Beth Mace, provided an overview of macro-economic conditions. She addressed the factors that impact individual market performance: economic vitality, labor force availability, demographics, and new building supply. “There is an upward pressure on wages and a downward pressure on rents,” she noted.

Audience members were polled on the Forum’s mobile app during the session. In answer to one question, a majority of attendees agreed that labor pressures are the biggest challenge they face.

Highlighting the wide variations in local markets, Lana Peck, NIC senior principal, detailed data on San Francisco, Houston and Atlanta. She also demonstrated NIC MAP tools that can be used to define trade areas, including a new feature that segments markets by drive time.