The Social Security Administration announced they will raise Social Security and Supplemental Security Income (SSI) benefits by 5.9% for approximately 70 million Americans – 64 million Social Security beneficiaries and 8 million SSI recipients. This adjustment is set to take effect with benefits that Social Security beneficiaries receive beginning in January 2022.

The announced increase in benefits will mark the highest one-year bump in almost four decades. For comparison, the cost-of-living adjustment (COLA) was 1.3% in 2020 and 1.6% in 2019.

The elevated COLA comes as a result of steep price increases as the U.S. economy emerges from the COVID-19 public health emergency. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index (CPI) as determined by the Bureau of Labor Statistics (BLS). The most recent BLS CPI report indicates that over the last 12 months, the all-items index increased 5.4%.

Experts caution, however, that seniors utilizing Medicare Part B will see substantially less than the 5.9% bump, as Medicare Part B premiums are expected to increase 6.7%, from $148.50 to $158.50 in 2022. Medicare Part B premiums are tied to seniors’ income and deducted from beneficiaries’ checks.

Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. The Social Security Administration has provided a fact sheet showing the effect of the various adjustments.

“In the Wave 33 survey, roughly 50% of respondents with senior living residences report that the pace of move-ins accelerated in the past 30-days—a notable increase from the prior survey. The shift was smaller for nursing care. Increased resident demand was the primary reason for acceleration in move-ins. Operators have suffered pandemic-related vacancies and myriad unplanned expenses and NOI has been pressured. In the Wave 33 survey, respondents were asked how much they expect their operating margins to increase or decrease in the next six months. Roughly half of respondents (49%) indicated they expect operating margins to increase with about one-third (31%) anticipating an increase between 1% and 5%.”

—Lana Peck, Senior Principal, NIC

NIC’s Executive Survey of operators in seniors housing and skilled nursing is designed to deliver transparency into market fundamentals in the seniors housing and care space as market conditions continue to change. This Wave 33 survey includes responses collected September 7 to October 3, 2021, from owners and executives of 67 small, medium, and large seniors housing and skilled nursing operators from across the nation, representing hundreds of buildings and thousands of units across respondents’ portfolios of properties.

Detailed reports for each “wave” of the survey and a PDF of the report charts can be found on the NIC COVID-19 Resource Center webpage under Executive Survey Insights.

Wave 33 Summary of Insights and Findings

• In the Wave 33 survey (representing operator experience in the month of August) roughly 50% of respondents with independent living, assisted living and/or memory care units report that the pace of move-ins accelerated in the past 30-days—a notable increase from the Wave 32 survey a month earlier. The shift was smaller for nursing care where 37% saw the pace of move-ins accelerating in the past 30-days, up slightly from 31% in the prior survey. Increased resident demand was the primary reason for acceleration in move-ins as the COVID-19 Delta variant’s pace of infection began to slow in many areas of the country.

• Illustrated in the chart below, the share of organizations with residents waiting to move in was nearly 35% in November 2020 during the third peak of the virus (Wave 16 conducted Nov. 9 – 22, 2020). After the COVID-19 vaccine became available through the Long-Term Care Vaccination Program in the latter half of December the backlog of move-ins began to ease for many operators. Organizations reporting an increase in the pace of move-ins remained robust until the Wave 32 survey (August 9 – September 6, 2021), and has since improved.

• During the summer, as the Delta variant primarily affected unvaccinated individuals, the share of organizations experiencing a backlog of residents waiting to move in grew slightly. The chart below shows the full time-series of the pace of move-ins for the assisted living care segment. It is interesting to note the similarities of the shares of organizations reporting a deceleration in the pace of move-ins (orange segments below) compared to the shape of the line chart (above) depicting backlog of residents waiting to move in.

• Despite the temporary decline in the momentum in the pace of move-ins experienced by some operators in Wave 32, optimism regarding occupancy recovery is strengthening. Nearly three-quarters of respondents (73%) currently expect their organization’s occupancy to return to pre-pandemic levels sometime in 2022–up from 57% in the Wave 25 survey (March 22 – April 4, 2021).

• In Wave 33 between roughly 50%-60% of organizations with independent living, assisted living and/or memory care units reported an increase in occupancy across their portfolios of properties in the past 30-days. About 40% of organizations with nursing care beds saw an increase in nursing care occupancy, up from one-third (32%) in the prior survey but still significantly below Wave 30 (June 14 – July 11) when three-quarters of organizations with nursing care beds saw occupancy increases in the 30-days prior (76%).

• In Wave 33, the share of organizations with independent living units reporting an increase in occupancy (57%) was equivalent to the peak reached in the Wave 28 survey (May 3 – 16, 2021). However, as shown in the chart below, most occupancy increases were relatively small for the independent living care segment (about 40% between 0.1 and 3 percentage points). Of note, between roughly one-quarter and one-third of organizations with assisted living, memory care and/or nursing care units saw occupancy increases of three percentage points or more.

• Staffing shortages that were experienced by many seniors housing and care operators prior to and exacerbated by the pandemic persist. As recently as this summer, as the COVID-19 virus Delta variant spread across the country, nearly all operators responding to NIC’s Executive Survey Insights conducted since July reported that their organizations were experiencing staffing shortages. Additionally, all respondents were paying staff overtime hours, and four out of five organizations were tapping expensive agency/temp staff to fill gaps in schedules and replace workers who left the labor force during the pandemic.
• In recent surveys, respondents were asked to rate the biggest challenge facing their organization today. By August, the share of organizations that cited attracting community and caregiving staff as their biggest challenge had risen from about 75% to roughly 90%.
• Typically, wages and benefits are significant operating expenses for a senior housing property (comprising up to 60% of overall expenses). Since the beginning of the pandemic, operators have sustained myriad unplanned expenses. And considering the losses of revenue associated with a pandemic-related decline in occupancy rates NOI has been pressured for many operators and their capital partners. In the Wave 33 survey, respondents were asked how much they expect their operating margins to increase or decrease in the next six months. Roughly half of respondents (49%) indicated they expect operating margins to increase. While about one-third (31%) anticipate an increase between 1% and 5%, one-quarter (25%) expect a decrease between 1 and 5%.

• While rent concessions often help to drive increases in occupancy, the shares of organizations offering rent concessions has not varied significantly since last summer (2020) when NIC began tracking the data. Currently, one-half (51%) of respondents are offering rent concessions to attract new residents. Fewer are offering rent discounts than in previous surveys (59% vs. 78% in Waves 27 and 29), however more are incentivizing with free rent for a specific period (69%).

Wave 33 Survey Demographics

• Responses were collected between September 7 and October 3, 2021, from owners and executives of 67 seniors housing and skilled nursing operators from across the nation. Owner/operators with 1 to 10 properties comprise one-half (50%) of the sample. Operators with 11 to 25 and 26 properties or more make up 25% of the sample, respectively.
• Under two-thirds of respondents are exclusively for-profit providers (62%); under one-third operate not-for-profit (29%) and 9% operate both.
• Many respondents in the sample report operating combinations of property types. Across their entire portfolios of properties, 74% of the organizations operate seniors housing properties (IL, AL, MC), 26% operate nursing care properties, and 29% operate CCRCs (aka Life Plan Communities).

Owners and C-suite executives of seniors housing and care properties, please help us tell an accurate story about our industry’s performance.

The current survey is available and takes under ten minutes to complete. If you are an owner or C-suite executive of seniors housing and care and have not received an email invitation to take the survey, please contact Lana Peck at lpeck@nic.org to be added to the list of recipients.

NIC wishes to thank survey respondents for their valuable input and continuing support for this effort to bring clarity and create a comprehensive and honest narrative in the seniors housing and care space at a time when trends are continuing to change in our sector.

In tune with NIC’s mission of educating the market on the opportunities and challenges of investing in seniors housing and care properties, The NIC Investment Guide: Investing in Seniors Housing & Care Properties, serves as a primer on the senior housing and care sector.

The Sixth Edition of the NIC Investment Guide, based on year-end 2019 time-series data, serves as a benchmark to the sector prior to the COVID-19 pandemic. Takeaways from this edition include:

• The investment-grade senior housing and care market is estimated to have a nationwide inventory of nearly 24,500 properties inclusive of more than 3.0 million units, and its overall market value is estimated at $474.5 billion.
• The market value estimate is based on an average $210,000 price per unit for senior housing properties and an average $81,000 price per bed for nursing care properties.
• The largest owner category of senior housing and care properties are private for-profit entities with ownership of 55.4% ($2 billion) of units in senior housing properties and 67.2% ($78.6 billion) of units in nursing care properties. Publicly traded REITs own 11.6% ($41.4 billion) of units in senior housing properties and 6.5% ($7.5 billion) of units in nursing care properties.

The technical chapters of the NIC Investment Guide include a detailed description of each senior housing and care community type. The community type descriptions incorporate resident profiles, supply data, industry operating structures, operating economics, and current trends. The Guide also discusses underwriting criteria, the development and construction of new properties and the acquisition of existing properties, debt and equity sources, and valuations, returns, and loan performance.

As in prior editions, the Sixth Edition features a chapter on Emerging Trends and Observations written by members of NIC’s Future Leaders Council (FLC). Drawing upon the acumen of industry participants to make observations and discuss emerging trends for which contemporaneous, empirical data may not be available, the topics put forth are forward-looking considering operating strategies, capital markets, joint venture preferences, labor shortages and the rising costs of labor, fragmented senior housing regulation, provider partnerships, and the growing market share for Managed Care, just to name a few. It also includes detailed appendices related to alternative housing and services, active adult communities, factors affecting demand, trends in technology, risks and mitigating factors, and the collaboration between housing and healthcare.

The large and growing middle market is also addressed. In 2019, The Forgotten Middle: Middle Market Seniors Housing Study was completed with results of the analysis published as a manuscript in Health Affairs. The study defined the middle-income cohort as people aged 75 and older who do not qualify for government assistance for senior housing—such as Medicaid—but are not wealthy enough to afford traditional private pay, market-rate senior housing for a meaningful amount of time. As shown below, the study determined that 54% of middle-income seniors will not have sufficient financial resources to cover projected average annual costs of approximately $60,000 for assisted living rent and other out-of-pocket medical costs by 2029.

Additionally, through NIC’s strategic alliance with Real Capital Analytics, the NIC Investment Guide provides pricing and volume metrics on closed sales transactions of senior housing and care properties throughout the U.S. for the prior 10 years, and cap rates by property type. When comparing valuations among different senior housing property types, the use of cap rates and price per unit (PPU) are common measures. As shown by the exhibit below, development cap rates have historically been 250-500 basis points higher than those of existing properties, although recently those spreads have narrowed.

A reflection of NIC’s mission to provide data, analytics, and connections, all of which advance the access and choice of seniors housing and care for America’s elders, examples such as these and more are widely accessible through NIC’s Investment Guide. The Executive Summary of the NIC Investment Guide is available free of charge as a PDF download from nic.org. The full NIC Investment Guide, Sixth Edition is available both as a PDF file priced at $50 per copy and as a print publication priced at $100 per copy. Both can be found at store.nic.org.

The Labor Department reported that nonfarm payrolls rose by a disappointing 195,000 in September 2021. The consensus had been for an increase of 500,000. This was a deceleration from August when jobs grew by an upwardly revised 366,000 (originally reported as 235,000) and from July when jobs increased by 1,091,000, up from 1,053,000 as originally reported. The three-month moving average of nonfarm payrolls was 550,000 as of September, versus 806,000 in August and 889,000 in July, still strong but signaling some slowing in momentum. Nonfarm payrolls remain down by 5.0 million from pre-pandemic levels of February 2020.  

Interestingly, the labor force contracted by 183,000 and was 3 million less than at its pre-pandemic level. Many had speculated that the labor force would increase since enhanced unemployment benefits had largely expired and schools largely reopened.

The data show that the U.S. recovery from the pandemic continues, but at a slower pace. The COVID-10 Delta variant may be weighing on the economy as evidenced by the limited growth in the high-contact leisure and hospitality sectors (up only by 74,000) which had been expanding rapidly prior to August. Businesses may be holding off hiring and workers may be holding off taking jobs amid heightened fear of the Delta variant. 

Today’s report is important as the Federal Reserve wants to see “substantial progress” in the economy before it shifts monetary policy and begins “tapering” when it will purchase fewer long-term securities for its balance sheet and before it starts to shift toward a higher interest rate regime. While disappointing from what the markets had anticipated, the report is likely strong enough that the Fed will begin tapering its asset purchases next month. That said, the growing evidence of upward pressure on wages suggests that the Fed will remain concerned about inflationary pressures. 

Indeed, average hourly earnings for all employees on private nonfarm payrolls rose by $0.19 in September to $30.85, a gain of 4.6% from a year earlier and up from a revised 4.3% in August. September marked the fifth consecutive month of increases. The data suggests that rising demand for labor associated with the recovery from the pandemic is putting upward pressure on wages. The large annual increase also occurred despite the return of lower-wage leisure and hospitality workers which theoretically should be depressing the overall increase. That said, the Labor Department warns that the pandemic has affected the ability to fully interpret the wage data due to the wide swings in employment trends.

Job levels continued to contract for nursing and residential care facilities which fell by 38,000. Overall employment in health care is down by 524,000 since February 2020, with nursing and residential care facilities accounting for about 80% of that loss.

Separately and from a different survey, the Labor Department reported that the unemployment rate fell by 0.4 percentage point to 4.8% in September and the number of unemployed persons fell to 7.7million, still higher than the 5.7 million persons prior to the pandemic. The jobless rate is now 1.3 percentage points above the pre-pandemic level of 3.5% seen in February 2020, but well below the 14.7% peak seen in April 2020. The underemployment rate or the U-6 jobless rate was 8.5% down from 8.8% in August 2021. This figure includes those who have quit looking for a job because they are discouraged about their prospects and people working part-time but desiring a full work week.

Reimbursement differential between Medicare fee-for-service and managed Medicare hits record.

NIC MAP^® data, powered by NIC MAP Vision, released its latest Skilled Nursing Monthly Report on September 30, 2021, which includes key monthly data points from January 2012 through July 2021.

Here are some key takeaways from the report.

Skilled nursing property occupancy increased for the sixth consecutive month in July, gaining 58 basis points from June to end July at 75.0%. Occupancy is now up 355 basis points from the pandemic low of 71.4% reached in January. Despite the improvement, occupancy remains very low compared to the pre-pandemic February 2020 level of 85.5%. More recently, the Delta variant has challenged the occupancy recovery as some areas of the country have experienced hospital capacity constraints which in turn have caused elective surgeries to slow. This can have a direct impact on skilled nursing occupancy as referrals from hospitals may decline as a result. Staffing is also a challenge as some operators are unable to hire an appropriate number of staff to accept admissions for new patients into their properties.

Medicare revenue per patient day (RPPD) held steady from June to end July 2021 at $560. However, Medicare RPPD has declined throughout the year dropping 1.5% from January 2021 when COVID-19 cases were elevated at skilled nursing properties. During the pandemic there has been support from the federal government to increase Medicare fee-for-service reimbursements for COVID-19-positive patients requiring isolation. RPPD has now declined and one possible reason is lower property-level case counts. Medicare RPPD has decreased 2.2% from the pandemic high set back in June 2020. Medicare revenue mix increased from June to July. However, it has also been trending down since January 2021, dropping 431 basis points to 20.3%. This suggests that, in addition to lower RPPD, utilization of the 3-Day Rule waiver declined as COVID-19 cases declined relative to the month of January. The 3-Day Rule waiver was implemented by Centers for Medicare and Medicaid Services (CMS) to eliminate the need to transfer positive COVID-19 patients back to the hospital to qualify for a Medicare paid skilled nursing stay.

Following four months of decline, Medicaid revenue per patient day (RPPD) increased from June to end July at $241. Medicaid RPPD was trending downward after hitting a high of $243 in February this year. However, this latest monthly data shows a 3.7% increase from February 2020, prior to the pandemic. Medicaid reimbursement has increased more than usual as many states embraced measures to increase reimbursement related to COVID-19. On the other hand, covering the cost of care for Medicaid patients is still a major concern as reimbursement does not cover the cost in many states. In addition, nursing home wage growth is elevated, as is inflation measured by the Consumer Price Index, and staffing shortages are a significant challenge in many areas of the country. Expectations are that wage growth will remain elevated as staffing challenges persist with turnover and competition for labor from other industries.

Managed Medicare revenue per patient day (RPPD) declined further in July and was down 4.5% from a year ago. The continued monthly decline in managed Medicare revenue per patient day creates additional challenges to skilled nursing operators during the COVID-19 crisis as the reimbursement differential between Medicare fee-for-service and managed Medicare has accelerated during the pandemic. Medicare fee-for-service RPPD ended July 2021 at $560 and managed Medicare ended at $447, representing a time-series record differential of $113.  Pre-pandemic, in February of 2020, the differential was $95.  As Medicare Advantage enrollment now represent 46% of all eligible Medicare beneficiaries, and continues to grow, operators must find ways to adjust such as opening their own insurance plans.

To get more trends from the latest data you can download the Skilled Nursing Monthly Report here. 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 in order to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form at https://www.nic.org/skilled-nursing-data-initiative. NIC and NIC MAP Vision maintain strict confidentiality of all data received.

Interested in learning more about NIC MAP data? To learn more about NIC MAP data, powered by NIC MAP Vision, and about accessing the data featured in this article, schedule a meeting with a product expert today.