Skilled Nursing Price Per Bed – What’s Driving Current Trends?

Skilled nursing properties have continued to see strong interest from investors, contributing to elevated skilled nursing valuations.

Over the past couple years skilled nursing properties have continued to see strong interest from investors in the sector. This has contributed to skilled nursing valuations becoming what some deem as elevated. However, others might argue differently. Regarding the overall skilled nursing market, many continue to see steady demand trends as the industry passes the inflection point where the growth of the senior population accelerates, and more people with higher acuity levels need care. There are headwinds as we are all aware, including the risk of Medicare reimbursement cuts, low occupancy rates, chronic underfunding of Medicaid reimbursement in many states, a staffing crisis, and ongoing elevated inflation including wage rate growth. Given the challenges that are present, why has skilled nursing property price per bed increased?

Before answering that question, let’s look at the pricing trends. Below is a chart that shows private pay seniors housing price per unit and nursing care (a.k.a. skilled nursing) price per bed. For this article, pay attention to the nursing care price per bed trendline. In late 2019, specifically the fourth quarter of 2019, nursing care price per bed was $80,000 and in the first quarter of 2020 it was at $78,550. It then proceeded to decline to $74,900 in the third quarter of 2020, its pandemic low. The decline made sense as many assets were struggling during the pandemic. However, the price per bed remarkably increased to $95,600 by the first quarter of 2021 during a period of very low occupancy levels. Occupancy is still challenged as of the second quarter 2022 but price per bed remained in the $95,000 range. Specifically, it was at $95,800 as of the preliminary data for the second quarter, which is 19.6% above the level in the fourth quarter of 2019 before the beginning of the pandemic.

Skilled Nursing Pricing Trends

There is not simply one answer as to the reasoning behind why skilled nursing price per bed is relatively high, given the challenging operating fundamentals. There are likely many factors involved.

First, both monetary and fiscal policy created a tremendous amount of liquidity and as a result most asset prices, e.g., real estate and public equities, increased significantly during the pandemic. Furthermore, the government made a commitment to help the skilled nursing industry during the pandemic. This was evident by many Paycheck Protection Program (PPP) loans, Medicare prepayments, Medicaid rate increases, and other forms of aid at the state levels. Second, the Patient Driven Payment Model, implemented before the pandemic, can compensate for higher care levels unlike the previous model but operators need to be able to code their systems accordingly to get paid. Hence, buyers can justify paying higher prices per bed if they are estimating higher cash flow.

In addition, owners with more properties can benefit from scale in certain geographies and potentially have other benefits like staffing flexibility. Therefore, some owners have planned to grow by acquisition and can justify higher prices paid if they own more properties in a certain area. Another reason is the opportunity for growth in other ancillary businesses. These businesses can include in-house dialysis, contract therapy, wound care, pharmacy services or an on-site diagnostic lab, among other businesses. Also, there is the dynamic that the number of skilled nursing property buyers seemingly were outnumbering the seller supply, at least for now.

Lastly, there is the yield spread vs. other real estate asset types. If skilled nursing properties are selling for cap rates at, say, 11%, investors still have significant cushion if they have debt cost of capital in the 5% range and a loan-to-value in the 90% range. In addition, from an overall real estate investment perspective when measuring against other real estate asset types, 11% cap rates look very attractive.

In conclusion, skilled nursing property pricing has been stronger than many would have expected during a pandemic for various reasons. However, the risk of higher rates and labor market challenges could give more reasons for sellers to come to market, which would increase the number of properties on the market. In addition, if the cost of capital continues to increase as well, the price per bed increases may be limited in the near-term.

Six Key Drivers Shaping the Future of Senior Living: Key Driver #1

The pandemic has had a major impact on the senior living industry. Beyond lower occupancies and added expenses, the crisis has changed the industry.

The COVID-19 Pandemic.

NIC Co-Founder and Strategic Advisor Robert Kramer has identified “Six Key Drivers” that will shape the senior living industry over the next 10 years. Kramer is also Founder & Fellow at Nexus Insights, a think tank to advance the well-being of older adults through innovative models of housing, community, and healthcare. NIC Notes will publish a bi-weekly series detailing each key driver. View the introduction to the series. What follows is an analysis of the first key driver: the pandemic.

bob headshot-1The pandemic has had a major impact on the senior living industry. Beyond lower occupancies and added expenses, the crisis has changed the way the industry is perceived and operates.

Certain trends have been accelerated such as the greater use of technology. At the same time, the pandemic has exposed the limits of our healthcare system, dramatically worsened the labor shortage, and underscored the crushing effects of isolation experienced by many of our elders.

The wide-ranging consequences of the pandemic will play out over the next decade. Here are six ramifications of the crisis that will change the senior living industry.

  1. A loss of consumer trust in our setting, leading to a demand for transparency.


    The loss of trust is not the same as the consumer who hopes to avoid senior living altogether. Rather, there is a real concern about the health threat of a congregate setting. Is it dangerous for me to put my mom in your building? We’ve never experienced that before. Transparency is key to reestablish trust. We must obviously provide transparency around health, infection control and prevention. This should include COVID-19 vaccination and booster rates in our buildings. More transparency in other areas is needed too. For example, operators should consider posting details on pricing and be prepared to share information on staffing levels, especially for night and weekend shifts. Consumers are also starting to ask about wage levels for the hourly staff. They want to know how you care for your staff because that serves as a proxy for how you will care for them or their loved ones.


  2. Forced entry into the 21st century world of digital.


    Healthcare has notoriously lagged behind other major sectors in its adoption of technology and senior living has lagged far behind the healthcare sector. COVID-19 quickly forced senior living into the 21st century digital world. The old ways of doing things didn’t work anymore. Modes of communication with residents, families and staff changed. We couldn’t ship residents out to hospitals or take them to doctors’ offices. Those were dangerous places that didn’t want them. So, we had to learn new ways to deliver care. Our multipurpose room was closed. Our van was going nowhere. So, how were we going to engage our residents when they were in their rooms? What about sales and marketing? The tours, lunches, and in-person appointments couldn’t happen. The change impacted pretty much every aspect of the business with the emergence of telehealth, Zoom calls, and virtual programming and tours. We were forced to enter the 21st century digital world and there is no return.


  3. Mental and behavioral health emerged from the shadows and will not fade away.


    The pandemic has exposed issues around mental and behavioral health. This is true for society at large, as well as for our workforce and our residents. They have suffered greatly from stress, anxiety and fear. Many residents, in particular, have endured isolation and loneliness, a risk factor for cognitive disorders and other mental disturbances. The need to address mental health issues will not recede. Programs to address mental and behavioral health for staff and residents will be necessary.


  4. The moat around our buildings has collapsed.


    What do I mean by that? During my entire career in the industry, particularly in private pay senior living, and especially with lawmakers in Washington D.C., a moat has encircled our buildings. We didn’t admit that any healthcare happened inside our buildings. Therefore, there was no need for the federal government to take an interest in our industry and regulate us. After 30 years of advocating that position, the two largest private pay senior living associations quickly did a 180-degree turn when the pandemic hit. They pointed out the frailty of our residents and that senior living is the front line of defense of the entire healthcare system in the face of a virus to which frail, older adults are the most vulnerable. If the government didn’t help us to meet our residents’ healthcare needs, the hospital ICUs would be overwhelmed.


    It was a tough sell at first because Members of Congress said, “We just thought wealthy, healthy, older seniors lived in your buildings, played golf and had fun. What do you mean they’re frail, and have all these ADLs and chronic conditions?” Senior living is now considered part of the healthcare continuum, which will impact the industry.


  5. Infection control and prevention are the new table stakes.


    The bar has been raised. It will never be lowered again. People won’t move in because of your infection control and prevention programs, but they will not move in if their concerns about infection control are not addressed. So, good infection control is necessary, but not a sufficient condition for a move. There’s going to be a flu season every year, complicated by the ongoing pandemic. Consumers want to know what protocols are in place. How does the community plan to handle mom’s engagement in the middle of flu season or when a new wave of COVID hits?


  6. COVID has punctuated the end of the 2nd generation of senior housing and care.


    From 1960 to 1990, we had the first generation of product. Primarily, these were not-for-profit retirement communities or board and care homes, driven by a mission. The Great Society legislation of 1965 launched Medicare and Medicaid. The explosive construction of nursing homes took off, and half of those homes are still in operation today, some with three and four bed wards. From 1990 to 2020, we saw explosive growth of independent living, assisted living and dedicated memory care properties driven by the entry of countless for-profit providers into the industry.


    A few senior living pioneers opened properties in the ‘70s and ‘80s, such as Bill Colson at Holiday Retirement and the Klaassen’s at Sunrise. But the industry really took off in the ‘90s because of baby boomer daughters. Prior to this time, long lived elders were cared for by their adult children, usually their daughters. But for the first time, most of these daughters were in the workforce. The Klaasen’s, for example, realized they weren’t marketing to the mother. They were marketing to the daughter, and she wasn’t going to put mom in a nursing home. The daughter saw the chandelier, the Queen Anne furniture, the curved stairway and assisted living took off.


    The 3rd generation of senior living, from 2020 to 2050, will have new products and new leaders. About 70% of all not-for-profit providers in the country expect their leadership to change in the next three to five years. The for-profit space will see a lot of acquisitions and changes in operational leadership. The 3rd generation of senior living will also have a new kind of customer. This new consumer is one of the “Six Key Drivers Shaping the Future of Senior Living.” A future blog post will detail our changing customer profile and what these consumers expect from senior living.


Next Up—Key Driver #2: The Endemic Staffing Crisis. The labor shortage will continue. How can providers recruit and retain the best workers?

Seniors Housing Investor Sentiment Remains Stable Despite Economic Headwinds

Investor sentiment in the seniors housing sector that appeared to be firmly on the road to recovery a year ago has taken a modest step back in 2022.

Fundamentals continue to improve, but rising costs, inflation and interest rate hikes are tempering enthusiasm even as seniors housing continues to bounce back from COVID-induced disruptions.

This article was originally published on WealthManagement.com.

Investor sentiment in the seniors housing sector that appeared to be firmly on the road to recovery a year ago has taken a modest step back in 2022. Exclusive results from the ninth annual WMRE / NIC Seniors Housing Survey show that high costs and broader economic concerns are creating challenges for operators and weighing on near-term investment strategies.

There is a dichotomy at play. While operators and investors have confidence in improving fundamentals within the sector, the factors of high inflation, rising interest rates and staffing issues have produced formidable headwinds.

Survey results show pessimism creeping back into plans to invest in the near term. On the positive side, three-fourths of respondents said they plan to invest the same, if not more, in the near term. But of concern is that one in four are likely to invest less—nearly double the 13.3 percent who said they planned to invest less a year ago.

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“What I’m starting to hear is that a lot of the investors and capital providers are beginning to understand that this is a challenging time and that there might be compromised margins as a result for the next few years,” says Beth Burnham Mace, NIC’s chief economist and director of outreach. Concerns are less impactful on longer-term strategies. A majority (85.5 percent) plan either no change or an increase in seniors housing investing, while only 14.5 percent said they are likely to invest less.

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Rising costs and staffing issues are clearly top of mind for operators and investors. Not surprisingly, nearly all respondents (96.4 percent) reported an increase in their expenses from March 2020 through June 2022. And for many, costs have increased significantly. Just less than two-thirds (65.0 percent) report that the increase in expenses has been 10 percent or more, with 16.0 percent saying costs have climbed 20 percent or higher from pre-COVID levels. The typical respondent reported an estimated mean increase of 12.0 percent as compared to 9.1 percent in the 2021 survey. “That is very significant, because that’s going to have an impact on the overall ability to maintain margins, and they’re largely not going to be able to offset the expense growth that they’re seeing by any kind of rent increase,” says Mace.

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Growing cost burden

More respondents now expect increases in expenses due to COVID-19 to be permanent at 78.3 percent as compared to 57.2 percent in the 2020 survey and 48.6 percent in the 2021 survey. A number of respondents voiced frustrations with reduced NOI due to higher costs that can’t be passed on to residents with equivalent increases in rents. “The increase of operating expenses has made the operations in the last three years extremely difficult,” wrote one respondent.

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Although rising costs have been a factor on expenses across the board from utilities to food, labor challenges are especially concerning as staffing typically accounts for about 60 percent of the overall expense load, according to NIC. Difficulty in filling vacant positions forces some operators to rely on more expensive temporary or agency help. Costs are further exacerbated by high turnover.

Respondents said that the positions that were most difficult to staff are frontline workers with 69.2 percent indicating it is “very” or “extremely” challenging to find workers, followed by LPNs at 63.2 percent and managerial staff at 46.4 percent. The turnover rate also is highest among frontline care workers with 80.0 percent reporting turnover for those positions within the first 12 months. LPN positions also had a high turnover rate of 62.6 percent within one year, while managerial was lower at 33.4 percent.

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“We have felt the effects of these challenges like everyone across the industry, but I think we have come up with pretty creative solutions internally to combat rising costs,” says Camilo Padron, senior vice president of senior living investments at Lloyd Jones LLC. For example, Lloyd Jones relies on its own local recruiting in a market to staff properties versus using agency staffing.
“Necessity is the mother of invention. So, we’re seeing our operators get more and more creative and involved in the hiring process,” adds S. Scott Stewart, founder and managing partner of Capitol Senior Housing, a private equity-backed real estate acquisition, development and investment management firm based in Washington, D.C. Some of the company’s regional operator partners are forming more extensive HR departments with a mission to step-up recruiting, while others are bringing in people and giving them the training they need to move up the ranks, he adds.

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Owners and operators also are paying more attention to creating a culture at facilities that helps retain and attract both workers and residents, which includes diversity, equity and inclusion (DEI) initiatives. Most respondents (59.5 percent) report their firms currently have some type of diversity, equity and inclusion initiatives in place. The most common is DEI awareness/sensitivity training for all staff among 39.0 percent of respondents.

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Occupancies continue to rebound

Seniors housing occupancy levels have shown steady improvement over the past year, increasing to 80.6 percent in the first quarter of 2022, a 2.6 percentage point increase from a pandemic-related low of 78.0 percent in the second quarter of 2021, according to new NIC MAP data, powered by NIC MAP Vision.

Confidence in fundamentals has been buoyed by rising vaccination levels along with the long-anticipated “Silver Tsunami” of aging baby boomers now on the doorstep for seniors housing facilities. More than four-in-five respondents (83.3 percent) believe occupancy rates will increase over the next 12 months, which is a slight uptick from the 80.1 percent who held that view in the 2021 survey.

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Overall, the average expectation is an increase of 250 basis points.

Respondents rated the South/Southeast/Southwest region most positively with regard to market fundamentals for the seniors housing sector. On a scale of 1 to 10 with 10 being the highest, the Southern region rated a mean score of 7.4, followed by West/Mountain/Pacific at 6.9, East at 6.5 and Midwest/East North Central/West North Central at 6.2.

Predictably, the COVID-19 pandemic has had the biggest impact on occupancy rates at seniors housing facilities over the past six months. On a scale of 1 to 5, COVID-19 rated the highest at 3.9 percent. That is not surprising giving the surge of the Omicron variant. However, the impact from COVID is lessening as compared to a mean score of 4.3 in 2020 and 4.0 in 2021. Other factors having a significant impact on occupancies are the economy at 3.7 and housing market at 3.5. Concerns about the state of the economy are the highest in the nine-year history of the survey, and concerns about the state of the housing market are the highest level since 2014.

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“That is important to note, because people often use proceeds from the sale of their house to go into seniors housing. So that is another headwind,” says Mace.

Another concerning result of the 2022 survey is that 40.5 percent of respondents said that labor shortages have caused a reduction in the number of operating units/beds in their portfolios, which further squeezes NOI. “The occupancy rate overall is improving from its COVID low, but it still has a significant way to go. If staffing shortages are going to impact occupancies, that is worrisome. So, staffing is top-of-mind from an investor’s point of view,” says Mace.

Views on transaction outlook are mixed

The seniors housing investment market is coming off a robust year of property sales in 2021. According to MSCI Real Assets, $20.0 billion in seniors housing properties traded compared to $18.4 billion in 2019. Although survey respondents are divided on their expectations for transaction volume in the coming 12 months, a majority 70 percent anticipate that sales volume will be the same if not higher. The 30 percent that anticipate a decrease is high based on historical survey results and second only to 2020 in bearish sentiment. According to MSCI Real Assets, 2022 sales activity is on a slower pace with $2.4 billion in closed transactions in the first quarter.

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Anecdotally, many industry participants see plenty of capital and avid interest focused on the seniors housing sector. “As seniors housing fundamentals continue to recover from the impact of the pandemic, this year is shaping up to be a much improved year, with many sellers looking to take advantage of strong interest in the sector,” says John Sweeny, senior vice president, Capital Markets at CBRE. “We anticipate strong investment over the intermediate and long-term as investors look to sell into fundamental strength and end of fund life timelines,” he says.

For example, Lloyd Jones acquired the 113-unit Hamilton Heights senior living community in West Hartford, Conn. in June. The property marks the firm’s fourth senior housing acquisition this year. “Our CEO, Chris Finlay, sees major opportunities in the market right now from an acquisitions standpoint,” says Padron. Lloyd Jones is pursuing 55+, IL, AL and memory care communities. In addition, the company has an ambitious goal to grow its portfolio from roughly 1,500 today to between 9,000 and 10,000 units within the next five years.

Chicago-based Blueprint Healthcare Real Estate Advisors is one brokerage firm that continues to see robust investment sales activity. The firm is on pace for a record year with nearly $1 billion in brokered transactions as of the end of June. The depth of bidder pools varies on the location and asset. For example, Blueprint showcased a substantial package of skilled nursing facilities earlier this year that attracted 21 bids—the most the firm has ever seen in its history. “The ones that are attractive and check the boxes, we’ve got more demand than we’ve ever had,” says Blueprint CEO and Co-founder Ben Firestone.

Cap rates likely to rise

Rising interest rates and pressure on NOI are contributing to expectations for higher cap rates ahead. A majority of respondents (70.8 percent) think seniors housing cap rates will increase over the next 12 months, while 10.9 percent anticipate no change and 18.2 percent believe cap rates could decrease. Expectations for rising cap rates have moved slightly higher compared to 65.5 percent who held that view in the 2021 survey. However, the overall change is likely to be modest with an average increase of 51 basis points, less than the expected rise in interest rates by economists.

In addition, some market participants argue that cap rates as applied to in-place income have been a more difficult market barometer with many properties that are battling near-term NOI challenges due to high inflation and lingering effects of COVID on occupancies. Instead, investors are focusing on other factors, such as per bed and per unit pricing, drivers of value, and top-line revenue, notes Firestone. “Investors are stretching out their investment period and looking to other metrics than where cash flows are today at a static cap rate,” he says.

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Pricing trends vary widely depending on the asset. For example, Blueprint recently closed on a single private-pay seniors housing asset with 60 percent occupancy for a cap rate of approximately 5.95 percent on projected year-two EBITDAR (earnings before interest, taxes, depreciation, amortization, and rent.) At the time of sale, the in-place EBITDAR was only marginal. However, prices continue to soar for those types of assets in good growth markets, which is driven in part by higher replacement costs, notes Firestone. “The investors that are the most aggressive in bidding are the ones that are willing to be patient and have a multi-year strategy,” he says.

Lloyd Jones is targeting acquisitions with cap rates ranging between 6.5 and 9.0 percent. “We’re also seeing a lot of negative cash flow deals. So, it’s hard to put a cap rate on some of those deals,” notes Padron. In particular, Lloyd Jones is looking to buy value-add assets at $70,000 to $80,000 per door. There were a number of operators that were hit hard by COVID and have yet to come out of it, he says. “That’s where we think we can come in at value and take properties over and turn things around,” he adds.

Rent growth also could help shore up cap rates. Annual rental rates rose across NIC MAP’s Primary Markets by 3.3 percent in first quarter, and an overwhelming majority (93.3 percent) expect rents to increase further over the next 12 months. Overall, the average expectation is an increase of 304 basis points. Sentiment is more positive than in the 2021 survey where 86.5 percent of respondents thought rents would rise by an average of 261 basis points.

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“While operational challenges are a factor, investors are accounting for those challenges accordingly. Spreads/yields continue to be attractive and the intermediate to longer-term outlooks look robust,” says Sweeney. “Given seniors housing has performed well during previous recessionary cycles, capital continues to be interested in putting dollars to work in the sector in the right locations.”

Access to capital may tighten

Investors are concerned that access to both debt and equity could be more limited in the coming year. Nearly half of investors (53.2 percent) believe debt will be more difficult to access over the next 12 months. Fears are not as great as in 2020 when 57.2 percent thought access to debt would tighten, but it is significant that those views on more limited debt are at the second-highest level in the history of the survey. Opinions on access to equity also are more pessimistic. Roughly one-third of respondents (32.0 percent) said access to equity could be tighter over the next 12 months. Similar to debt, 2020, views on less availability of equity ahead are the second-highest level in the history of the survey.

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That being said, a majority of respondents do think equity will remain the same (44.8 percent) or improve (23.1 percent.) “There is an abundance of capital that has been raised that these institutional groups need to put to work,” says Cary Tremper, managing director and head of Senior Housing Capital Markets at Greystone. “I wouldn’t say that everyone has the same access to capital across the board, but typically for the ones that have the ability to execute and have the track record, capital is there on the equity side,” he says.

Consistent with the prior survey, institutional lenders and REITs have edged out national banks as the most significant sources of debt capital for the seniors housing sector. On a scale of 1 to 10 with 10 representing a very significant source of capital, institutions had a mean score of 6.6 and REITs 6.4 followed by national banks at 6.3.

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Over the ups and downs over the past three years, availability of both debt and equity for seniors housing has been relatively consistent, notes Tremper. Greystone’s Senior Housing Capital Markets team is currently working on sourcing capital on about 50 different engagements from permanent financing to bridge and construction financing. “Some lenders are taking more of a cautious approach, but in order to lend in this space and build a reputation, it is very difficult to time markets in terms of getting in and getting out,” says Tremper.

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Respondents are bracing for bigger changes ahead in financing over the next 12 months. In all, 83 percent are anticipating interest rates to move higher, while 64.4 percent think risk premiums will rise. More respondents (68.8 percent) now expect underwriting standards to tighten in the coming year compared to 32.2 percent who held that view in the 2021 survey.

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According to Tremper, leverage levels have ticked down 5 to 10 percent as compared to six to 12 months ago, but there are still viable options out in the marketplace with a diverse group of lenders that are still committed to the space. “I also think that people going to the market today are realistic with their financing objectives,” he says. For example, some deals might require more structuring to get done, such as building in operating deficits or earn-outs, because there is recognition that it might take longer to execute on a business plan. About half of investors believe the time to close a transaction will remain the same, while 35 percent said the time required to close a seniors housing property transaction could be slower in the coming year.

2022 NIC Notes Blog WMRE Graph 19Higher costs slow new supply

The seniors housing development pipeline is still feeling the effects of COVID-19. Projects that were delayed or halted during 2020 is showing up in current construction numbers. Inventory growth during first quarter slowed to 5.3 percent, which is the weakest level since 2013. In addition, the roughly 36,000 seniors housing units under construction during first quarter is the lowest volume since 2015, according to NIC.

Construction starts are going to linger at moderate levels as rising construction costs, labor shortages and higher interest rates collectively weigh on plans for new development, notes Mace. Three in four respondents (75 percent) report canceling or delaying projects as a result of supply chain restrictions and/or inflation, while 9 percent said they have sped up timelines and 17 percent said supply chain and inflation have had no impact.

Respondents are divided on their outlook for seniors housing construction starts over the next 12 months. Overall, 38.9 percent said starts are likely to increase; 32.1 percent think they will decrease, and 29.1 percent do not anticipate any meaningful change. Expectations for increased construction activity has pulled back significantly from a year ago when 55.5 percent predicted that construction starts would increase.

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However, some builders remain optimistic on the outlook for growing demand. “We’re very bullish on the sector,” says Stewart. “Even in light of the fact that we’re probably in a recession right now and there are supply chain issues, inflationary issues, workforce issues, we’re taking the long view and developing in good markets,” says Stewart. Capitol Senior Housing has four projects under development and 15 more that are in pre-development. “The slowdown is going to be exacerbated by construction lending drying up, and we think that is going to benefit us in the long run, because we won’t have to worry about as many competitors,” he says.

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One of the key reasons that Capitol Senior Housing likes the sector is the demographics and fundamental demand drivers. “It’s impossible to argue the demographics,” notes Stewart. Roughly 10,000 Americans are turning 65 every day until 2030. At that time, seniors 65 and older will be 20 percent of the population. Stewart estimates that the demand for 55+active adult units annually will be an additional 230,000 units for the next several years. “We’re doing our best to meet the demand, but we still think there’s going to be a significant imbalance of demand outstripping supply for years to come,” he says.

Despite near-term challenges, seniors housing consistently ranks favorably compared to other property types. When respondents were asked to rate the attractiveness of investing in various property types on a scale of 1 to 10, seniors housing scored a mean 7.0, which was second only to apartments at 7.5. Although the current mean score is an improvement over the historical low of 6.3 in the 2020 survey, it is only slightly below its pre-pandemic score of 7.2.

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Over the nine-year history of the survey, seniors housing has consistently ranked as the top one or two favored property sector. Many of the reasons the sector has traditionally been attractive to investors are still in place. It offers a good value proposition, and there is good demand across the spectrum of different property types and price points, notes Mace. “What we’ve seen in the last few years is greater segmentation and differentiation in seniors housing, much like you’ve seen in hotels,” she says. Increasingly, operators are picking which segment of the market they want to focus on, such as traditional, high-end or ultra-high-end, as well as the level of care that communities offer. “The sector is maturing and growing, and as that happens, there are going to be more options for aging adults, which also is going to help support greater usage of this product,” adds Mace.

Acces the full survey.

Survey methodology: The WMRE / NIC research report on the seniors housing sector was conducted via an online survey distributed to WMRE readers in June. The 2022 survey results are based on responses from 208 participants. The majority of respondents hold top positions at their firms with 43 percent who said they were either an owner or C-suite executive. Respondents also represent a cross-section of different roles in the seniors housing sector, including investors, lenders, developers, brokers and owner/operators.

State of the Nursing Labor Market in Senior Living and Adjacent Healthcare Industries

This analysis and complimentary state report pinpoints where skilled nursing and senior housing jobs stood in 2021.

2021 Occupational Employment and Wage Statistics: Labor Concentration and Complimentary State Level Report.  

In a NIC Notes blog published June 23, 2022, NIC Analytics examined jobs in the skilled nursing and senior housing sectors by looking at employment patterns since March 2020. The analysis included insights on workforce contraction and recovery in the sectors, as well as wage increases, compared with other adjacent healthcare industry groups. The blog provided context on jobs and wages for all employees within select healthcare industry groups.

In this follow-up blog, NIC Analytics compiled 2021 Occupational Employment and Wage Statistics (OEWS) data from the Bureau of Labor Statistics (BLS) to provide a detailed overview of jobs and wages for nursing staff and aides, including registered nurses, licensed practical and licensed vocational nurses, nursing assistants, and home health and personal care aides across all U.S. states. The primary purpose of this analysis and complimentary state report is to pinpoint where skilled nursing (SNF) and senior housing (CCRC and assisted living) jobs stood in 2021 compared with the competitive landscape (i.e., other industries & healthcare settings).

The competitive landscape includes six select healthcare industries that employ 81% of the nation’s four occupations listed above (nursing staff and aides). These are: (1) skilled nursing facilities, (2) home health care facilities, (3) continuing care retirement communities and assisted living facilities for the elderly (CCRC & AL), (4) general medical and surgical hospitals, (5) individual and family services, and (6) offices of physicians. These industry groups are based on the Office of Management and Budget’s (OMB) standard industry classification codes known as the NAICS or the North America Industry Classification System.

Skilled Nursing and Senior Housing vs. Select Healthcare Settings: Workforce Mix

  • Four occupations, including (1) registered nurses, (2) licensed practical and licensed vocational nurses (LPNs and LVNs), (3) nursing assistants, and (4) home health and personal care aides (aides) accounted for roughly 60% of all staff within the skilled nursing sector and about 52% of all employees within the senior housing sector (CCRC and assisted living) in 2021.
  • For other healthcare industry groups, these four occupations represented 40% of all employees for general medical and surgical hospitals in 2021, 65% of all employees for individual and family services, and 79.8% of all employees for home health care services. This was the largest share across the select healthcare industries in Exhibit 1 below.
  • The skilled nursing workforce mix had the largest share of nursing assistants and LPNs & LVNs compared with adjacent healthcare industry groups. The skilled nursing workforce comprised 33.5% of nursing assistants, equivalent to (471,160) and 12.6% of LPNs and LVNs (177,960).
  • Registered nurses for skilled nursing had employment of 131,320 in May 2021 in the U.S., representing 9.3% of all employees, while aides had employment of 62,400, accounting for 4.4% of all employees for skilled nursing.
  • For senior housing, aides and nursing assistants comprised the largest shares of all employees, with 27.6% (245,910) and 15.8% (140,850), respectively, followed by LPNs and LVNs with 5.1% (45,200), and then registered nurses with 3.6% (32,220).
  • Compared with skilled nursing, senior housing employed less nursing staff (registered nurses, LPNs and LVNs, and nursing assistants) but more aides in 2021.
  • Individual and family services had the largest number and highest proportion of aides across all healthcare industries, with 1,657,960, accounting for 62.4% of all employees and representing 49.2% of total national employment.
  • Home health care services employed fewer nursing assistants, but more registered nurses and aides compared with the skilled nursing and senior housing sectors in 2021. Home health care services comprised 56.9% of aides, equivalent to 861,740, and 11.5% of registered nurses (173,790), while nursing assistants represented 5.5% of all employees, equivalent to 83,560.
  • General medical and surgical hospitals employed the largest number of registered nurses across all healthcare industries at 1,752,210, accounting for 31.3% of all employees and representing 57.5% of total national employment.

The complimentary state occupational employment and wages report at the end of this blog provides state level data.

Exhibit 1 – Workforce Mix Within Select Healthcare Industries

Exhibit 1-1

 

Skilled Nursing and Senior Housing vs. Select Healthcare Settings: Hourly Mean Wages

  • Registered Nurses. The highest paying healthcare industry for registered nurses was general medical and surgical hospitals, with an hourly mean wage of $40.88, 2.8% above U.S. average wage for registered nurses ($39.78). All other healthcare industries paid an hourly mean wage below the national average wage. Skilled nursing and senior housing were the lowest paying healthcare industries with $34.74 (12.7% or $5.04 below U.S. average wage) and $32.59 (18.1% or $7.19 below U.S. average wage), respectively.
  • LPNs and LVNs. At $25.80 per hour on average, LPNs and LVNs within skilled nursing were paid the highest among the select healthcare industry groups, nearly $1 or 3.5% above the national average wage of $24.93. For senior housing, LPNs & LVNs were also paid above national average at $25.22 (1.2% or $0.29 more) and nearly the same or better than all other healthcare settings including general medical and surgical hospitals (at $23.10 – more than $2 less per hour than skilled nursing and senior housing).
  • Nursing Assistants. Wages for nursing assistant workers in skilled nursing and senior housing were also competitive at $15.43 and $15.15, respectively. Nursing assistants in skilled nursing and senior housing were paid slightly lower than the national average ($15.99) and about $1.50 less per hour than in general medical and surgical hospitals ($16.92), but better than those in home health care services ($14.39) and individual and family services ($13.84).
  • Home Health and Personal Care Aides. Average hourly earnings for aides in skilled nursing ($14.49) and senior housing ($14.06) were also competitive compared with the national average ($14.07) and other industries and healthcare settings, including individual and family services ($14.20) and home health care services ($13.52), which employed the largest number of aides across all healthcare industries.

Other than registered nurses, skilled nursing and senior housing wage rates were somewhat competitive compared with the U.S. average wages and other healthcare industries (based on the vintage of the BLS data which is date stamped May 2021). This suggests that workforce attraction and retention are more about a mix of other factors than just workers’ pay.

The complimentary state occupational employment and wages report at the end of this blog provides state level data.

Exhibit 2 – Wage Rates in Senior Housing, Skilled Nursing, and Select Healthcare Industries

Exhibit 2-2

Labor Concentration

Labor availability continues to be a major challenge for the skilled nursing and senior housing sectors. Labor shortages have been exacerbated by a shrinking labor force. Many workers have dropped out of the workforce or changed industries. Further, the labor force participation rate remains well below pre-pandemic levels at 62.2% as of June 2022, 1.2 percentage points below the pre-pandemic level of 63.4%. Due to the COVID pandemic and its related economic cycle, there are fewer jobs today in skilled nursing and senior housing than in March 2020. See the NIC Notes blog published on June 23, 2022, for more details.

For this blog, we have created a labor concentration ratio as a measure of job intensity or concentration, where the ratio is defined as the number of employed workers in a specific occupation per 100 persons aged 80 and older, i.e., how many workers are employed per older adult.

For the LPNs and LVNs occupation category, this equates to 5.2 LPNs and LVNs for every 100 eighty-year-olds, while for nursing assistants, this ratio is 10.7. By comparison, there are more workers for each older adult for registered nurses (24.8) and aides (27.4). Notably, as Exhibit 1 shows, LPNS and LVNs and nursing assistants comprised the largest share of total employees in skilled nursing (46.1%), while registered nurses and aides accounted for a smaller share at 13.7% of all employees.

Among the Findings – The Concentration of Workers in these Four Occupations Vary by State

A higher or lower labor concentration ratio is a factor of both the number of employed workers in a specific occupation and the number of persons aged 80 and older. For this metric, a labor concentration ratio is considered higher or lower than the national average if it’s above or below the national average by at least +/-10%. See the complimentary state occupational employment and wages report at the end of this blog for more details.

Registered Nurses. There are some states with higher ratios and some with lower labor concentration ratios. Overall, 18 states had labor concentrations higher than the national average of 24.8 by at least +/-10%. Some of these states include Colorado (30.2), Indiana (27.8), Massachusetts (32.0), Ohio (27.9), and Texas (27.6). The lowest labor concentration ratios (below at least +/- 10% of national ratio) occurred in New Jersey (21.2), New Mexico (20.6), and Florida (16.8)

LPNs and LVNs. Overall, 16 states had labor concentrations higher than the national average of 5.2 by at least +/-10%. The largest labor concentration ratios were seen in Louisiana (11.4), Oklahoma (8.6), and Texas (8.2). Some of the lowest labor concentration ratios (below at least +/- 10% of national ratio) were seen in New Mexico (2.2), Oregon (2.2), Utah (1.5)

Nursing Assistants. 27 states had labor concentrations higher than the national average of 10.7. Kansas (19.3), Nebraska (19.1), and Wisconsin (13.2) were among the states with the highest labor concentration ratios, while California (7.0), Nevada (8.2), and Florida (7.4) were among the states with the lowest labor concentration ratios. Interestingly, California employed the largest number of nursing assistants in 2021 (94,450) across all U.S. States. At the same time, the number of persons aged 80 and older in California was relatively high (1,352,968), resulting in a lower labor concentration ratio for nursing assistants than the national average.

Home Health and Personal Care Aides. 10 states had labor concentrations higher than the national average of 27.4. The highest labor concentration ratios for aides occurred in New York, (57.5), Washington, DC (53.6), and California (53.0). Illinois (21.5), Alabama (10.6), and New Jersey (19.8) were among the states with the lowest labor concentration ratios.

Exhibit 3 – Labor Concentration Ratios for Registered Nurses, LPNs & LVNs, Nursing Assistants, and Aides

Exhibit 3-1

This article has highlighted the state of the labor market for nursing staff and aides in skilled nursing, senior housing, as well as adjacent healthcare industries. In addition, NIC Analytics compiled 2021 data from the Bureau of Labor Statistics (BLS) to provide a detailed overview of occupational employment and wages by state, available to download below or on our website. For questions about the complimentary state occupational employment and wages report, please contact us at analytics@nic.org.

The complimentary state occupational employment and wages report provides another alternative measure of job intensity or concentration for skilled nursing – full-time equivalent ratio (FTE Ratio) – where the ratio is defined as the total number of persons employed in skilled nursing by a specific occupation per 100 certified beds. Both the FTE and labor concentration ratios are an important distinction in the context of policy discussions currently underway regarding staffing mandates. For example, if staffing mandates were to change, skilled nursing facilities in states where these ratios are low may be required to implement higher minimum nursing staff-to-resident ratios, and meeting those requirements could be challenging.

Complimentary State Occupational Employment and Wages Report (PDF)
Complimentary State Occupational Employment and Wages Report (Excel)

NIC Leadership Huddle: Leading Through Change

The senior housing and care sector is constantly evolving, but fresh industry, economic, and societal pressures force owners and operators to be nimble.

Chris Taylor Headshot Cut Out Color 1200x1200The senior housing and care sector is constantly evolving, but fresh industry, economic, and societal pressures force owners and operators to be nimbler than ever to thrive. On July 13, NIC hosted its final Leadership Huddle of 2022 – Chris Taylor, managing director of Capital One Healthcare Real Estate led the conversation between senior living experts Cindy Baier, CEO of Brookdale Living, and Kimberly Lody, CEO of Sonida Senior Living, to explore how leaders can navigate change and utilize it to improve their organizations.

For more insights, view all past leadership huddles in the 
NIC Leadership Huddle Archives.

Baier and Lody are focused on ushering their companies through some of the biggest challenges facing the industry, including a tough labor market. “One of our top priorities is to attract, engage, develop, and retain the best workforce,” Baier said. As Sonida works to attract new staff, Lody explained, “it’s about leading through the inflationary pressures that are impacting everyone… understanding the pressures that people are faced with every single day.”Kim_Lody_Headshot_5.31.22

As organizations change and adapt, encouraging team members to embrace transformation by involving them in the process is critical. “I think that people are much more likely to embrace change if they’re a part of the solution,” Baier said. Lody agreed, adding that mapping and sharing goals can create a shared mission. “It [allows] people to embrace the concept and have ownership in it,” she said.

Baier_Cindy_photo_cut-outSpeaking broadly of leadership, Lody believes that a willingness to collaborate sets senior living apart from other industries. “There’s really not a moment of hesitation for people to raise their hand and say to you, ‘I’m happy to share with you what we’re doing.’” Baier sees the amount of passion among senior living leaders as a key differentiator. “It’s really the heart of people in this industry that I think is truly unique… how much people will sacrifice for others in this industry.”

Both speakers agreed that growing as a leader requires a constant pursuit of knowledge and a willingness to listen. “I’m really proud that Brookdale is a learning organization,” Baier said. “The day you stop learning is the day you stop adding value.” Lody relies on her board of directors and feedback from professional and personal relationships to continue growing as a leader, “I ask for feedback all the time… I think you can learn from everyone.”