NIC MAP Vision released its latest Skilled Nursing Monthly Report on June 1, 2023. The report includes key monthly data points from January 2012 through March 2023.

Here are some key takeaways from the report:

Skilled nursing property occupancy decreased in March, after increasing for two months in a row. It declined 27 basis points from February to end the month at 81.0%. There has been positive momentum in occupancy throughout 2022 and the first couple months of 2023. It is up 6.3 percentage points since the low (74.7%) point reached in January 2021. However, staffing in the sector is still a significant burden on skilled nursing operators and is limiting additional admissions in many markets around the country. Occupancy is down 7.8 percentage points from the pre-pandemic February 2020 level of 88.9%. As staffing and general inflation pressures persist, operations for many operators will be under pressure but the long-term demand for skilled nursing services is expected to grow over time.

Both Medicare revenue mix and the revenue per patient day (RPPD) increased in March. However, both are down slightly from December 2022. Medicare revenue mix is down 251 basis points from the most recent in high in February 2022 which was a time when increased cases of COVID-19 resulted in additional need for utilizing the 3-Day rule waiver and per day reimbursement for COVID-19-positive patients. Medicare revenue mix ended March at 22.2%. Medicare RPPD ended March at $591 and is up 0.78% from one year ago. Meanwhile, Managed Medicare revenue mix was down 28 basis points to 11.4% in March. However, this is 220 basis points above the pandemic low of 9.2% set in May 2020.

Managed Medicare revenue per patient day (RPPD) increased slightly in March, but it is down 0.8% from March 2022. Depending on an operator’s business model, the continued decline in managed Medicare revenue per patient day can pose a challenge as the reimbursement differential between Medicare fee-for-service and managed Medicare has increased during the past two years. However, some operators see opportunity to capture patient volume with the growth of managed care. Medicare fee-for-service RPPD ended March 2023 at $591 and managed Medicare ended at $478, representing a $113 differential. In March of 2021, the differential was $90.

After increasing slightly in the month of February, Medicaid patient day mix was flat, ending March at 64.9%. However, it has increased 188 basis points from the pandemic low of 63.1% set in February 2022. Meanwhile, Medicaid revenue mix declined 45 basis points from the prior month, ending March at 50.1%. One element of the Medicaid revenue share of a property’s revenue is RPPD and that declined 0.23% from February. However, it up 3.44% since last year in March 2022.

Get more trends from the latest data by downloading the Skilled Nursing Monthly Report. There is no charge for this report. 

The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. NIC continues to grow its database of participating operators to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form on our website. NIC and NIC MAP Vision maintain strict confidentiality of all data received.

After facing down a pandemic for three years, the senior housing industry now faces a new reality—some parts good and some not so good.   

On the plus side, the occupancy rate is improving. The labor market is tight, but better than it was a year ago. New inventory growth is relatively limited.  And, inflation and expenses continue to rise, although at a slower pace 

On the less positive side is a lot of uncertainty, which few business leaders like. They wait for clues on whether interest rates will continue to climb. Debt financing is scarce. The stability of the regional banks, a source of loans for the industry, is a concern. Added to that, economists think a mild recession seems more likely than not in the next 12 months. 

So, what do current market trends tell us about where the industry is headed?  

A panel of experts recently took a deep dive into that question during a NIC Leadership Huddle webinar. The conversation was led by NIC Chief Economist Beth Mace. She was joined by three senior living executives with different roles and market perspectives.  

Putting the conversation in context, Mace presented a detailed look at current economic conditions and the commercial real estate and senior housing markets. She said that inflation, the direction of interest rates, and the impact of rate hikes to date remain a concern though senior housing market fundamentals are recovering. 

Join the next complimentary NIC Leadership Huddle Webinar

“Prominent Real Estate Research Directors Discuss

Market Trends and the Economic Outlook”

June 13, 2023, 2:00 PM ET

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Commercial Credit Freeze 

The capital markets are a worry.  

“It’s incredibly inefficient to finance something,” said panelist Aron Will, vice chairman and co-head, National Senior Housing, CBRE Capital Markets. A large slice of equity capital has returned to the market, but debt financing is difficult to secure. 

The national banks have been out of the lending market since last summer and the regional banks have liquidity problems. It’s especially difficult to refinance or trade value-add type properties—the projects that need the most help. “There’s just not a lot of deals that qualify,” said Will.  

The general slump in commercial real estate is having a spillover effect on senior housing, according to panelist Steve Blazejewski, senior portfolio manager and managing director at asset management firm PGIM. Institutional investors have hit pause waiting for the liquidity crisis to pass. “Nothing is transacting,” said Blazejewski.  

Good Things Happen Here 

From an operator’s perspective, Kris Woolley expressed a big sense of relief. “It feels a lot better today,” said Woolley, founder and CEO, Avista Senior Living. “COVID was just overwhelming.” 

He said his staff of 1,100 people is in a better frame of mind now. Reliance on expensive staffing agencies has decreased dramatically. Rents are being raised without pushback from consumers.  

Fewer new communities are opening so there’s less competition. Net operating income is up year-over-year. “Despite the very difficult capital markets issues, there’s a lot of good things going on,” he said.  

Avista is fielding more inquiries about management assignments from institutional owners with troubled properties. Woolley said that a reset in valuations could provide an opportunity for operators to seek some form of ownership. Regional operators could be the winners. “The market is creating a much deeper bench of mid-sized, regional operators,” he said.    

Recession Apprehension 

The panelists expect more trouble in the short-term but a brighter outlook in the years ahead as baby boomers age into senior housing and care.  

For now, the continued disruption in the capital markets and the prospect of a recession worry the panelists. A lot of senior housing properties have floating rate debt and higher interest rates are sapping any gains being made in net operating income. “It’s difficult,” said Woolley.  

Some troubled properties are going back to the lenders. “What happens then?” asked Mace. The panel agreed that lenders do not want to operate senior housing properties. 

Blazejewski expects write-downs, loan covenant modifications and property sales at lower prices. Banks are already asking equity providers to put in more capital to refinance loans. But opportunities could emerge for investors with capital to buy loans.    

Older properties represent a big challenge. “You can’t put enough CapEx into them to keep them competitive,” said Will. As an alternative, older properties could be retooled to provide a more affordable product for the underserved middle market.  

Beyond the next 12-18 months, the outlook for senior housing is bullish. New construction is down 54% from its peak. The aging population is a big plus. Consumers are also more aware of the senior housing product than they were 10 years ago.  

Another bright spot is senior housing’s fundamental strength. Annual rent growth has recently topped 5%. “That’s a remarkable statistic,” said Will. “The resilience of this asset makes it a shining star.” 

To stay current on senior housing market conditions during these turbulent times, visit NIC’s new Senior Housing Market Conditions Hub for insights and resources on factors influencing the outlook for senior housing and care.  

The next NIC Leadership Huddle webinar will be held June 13. Prominent real estate research directors will discuss market trends and the economic outlook.  Register now! 

Data from the recently released 1Q2023 NIC MAP Vision Actual Rates Report showed growth for asking rates was at near-record highs on a year-over-year basis for all three care segments (independent living, assisted living, and memory care) for the data contributors to this data collection. In the recently released report, monthly data of actual rates and leasing velocity are presented through March 2023, including data on rate discounting and move-in/move-out trends. Key takeaways from the report, specifically from the Segment Type report, are presented below. Care segments refer to the levels of care and services provided to a resident living in an assisted living, memory care or independent living unit. 

Key Takeaways

• The year-over-year pace of growth in all rates for all care segments reached near record highs.

• • • At 9.6% in March 2023, year-over-year asking rate growth for the independent living care segment was the strongest pace of the three rate categories. Separately, in-place rates were up by 7.5% from year-earlier levels, and initial or move-in rates were up by 8.2%. These were nearly the highest rates of growth in the time series for these rates, except for January 2022, when many rates rose with lease renewals and annual adjustments.
    • For assisted living, growth in initial rates was a very high 11.5% in February 2023, the largest year-over-year increase in the time series. March 2023 gains were also high at 8.7% from year-earlier levels. Asking rate growth topped 9.1% in March 2023.
    • Of the three tracked memory care rate categories (in-place, asking and initial/move-in), the fastest pace of growth occurred in asking rates, which were up by 9.1% from year-earlier levels in March 2023. In-place rates were up by 9.0% from year-earlier levels in March 2023 and initial rates were up by 7.4%. 

• Discounts are highest in the independent living care segment.
  • • Discounts between asking rates and move-in rates (initial rates) within the independent living segment have hovered between 1.0 months and 1.3 months on an annualized basis since February 2022 and were the equivalent of $383 (1.2 months) in March 2023. Compared with asking rates, in-place rates had a 0.6 month annualized equivalent discount. This is higher than the historic average of 0.2 of a month.

• The pace of move-ins generally strengthened in the early months of 2023 for assisted living, and memory care.
  • • Move-ins for assisted living segments averaged 3.6% of inventory in March 2023, among the strongest months since September 2021. At its lowest point in the early months of the pandemic, move-ins averaged 1.1% of inventory in April 2020 before accelerating to a high rate of 3.9% in June 2021.  

Additional key takeaways are available to NIC MAP Vision subscribers in the full report.

NIC MAP Vision continues to work to onboard new data contributors and is dedicated to reporting more metros. It is only with the support of Actual Rates data contributors and officially certified Actual Rates software partners that expanded metro-level reporting is now available. For more information on which metropolitan markets are now available to NIC MAP Vision subscribers, please contact a product expert at NIC MAP Vision today. 

About the Report

The NIC MAP Vision Seniors Housing Actual Rates Report provides aggregate national data from approximately 300,000 units within more than 2,700 properties across the U.S. operated by 35 to 40 senior housing providers. The operators included in the current sample tend to be larger, professionally managed, and investment-grade operators as we currently require participating operators to manage 5 or more properties. Note that this monthly time series is comprised of end-of-month data for each respective month, and that the set of properties included in each month’s data set is subject to change. The sample is not “same store,” and occupancy is inclusive of newly opened properties in lease-up. NIC MAP Vision is working on including same-store rate metrics in a future release.

Interested in Participating?

The Actual Rates Data Initiative is an effort to expand senior housing data and we are looking for operators who have five or more properties to participate. NIC MAP Vision has expertise in extracting data from industry leading software systems, such as Yardi, PointClickCare, Alis, MatrixCare, Glennis Solutions, Vitals, Move-N, and Eldermark and can facilitate the process for you. 

Operators contributing data to the actual rates report receive a complimentary report which allows them to compare their own data against national, and metropolitan market benchmarks.

In addition to receiving a complimentary report, your organization benefits through:

• More informed benchmarking, strategic planning, and day-to-day business operations,
• Increased transparency, aligning with other commercial real estate assets in terms of data availability,
• Saved time, Actual Rates data is collected electronically directly from operators’ corporate offices, removing the need for telephone calls to individual properties, and
• Enhanced investment and efficiency across the sector.

Visit NIC Map Vision’s website for more information.

Mental health is part of physical health. If that wasn’t always obvious, it became painfully apparent during the pandemic. Isolation and loneliness can trigger anxiety and depression.  

Senior living residents can be especially vulnerable. Many residents move in with chronic health conditions, such as congestive heart failure, which can be addressed. Less recognized is the fact that mental health issues are also common among the older population. 

But that’s changing. Awareness is growing among owners and operators that residents’ mental health issues need to be addressed. “Mental health challenges are being talked about more routinely these days,” said NIC Senior Principal Ryan Brooks. “That’s a good thing.” 

Brooks led a panel of experts at the 2023 NIC Spring Conference in a discussion titled, “Opportunities in Behavioral Health.”  

The speakers addressed how owners and operators are integrating mental health programs into their offerings. The panel also discussed how some senior living providers are exploring whether underutilized properties could be recycled as behavioral health centers.  

By the Numbers 

A recent study by NORC, the research arm at the University of Chicago, conducted through a grant from NIC, found that more than half of senior housing residents have at least one mental or behavioral health diagnosis. Four out of five nursing home residents have a behavioral health diagnosis.  

AARP found that 35% of older adults are lonely and prone to depression, leading to a higher risk of problems with alcohol and substance abuse. Twenty percent of seniors already suffer from some form of substance abuse, according to the Substance Abuse and Mental Health Services Administration.  

“Positive health outcomes are not just nice to have,” said Brooks. Poor mental health can impact the resident’s ability to engage with their provider, keep appointments and take their medications.  

Compromised mental health also hinders social engagement, according to panelist Hilary Forman, chief clinical strategies officer at HealthPro Heritage, an integrated health and wellness company that helps communities implement therapy, wellness and life enrichment programs. “We should be able to openly talk about this,” she said.  

Beyond Awareness 

A shift is needed from simple awareness of the problem to the establishment of clearly defined protocols and services, said panelist Richard Feldman, co-founder & managing principal, Behavioral Health Advisory Group. He added that the growth of telehealth is a step in the right direction, especially to supplement the shortage of mental health specialists.  

Brooks asked about the role of the staff at the community. The first step is to train the staff about the importance of mental health. They should be aware of any diagnoses in the resident’s electronic medical record.  

The staff should look for red flags. How does the resident behave? Is the resident attending programming? Going to dinner? “Look for simple clues that indicate isolation or a change in behavior,” said Forman. Also, big life events such as the recent loss of a spouse followed by a move to a community often puts a new resident at increased risk. 

As a start, Feldman conducts an educational needs assessment with the entire staff. That forms the basis of protocols, such as when the CNAs should report a behavior or incident to a nurse who might need to report that to a physician. The goal is to integrate a behavioral health framework into resident programming and staff training. “I think you begin there,” he said.  

The Real Estate Play 

Some senior housing owners and operators are expanding their portfolios with dedicated mental health facilities. Substance abuse treatment centers and short-term psychiatric hospitals represent an opportunity for the industry, according to panelist Talya Nevo-Hacohen, chief investment officer at Sabra Health Care REIT. She said the trend is being driven primarily by insurance companies willing to pay for treatment.  

Sabra has had some success recycling older, less financially viable skilled nursing and senior housing assets into dedicated behavioral health facilities. Yields range from about 8-9%, on par with skilled nursing cap rates.  

“You really have to vet the opportunity,” said Feldman. Is there a market for acute inpatient psychiatry services? Will all the services offered be reimbursed by payers? Medicare has a strong base rate for mental health treatment. But, he warned, “Do your homework.”  

Nevo-Hacohen added that the availability of capital is limited in the behavioral space. Few operators have a solid track record. Debt is scarce. Equity investors are focused on building platforms to roll up properties. “It’s a very fragmented space,” said Nevo-Hacohen, who added that Sabra is helping to fill the capital gap.   

On the services side, hospitals are looking for alternative providers with mental health programs. Value-based care insurers recognize the need to house patients in the right level of care. Forman thinks this could be an opportunity for senior living providers if they have the right programming in place.    

Senior housing operators don’t have to hire mental health professionals, the panelists agreed. “Think about how to affiliate with providers who can bring those services in,” said Feldman. Program discussions should include the entire treatment team, both internal and external. “Make sure everyone is on the same page,” said Forman.  

Bringing the discussion full circle, Feldman emphasized the importance of integrating physical and mental health care. “Psychiatry is a medical issue,” he said. “It’s not distinct from treating heart failure, obesity, diabetes, or anything else.”

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

Takeaway #1: Senior Housing Occupancy Rose 0.3 percentage points in 1Q 2023 

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 0.3 percentage points to 83.2% from the fourth quarter of 2022 to the first quarter of 2023 for the 31 NIC MAP Primary Markets. This marked the seventh consecutive quarter of occupancy increases.  

At 83.2%, occupancy was 5.4 percentage points above its pandemic-related low of 77.8% recorded in the second quarter of 2021 and was 4.0 percentage points below its pre-pandemic level of 87.2% of the first quarter of 2020.   

Demand as measured by the change in occupied inventory or net absorption moderated in the first quarter, increasing by 3,927 units in the Primary Markets after having increased by more than 8,000 units in the prior three quarters, but it was still well above the historical quarterly average of 2,251 units. The robust positive demand that has occurred over the past eight quarters has helped occupancy to improve.   

Takeaway #2: Occupancy Recovery Continues, Led by Assisted Living 

The chart below shows the pace of recovery to date for each property type and the gap remaining to reach pre-pandemic 1Q 2020 occupancy levels. 

Independent living occupancy was up 3.5 percentage points from its 2021 trough with 4.5 percentage points remaining to reach its pre-pandemic level.  

Assisted living occupancy was up 7.3 percentage points from its 2021 trough with 3.3 percentage points remaining to reach its pre-pandemic level. 

Nursing home occupancy was also up 7.3 percentage points from its 2021 trough with 5.3 percentage points remaining to reach its pre-pandemic level.  

Takeaway #3: Annual Inventory Growth Rate Has Slowed Significantly for Assisted Living 

Annual inventory growth in the first quarter for independent living stood at 1.7%, near its pre-pandemic average of 1.6%. 

Assisted living inventory grew by a similar amount in the first quarter at 1.6%, but this growth was 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: Occupancy Rate Improvements in 1Q 2023 Were Largest for Single Properties, Small Chains, and Large Chains 

The greatest occupancy rate improvements in the first quarter were for single properties (up 0.6%) and for small chains (up 0.6%) with 2 to 4 properties, followed by large chains (up 0.5%) with 10 to 24 properties. 

Single properties continued to have the highest occupancy rate at 86.1% with only 3.1 percentage points of occupancy left to recover to reach its pre-pandemic level. 

Meanwhile, medium chains of 5 to 9 properties and very large chains of 25 or more properties saw no change in their average occupancy rates from the fourth quarter of 2022 to the first quarter of 2023.  

Despite the unchanged occupancy rate, the smallest gap to achieve pre-pandemic occupancy was for the medium chains with 3.0 percentage points remaining to recover. 

The very large chains still had the weakest occupancy rate at 79.5%, with another 5.2 percentage points still to be recovered. 

Takeaway #5: Construction Activity Still Slow in Most Markets 

The heat map below shows which markets were experiencing the most construction activity over time.  

For perspective, for senior housing overall, construction totaled 5.1% of inventory for the Primary Markets in the first quarter of 2023, down from a peak of 7.8% in 2019. 

The blue tones indicate that construction activity is relatively “cool” in most markets during recent quarters. 

The markets that are shaded brighter red had the most construction as a percent of inventory in the first quarter. This group was led by San Jose at 13%, followed by Miami at 11%, and Denver, Portland, and Washington, DC all at 10%. 

At the other end of the spectrum were markets where there was very little construction underway in the first quarter; this includes Pittsburgh at 0%, San Antonio at 1%, and Cincinnati, and Kansas City at 2%. 

This article also appeared in the May edition of the NIC Insider newsletter.