NIC MAP Vision released its latest Skilled Nursing Monthly Report on November 2, 2023.  The report includes key monthly data points from January 2012 through August 2023.   

Here are some key takeaways from the report:

Occupancy 

Skilled nursing property occupancy increased 59 basis points from July to end August at 82.3%. Occupancy is up 142 basis points from one year ago in August 2022 as it continues to recover since the pandemic low of 75.0% set in January 2021. Occupancy hovered around 81% from January 2023 through July 2023. August 2023 represents the first-time occupancy was over 82% since April 2020. However, challenges do persist with staffing shortages that continue to create difficulties within skilled nursing properties limiting the ability to admit new residents in some markets. The current occupancy trend over the past year does suggest that demand for skilled nursing properties is recovering. Occupancy remains low compared to February 2020 pre-pandemic levels of 89.1% (6.9 percentage points). 

Managed Care 

Managed Medicare revenue mix increased 19 basis points from July to end August at 11.8%. It has declined 68 basis points since its recent high of 12.5% in February 2022, but it is up by 262 basis points from the pandemic low set in May 2020 of 9.2%. Expectations are that it will continue to increase over time with the continued growth of managed Medicare. Meanwhile, Managed Medicare revenue per patient day (RPPD) declined 0.6% ending August at $487 and it is down 0.1% from last year in August 2022.  It has decreased $122 (20.1%) since January 2012 and continues to pressure some operators’ revenue as managed Medicare enrollment grows around the country. However, some operators see managed Medicare as an opportunity for growth in patient volume. 

Medicaid 

Medicaid patient day mix decreased 13 basis points to 67.0% in August. It has increased 397 basis points from the pandemic low of 63.1% set in February 2022. In addition, Medicaid revenue mix decreased in August, but still represented over half of property revenue at 53.8%. It has increased 472 basis points from the pandemic low of 49.1% set in February 2022. Meanwhile, Medicaid revenue per patient day (RPPD) decreased to $277 in August. It increased 2.6% from $270 one year ago in August 2022. 

Medicare 

Medicare revenue per patient day (RPPD) increased from July to end August 2023 at $592. It has increased 2.9% since September 2022. Most of this increase in reimbursement is likely a result of the increase in Medicare rates to skilled nursing properties for fiscal year 2023 and potentially higher acuity patients, which also increases RPPD to care for more complex patients. Meanwhile, Medicare revenue increased slightly from July to end August at 17.3%. However, it is down from one year ago, decreasing 419 basis points from August 2022.  

NIC MAP Vision clients with access to NIC MAP data can access the Skilled Nursing Monthly Report. The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. Talk to a product expert to learn more about NIC MAP Vision.

NIC is continuously seeking operators to contribute data featured in the NIC MAP Vision report on a monthly basis. Operators who are interested in participating can complete a participation form here. NIC maintains strict confidentiality of all data it receives. 

NIC MAP Vision clients, with access to NIC MAP® data, attended a webinar in mid-October on key senior housing data trends during the third quarter of 2023. Findings were presented by the NIC Analytics research team. Key takeaways included the following: 

Takeaway #1: Market Fundamentals on Track for Occupancy Recovery 

• The occupancy rate for senior housing—where senior housing is defined as the combination of the majority independent living and assisted living property types—rose 0.8 percentage points to 84.4% from the second quarter of 2023 to the third quarter for the 31 NIC MAP Primary Markets. This marked the ninth consecutive quarter of occupancy increases.  
• At 84.4%, occupancy is 6.6 percentage points above its pandemic-related low of 77.8% recorded in mid-2021 and 2.7 percentage points below its pre-pandemic level of 87.1% of the first quarter of 2020.   
• Demand in the third quarter as measured by the change in occupied inventory, or net absorption, totaled 7,853 units in the 31 Primary Markets, which was nearly three times the 2,806 units that arrived online during that same period. Demand has been positive over the past 10 quarters, which has helped occupancy to improve.    

Takeaway #2: Majority Independent Living Occupancy Gains Accelerated in Third Quarter 

• In the third quarter of 2023, the occupancy rate for assisted living increased by 0.9 percentage points to 82.6%. Meanwhile, after hovering around the 85% range for three consecutive quarters, the occupancy rate for independent living in the third quarter jumped by 0.7 percentage points to 86.1%.  
• Despite this jump, this was still the ninth consecutive quarter (i.e., the entirety of the pandemic recovery thus far) in which occupancy gains were stronger for assisted living than for independent living. As a result, the occupancy gap between the two stood at only 3.5 percentage points in the third quarter, which was smaller than the 4.9 percentage point gap recorded before the onset of the pandemic.  

Takeaway #3: Annual Inventory Growth Remained Low 

• In the chart below, we show annual inventory growth as a percentage of existing inventory.  
• By property type, annual inventory growth in the third quarter for independent living was 1.2%, below its pre-pandemic average of 1.6%. 
• Assisted living in the third quarter grew by a slightly higher amount at 1.5% year-over-year, which was a slight uptick from the prior quarter. Still, this year-over-year growth was less than half the typical growth recorded for assisted living before the onset of the pandemic, which was 3.2% annually. 
• This slower inventory growth stems from the slowdown in construction starts that we experienced during the height of the pandemic, a trend that occurred for both independent living and assisted living.

Takeaway #4: A Growing Share of Inventory is 25 Years or Older 

• With inventory growth slowing, it is interesting to evaluate how senior housing inventory has aged in recent years. In the chart below, we illustrate the distribution of stabilized properties in the first quarter of 2020 and the third quarter of 2023. 
• As shown at the bottom of the chart, the share of properties that are 25 years or older has grown from 34% to 41% in the past three and a half years. This older cohort has one of the largest shares of properties with occupancies that are 80% or lower, which may be driven by several factors, e.g., older floor plans that no longer meet consumer needs in terms of the size of units or the unit mix. 
• Meanwhile, the share of properties that are 10 to 17 years old has shrunk slightly from 13% to less than 11%. This younger cohort has the highest share of occupancy rates at 90% or higher, which could be indicative of having an established team in place and perhaps some brand recognition. 

Interested in learning more?

The data featured in this article derives from NIC’s analysis of NIC MAP Vision’s Senior Housing Market Fundamentals Data Release. NIC MAP Vision clients with access to NIC MAP data also receive an exclusive invitation to a market fundamentals webinar led by NIC’s Research team where they review each quarter’s trends in context with historical data and current events. To get a better idea of what’s covered, watch an abridged version of the webinar. To learn more about NIC MAP data, powered by NIC MAP Vision, and accessing the data featured in this article, schedule a meeting with a product expert today.

NIC Academy has gone live this week with The Fundamentals of Underwriting Senior Housing and Care certificate program. This certificate program stands out as the industry’s premier certification program designed to train investment and finance professionals. Upon completing the program’s six courses, graduates will earn a certificate in the Fundamentals of Underwriting Senior Housing & Care and the professional designation of ‘CSHIP’ – Certified Senior Housing Investment Professional. The CSHIP designation is the first and only professional certification tailored specifically for investment and real estate professionals in the senior housing and care industry. This comprehensive 90-day program is offered online in a self-paced, asynchronous format to maximize convenience for learners. The program is available multiple times a year and not only saves you time but also money by bundling relevant courses together. 

In the senior housing and care industry, the significance of hiring is growing due to shifting demographics in the United States, evolving consumer preferences, the introduction of innovative technologies, and the increasing demand for novel housing solutions. Hiring and retaining skilled, well-trained employees will be imperative as the industry prepares for expansion. 

Traditionally, the senior housing and care industry, known for its niche and unique nature, has relied on on-the-job training (OJT) methods to onboard new hires in real estate or investment-based roles within the sector. While OJT methods have their advantages, they also come with various challenges. For instance, many OJT training methods lack standardization of quality control, offer limited exposure, and often result in a loss of productivity among teams responsible for managing new hires. These challenges prompted the NIC Academy team to reconsider how best to prepare the next generation of industry professionals, ensuring they are equipped with all the tools for success. 

NIC Academy’s Fundamentals of Underwriting Senior Housing and Care certificate program provides a viable solution by enhancing the training and onboarding process and acting as a strong supplement or replacement for OJT training methods. 

I recently had the opportunity to speak with Zach Bowyer, MAI, Senior Managing Director at Cushman & Wakefield. As an executive in the senior housing and care industry, he effectively balances the demands of his executive role with the essential task of training new hires. Bowyer explained, “Attracting top talent and equipping them with the necessary expertise as swiftly as possible has always been a top priority for us. I’m excited to learn about NIC Academy’s Fundamentals of Underwriting Senior Housing & Care Certificate Program, and I am confident it will be a game changer in this regard.” 

Properly training new hires is vital for the growth, success, and long-term sustainability of any organization. It not only equips employees with the necessary skills and knowledge but also fosters a positive work environment and a professional culture, ultimately leading to improved business outcomes. 

Promoting the pursuit of professional designations will help the senior housing and care industry grow by ensuring standardization, credibility, quality, ethical standards, and by facilitating career advancement and increased collaboration. Professional designations benefit professionals by fostering a culture of excellence and continuous improvement. The NIC Academy team is confident that the CSHIP designation will establish a new ‘gold standard’ for the senior housing and care industry moving forward, becoming the foundational requirement for hiring and training new employees. This designation offers new industry entrants and career changers an equal opportunity to succeed in the ever-evolving senior housing and care industry. 

Learn more about The Fundamentals of Underwriting Senior Housing and Care certificate program.

Capital is available, but solving the financing puzzle nowadays takes some out-of-the-box thinking. Tony Marino has seen the market’s ups and downs over time and knows how to get deals done.  

Marino is managing director at Cambridge Realty Capital, an FHA/HUD approved lender. Marino recently talked about the firm’s approach with NIC Senior Principal Bill Kauffman. Here is a recap of their conversation with key insights on how to get to “yes” by creating win-win transactions for all parties.  

Kauffman: Can you give us some background on your professional career and your current focus? 

Marino: I’ve been with Cambridge for 26 years. I started here as an intern in college. Cambridge is one of the nation’s oldest and most trusted healthcare capital providers for senior housing and healthcare facilities. We are an FHA/HUD-approved lender and service our loans in-house. 

I’ve worked on every segment of the loan process from origination, underwriting, closing and asset management. I’m a HUD approved underwriter. I focus on origination and underwriting. I mainly work on new business and with borrowers as the liaison between the borrower and the underwriting team. I also do some asset management work to make sure borrowers are getting their needs met. We build long-term relationships with our borrowers. They are our focus.  

Kauffman: Can you give us an overview of Cambridge Realty? 

Marino: We are a privately-owned firm that was co-founded 40 years ago by the President, Andy Erkes, and Jeff Davis. Cambridge has been involved in virtually every type of financing available to the healthcare industry including agency (HUD), conventional bank and unconventional, non-bank, CMBS, life insurance and sale-leasebacks with both public and private REITs. We have closed more than $6.7 billion in HUD transactions and have a sizeable servicing portfolio. Cambridge has enjoyed a 99% HUD closing rate in the last five years and has consistently been ranked among the top HUD senior housing lenders for many years.  

Kauffman: How big is your team? 

Marino: Cambridge has a team of five originators on the front line. We have four team members in underwriting, two in loan servicing and a support staff. Our staff averages about 15 years of experience with the company. We’re a tight knit group and work closely together. We don’t put people in boxes. Our team understands each lending program’s requirements and underwriting guidelines to properly assess loan options and discuss them with borrowers. I’m the team’s one-stop shop for questions and answers.  

Kauffman: Is it important in today’s market to lock down interest rates? 

Marino: It’s the borrower’s decision. We like to say our crystal ball is in the shop. The decision depends on the borrower’s goals. Some borrowers want the best rate available at that time and want to take risk out of the mix. Other borrowers are willing to ride the ebbs and flows of the interest rate market. 

Some deals are more sensitive to interest rates, which can affect the purchase price. The borrower may need the highest amount of proceeds to fund the acquisition or necessary repairs. It’s a matter of what the borrower wants. We try to meet their needs and let them decide.  

For certain borrowers and deals that qualify, we offer an early rate lock option. We recently had several borrowers take advantage of this option to get significantly lower rates than what the current market is offering. 

If they ask for our opinion, we tell them what we’ve seen in the past. Like I said, we don’t have a crystal ball to predict the future. But we work with the borrower to develop a sensitivity analysis to make sure they are informed and educated. The more comfortable and knowledgeable borrowers are, the more likely they are to work with us again. We encourage borrowers to call and consult with us, we’re happy to be a sounding board and source of information.   

Kauffman: What other options do you offer in place of a bridge loan? 

Marino: We see a lot of owners who are ready to cash in and move on, and we work with many bridge lenders. But a bridge loan is not always the best fit. Bridge loans are a lot tighter now in terms of coverage restrictions and underwriting. So, we look at ways to get deals done.  

We’ve had success working with the seller in a purchase situation by creating a unique structure such as assuming existing debt from the ownership. It’s a win-win situation. The seller gets the best price because the buyer may not be able to finance as much with a traditional lender. We can underwrite that kind of deal, so the borrower gets more proceeds. It works out for all parties. 

The bigger regional companies may have access to financing, but loan terms may be too punitive for small companies. That puts a lot of pressure on the borrower. We’ve also found that it’s best to work with those who understand the industry. There are a lot of nuances between states and markets, such as differing reimbursement rates. Senior living is a unique business. 

Kauffman: Do you concentrate on a certain segment of senior living? 

Marino: We finance all types of healthcare properties: assisted and independent living, memory care, skilled nursing, if it’s financeable, we can find a home for it. 

Kauffman: What is your outlook for the rest of the year and the capital markets?  

Marino: We’re seeing rates go up lately, but my experience leads me to believe we’re coming to a peak. We may see a dip in rates after the Federal Reserve’s late October/November meeting. In an election year, the Federal Reserve tries to take a hands-off approach unless a serious event causes a policy change. They don’t want to be accused of meddling in politics. Next year, I think rates will be flat from where they land in December.  

Kauffman: Are deals coming off the table? 

Marino: The healthcare industry is recession proof. There’s always a need and we’re always doing deals. But deals are taking a different shape today. We are creative to get the maximum proceeds for the borrower. Our experience and knowledge allow us to delve deep into the numbers and optimize them to achieve the borrower’s goals and objectives. You have to get into the details to understand the market and the operator. We find unique ways to underwrite deals. 

Kauffman: Any other closing thoughts? 

Marino: The industry is going through some changes post-Covid. This is a time to adapt and explore new opportunities—not only in financing but also in operations. Over the last 40 years we’ve seen many different iterations of the industry, operators are resilient, and Cambridge’s ability to adapt and change with the times is one of our biggest assets.  

The senior housing market appears well-positioned for a steady and ongoing recovery, with occupancy levels expected to reach/exceed pre-pandemic levels in 2024, barring unforeseen challenges. 

Demand. According to third quarter 2023 NIC MAP® data, released by NIC MAP Vision, senior housing demand, as measured by the change in occupied units, continued to outpace new supply, marking its ninth consecutive quarter of growth with a net absorption gain for the NIC MAP Primary Markets of 7,853 units or 1.3% from the prior quarter and 24,627 units or 4.3% from year-earlier levels. Senior housing occupied stock is now 2.6% or 15,026 units above the pre-pandemic 1Q 2020 level.  

Supply. In the third quarter of 2023, the inventory of senior housing properties in the NIC MAP Primary Markets increased by 0.4% or 2,806 units from the prior quarter and 1.3% or 9,230 units from year-earlier levels. Additionally, within the NIC MAP Primary Markets, construction starts continued to be limited compared with pre-pandemic levels. Notably, over the four-quarter period ending in the third quarter of 2023, senior housing starts totaled 11,133 units, marking a level not seen since 2012 and representing less than half of the starts reported during the four quarters of 2019.  

AIV Ratio. The AIV (Absorption-to-Inventory Velocity) ratio for senior housing in the third quarter of 2023 remained above the AIV threshold and stood at 28:10 for the NIC MAP Primary Markets, which implies that for every 10 newly added units, 28 were absorbed. This indicates that the senior housing market has been able to absorb a significantly higher number of units than were added during the third quarter of 2023. 

Occupancy. As a result of this trend of positive demand coupled with a moderate pace of new supply and reflected in the recently strong absorption-to-inventory velocity ratio, the senior housing all-occupancy rate for the NIC MAP Primary Markets increased for the ninth consecutive quarter to 84.4% in the third quarter 2023, up 0.8 percentage points (pps) from the prior quarter. From its time series low of 77.8% in second quarter 2021, occupancy increased by 6.6pps but remained 2.7pps below pre-pandemic first quarter 2020 levels of 87.1%.  

When Might Senior Housing Occupancy Return to 1Q 2020 Levels? 

Just to provide context. While we often use 1Q 2020 as a benchmark to gauge the senior housing occupancy recovery, dynamics within the industry have evolved significantly. The occupancy level of 1Q 2020 may no longer serve as the benchmark for many operators due to the transformative impact of the pandemic. 

Based on the analysis below of absorption rates and inventory growth from 3Q 2021 to 3Q 2023, representing the last two years of recovery, it is projected that the senior housing occupancy rate will likely reach/exceed 1Q 2020 levels in 2024. This optimistic outlook is underpinned by the robust demand, limited supply growth, and the strong absorption-to-inventory velocity ratio observed in the market. 

It’s interesting to note that had the pandemic not occurred, the senior housing occupancy rate would have likely reached today’s mid-80% level. This projection is derived from modeling the occupancy growth trajectory from 1Q 2017 to 1Q 2020, the three years leading up to the pandemic. During this period, inventory growth was outpacing absorption, which resulted in a prolonged phase of declining occupancy before the pandemic struck. 

However, it’s important to acknowledge potential limitations and risks of this projection. Downside risks related to less robust demand, which could hinder the attainment of the projected occupancy rate of 88% include economic recession, rising interest rates, fluctuations in consumer confidence, and unpredictable public health conditions which taken to an extreme could be similar to the pandemic. Additionally, downside risks to supply, although unlikely, could emerge if inventory growth were to accelerate. However, current capital market conditions and the resulting lending environment, today’s relatively limited construction pipeline, and elongated delivery timelines of new projects suggest that supply growth is manageable and is not expected to outpace demand through 2024. 

Note that occupancy recovery timelines vary by property type, with assisted living occupancy rebounding at a relatively faster pace compared to independent living. This divergence reflects the unique dynamics within each property type of the senior housing market. 

By majority property type. At 86.1%, the all-occupancy rate for majority independent living (IL) properties for the NIC MAP Primary Markets increased by 0.7pps from the second quarter 2023. For majority assisted living properties (AL), the all-occupancy rate for the NIC MAP Primary Markets was up 0.9pps to 82.6% in the third quarter 2023.  

From pandemic-related lows, occupancy for assisted living increased by 8.7pps, nearly twice the increase for independent living (up 4.6pps since second quarter 2021). However, occupancy for both independent living properties and assisted living properties remained 3.4pps and 2.0pps below their respective first quarter 2020 levels.  

Notably, the occupancy rate for majority assisted living properties in the 68 NIC MAP Secondary Markets (84.3%) has fully recovered and surpassed its 1Q 2020 levels of 84.2% by 0.1pps. This remarkable recovery reflects a rebound of 9.8pps from the depths of the pandemic. Part of the explanation for this speedier recovery has to do with limited inventory growth and more restrained supply pipelines. 

Reflecting on the Future. The effects of the pandemic continue to reverberate within the industry, impacting operators in various ways. However, the overall trend suggests that the senior housing market is on a positive trajectory, with a renewed sense of its value proposition and purpose in serving the needs of older adults. 

One notable and positive shift brought about by the pandemic is the increased recognition of the value proposition that senior housing offers. This includes room and board, security, socialization, engagement, care coordination, and lifestyle. Indeed, the industry is gaining a heightened level of recognition, with more adult children and their aging parents appreciating the benefits a senior housing setting provides. This newfound awareness is reflected in the remarkable strength of demand dynamics, which have remained robust for nine consecutive quarters. The pandemic, while posing significant challenges to operators across the industry, has also highlighted the resilience and adaptability of senior housing operators.  

Notably, new research from NORC at the University of Chicago, funded by a grant from NIC shows that vulnerability – as defined by “frailty levels” of residents – rises in the months leading up to a move into a senior housing and care community, however, approximately three months following move-in, vulnerability plateaus and thereafter improves.  

Occupancy Changes in the Third Quarter 2023 Across Select NIC MAP Primary Markets.  

All-occupancy increased or remained stable in 27 of the 31 Primary Markets for IL in the third quarter 2023. At 90.5%, Minneapolis saw the second largest quarterly improvement, up 1.8pps from the second quarter 2023. San Jose IL occupancy had the second largest quarterly decline among the 31 NIC MAP Primary Markets and fell 0.6pps in the third quarter 2023 to 90.1%. Other markets such as Las Vegas, San Jose, Los Angeles, and Dallas experienced occupancy declines but not exceeding negative 1.0pps. 

All-occupancy rose or remained stable in 26 of the 31 Primary Markets for AL in the third quarter 2023. At 82.0%, St. Louis AL occupancy saw the largest increase and gained 2.6pps quarter-to-quarter. Portland, Philadelphia, Baltimore, and Atlanta experienced occupancy declines in the third quarter of 2023, but with declines less than 1.0pps.  

Keep track of the timely review of the sector’s market fundamentals and trends. The NIC Intra-Quarterly Snapshot monthly publication, available for complimentary download on our website, continues to provide a powerful and closely watched means to stay ahead of industry trends. 

The October 2023 Intra-Quarterly Snapshot report will be released on our website on Thursday, November 9, 2023, at 4:30 pm.   

Interested in learning more about NIC MAP Intra-Quarterly data? To learn more about NIC MAP Vision data, schedule a meeting with a product expert today.