“The increase in occupancy, along with increasing managed Medicare patient day mix, suggests higher demand from managed Medicare beneficiaries for skilled nursing care in the month of February”

-Bill Kauffman

NIC MAP^® Data, powered by NIC MAP Vision, released its latest Skilled Nursing Monthly Report on May 5, 2022. The report includes key monthly data points from January 2012 through February 2022.

Here are some key takeaways from the report:

Skilled nursing property occupancy increased 94 basis points in the month of February, ending the month at 76.7%. This was the highest occupancy level since April 2020, at which time occupancy began to fall rapidly due to the onset of the pandemic. Occupancy continues to recover since the pandemic low of 71.9% set in January 2021 but has encountered challenges given the Delta and Omicron variants. In addition, staffing shortages have created significant difficulties within skilled nursing properties limiting the ability to admit new residents. However, the current occupancy trend does suggest that the demand for skilled nursing properties is recovering, given the 94-basis point increase from January to February. Occupancy has increased 439 basis points from one year ago and 480 basis points from its pandemic low.

Managed Medicare revenue mix increased 83 basis points in the month of February, ending the month at 11.4%. This the highest level since March 2019. This increase, along with improving overall occupancy and rising managed Medicare patient day mix, suggests higher demand from managed Medicare beneficiaries for skilled nursing care. Managed Medicare revenue mix has risen three months in a row and is 151 basis points above its November 2021 level. Patient day mix also trended upward over the past three months, increasing 125 basis points to end February at 8.5%. Meanwhile, managed Medicare revenue per patient day (RPPD) increased in February to $450. The fact that RPPD increased in a month that COVID-19 cases were declining, may suggest higher acuity patient care in February.

Skilled mix increased 41 basis points from January to end February at 28.9%. This increase seemingly was driven by both Medicare and managed Medicare patient day mix as they each increased from the prior month. However, managed Medicare was the main driver as the patient day mix increased 66 basis points from 7.8% and Medicare only increased 26 basis points from 13.7%. In addition, Medicare revenue mix increased 14 basis points to end February at 24.6%, after it increased significantly (386 basis points) from December to January when skilled nursing operators utilized the 3-Day Rule waiver as COVID-19 cases increased in the month of January.

Medicaid patient day mix decreased for the second month in a row, falling 33 basis points from January to end February at 63.3%.  Its patient day mix has declined 163 basis points from one year ago, while Medicare patient day mix increased 68 basis points. Some of the explanation of this yearly decline in Medicaid patient days is due to the spike in Omicron cases in January as operators moved residents from Medicaid to Medicare days as they required isolation and higher skilled care.

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 maintains strict confidentiality of all data it receives.

In a new question in the Wave 40 survey, respondents were asked whether they planned to increase, decrease, or not change their current care offering unit mix. Significantly, one-half of organizations expect to increase the independent living care segment over the next 12-months. On the flip side, one out of five respondents (21%) expect to decrease the nursing care segment. Regarding the current share of all full-time open positions across respondent organizations, in the Wave 40 survey, one-quarter have more than 20% of positions currently unfilled. Some innovative methods that have successfully recruited non-caregiving staff include quick hires with orientation scheduled several times during the week, educational incentives, directly recruiting in-person at nearby businesses, and more. The shares of organizations reporting acceleration in nursing care move-ins increased significantly—from 21% in Wave 37 conducted in January to 63% in Wave 40. One-half of respondents to the Wave 40 survey (52%) reported lead volumes above pre-pandemic levels in April—a notable increase from the Wave 38 survey reflecting results in February (33%). However, expectations for occupancy to recover to pre-pandemic levels in the near term have tempered over the past year. One-half of organizations currently expect occupancy recovery to occur in 2023, with the majority expecting it to happen in the first half of 2023.

–Lana Peck, Senior Principal, NIC

NIC’s Executive Survey of senior housing and skilled nursing operators was implemented in March 2020 to deliver real-time insights into the impact of the pandemic and the pace of recovery. In its third year, the “ESI” is transitioning away from the COVID-19 crisis to focus on timely industry topics. While some standard questions will remain for tracking purposes, in each new survey “wave,” fresh questions may be added.

This Wave 40 survey includes responses from April 4 to May 1, 2022, from owners and executives of 65 small, medium, and large senior housing and skilled nursing operators across the nation, representing hundreds of buildings and thousands of units across respondents’ portfolios of properties. More 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.

In a new question included in the Wave 40 survey, respondents were asked whether they planned to increase, decrease, or not change their current care offering unit mix—some, or all of which may already be in the development pipeline. Significantly, one-half of organizations expect to increase the independent living care segment over the next 12-months. Of note, one out of five respondents (21%) expect to decrease the nursing care segment.

In the Wave 40 survey, three-quarters of respondents indicated the severity of their staffing shortages across their organizations was moderate (73%). Fewer respondents reported severe staffing shortages in the Wave 40 survey than in Wave 39 (19% vs. 27%). Attracting community and caregiving staff continues to be among operators’ most significant challenges, followed by rising operating expenses (89% and 80%, respectively).

Regarding the most effective methods respondents have found for attracting new employees, increasing wages remain the most often cited. Comparing the Wave 30 survey conducted in June/July 2021 and the Wave 40 survey, 63% to 70% indicated that increasing wages continues to be the most effective.

With regard to the current share of all full-time, open positions across respondent organizations, in the Wave 40 survey, one-quarter have more than 20% of positions currently unfilled. One-half have between 11% and 20% of full-time positions unfilled.

In the Wave 39 survey, respondents were asked to share innovative methods they had found to be particularly successful in recruiting caregiving staff. In the Wave 40 survey, they were asked about innovative ways of recruiting non-caregiving staff. Beyond generally increasing wages, offering flexible schedules, hiring, and referral bonuses—all of which have been reported as effective to some degree—the list below includes alternative ways to attract non-caregiving staff as cited by respondents:

• Quick hires with orientation scheduled several times during the week.
• Quarter for quarter raise structure; all hourly employees receive a $.25 raise each quarter they stay with us.
• Directly recruiting in-person at nearby businesses.
• Attempting a daily pay option as a test to see if it has value as an incentive to staff.
• Opportunities to grow in position by providing educational incentives.
• Use of social media has had the most impact for us.

The timeline below shows the share of organizations reporting an increase in the pace of move-ins during the prior 30-days. Data from the Wave 40 survey reflects an increase in the share of operators reporting acceleration in the pace of move-ins after COVID-19 variant cases declined sharply in the U.S. Note that seasonality also may have an effect.

In the Wave 40 survey (reflecting operator experiences in April), between roughly 40% and 60% of organizations with independent living residences, assisted living residences, memory care residences, and nursing care beds reported an acceleration in the pace of move-ins. Since January, the shares of organizations that reported acceleration in nursing care move-ins increased significantly—from 21% in Wave 37 to 63% in Wave 40.

One-half of respondents to the Wave 40 survey (52%) reported lead volumes above pre-pandemic levels in April—a notable increase from the Wave 38 survey reflecting results in February (33%). Smaller organizations saw the most significant gains. Single-site operators with lead volume above pre-pandemic levels rose from 15% to 44% in Wave 40, and operators with 2 to 9 properties increased from 21% to 50%). Given pent-up demand coming out of the pandemic and questions about the sustainability of record-high absorption rates in the last half of 2021 per NIC MAP Vision data, this measure in the ESI may be a leading indicator to watch with regard to occupancy recovery.

Expectations for occupancy to recover to pre-pandemic levels in the near term have tempered over the past year. One-half of organizations (51%) currently expect occupancy recovery to occur in 2023, with 42% expecting it to happen in the first half of 2023. In the Wave 33 survey conducted in the fall of 2021, three-quarters of respondents expected their occupancy to recover to pre-pandemic levels by the first half of 2022.

Wave 40 Survey Demographics

• Responses were collected between April 4 to May 1, 2022, from owners and executives of 65 seniors housing and skilled nursing operators across the nation. Owner/operators with 1 to 10 properties comprise roughly one-half (55%) of the sample. Operators with 11 to 25 and 26 properties or more make up the rest of the sample (20% and 25%, respectively).
• More than one-half of respondents are exclusively for-profit providers (58%), one-third operate not-for-profit seniors housing and care organizations (33%), and 9% operate both.
• Many respondents in the sample report operating combinations of property types. Across their entire portfolios of properties, 75% of the organizations operate seniors housing properties (IL, AL, MC), 22% operate nursing care properties, and 31% 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. If you are an owner or C-suite executive of senior 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 respondents for their valuable input and continuing support for this effort to provide the broader market with a sense of the evolving landscape as we recover from the pandemic. This is your survey! Please take the Wave 41 survey and suggest new questions for Wave 42.

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

Takeaway #1: Senior Housing Occupancy Edged Up in 1Q 2022

• The occupancy rate for senior housing—where senior housing is defined as the combination of the majority independent living (IL) and assisted living (AL) property types—rose 0.2 percentage point from the fourth quarter of 2021 to the first quarter of 2022 for the 31 NIC MAP Primary Markets. This marked the third consecutive quarterly increase in occupancy. For perspective, this was a 2.5 percentage point increase from the pandemic-related low of 78.0% recorded in the second quarter of 2021 but was 6.7 percentage points below its pre-pandemic level of the first quarter of 2020.
• The 0.2 percentage point increase in occupancy in the first quarter is encouraging in light of the highly contagious omicron variant that was rampant during the early months of 2022. It is a testament to the success of the COVID-19 vaccines and to the infection control policies operators have put in place to keep residents safe.
• Continued, albeit moderating, demand and weak inventory growth associated with the slowdown in construction starts in 2020 contributed to the occupancy increase in recent months.
• More specifically, demand, as measured by the change in occupied inventory or net absorption, continued to recover in the first quarter of 2022, increasing by 2,761 units in the Primary Markets. This was below the rapid pace seen in the third and fourth quarters of 2021, however. Since the recovery began in second quarter of 2021, 26,683 of the 45,499 units placed back on the market have been re-occupied, or 59% of those units.

Takeaway #2: More Than Six Percentage Points Needed for Occupancy to Recover

• For senior housing, occupancy had fallen 9.2 percentage points from peak to trough and through the first quarter of 2022, occupancy has recovered by 2.5 percentage points. This means that another 6.7 percentage points of occupancy has to be recovered.
• The strongest recovery to date has been in assisted living. Overall, occupancy is up 3.7 percentage points from its low point, but it remains 6.8 percentage points below its Q1 2020 pre-pandemic level of 84.6%.
• IL occupancy was 1.4 percentage points above its low point, but remained 6.6 percentage points below its pre-pandemic peak, almost the same as for AL.
• And lastly, nursing home occupancy fell a very large 12.5 percentage points and has thus far recovered 3.6 percentage points of occupancy, almost the same as for AL, but it remains furthest behind its pre-pandemic occupancy at 77.6%, with a 9.0 percentage point gap. Note however, that the first quarter occupancy rate for NC is almost the same as for AL at 77.6% versus 77.9%, respectively.
• Within senior housing, AL occupancy remains below IL occupancy, but the pace of occupancy recovery has been more in the need-based AL majority property type. That said, anecdotally, we are hearing that the socialization aspect of IL is attracting new residents after the long-extended pandemic related period of isolation for so many older adults.

Takeaway #3: Construction Activity Still Slow in Most Markets

• This heat map shows which metropolitan markets are experiencing the most construction activity. Looking at the right-hand part of the grid, those markets that are shaded brighter red are seeing the most construction as a share of inventory. This includes Miami where construction as a share of inventory amounted to 10.7% in the first quarter (2,739 units in 17 properties). This was the second most ever (first was in 2Q 2021). And at 8.5% of inventory, Portland, Oregon’s construction was at an all-time high at 1,813 units in 12 properties.
• Atlanta stands out on this heat map, with its red shades, but construction as a share of inventory was relatively low for Atlanta at 9.4% (18 building and 2,371 units). This is well below the 17.4% share seen in Atlanta in mid-2017, when there were 30 buildings under construction (over 3,000 units). Since that time, the inventory of senior housing in Atlanta has increased by 33% (more than 6,000 units).
• The flip side is Sacramento where construction as a share of inventory shrank to 1.3% in 1Q 2022, down from 16.8% in 2019, with only three buildings underway with 160 units. Pittsburgh is also notable in that construction as a share of inventory was virtually zero in 1Q 2022. This was a dramatic shift from a share of 9.5% in 2019.
• For perspective, for senior housing, this equals 5.3% of inventory for the Primary Markets and it peaked at 7.8% in late 2017 and more recently at 7.5% pre-pandemic 1Q 2020.

Takeaway #4: East and West Coast Markets Outperforming Other Markets

• The map below shows occupancy rates for the NIC MAP Primary Markets in the first quarter benchmarked to the Primary Market average of 80.6%. Markets with higher occupancy rates are colored deeper shades of green, while those poorer performing markets are colored deeper shades of red.
• It becomes clear that the strongest occupied markets are along the coast and the lesser occupied markets are generally in the center of the country.

Key Takeaway #5: Transaction Activity Dominated by Private Buyers in 1Q 2022

• Of the $1.2 billion of closed deals in the first quarter of 2022, private buyers represented $877 million, or 76% of the closed volume. For context, private buyers represented 43% of closed volume in 2021 for the entire year, with the public buyers coming next, representing 35% of closed volume in 2021.
• Private capital has been a steady source of capital for many years, especially the private partnerships and family regional owner/operators have been a steady source of liquidity. Private buyers have represented 35% or more of buyer activity in seniors housing and care every year since 2016.
• The private buyer is any company that is not publicly traded—for example, a private REIT or single owner or partnership, family offices, etc. The public type is just that: any publicly traded company. The institutional type is usually the equity funds that manage pension money or other types of institutional money. And cross-border represents any buyers from outside the United States.
• Note that the transactions data discussed in this key takeaway is only the closed property sales transactions throughout the United States. It does not include deals that have been announced in the quarter and not yet closed. It is also important to remember that this data is preliminary for the first quarter of 2022 as data points could be updated with other deals being captured as we learn about their closings. These updates typically occur as public records become available and given slower recordings within public records it is possible this data is updated more so than usual, especially when it comes to single property transactions that are under the radar from public announcement and reporting.

Interested in learning more?

• While the full key takeaways presentation is only available to NIC MAP clients with access to NIC MAP data, you can access the abridged version of the 1Q22 Data Release Webinar & Discussion featuring my exclusive commentary below.

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• To learn more about NIC MAP data, powered by NIC MAP Vision, an affiliate of NIC, and accessing the data featured in this article, schedule a meeting with a product expert today.

The educational programming topics at the recent 2022 NIC Spring Conference focused on the theme “A New Day” for the senior housing and care industry. Read below the opening remarks by Kurt Read, Chair of Board of Directors, NIC, and Principal, RSF Partners, in which he offered a glimpse into the new day, with opportunities awaiting in the sector.  

“Any time there’s a big moment of disruption, I think it’s really important to step back as an investor to look at the space that we’re in. Let’s set the stage a little bit here: We look like we’re at the end of a 12 plus year credit cycle, which in my 30 years in the industry, is the longest cycle that I’ve ever participated in.

Interest rates are rising. We have a war in Europe. Inflation is spiking. Market volatility is increasing. There is change everywhere, but capital is really interested in what we have to offer. We have a simple, easy to understand story around the drivers of growth in our space. And we have demonstrated good returns over the long run. Those are things that attract capital. However, the pandemic has accelerated the recognition that senior housing and care is an important part of the broader healthcare ecosystem. And many of the sessions here at NIC are going to talk about that.

So what does that mean to be part of the healthcare ecosystem? Let me give you a couple of fas just to set the stage on how we fit into this. As you know, healthcare spending is roughly 20% of GDP in the U.S. — that puts it at over $4.1 trillion a year. The health insurance industry has over $2 trillion a year in revenue. And just three of the larger companies in the health insurance space — United, Aetna CVS, and Humana — have more assets than our whole industry combined, about $480 billion. Why is that important? Because the health insurance industry is large, it’s healthy, and it’s well capitalized. And what are they looking at?

A growing number of their members live in our buildings and are more and more part of the equation of the increasing costs. And they require a lot of care. If you’re a health insurer or a risk taker in our space, they look at our space and say, “we’re not the senior living industry, we’re not the skilled nursing industry, we’re not the CCRC industry.” But, we have their members that are either pre-acute or post-acute. A pretty interesting distinction from the way we look at it.

And they have a business model that’s pretty easy to understand; sort of three things they’re looking at. One is they need to increase membership, particularly in their special needs plans, because those are the most expensive members they have. They need better, more integrated care delivery networks. Think about what that means. It’s all of you in this room (the care delivery network). And they need better, more integrated data. That’s why it’s so important for all of us to continue to contribute our data to NIC MAP Vision.

It’s pretty easy to see where this is going. Whether you’re a small operator, a developer, a large investor, we should all anticipate that this well-capitalized health insurance industry will be a force for change both in capital formation and in operations. At NIC and NIC MAP Vision, it’s clear that we need to remain at the forefront of creating more consistent, timely, useful data to engage with risk takers in the insurance industry at both the granular level (that means in your buildings) as well as at the industry level.

I’m a private equity investor. We’re raising our eighth fund. Am I bullish on investing in the senior living space? We are very bullish. We anticipate investing a lot of our next $500 million fund in the senior living business.

Why? Let me just remind you, other than the obviously wonderful demographic growth story, as we shift our focus to the baby boom generation, which is 62% larger than the silent generation we have been serving, let’s talk about the structural characteristics of our industry quickly that make it very favorable to invest in this space.

First, there’s an aging stock of supply in our industry. Second, rents are not correlated to the broader economy. Demand is inelastic; it’s driven by need. Our residents are not tied to the labor market (even though we’re having trouble with staffing) because they’re already retired. The industry is highly fragmented, which means there’s great opportunity for consolidation and growth. It’s notoriously difficult to scale. So those participants who can execute have a big advantage. Why is it hard to scale? Local markets matter. Customer demand, competition, land usage, and labor markets are all driven locally. Operations are a complex mix of real estate, wellness, healthcare, and hospitality. That’s hard to do. Branding has a limited effect. Families only make the decision to use our product once or twice in their entire lives. And regulations are a confusing mix of local, state and federal rules.

And lastly, one of my favorites is, you can’t offshore personal care.

All these factors favor dedicated, focused, expert participants and combine to create a terrific environment to earn a premium return on your effort.”

Experts weigh in at 2022 NIC Spring Conference.

Rebuilding occupancy is a top priority for the senior living industry. But the old roadmaps to success don’t necessarily apply in the wake of the pandemic and quickly changing market conditions. The labor shortage and shifting consumer preferences only make the task to fill units that much harder.

Effective, new strategies to attract residents were detailed by industry and outside experts at the 2022 NIC Spring Conference. The panel discussion, “A Roadmap for Building Back Occupancy,” was followed by lively breakout groups for participants to share successes and brainstorm new ideas.

“Building back occupancy is key,” commented NIC President and CEO Brian Jurutka at the Spring Conference. He added that the session on occupancy was first on the three-day program, reflecting the importance of the topic and the Spring Conference theme of “A New Day.”

Putting the discussion in context, occupancy rates are improving despite the emergence of new COVID-19 variants. Senior housing occupancy increased to 80.6% in the first quarter of 2022 in the 31 NIC MAP^® Primary Markets, a 0.2 percentage point increase from the fourth quarter of 2021 and a 2.5 percentage point increase from a pandemic-related low of 78.0% in the second quarter of 2021, according to NIC MAP data, powered by NIC MAP Vision. (The numbers were released in early April, after the Spring Conference.) This is the third consecutive quarter of increasing occupancy.

At the Conference, panel moderator and property appraiser Colleen Blumenthal, COO, HealthTrust, noted that occupancy rates vary widely. Coastal markets are faring better than inland markets. New supply in Atlanta and Dallas is filling quickly. Other markets without much new supply are still struggling. “Each market reacts differently,” she said.

Here are five ideas from the panelists on how to boost occupancy.

1. Address changing consumer preferences. Panelist Derek Dunham, vice president at Varsity Branding said consumers have changed. They are well informed about senior housing. “They’ve done their research,” he said. They don’t want to focus on the pandemic but want to know how the community responded to the health emergency. But he added that consumers are making decisions faster because they’ve already done their homework. “They know what they want,” he said.

   Adult children want to understand how mom and dad will be kept safe, according to panelist Courtney Siegel, president at Oakmont Senior Living. The company has opened 12 communities since 2020 and they are 90% occupied. Oakmont produced a new tool kit for on-site team members that provides healthcare resources for consumers. “We have to get the consumer comfortable to move into the building,” said Siegel.

2. Strengthen referral networks. Demand for post-acute beds is growing at New Jersey-based Ocean Healthcare. “We have seen a turn back to pre-pandemic referrals from our acute-care partners,” said Joe Kiernan, chief strategy officer at Ocean Healthcare. Demand is also strong for the company’s home health services.

   Metrics are crucial to boost post-acute occupancy. Providers must understand what measures their referral partners are looking for in value- based arrangements. “A big factor is lowering the hospital readmission rate,” said Kiernan. He added that population health departments drive referrals now more than social workers.

   Oakmont tracks data such as falls, the use of psychotropics and outcomes on a daily basis to improve care. But metrics are not shared with consumers. “They’re looking for trust,” said Siegel. It’s more important how they feel about the relationships they have with the on-site team, “That gives them the confidence to move,” she said.

3. Retool recruitment efforts. The tight labor market impacts occupancy. Some communities can’t take new residents because there’s not enough staff to care for them or process admissions. Ocean Healthcare launched its own staffing agency to stabilize staffing so it could grow occupancy. “We staffed our own buildings,” said Kiernan.

   Other ideas to recruit and retain workers include higher pay, bonuses and flexible work schedules. Some communities in high income areas are adding workforce housing for their employees.

   At Oakmont, talent recruitment is as important as consumer marketing, utilizing all communication channels, including social media, to reach potential employees. Another idea: Oakmont hired a full-time staff member to recruit applicants at job fairs at universities, colleges, and trade schools, generating dozens of applicants in difficult California markets. “It’s been very successful,” said Siegel. “We are full-time recruiters.”

4. Reconfigure older buildings. Many older properties have small studio apartments. The obvious answer is to combine units though that’s not always possible, according to Dunham. Make sure the small units are professionally staged. “Let people see the possibilities,” he said. Target consumers on the lower end of the income scale with emails of floor plans of units that are immediately available. “They might not think they can afford to live there,” he said. Small units might also serve as workforce housing or guest suites.

   Make sure online marketing campaigns match the available inventory. “Your marketing plan will evolve based on your vacancy,” said Siegel.

   Ocean Healthcare grows through acquisition, including the purchase of older county nursing homes. Group rooms are reconfigured as private rooms. Larger spaces are dedicated to clinical programs. “We need to attract people,” said Kiernan, noting that hospitals are creating private rooms for patients that look like hotel suites.

5. Improve tech offerings. Consumers expect robust wi-fi. The panelists also agreed that residents and families are looking for choice. A robust tech platform that allows the resident to order services or meals to-go can be a selling point. Zoom stations give residents an easy-to-use option to connect with family.

The session wrapped up with reports from the breakout groups. Some highlights: rate concessions don’t work and hurt long-term operating income; design needs-based housing more like a typical apartment building to make it feel like a discretionary choice to move in.

When will occupancy return to pre-pandemic levels? Kiernan thinks it will take 18-24 months though some regions will get there sooner. Siegel said it will depend on execution at the property level. Dunham added that some communities are having record years now.

Moderator Blumenthal emphasized the differences in markets. Some markets have already recovered; others will take a long time to reach pre-pandemic occupancy levels. Also, new residents are frailer than previous ones because they waited to move due to the pandemic. “Their length of stay may not be as long,” Blumenthal said, which could stretch out the refilling process. But in the effort to increase occupancy, stakeholders continue to explore a variety of new ideas.