The COVID-19 pandemic has caused irreparable pain and devastating loss to many families and businesses. The impact has been broad-based, and in response, seniors housing and care operators have been creative, passionate and remarkably effective, given the highly vulnerable nature of their residents, the shortages of critical testing and PPE supplies, and the realities of staffing shortages and financial pressure. Their perspectives on the crisis so far, as well as their insights on what the future holds, were the focus of the latest installment of NIC’s “Leadership Huddle” webinar series, held Thursday, June 18.

Both known for thinking outside the box, operators Kelly Cook Andress, President, Sage Senior Living, and Dwayne Clark, Founder, Aegis Living shared what they’ve learned in a discussion moderated by NIC chief economist, Beth Mace.

In her opening remarks, Mace highlighted the need for data, and transparency: “In continuation of our mission at NIC, we continue to encourage transparency in our understanding of the virus. As the COVID-19 pandemic has developed it has become increasingly clear that the availability of data on seniors housing and skilled nursing communities is vitally important.” She pointed to the many NIC initiatives to collect, analyze, and distribute COVID-19-relevant data, and expressed gratitude to the many operators who continue to contribute their data for the effort. Data contributors, she said, “are improving transparency in the sector, which leads to credibility, and ultimately trust, by educating not just investors and other operators but also policymakers and the general public.”

Perhaps surprising to some, both operators reported in their self-introductions that projects in development continue to move forward. Philadelphia-based Sage Senior Living, which Andress said is now called Sage Life, has 650 residents spread over Maryland and Pennsylvania. The company will be opening two new communities this summer. Clark’s Aegis Living operates 32 communities primarily in Washington state and California, and has 10 more in construction development, which, he said, “is an interesting discussion in and of itself right now, during these times.”

Both leaders, responding to a question on the impact of COVID-19 on their businesses, reported lower occupancy rates. “Our occupancy has slid,” Andress said, “What we are projecting is about a 2% per month decrease in occupancy.” On the expense side, she said, “We have found that our expenses have stayed about the same, but they have been re-jiggered as our operation has changed.”

Although Clark also reported a “severe decline in occupancy” since the virus first hit his properties in February, he is now seeing an uptick. “We were up about 14 residents the last three weeks, which is not a bunch, but a positive’s a positive.” He said Aegis is currently down approximately 3% from their February occupancy rate of 93.1%, but, “I think the customer base is getting adjusted to a new normal and I think people are getting fatigued from being who have mom and dad living at home.”

On whether their properties’ infection rates “tracked” with the local and regional spread of the virus, Andress described a regional correlation. Her properties in Philadelphia and Baltimore saw higher infection rates about a month after New York, which was a major hot spot. “You could almost see it come down the east coast to us. I really think this is a regional situation more than a national situation at this point,” she concluded.

Mace asked what seniors housing operators are doing in terms of safety protocols, and whether these communities are actually the safest places to be for many residents. In Clarke’s view:: “I think that depends on the operator, and the investments you make, and the training you have and everything else.” He described being hit (by the coronavirus) very early, in February, and locking down buildings before policymakers required lockdowns. “It depends on your diligence…it can be the safest place on the planet. We’re not seeing a correlation between the upticks because of the safety measures that we take, not only with the people at work, but the safety measures we take when they’re at home.” He said his company provides telemedicine and food both for staff and their families at home, to help keep them away from the infection within their communities. “That’s the greatest risk,” he said, “we can keep people in a bubble and keep them safe, but it is when people go out into the greater community that it’s a problem.

Both leaders discussed how culture plays a key role in their ability to fight this pandemic. Clarke, an outspoken advocate for developing a strong culture, believes his investment in his staff has paid off with their loyalty and dedication, even during a time of crisis. Asked how he develops a strong culture, he pointed to his company’s focus on understanding staff needs even as the pandemic struck. “On March 8, 9, 10, we were meeting with staff, saying ‘what are your immediate concerns? Is it childcare? Yes, it’s childcare, so we got groups together to discuss their childcare issues. We talked to them about bringing food home for their entire family. We talked about telemedicine. We’re doing a series right now on the psychological impact of COVID…its being an advocate for your staff, being sympathetic, you know, and transparency. You tell them the good news first, but you also tell them the bad news.”

“You earn your culture before you need it,” said Andress, “Our staff has to know that we’re there for them. One of the leadership promises that we make to our team members is that they will have the supplies they need. Going to them early and saying ‘we’ve made the investment in PPE so that you will be safe here.” She pointed out that “no matter how many satisfaction surveys we do, the relationship between the resident and the staff is always very high up if not the number one source of satisfaction,” and highlighted the importance of keeping staff and residents well informed on what’s occurring in their residences, both good and bad. She also pointed out that this commitment to culture began long before COVID hit, “troubled times are a very difficult time to create culture, because that trust isn’t there.”

As millions of workers enter the labor market, some labor shortages are easing for operators. But not for every position. “Have we seen an abundance of care managers wanting to come to assisted living? The answer would be categorically, no,” said Clarke. “Have we seen an abundance of GM (general managers), (of) hotels that we would have loved to have had twelve months ago? More in the last 35 days than we’ve seen in the last three years.”

On finance and development, both operators are seeing the impact of COVID. Out of 22 banks recently surveyed by Aegis, only 2 are currently lending. “The equity requirements have totally changed, the floors have changed, the spreads have changed, everything has changed. I don’t think this is any different than what we had in the middle of the (2008/2009) recession…we saw the exact same thing. We saw spreads change 100, 125 basis points over night.” While he believes lending will resume, he pointed out that anyone new to the seniors housing and care sector will have a very hard time, “if you are new and you don’t have an established relationship with a banker, you are in an awful position…if you think you’re going to start an assisted living company today, I hope you have a couple billion dollars lying around because you’re not going to go to a bank,” he said.

Andress also sees the value in long-term relationships. “Our lenders have been very good to us, they have worked with us, but we and our partners have had long-term relationships with these folks. They know that we’re there in the short, the medium, and the long-term, along with our partners.” Looking to Fannie Mae and Freddie Mac, however, is presenting challenges. “We have heard that Fannie Mae will not close or lock on a deal that has a single COVID case. Who is going to go through an underwriting situation and not know if you have one COVID case come up between now and then? So, there are different levels of conservatism at different levels of the capital stack on the lender side.”

Responding to a question on the impact on development, Clark stated that his equity investors see the pandemic as a short-term problem and want to get back into the game. “Debt is the problem. We have about five projects teed up for construction lending and I don’t know that we’ll get all those funded…it’s the classic chicken or egg situation. All these great sites that we were salivating for six months ago are now coming available because people can’t fund them, or the hotel’s not going to be developed or the apartment complex is not going to be developed…we see all these great sites, but you can’t get traditional funding.” He said he’s looking at other funding options, potentially with high-net worth investors.

Andress agreed, “I think some equity and debt sources aresitting on the sidelines saying ‘let’s see what happens in the Fall.’ The Fall is very important because that will have taken us through six, seven, eight months of this (pandemic). Seeing how quickly the resident base rebounds, and then seeing what the Fall situation is and if there is a second wave will be important,.” She also suggested she would seek out alternative financing sources if necessary. “Capital is fluid, capital tries to be put out to be productive and there are some interesting sources emerging that just need to be vetted and figured out.”

Clarke added that he sees promise in the industry, “We have some great market indicators that we don’t always pay attention to…Brookdale in the last 30 days had a 46% rise from low to high…someone’s believing in our industry and let’s not forget that we’re approaching the hockey stick years in 2026when we see the first baby boomer hit 80 years old. Every investor, economist and banker is looking at that and saying ‘that’s fertile ground.” However, he believes the crisis is not yet over, and is preparing for a second wave. “I think we’re going to be in a COVID crisis for 18 months…it’s another 18 months of pain.”

Both operators are closely watching developments in the understanding of the COVID-19 virus, as well as potential improvements in testing and PPE as the science and production of resources improves. They are also looking at other approaches to adapt their properties to better handle a pandemic. “Cleaning, vital oxide (disinfectant), UV (ultraviolet light), hepa filters, all of those things are definitely going to be, if not retrofitted, built in to new communities.” She also pointed to the importance of housekeeping and digital communications, including digital communications that are used for marketing as major advances that will remain in the future.

On technology, Clarke is cautious, “The sex appeal may outweigh the practicality of it.” He’s looking at UV lighting, digital communications, disinfecting technologies, and other potential advances, but he’s also looking at “practical solutions” such as outdoor living rooms, which can be used as visiting stations, and how to enable physical touch with families. He also said he thinks telemedicine “is going to boom,” as it keeps residents from visiting the hospital, a major risk of infection.

Clark also suggested the need for the industry to engage more with science and healthcare sectors. “We’re hiring a new chief medical officer…we want to be more science-based in our approach to healthcare.” Andress is looking to healthcare solutions, too, seeing telehealth as a “gamechanger.” She pointed out that doctors are more comfortable with the technology, which keeps residents out of the hospital while enabling access to quality healthcare.

Before taking questions from attendees, both panelists wrapped up with a few observations and comments on the impact of COVID. Clark suggested that not every operator would survive, “I’m not sure everyone’s going to make it through this. I think if you’re a company that has a weak culture, if you have a weak credit rating, if you have a weak leadership, I don’t think everyone’s going to make it.” Although asserting that the industry would survive, he went on to argue that change is inevitable: “Whether we like it or not, whether we think it’s going to change or not, it’s going to change. So, you’ve got to get ahead of the curve as opposed to being behind it.” He said his organization is rethinking health and wellness, “We want to be not only safe, we want to introduce things that are going to actually make people better in our buildings than when they came in.”

Andress sees another opportunity in the coming changes. “As an industry, we fell in love with the highest income residents. Let’s face it, during this time those highest income residents had more options in staying at home…I think we’ve seen a new appreciation for those folks who aren’t moving from the 4,000 square foot house and can bring in 24-hour care to shelter in place with.” Another change will reflect adjustments in vetting of assisted living residents’ health: “I think what we’ll end up with, six to nine months from now, will be less frail assisted living residents, and I think all of these things we’re implementing now will also keep influenza down, and other things that used to put our residents in the hospital.”

Answering attendee questions on demand, both leaders said they expect to see significant increases in move-ins, as pent-up demand comes to fruition. Clark explained the reason for his optimism: “We’re talking to the families and they’re saying ‘when this thing calms down,’ and we’re tracking that, how many people are saying that. It’s an abundance. I mean it’s in the hundreds…we think if there was a drug tomorrow, which there won’t be, you know a vaccine’s going to take 18-24 months for a variety of reasons, we’re going to see a real uptick.”

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Understanding the factors that have contributed to high penetration rates of COVID-19 in select nursing homes is essential to the development of strategies and policies that will help prevent and mitigate future disease outbreaks. Recently published studies from academics at Brown University, Harvard University, and the University of Chicago have suggested that there are a few key characteristics that can be associated with higher penetration rates of COVID-19 in U.S. nursing homes. Some of the identified factors are to be expected, but certain factors that did not have a significant bearing on COVID-19 cases may be surprising.

First, let’s look at the factors that were found to contribute to an increased likelihood of a nursing home having a documented COVID-19 case. 

Facility Size and Location

David Grabowski, PhD, a professor of health care policy at Harvard Medical School, and colleagues conducted an analysis of 9,395 nursing homes to examine the association between certain characteristics and the likelihood of having a documented COVID-19 case. Larger facility size and urban location were both significantly related to increased probability of having a COVID-19 case. 

With regard to facility size, the study found that while smaller facilities are less likely to have outbreaks, the outbreaks at small facilities affect more patients per bed. This is likely reflective of a number of characteristics of smaller facilities, such as higher patient turnover and the possibility that isolating COVID-positive residents is more difficult for smaller facilities. 

Speaking on his own research, Dr. Vincent Mor, a Brown University School of Public Health professor, reported “the spread is affected more by the facility size and community prevalence due to the virus’ characteristics. Simply put, nursing facilities faced a perfect storm of an opportunistic virus, a vulnerable population base, resources shortages born of years of underfunding, and current policies that favored an acute care focus over all other care settings.”

Non-Chain Status

Skilled nursing properties that are part of a larger chain are more integrated and therefore more likely to have the resources to allow a quicker and more systematic response across their nursing homes. This includes access to resident and staff testing and access to PPE. Nursing home chains are also more likely to have a Chief Medical Officer, who can provide guidance to facilities on best practices for infection control. 

Percentage of African American Residents

In early May of this year, evidence began circulating that African Americans were disproportionately being affected by COVID-19, compared with whites and other ethnic groups. This was also evident in seniors housing properties, with studies showing that the likelihood of having a COVID-19 outbreak in seniors housing and skilled nursing properties is correlated with the proportion of African Americans residing in the property. 

Nursing homes are more likely to draw upon and employ staff from the neighborhoods in which they are located.  This is also the case for the residents/patients in those properties. Hence, nursing homes often reflect the demographic characteristics of the neighborhood in which they are located. As people in predominantly non-white neighborhoods are most affected by the pandemic, these factors are also putting nursing homes in these areas at the most risk. 

Tamara Konetzka, PhD, a health economics and health services research professor with the University of Chicago, presented her team’s findings to the Senate Select Committee on Aging on May 21, 2020. The first key result “found a strong and consistent relationship between race and the probability of COVID-19 cases and deaths. Nursing homes with the lowest percent white residents were more than twice as likely to have COVID-19 cases or deaths as those with the highest percent white residents.”

The study’s findings confirm that the patterns of COVID-19 infections and deaths in nursing homes are consistent with wider racial and socioeconomic disparities. Nursing homes serving traditionally underserved populations are bearing the worst outcomes of the pandemic.

Five-Star Rating Not Significantly Related

Given the asymptomatic spread of the virus, inadequate testing, and the fact that nursing homes cater to both post-acute, rehabilitative patients as well as highly vulnerable high-acuity patients in need of long-term care, it may seem inevitable that many of these congregate setting communities would become infected with the virus. In addition, there have been challenges with acquiring the appropriate amount of personal protection equipment, which has made it that much more difficult to keep patients safe. It may seem likely, therefore, that lower quality ratings should result in higher infection rates. Traditional quality metrics, however, such as the Centers for Medicare and Medicaid Services (CMS) five-star rating system, have been shown not to be a reliable predictor of COVID-19 infection rates. 

This finding prompted some pushback from CMS, however, which argued that “facilities that had a one-star quality rating were more likely to have large numbers of COVID-19 cases than facilities with a five-star quality rating.” While CMS is correct in their assertion, Konetzka’s findings indicate that variations in COVID-19 infection and mortality rates do not correlate to star-rating alone. CMS’ position falls short of a full explanation. 

Further, both the direction and strength of the relationship between star ratings and COVID-19 cases across and within states is inconsistent. Konetzka notes, “In some states, such as Illinois, nursing homes with higher quality ratings (four or five stars) were marginally less likely to have a case of COVID-19, but in other states, such as New Jersey, higher quality homes were marginally more likely to experience a case.” 

Relationship between Nursing Home Quality and COVID-19 Cases and Deaths

Ownership Structure Not a Factor

Lastly, Konetzka’s study looked for meaningful differences based on for-profit or not-for-profit status.  The findings indicated that there was the same probability – 36% – of a for-profit nursing home and a not-for-profit nursing home having a COVID-19 case in their respective community. 

The bottom line is that standard quality measures alone are not enough to distinguish which nursing homes have higher propensity for COVID-19 cases and deaths. Instead, early research indicates that factors such as location, which can reflect community vulnerabilities, facility size, and access to testing and personal protective equipment are more likely to have an impact.

The enormity of this pandemic, coupled with the intrinsic susceptibility of the nursing home setting and population, means that even the highest-quality nursing homes are not impervious to the virus. 

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The NIC MAP^® Data Service recently released national monthly data through March 2020 for actual rates and leasing velocity. In this release, NIC also provided data on three metropolitan areas for which there is sufficient data to report upon: Atlanta, Philadelphia, and Phoenix.

A few of the key takeaways from the 1Q2020 Seniors Housing Actual Rates Segment Report at the national aggregated level are listed below. Full access to the reports and other takeaways is available to NIC MAP Data Service clients.

Key Takeaways

• Average initial rates for residents moving into independent living, assisted living and memory care segments were below average asking rates, with monthly spreads generally largest for memory care, followed by assisted living segments and then independent living segments. Care segments refers to the levels of care provided to a resident living in an assisted living, memory care, or independent living unit. 
  • • The average discount for the memory care segment was the largest of the three care segments in March 2020 and averaged 10.7% below average asking rates. This equates to an average initial rate discount of 1.3 months on an annualized basis, less than the 1.5 months seen at the end of 2019.
    • As of March 2020, initial rates for assisted living care units averaged 7.6% ($386) below average asking rates. This equates to an average initial rate discount of 0.9 month on an annualized basis, the same as the year-earlier and the year-end 2019 discount.
• Average in-place rates for residents in independent living, assisted living, and memory care segments were below average asking rates. The discount was smaller for in-place rates than initial rates compared with asking rates. 
  • • For the assisted living segment, average in-place rates consistently were below average asking rates since reporting began in January 2017. The monthly gap between these rates was 2.3% or $117 in March 2020, the equivalent of 0.3 months. It has averaged 0.4 months over the past 12 months. 
• The rate of move-ins has exceeded or equaled the rate of move-outs for 8 of the prior 12 months for the memory care segment, 5 of the latest 12 months for assisted living segment and 7 of the past 12 months for independent living segments as of March 2020.

The NIC Actual Rates initiative is driven by the need to continually increase transparency in the seniors housing sector and achieve greater parity to data that is available in other real estate asset types. Now more than ever, in the world of the COVID-19 pandemic, having access to accurate data on the actual monthly rates that a seniors housing resident pays as compared to property level asking rates helps NIC achieve this goal. That said, the data reported in this blog post does not reflect the effects of the pandemic, but better serves as a baseline for the conditions that prevailed prior to the coronavirus. 

The Seniors Housing Actual Rates Report provides aggregate national data from approximately 300,000 units within more than 2,500 properties across the U.S. operated by 25 to 30 seniors housing providers. The operators included in the current sample tend to be larger, professionally managed, and investment-grade operators as we currently require participating operators to manage 5 or more properties. Note that this monthly time series is comprised of end-of-month data for each respective month.

The data reported here is on care segment, where care segment type refers to each part or section of a property that provides a specific level of service, i.e., independent living, assisted living, or memory care. NIC also has this data for majority property type, where majority property type refers to which care segment comprises the largest share of inventory. In addition, care segment actual rates data is also available for the Atlanta, Phoenix and Philadelphia metropolitan areas. 

While these trends are certainly interesting aggregated across the states, actual rate data is even more useful at the metro level. As NIC continues to work towards growing the sample size to be large enough to release more data at the CBSA level, partnering with leading software providers like Alis, MatrixCare PointClickCare, and Yardi makes it easier for operators to contribute data to the Actual Rates initiative. NIC appreciates our partnerships with software providers and our data contributors and their work in achieving standardized data reporting.

If you are an operator or a software provider interested in how you can contribute to the Actual Rates initiative, please visit nic.org/actual-rates.

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Pandemic underscores impact of social determinants of health

Before the pandemic hit three months ago, one of the hottest industry topics was the social determinants of health. Recognition has been growing over the last several years that a huge amount of healthcare costs is driven by people’s lives outside of the doctor’s office. Factors such as food insecurity, isolation, and lack of access to services are just a few of the social elements that contribute to healthcare outcomes. A frail elder without social support is unlikely to manage the intricacies of a complex healthcare system.

The pandemic has drawn even more attention to the link between health and life circumstances. Communities that face social challenges, particularly those of color and the frail elderly, have been hit hard by the disease.

“People’s needs are spiking,” said Michael Monson, senior vice president of Medicaid and complex care at Centene, a St. Louis-based insurer and the nation’s largest Medicaid managed care organization.

While living conditions are widely recognized as a health factor, a big question for seniors housing operators has been how to pay for support services that impact health. Should health systems, or insurers, pay seniors housing operators to track the health habits of their residents and provide interventions?

“We do not have sustainable flows of funds from the healthcare sector to seniors housing,” said Monson.

Piece-meal solutions are slowly emerging. Some Medicare Advantage plans are starting to offer benefits that address the social determinants of health, such as meals and exercise plans. Pilot programs test new approaches but are not widely available.

Because of its impact on vulnerable groups such as seniors, the pandemic could accelerate the push for more social services, experts say. But collaboration will be key to success.

How to link healthcare and housing

In 2019, Centene launched a new subsidiary called Social Health Bridge. Monson is the CEO. Social Health Bridge acts as a financial and interventional layer between the healthcare sector and community organizations, including housing providers. The goal is to improve health outcomes and lower healthcare costs by providing social supports and access to critical services for residents.

Social Health Bridge offers a market-based solution for seniors housing operators, explained Monson. “This is a way to create a regular funding stream to pay for certain services.”

Here’s how it works. Residents sign up to join the Social Health Bridge Network. It includes local health systems, hospitals and physician groups in value-based arrangements that tie compensation to certain performance measures. Residents can have any kind of insurance, whether a Medicare Advantage plan, Medicaid, or a private plan.

The Network pays for a resident service coordinator on-site at the building. The service coordinator links residents to needed services and interventions on behalf of the healthcare providers. Typical services include case management, transportation, and other social supports. A long-term program goal is to place doctors and nurse practitioners on-site with office hours to fill care gaps.

The idea harkens back to the 1960s when HUD-financed senior apartments introduced service coordinators on-site. Centene beefed up that model and introduced standardized protocols, policies, technology systems and oversight. “We give them the tools they need to improve quality health scores while lowering healthcare costs,” said Monson.

Lower healthcare costs result in savings which fund the program. “Seniors housing pays us nothing,” said Monson, adding that many assisted and independent living properties don’t have the budget for an on-site service coordinator. It’s important to note that the seniors housing operators bear no insurance risk, he added, in contrast to programs where the housing operator forms its own Medicare Advantage plan.

The program is suited for independent and assisted living communities, not skilled nursing facilities.

The business model works best with a large risk pool of participants, probably 10,000 individuals or more, said Monson.  To reach that scale, Centene seeks markets where it already has a strong customer base.

Last January, Centene launched its first community partnership in New Orleans with an affordable housing provider. The first step is to assess residents and find them access to care, though Monson said the pandemic has slowed the process. An agreement with a seniors housing community is in the works.

“We are in early days,” said Monson, commenting on the roll-out of Centene’s program. “But this is an option to bring together the seniors housing provider and health system network.”

The Department of Health and Human Services (HHS) has announced an additional $15 billion distribution, targeted at providers serving Medicaid and CHIP recipients. Included among these recipients are eligible assisted living facilities that serve Medicaid residents. According to the National Center for Assisted Living, 16.5% of assisted living residents rely on Medicaid. Skilled nursing properties serving exclusively Medicaid residents are also eligible. To qualify, providers must not have received a payment from the Provider Relief Fund General Distribution. 

Medicaid providers can use the HHS portal to complete the application process for funding requests. Funding will start at 2% of reported gross revenue for patient care. HHS will use additional information, including number of Medicaid residents served, to ultimately determine the final payment amount. 

Industry associations continue to advocate to secure an allocation of funds to provide relief to private pay seniors housing operators who have served, and continue to serve, on the frontlines of the COVID-19 pandemic. 

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