The unemployment rate fell to 3.4% in January, its lowest level since 1969 and below December’s already low rate of 3.5%.  Separately, the U.S. Bureau of Labor Statistics also reported that nonfarm payrolls rose by a very large 517,000 in January 2023, nearly twice as much as in December (260,000) and more than the monthly average of 401,000 in 2022.  Market expectations had called for a gain of less than 200,000 jobs.  Revisions added 71,000 positions to total payrolls in the previous two months.  The monthly gain and revisions paint an image of a still strong labor market.  

Today’s labor report will add further impetus to the Fed’s policy conviction of nudging interest rates higher after already increasing rates aggressively last year and one month into 2023.  Indeed, at the FOMC meeting this past week, the Fed announced a 25-basis point increase in the Fed Funds rate to a range of 4.50% to 4.75%.  While this was a smaller increase than those in 2022, it nevertheless brought rates to their highest level since 2007.  Further, in its official statement, the Fed indicated that “ongoing increases” in rates would still be required.  Further, Federal Reserve Chair Jay Powell said he thought it would take “a couple of more rate hikes to get to that level we think is appropriately restrictive.” The Fed is hyper-focused on the rate of inflation and wants to be confident that inflation can be sustained at a 2% target range.  At this point, the Fed is not convinced that this is the case despite evidence that inflation is decelerating.  While goods inflation does indeed appear to be slowing, service inflation, largely driven by wages, continues to be worrisome.

Indeed, average hourly earnings for all employees on private nonfarm payrolls rose by $0.10 in January to $33.03.  This was a gain of 4.4% from year-earlier levels, but lower than in recent months.

Employment in health care rose by 58,000 in January and after averaging 47,000 jobs per month in 2022.   Employment in nursing care facilities grew by 4,500 jobs from last month and 35,600 from year-earlier levels and stood at 1,380,100 positions.  Jobs increased by 8,400 positions in CCRC and assisted living facilities and were up by 60,700 from year earlier levels to 930,700 jobs.

In the household survey conducted by the BLS, the jobless rate fell from 3.5% in December and stood at 3.4% in January. Both months’ unemployment rates were well below the 14.7% peak seen in April 2020.

The labor force participation rate stood at 62.4% in January, up from 62.3% in December but was below the February 2020 level of 63.3%.   

Among the major worker groups, the January unemployment rates were 3.1% for adult women, adult men (3.2%), teenagers (10.3%), Whites (3.1%), Hispanics (4.5%), Blacks (5.4%), and Asians (2.8%).

NIC MAP Vision released its latest Skilled Nursing Monthly Report on February 2, 2023. The report includes key monthly data points from January 2012 through November 2022.

Here are some key takeaways from the report:

Skilled nursing occupancy decreased slightly in November. It declined 12 basis points from October to end the month at 79.4%. There was positive momentum in occupancy throughout 2022 and it is up 593 basis points since the low (73.5%) point reached in January 2021. However, COVID-19 cases created additional challenges in 2021, which slowed some of the initial momentum, and occupancy has been flat from August to November 2022. The staffing crisis in the sector is still a significant burden on skilled nursing operators. As staffing, wage growth, 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.

Medicare revenue mix increased but the Medicare revenue per patient day decreased in November. Both are down from earlier in the year (January/February) when increased cases of COVID-19 resulted in additional need for utilizing the 3-Day rule waiver and per day reimbursement for COVD-19 positive patients. Medicare revenue mix ended November at 21.9% but is down from its pandemic high of 24.8% set in February 2022. Medicare RPPD is down 1.3% from its pandemic peak of $594 in June 2020. Meanwhile, Managed Medicare revenue mix was down 31 basis points to 10.2% in November. However, this is 194 basis points above the pandemic low of 8.3% set in May 2020.

Medicaid patient day mix increased for a fourth month in a row. It increased 7 basis points ending November at 64.7%. In addition, it has increased 269 basis points from the pandemic low of 62.0% set in February 2022. Meanwhile, Medicaid revenue mix also increased from the prior month, ending November at 50.8%. One element of the Medicaid revenue share of a property’s revenue is RPPD and that increased 0.55% from October. It up 0.9% since last year in November 2021. 

Managed Medicare revenue per patient day (RPPD) increased slightly in November but is down 1.1% from last year in November 2021. Skilled nursing property operating models can differ, and some may experience the decline in managed Medicare revenue per patient day poses 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 November 2022 at $587 and managed Medicare ended at $472, representing a $115 differential. In November of 2020, the differential was $96.

To get more trends from the latest data, download 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 maintains strict confidentiality of all data it receives.

Older adults choosing where they live is becoming increasingly dependent on how they want to live. Baby Boomers are determined to live with a sense of greater purpose—connected to their personal interests and those of the community around them. As part of that greater purpose, this generation is prioritizing their health and well-being. Senior housing has a significant role to play now, and in the future, to help deliver the value that residents demand.

The 2023 NIC Spring Conference offers a deep dive into how senior living can integrate healthcare services to provide better outcomes to residents. Understanding how operators and investors can incorporate healthcare services into senior housing—from prioritizing services to integrating models for how to deliver and pay for them—will be critical to meeting residents’ needs. Several Conference sessions will explain how emerging strategies for paying for resident healthcare services give operators the best opportunity to provide high-quality care at lower costs.

Value-based care aligns payment for healthcare services with clinical quality and performance for better patient health outcomes, rather than payment aligned with the volume of care delivered. This type of care delivery model rewards providers for the “value” a patient receives as a result of their care—which can lead to better outcomes for patients, greater patient satisfaction, and lower system-wide costs. Senior housing facilities that integrate healthcare services for older adults through value-based care delivery models can provide residents with purposeful living while gaining a competitive advantage over facilities that fail to prioritize healthcare.

The NIC Spring Conference features five exciting sessions to help senior housing providers effectively adopt value-based care delivery and payment models now and in the future.

Healthcare payers are increasingly looking to partner with senior housing and long-term care operators to grow their practices effectively. The “Emerging Value Based Care Opportunities for Seniors Housing & LTC Operators” session will explore the different partnership options operators looking to participate in value-based care models should seek out.

Learn from your peers about how value-based care models and at-home primary care can benefit both residents’ health and operators’ business models in the “Benefits of Integrating Primary Care into Senior Housing” Innovation Lab. Speaking of care delivery, Dr. Sachin Jain, CEO of SCAN Group & Health Plan, will give a keynote address called “Trends and Opportunities in Medicare” to explain senior living’s opportunity to serve Medicare enrollees as care delivery and payment models evolve and generate untapped efficiencies for senior living providers.

In the hands-on “Customizing a Value-Based Care Strategy for Operators” workshop, attendees can test their knowledge of value-based care models and work with fellow attendees to identify the first steps needed to build partnerships between housing and value-based care providers.

The “Taking Your Show on the Road: Bridging Care Gaps by Extending Services into the Community” session will highlight the wide range of options hospital and skilled nursing providers are exploring to extend their services into the senior living community, including hospital-at-home, skilled-nursing-at-home, and community-based special needs plans.

Finally, how can operators harness value-based care opportunities to create a sustainable future of quality healthcare in senior living? Dr. Nirav Shah, Senior Scholar at Stanford University’s Clinical Excellence Research Center, will lead a keynote session called “The Future of Health and Healthcare: How Will Senior Living Operators Differentiate Themselves?” about the significant advances in health technology that are altering the landscape of opportunities for operators and investors in senior housing and how they can help senior living residents live healthier lives.

Be sure to join us for these valuable learning sessions at the 2023 NIC Spring Conference. To register or learn more about these sessions and our other programming, visit our website.

For more on the basics of value-based care and why it matters in senior living, see this interview with Andre Maksimow, Senior Vice President, Kaufman Hall, in the January 2023 edition of the NIC Insider newsletter.

NIC MAP Vision clients, with access to NIC MAP^® data, attended a webinar in mid-January on key seniors housing data trends during the fourth quarter and full year 2022. Findings were presented by the NIC Analytics research team. Key takeaways included the following: 

Takeaway #1: Seniors Housing Occupancy Rose 0.9 percentage points in 4Q and 2.8 percentage points in 2022 

• The occupancy rate for seniors housing—where seniors housing is defined as the combination of the majority independent living and assisted living property types—rose 0.9 percentage points to 83.0% from the third quarter of 2022 to the fourth quarter of 2022 for the 31 NIC MAP Primary Markets. This marked the sixth consecutive quarter of occupancy gains. At 83.0%, occupancy was 5.1 percentage points above its pandemic-related low of 77.8% recorded in the second quarter of 2021 but was still 4.2 percentage points below its pre-pandemic level of 87.1% in the first quarter of 2020.
• Demand as measured by the change in occupied inventory, or net absorption, was strong in the fourth quarter, increasing by 8,638 units in the Primary Markets after increasing by 8,513 units in the third quarter. For the full year 2022, net absorption totaled 27,845 units, which was the strongest annual demand ever recorded by NIC MAP Vision. 
• Since the recovery began in the second quarter of 2021, 52,189 units have been absorbed on a net basis, surpassing the negative absorption that occurred following the onset of the pandemic when 45,411 units were placed back on the market on a net basis.  
• For the full year 2022, following the record demand and strong net absorption, occupancy increased 2.8 percentage points from year-end 2021.  

Takeaway #2: Inventory Growth Dropped to Near 2014 Levels in 2022 

• Inventory growth has generally trended down from its high point of 21,440 units in 2018.
• Inventory growth in 2022 was a little under 11,000 units, a level of growth not seen since 2014.
• Between 2014 and late 2019 just before the pandemic began, inventory grew by an average of 18,056 units annually. The year 2022’s pace was down nearly 40% from those levels. 

Takeaway #3: Occupied Units in Secondary Markets Highest Level Ever 

• NIC MAP Vision defines Secondary Markets as Markets 32 through 99, or 68 large core based statistical areas (CBSAs) in the continental U.S. Each of these markets is generally smaller in population than any single one of the 31 Primary Markets.
• In 2022, occupied units in the Secondary Markets continued to increase, and in the fourth quarter reached an all-time high of 314,181, which was above their pre-pandemic high by 6,908 units.
• This trend shows that more older adults than ever before are residents in senior housing properties today, which speaks to the tremendous need for senior housing and care for aging adults, and the industry continues to meet that need. 

Takeaway #4: Asking Rent Highest on Record for Assisted Living and Independent Living 

• Same-store asking rates rose across NIC MAP’s Primary Markets by 5.5% from year-earlier levels for assisted living. This was the largest increase since NIC began reporting the data in 2005. Rates grew a bit less rapidly for independent living, but growth was still at a time-series high of 4.5% year-over-year.
• Third quarter wage rate data from the Bureau of Labor Statistics (BLS) show that average hourly earnings for assisted living employees increased by 9.0% from year earlier levels, much more than asking rent growth, but this 9.0% was down slightly from the roughly 10% year-over-year growth reported in the prior two quarters.  
• The divergence between rent growth and wage growth has put significant pressure on NOI for many operators, as are rising costs of other expense categories, although there are signs that these pressures may be easing. For example, the widely followed consumer price index (CPI) rose by 6.5% for the twelve months ending in December, which marked the sixth consecutive monthly deceleration since a mid-2022 peak of 9.1% in June. Overall, however, inflation remains well above the roughly 2% average inflation rate that occurred in the three years before the pandemic.  

Takeaway #5: Units Under Construction Least Since 2015 

• In the fourth quarter of 2022, the number of senior housing units under construction in the 31 NIC MAP Primary Markets remained near its lowest level since 2015. This number totaled 35,719 units.
• For assisted living, there were 19,165 units under construction, down roughly 2,000 units from a year earlier. Note that this was the fewest units under construction since mid-2015.  As a share of inventory, this amounted to 5.6%, which was well below its peak of 10.2% in late 2017.  
• For independent living, there were 16,554 units under construction in the fourth quarter, equal to 4.7% of existing inventory compared to 6.7% in 1Q 2020.
• Overall, both inventory growth as described above and units under construction were quite moderate, retreating to levels not seen in more than five years.

Who, What, When, Where, Why. Those are the five basic questions vital to information gathering.  

The so-called five “W’s” are also a good place for owners and operators to start as they consider how to reposition a property amid occupancy challenges, changing demographics and an aging building stock.  

A panel of experts tackled the big questions on repositioning during an educational session at the 2022 NIC Fall Conference. The discussion, recapped below, was led by NIC Chief Economist Beth Mace.  

WHO is the customer? The senior housing customer mix is changing, Mace pointed out. The huge baby boomer demographic is on the cusp of senior living. Some are already moving to active adult communities. Panelist Chris Guay, CEO, Vitality Living, noted that boomers have champagne tastes, but beer budgets. “We have to set up expectations for success,” he said. Guay added that baby boomers tend to have close relationships with their children, and grandchildren, and want to retire near them. He expects those adult children to have more influence over parental housing decisions.