Skilled nursing property occupancy increased in June, after decreasing slightly the previous month. It increased 31 basis points from May to end the month at 81.2%. There was positive momentum in occupancy throughout 2022 and it has increased 77 basis points since December 2022. It is up 6.6 percentage points since the low (74.6%) 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.
NIC MAP Vision released its latest Skilled Nursing Monthly Report on August 31, 2023. The report includes key monthly data points from January 2012 through June 2023.
Here are some key takeaways from the report:
Skilled nursing property occupancy increased in June, after decreasing slightly the previous month. It increased 31 basis points from May to end the month at 81.2%. There was positive momentum in occupancy throughout 2022 and it has increased 77 basis points since December 2022. It is up 6.6 percentage points since the low (74.6%) 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 7.5 percentage points from the pre-pandemic February 2020 level of 88.8%. As staffing continues to be a challenge, skilled nursing property wage growth expense has declined which may provide some relief to operators. However, higher debt costs are a concern.
Medicare revenue mix declined as the revenue per patient day increased slightly in June. However, both are down from December 2022. Medicare revenue mix is down 615 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 June at 18.0%. Medicare RPPD ended June at $590 and is up 1.38% from one year ago. Meanwhile, Managed Medicare revenue mix was up 61 basis points to 12.0% in June. It is up 280 basis points above the pandemic low of 9.2% set in May 2020.
Managed Medicare revenue per patient day (RPPD) increased in June, but it is down 0.5% from last year in June 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 continues to increase. However, some operators see opportunity to capture patient volume with the growth of managed care. Medicare fee-for-service RPPD ended June 2023 at $590 and managed Medicare ended at $490, representing a $101 differential. In June of 2022, the differential was $90.
Medicaid patient day mix continued the upward trend in June, ending at 66.7%. However, it has increased 353 basis points from the pandemic low of 63.2% set in February 2022. Meanwhile, Medicaid revenue mix increased 130 basis points from the prior month, ending June at 52.7%. One element of the Medicaid revenue share of a property’s revenue is RPPD and that increased 0.31% from May. It is up 3.2% since last year in June 2022.
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 to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form here. NIC maintains strict confidentiality of all data it receives.
The New NIC Academy: A Great Investment in Your Future
NIC Academy offers boot camps, certificate programs, and courses to educate investment and finance professionals in the senior housing and care industry. Your instructors are experienced leaders in the industry and will share invaluable skills from decades of experience
“An investment in knowledge pays the best interest.”
So said Benjamin Franklin, who had good experience creating, building, and partnering with others to build some significant and (lasting!) things.
We are strong believers in the power of education and have been a valued source for several educational opportunities in senior housing and care investment over the years with our sold-out boot camps and curated insightful sessions at our NIC Spring and NIC Fall conferences. We saw that the industry lacked a true provider of comprehensive professional education for investment and finance professionals in the senior housing and care space, which is why we are excited to announce the launch of NIC Academy.
Upon completion of the program, graduates receive a certificate from NIC Academy in Fundamentals of Underwriting Seniors Housing & Care Certificate Program and a professional designation of Certified Senior Housing Investment Professional (CSHIP). This prestigious designation can be applied on LinkedIn profiles, and email signatures and will signal to industry leaders that this candidate has learned directly from industry experts and is different from the rest.
This new Certification for Underwriting in Senior Housing and Care program is an invaluable resource that focuses on the six pivotal topics critical for underwriting success. In just 90 days, students acquire the essential skills to kickstart their careers and fortify their organizations. This innovative program not only equips individuals with expertise but also offers a substantial benefit to employers. With this Certificate, employers can save both time and money, all while fostering the professional development tool for existing employees in need of upskilling or reskilling. The courses within the certification program are led by industry experts who draw from decades of experience in the sector, providing unparalleled insights and knowledge.
Candidates will gain insights and skills that would typically require years of on-the-job training. The curriculum has been meticulously crafted and course offerings range from comprehensive discussions to deep case studies on real-world issues.
The following six courses are designed to take about eight hours each:
Thanks to NIC’s extensive resources, thoughtfully designed curriculum, accomplished faculty, and effective teaching methodologies, students can promptly apply their acquired knowledge to create meaningful contributions within their organizations. This empowers them to delve into pertinent topics such as property valuation in senior housing and care, ensuring their learning translates into actionable insights.
Learning at your convenience
All NIC Academy program courses are offered online, multiple times per year, or on-demand. Online discussion rooms are seamlessly integrated with the courses to help answer questions, expand perspectives, and strengthen the community.
The NIC Academy is dedicated to consistently providing high-quality educational opportunities and we’re proud to offer this new certification program.
“NIC Academy’s Fundamentals of Underwriting Senior Housing and Care Certificate Program fills the void for comprehensive training of financial and investment professionals in our industry. As we ramp up hiring to meet demand growth, this gold standard Certificate Program will be our go-to resource to quickly get our team up to speed.”
-John Rijos, Co-founder and Operating Partner, Chicago Pacific Founders
Executive Survey Insights Recap and Future NIC Surveys
NIC launched its Executive Survey Insights (ESI) series in March 2020 to provide timely insights on key property operational metrics within the senior housing and skilled nursing sectors. Since this survey series was launched, more than 50 waves of the survey captured the property market’s performance through numerous challenges – COVID-19, labor deficiencies, supply shortages, threats of a looming recession, inflation, and rising expenses.
NIC launched its Executive Survey Insights (ESI) series in March 2020 to provide timely insights on key property operational metrics within the senior housing and skilled nursing sectors during a critical time. Since this survey series was launched, more than 50 waves of the survey captured the property market’s performance through numerous challenges – COVID-19, labor deficiencies, supply shortages, threats of a looming recession, inflation, and rising expenses.
As the industry navigated these circumstances, the real-time insights captured in the ESI reports and accompanying chart packs provided industry stakeholders with perspective on these issues and ensured the narrative on senior housing and care operational trends was accurate.
Future NIC Surveys
To continuously improve transparency within our industry, NIC is pausing the ESI survey while we evaluate our surveying opportunities going forward. As the senior housing and care industry is now at a pivotal point, NIC’s forthcoming surveys will focus on the forward-looking perspectives of the industry’s leaders to provide actionable insights for developing strategies for navigating our dynamic and evolving market.
Executive Survey Insights’ Hot Topics
While we are taking the time to re-engineer our survey tools, let’s revisit a couple of the most pressing issues addressed by NIC’s Executive Survey Insights during the past few years.
Impact of COVID-19 Variants on Occupancy
A question throughout the entirety of the ESI series investigated the pace of move-ins and move-outs over the prior 30-day period. Within each wave, respondents also gave insights about the primary causes behind the changes in the pace of move-ins, including organization or state-imposed ban, resident or family member concerns, delays in lead conversions, or potential residents’ fear of an unstable economy.
Impact of Labor Shortages on FTE Recruitment
Labor shortages were an unfortunate hallmark of the COVID-19 pandemic. Questions pertaining to the severity of staffing shortages, agency utilization, and attracting and retaining employees were always of great interest.
These survey questions provided reference points on where other organizations stood and insights into strategies to address the situation and which of those strategies were most successful. For example, in June 2022, the most effective method cited for attracting new community staff was increasing wages, followed by flexible schedules, and hiring bonuses.
Upcoming NIC Launch
NIC’s ESI findings have garnered great interest from media and have provided the senior housing and care industry with timely information on relevant market trends. Keep an eye out for NIC’s launch of its new survey series in the coming months!
On-going Gains in Senior Housing Occupancy in July 2023
The all-occupancy rate for senior housing for the NIC MAP Primary Markets increased to 84.2% in the July 2023 reporting period, up 0.5 percentage point (pps) from the June 2023 reporting period on three-month rolling basis, according to intra-quarterly NIC MAP® data, released by NIC MAP Vision. From its pandemic record low of 77.8% in June 2021, senior housing all-occupancy increased by 6.4pps and is now 2.9pps from the pre-pandemic March 2020 level of 87.1%.
The occupancy recovery for senior housing will likely be sustained during the near-term given current supply and demand conditions.
The all-occupancy rate for senior housing for the NIC MAP Primary Markets increased to 84.2% in the July 2023 reporting period, up 0.5 percentage point (pps) from the June 2023 reporting period on three-month rolling basis, according to intra-quarterly NIC MAP® data, released by NIC MAP Vision. From its pandemic record low of 77.8% in June 2021, senior housing all-occupancy increased by 6.4pps and is now 2.9pps from the pre-pandemic March 2020 level of 87.1%.
Occupancy Recovery by Majority Property Type.At 85.8%, the all-occupancy rate for majority independent living (IL) properties for the NIC MAP Primary Markets increased 0.3pps from June 2023 but remained 3.8pps below March 2020 levels. For majority assisted living properties (AL), the all-occupancy rate for the NIC MAP Primary Markets was up 0.6pps to 82.5% from June 2023 and is now 2.0pps below March 2020 levels. Occupancy for AL continued to recover relatively fast compared with IL. From pandemic related low, all-occupancy for AL increased by 8.6pps, more than double the increase for IL (up 4.2pps since March 2021).
The senior housing market is demonstrating a steady recovery, with demand and occupancy continuing to rise. A new ratio developed by NIC Analytics offers further insights into these encouraging trends. This new measure offers a nuanced perspective on the balance between demand and supply and occupancy outlook. Called the absorption-to-inventory velocity (AIV), this ratio serves as an indicator of how effectively the market absorbs or leases the newly supplied units on a net basis.
In the second quarter of 2023, the AIV ratio (on a rolling 4-quarter basis) for majority assisted living was 38:10 for the Primary Markets. This means that for every 10 new units added, there was positive absorption of 38 units in the Primary Markets. The AIV ratio for majority assisted living properties reached an all-time high, far exceeding any level recorded since NIC MAP Vision began reporting data in 2005, suggesting an ongoing trend of high acuity demand in the senior housing market and that the recovery will likely be sustained during the near-term given current supply and demand conditions. In the August 2023 NIC Insider Newsletter, we explore the AIV ratio in greater detail.
The inventory of majority independent living properties for the NIC MAP Primary Markets increased by 1.2% or 4,097 units from year-earlier levels in the July 2023 reporting period. AL inventory increased by 1.3% over this same period.
Occupancy Recovery Across Select Metropolitan Markets.The all-occupancy rate for majority independent living properties increased or remained stable in 27 of the 31 Primary Markets in the July 2023 reporting period compared with June 2023. At 86.8%, Riverside IL occupancy saw the largest increase from the prior month, up 1.5pps and is now 3.2pps above March 2020 levels. San Antonio IL occupancy fell by 0.5pps in July 2023 to 86.0%, marking the largest decline from June 2023. However, this rate is still 0.8pps higher than the pre-pandemic level in March 2020.
For AL, the all-occupancy rate increased or remained stable in 28 of the 31 Primary Markets in July 2023. At 78.3%, Houston AL occupancy saw the second largest increase, up 1.3pps from June 2023. The AL occupancy rate in Miami had the largest decline and fell 0.7pps from June 2023 to 83.2%. Both Houston and Riverside occupancy rates remained 1.4pps below pre-pandemic levels.
Keep track of the most timely comprehensive review of the sector’s market fundamentals and trends. The NIC Intra-Quarterly Snapshot monthly publication, available for complimentary download on our website, continues to provide a powerful and closely watched means to stay ahead of industry trends, even as senior housing markets sustain a fast pace of evolution and adaptation, amidst an apparent recovery.
The August 2023 Intra-Quarterly Snapshot report will be released on our website on Thursday, September 14, 2023, at 4:30pm.
Interested in learning more about NIC MAP Intra-Quarterly data? To learn more about NIC MAP Vision data, schedule a meeting with a product expert today.
1Q 2023 Lending Trends: Tighter Credit Conditions Take a Toll on Lending Activity in Senior Housing and Nursing Care
NIC Analytics released the 1Q 2023 NIC Lending Trends Report today. The quarterly report, available complimentary to NIC constituents, includes data trends over six years for senior housing and nursing care construction loans, mini-perm/bridge loans, and permanent loans, from 3Q 2016 through 1Q 2023.
NIC Analytics released the 1Q 2023 NIC Lending Trends Report today. The quarterly report, available complimentary to NIC constituents, includes data trends over six years for senior housing and nursing care construction loans, mini-perm/bridge loans, and permanent loans, from 3Q 2016 through 1Q 2023.
Takeaways from the 1Q 2023 NIC Lending Trends Report
The issuance of new permanent debt reached a time series low for senior housing and a near record low for nursing care as well. The marked decline in permanent financing reflects tightening lending standards, widening spreads (i.e., the amount charged over the risk-free rate to compensate for risk), and lower loan proceeds. Credit conditions have changed dramatically because of the Federal Reserve’s efforts to slow economic growth to stem inflation through a series of interest rate hikes since March 2022.
The issuance ofmini-perm/bridgedebt for senior housing fell nearly 50% in the first quarter of 2023 from late 2022 levels. Mini-perm/bridge loan issuance was largely unchanged for nursing care and remained relatively low and on par with pre-pandemic levels. Heightened activity in the fourth quarter for senior housing bridge financing showed some borrowers’ preference for financing structures that offer flexibility – i.e., short-term loans over permanent ones for certain deals.
New construction loan closings for senior housing remained notably weak in the first quarter of 2023 compared to historical standards, with only two other periods in the time series matching this low level — the third quarter of 2022 and the first quarter of 2021. Issuance of construction debt for nursing care was virtually non-existent for the lenders sampled in the NIC Lending Trends Report. This aligns with the observed pattern of limited debt financing for new nursing care property construction since NIC began data collection in 2016. In fact, there has been limited development of new nursing care properties for several years.
The total balance of senior housing delinquent loans saw a notable increase, though still lower than the high levels seen in the third quarter of 2020. Delinquencies in senior housing in the first quarter 2023 rose by 68.9%, while those in nursing care climbed by 16.0% from the prior quarter. Delinquencies as a share of total loans rose to 2.1% for senior housing, up from 1.3% in the fourth quarter of 2022. For nursing care, the delinquency rate edged up to 1.2%. Note that loans in forbearance are reported in the delinquent loan data for some debt providers. Also of note, some foreclosures were reported for the sample in first quarter 2023 for both senior housing and nursing care.
As background, the lending environment has tightened sharply in the past 16 months. The Federal Reserve raised interest rates by another 0.50 percentage points (pps) to 5.00% in the first quarter of 2023 (+0.25pps in February 2023 and +0.25pps in March 2023), up from 0% in March 2022 in an effort to tame inflation. Since June 2022, the annual inflation rate in the U.S. has continued to slow, decelerating for a ninth consecutive month to 5.0% in March 2023, down 4.1pps from the highs seen in June 2022 (9.1%). Meanwhile, senior housing construction starts remained relatively low in the first quarter of 2023, and the number of senior housing units under construction in the 31 NIC MAP Primary Markets remained near its lowest level since 2015, according to data released by NIC MAP Vision.
Looking ahead, these trends will likely persist in 2023. The broader economic landscape, characterized by relatively high interest rates and inflation, will continue to influence the senior housing and nursing care lending environment. This could result in further tightening of lending standards and an ongoing preference for short-term loans over permanent ones. The caution surrounding new construction financing and the elevated delinquency rates may also persist. However, the resilience and adaptability of this sector have been demonstrated time and again, and it will be interesting to monitor how these challenges are navigated moving forward. As always, understanding and responding to these trends will be critical for lenders, borrowers, and other stakeholders in the senior housing and nursing care sector.
From the Field: 1Q 2023 Survey Comments
In this release, we reached out to our network of contributors, engaging them with key questions about the lending environment for senior housing and nursing care. We sought to understand their strategies in response to changing capital market conditions, their lending patterns with respect to existing versus new clients, and any notable trends they observed in the market in the first quarter of 2023.
In the face of changing capital market conditions in the first quarter 2023, the responses indicated that lenders are responding to these changing conditions by focusing on strong sponsorship and strong credits. This trend reflects a reaction to a jump in the SOFR and 10-year Treasury rates, lower loan-to-value (LTV) ratios, tighter spreads, leaner proceeds, and higher equity requirements.
The first quarter of 2023 also saw a focus on long-term relationships with many lenders extending loans predominantly to existing clients. Limited transactions were completed with new clients. New financing requests mainly consisted of acquisition projects requiring substantial turnaround or lengthy runways, thus directing attention towards short-term bridge loans that can exit successfully within 18 to 24 months. Nonetheless, the number of new clients onboarded was relatively fewer due to tightened lending standards driven by higher interest rates.
The first quarter of 2023 continued to signal a cautious lending climate, with a significant slowdown in construction requests. Opportunities, however, have arisen for funds looking to acquire underperforming assets at discounted rates.
Note that this survey does not fully reflect the immediate disruption to the banking system following the failures of Silvergate, Silicon Valley Bank, and Signature Bank and the sale of First Republic Bank to JP Morgan Chase.
Download the complimentary 1Q 2023 NIC Lending Trends Report for full details on these and other trends in senior housing and skilled nursing lending.
Note: These data are not to be interpreted as a census of all senior housing and skilled nursing lending activity in the U.S., but rather reflect lending activity from participants included in the survey sample only.
The 2Q2023 NIC Lending Trends Report is scheduled for release in mid-November 2023.
Interested in participating? The NIC Lending Trends Report helps NIC Analytics to deliver on NIC’s mission to enable access and choice by further enhancing transparency of capital market trends in the senior housing and care sectors. We very much appreciate our data contributors. This report would not be possible without them.
If you would like to participate and contribute your data, please contact us at analytics@nic.org. As a courtesy for providing data, data contributors receive this report early before publication on the website. The information provided as part of the survey will be kept strictly confidential. Individual answers will be combined with the answers of all other respondents. Data acquired from this survey will only be reported in the aggregate, and therefore, the resulting aggregated data will not be attributed to you or your company upon distribution.
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