A Pandmeic Initiative

In spring 2020, responding to the onset of the COVID-19 pandemic, NIC launched numerous initiatives to help senior living leaders understand and improve their responses to the crisis. Given the pace of change impacting the industry, NIC began to produce a high volume of relevant and timely data and analysis more frequently than ever before. In just a few months, NIC produced an entire suite of resources aimed  at improving access to data and analysis relevant to the impact of COVID-19 on the senior housing and care industry. Part of that effort was to release the NIC Intra-Quarterly Snapshot  reports, which, like several other pandemic-related NIC initiatives, is still being produced today.  

Each monthly report, based on three-month rolling data from NIC affiliate NIC MAP Vision, provides the most timely comprehensive review of the sector’s market  fundamentals and trends. In addition, the report provides economic trends, inventory growth data, and occupancy rates, with analysis and insights from the NIC Analytics team, including myself and NIC Chief Economist, Beth Mace. In addition to analysis of the most recent data, the reports show three-month rolling data on either total or stabilized occupancy for both seniors housing and nursing care properties over the prior 13 months, offering a perspective on broader trends.  

Today, Intra-Quarterly Snapshot reports continue 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. 

Intra-Quarterly Snapshot Headlines Track the Trends 

A look back at Intra-Quarterly Snapshot headlines, pulled from the top of every report published over the eighteen months, illustrates just how well these reports have tracked with industry trends, practically in real time. Each headline, as charted below, tracks with the key trends and inflection points over the pandemic to date. The The market’s initial contraction was identified in the first Intra-Quarterly Snapshot, in April 2020, and developed over subsequent months, through February 2021. From March through May, the headlines reflect cautious optimism of stabilization, which then begins to take hold in June 2021, as demand improved. From July of this year, each report has reflected improvements in occupancy rates. 
 

If we chart just the changes in occupancy and stabilized occupancy, as reported in Intra-Quarterly Snapshot headlines, we find similar tracking with current market trends. 

Changes in occupancy/stabilized occupancy as reported in Intra-Quarterly Snapshot headlines.

All-occupancy is defined by NIC MAP^® as percent of existing inventory’s units that are occupied by residents as of the end of the month. Stabilized occupancy is defined by NIC MAP^® as the occupancy of properties that are (a) at least two years old, or (b) if less than two years old, properties that have achieved occupancy of at least 95.0% since their opening. 

Phase 1: March 2020 to March 2021 

From March 2020 to March 2021, the largest occupancy decreases were reported in the April and July 2020 and January 2021 reporting periods. During this period, senior housing all-occupancy fell by 8.7 percentage points (pps) and stabilized occupancy fell by 8.5pps. Meanwhile, senior housing inventory increased by 2.8%, or 17,950 units. Demand through this period, as measured by occupied units of senior housing properties for the NIC MAP Primary Markets decreased by 7.5% or 42,344 units.

Phase 2: March 2021 to June 2021 

During this time period as the vaccine rollout was nearly completed for most residents in seniors housing and skilled nursing properties, occupancy started to stabilize but continued to be challenged due to inventory growth. Quarterly absorption (% change in occupied units) turned green for the first time since the onset of the pandemic. Senior housing occupancy remained largely unchanged, mainly due to inventory growth offsetting demand growth. The inventory of senior housing properties for the NIC MAP Primary Markets increased by 0.7% or 4,354 units and demand increased by 0.6% or 3,364 units.

Phase 3: June 2021 to September 2021 

Occupancy started to improve as demand rebounded over the Summer of 2021. The industry registered its strongest increase in the number of occupied units since NIC MAP began reporting the data back in 2005. The inventory of senior housing properties for the NIC MAP Primary Markets increased by 0.5% or 3,441 units and demand increased by 2.3% or 12,318 units. During this period, occupancy saw the largest quarterly growth since 2005 of 1.4pps.

To view what is happening today, and to gain insight into the continuation of occupancy gains, see the recently released October 2021 Intra-Quarterly Snapshot report. 

Future Outlook 

The October Intra-Quarterly Snapshot reveals that senior housing stabilized occupancy rose for the fourth consecutive reporting period. Notably, the stabilized occupancy rate for senior housing increased to 82.6% in the October 2021 reporting period for the NIC MAP Primary Markets, up 1.6pps from its time series low of 81.0% in the June 2021 reporting period and 0.4pps from the September 2021 reporting period on a three-month rolling basis. Senior housing stabilized occupancy continued the road to recovery but remained seven full percentage points below pre-pandemic March 2020 levels of 89.6%. 

We cannot yet know how pandemic-derived challenges will unfold in future months, or when they will be fully behind us, but as the Intra-Quarterly Snapshot’s headlines reveal, the senior housing industry has weathered this extremely difficult period and begun the path to recovery.

At the 2021 NIC Fall Conference, senior housing constituents, while addressing the most pressing challenges facing the industry, nevertheless demonstrated reasons for optimism over the short, intermediate, and long term. The positive gains in occupancy over the last four intra-quarterly reporting periods provide a bullish indicator that the senior housing market outlook remains positive. Taken in combination with other market realities, such as the resilience of need-based demand, the ready availability of affordable financing, and major demographic tailwinds, conference attendees were understandably ready to look to the future with excitement and renewed positive energy. 

Many conference attendees reflected on the past eighteen months, which for many may have been the toughest period in memory.  Analysts may agree that the senior housing sector underwent perhaps its most severe era of demand loss and uncertainty on record. However, as revealed in every month’s Intra-Quarterly Snapshot, the industry is clearly demonstrating that, through innovation, collaboration, creativity, and risk tolerance, it is agile and resilient enough to bounce back even from that.  

The data underlying every Intra-Quarterly Snapshot report is available to NIC MAP Vision clients. Data highlights, along with expert analysis and commentary, are provided in the complimentary Intra-Quarterly Snapshot monthly publication, available for download on nic.org.

The November 2021 IQ Snapshot report will be released on nic.org on Thursday, December 9, 2021 at 5:00pm. 

Updated November 23, 2021 (original blog posted June 29, 2021).

The primary tool CMS has for enforcing care standards at skilled nursing properties are civil monetary penalties (CMPs), which are essentially fines for facilities found to be out of compliance with CMS care standards. Based on a national average, CMS penalties for skilled nursing properties had been on the rise from 2016 to the third quarter of 2019.

As the country began to grapple with the COVID-19 pandemic, and the public health emergency was announced, the national average of CMS penalties declined. This was likely a reflection of the more collaborative, less-punitive surveys that took place while surveyors – the CMS regulatory staff who assess compliance with Medicare health and safety regulations – and operators alike learned about COVID-19, it’s spread, and the best practices regarding infection control, PPE stock, and sanitation protocols.

The COVID-19 Public Health Emergency (PHE) was first declared on January 31, 2020 and was most recently renewed for an additional 90 days on October 15, 2021. With no other renewals, this would bring the COVID-19 Public Health Emergency to a duration just a few weeks shy of two entire years.

Source: Data.cms.gov; Nursing Home Services Data Archive, 2016-2021

After a downward trend in average CMS skilled nursing penalty during the first ten months of the Public Health Emergency, this metric has now shifted, trending upwards for the past 11 months. The most recently released data from CMS’ Provider Data Set, shows the average skilled nursing penalty at $18,551 for October 2021. This is $2,080, or 12.6%, higher than the pre-Public Health Emergency high mark of $16,471 reported in August 2019.

Two key changes occurred during the COVID-19 Public Health Emergency. First, the understanding about COVID-19 and how to best protect residents grew dramatically. This understanding occurred at many levels – the seniors housing and care sectors, the industry’s regulatory bodies, as well as federal, state, and local governments that all had to get up to speed quickly on best practices regarding the novel coronavirus.

Once that learning curve had been achieved, average CMS skilled nursing penalties began to rise steeply. The rise in average penalty coincided with early vaccination efforts for skilled nursing residents and staff and continued to increase to encourage operators to meet higher staffing ratios, newly identified infection control practices, and sanitation protocols, among other criteria.

In addition to the increasing average CMS skilled nursing penalty, another significant trend has materialized in 2021 – a steep rise in per diem, or per-day, penalties. Skilled nursing properties can be penalized through the imposition of a CMP for either the number of days that a facility has been out of compliance with a federal requirement (per-day or per-diem), for each episode of noncompliance (per-instance), or CMS can deny payments for new admissions.

Source: CMS Quality, Certification, & Oversight (QCOR) Reports

In 2017, guidelines were changed to set per-instance CMPs, rather than per-day, as the default penalty. Per-day penalties are often applied retrospectively and can accumulate to significant fines. Although per-day penalties remained the recommended approach for major violations, their overall use has been reasonably limited until 2021.

With a new federal government administration and new leadership at both CMS and HHS, we may be witnessing the return of a stricter survey process. While penalties from CMS are an essential tool for ensuring skilled nursing properties are complying with care standards and are protecting their residents, both the approach to surveying and severity of enforcement may be changing.

“Lead volumes are improving. In Wave 34 of the survey, one-third of organizations report lead volumes reaching pre-pandemic levels (33%), up from just one-fifth back in April 2021 (20%). During the pandemic new construction lending had slowed sharply. A recent increase in construction lending is reflected in the Wave 34 survey where 41% of respondent organizations now expect their development pipelines to increase. However, challenges to the practicality of new construction and timelines persist due to labor and key materials shortages and relatively high costs. Future surveys will help shed light on whether pent-up demand for senior housing as supported by an historically high rate of net absorption reported by NIC MAP Vision in 3Q 2021 will continue to usher in occupancy to fill pandemic vacancies or will the effects of normal seasonal impacts on admissions come into play.” 

 —Lana Peck, Senior Principal, NIC 

NIC’s Executive Survey of operators in senior housing and skilled nursing is designed to deliver transparency into market fundamentals in the senior housing and care space as market conditions continue to change. This Wave 34 survey includes responses collected October 4 to November 7, 2021, from owners and executives of 74 small, medium, and large senior housing and skilled nursing operators from across the nation, representing hundreds of buildings and thousands of units across respondents’ portfolios of properties. 

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

Wave 34 Summary of Insights and Findings

• Through the 34 Waves of the NIC Executive Survey Insights report — that started at the beginning of the pandemic in March 24, 2020 and has continued through the current survey date of November 7, 2021 — the results have closely corresponded with the broad incidence of COVID-19 infection cases in the United States. This is demonstrated in the timeline below that shows the share of organizations reporting an increase in the pace of move-ins during the prior 30-days. For example, the Wave 19 survey (which collected responses from December 28, 2020 to January 10, 2021) showed that when the COVID-19 vaccine had begun to be distributed across the country through the Long-Term Care Vaccination Program, the pace of move-ins began to accelerate and continued to do so through Wave 31. However, in Wave 32, the shares of organizations reporting an acceleration in the pace of move-ins in the past 30-days dropped notably, presumably due to the spread of the COVID-19 Delta variant primarily among the unvaccinated. In the Wave 33 survey (representing operator experience in the month of August) respondents reported a notable increase in move-ins compared with the Wave 32 survey as Delta variant infections waned and vaccinations ticked up. The most recent survey results were largely similar to Wave 33.  

• Lead volumes are improving. In Wave 34, one-third of organizations had lead volume at pre-pandemic levels (33%), up from just one out of five back in April 2021 (20%).   
  

• By care segment, roughly 50% of Wave 34 respondents with independent living and/or assisted living units reported that the pace of move-ins accelerated in the past 30-days (similar to the previous, Wave 33, survey). However, the memory care and nursing care segments did not see the same pace of acceleration. While slightly more organizations with nursing care beds saw an acceleration in the pace of move–ins from the previous survey (42% up from 37%), 22% to 27% of organizations with nursing care beds have reported deceleration in the pace of move-ins since the Wave 32 survey. 

• As shown in the chart above, fewer organizations with memory care units saw an acceleration in move-ins since the Wave 33 survey (38% vs. 48%), and shown in the chart below, notably more saw no change or a decline in occupancy during the same timeframe.  
• In Wave 34, roughly 50% of organizations with independent living and/or assisted living units reported higher occupancy rates. Organizations with nursing care beds reported equal levels of increases and decreases in occupancy (38%, respectively).  

• As shown in the chart below, most occupancy increases were between 0.1 and 3 percentage points. Of note however, approximately 20% of organizations with assisted living and/or memory care units saw occupancy increase three percentage points or more.  

• The NIC Executive Survey Insights has asked organizations about their development plans since near the beginning of the pandemic. In Wave 3 (April 13 – 19, 2020), only 15% of operators expected their development pipelines to increase, primarily due to projects already underway. During the pandemic, new construction lending had slowed sharply. NIC Analytics recently released the second quarter 2021 NIC Lending Trends Report, which notes that newly closed senior housing construction loans increased by 46.7% on a same-store, quarter-over-quarter basis—the highest recorded quarterly increase since the fourth quarter of 2017. The recent uptick in construction lending is reflected in the Wave 34 survey where 41% now expect their development pipelines to increase. However, challenges to new construction continue due to labor and key materials shortages and higher costs largely associated with supply chain disruptions, tariffs in some instances and rising energy prices.

• NOI has been pressured for many operators due to the impact of labor shortages and higher wages on expenses, the pandemic-related decline in occupancy rates, and the inability to grow rents. In the current and prior survey, respondents were asked how much they expect their operating margins to increase or decrease in the next six months. Roughly half of respondents (49% and 47%) indicated they expect operating margins to increase. However, slightly more operators in Wave 34 anticipate smaller increases than in Wave 33 (40% between 1% and 5%).

• A new question was added to the Wave 34 survey to gauge operator interest in diversifying their products to serve a different resident. While roughly two-thirds of organizations stated that they were not considering changing their product mix (64%), nearly one-quarter (23%) reported considering expanding their offerings toward lower acuity settings.  

Featured Survey Comments 

At the end of each survey, several respondents offer detailed comments that add informative detail to their responses. The following set of quotes is an abbreviated selection of the Wave 34 comments: 

• “Our independent living is thriving, with the duplex home expansion filling up more quickly than anticipated. We intend to add more IL units in the next couple of years, once that project is complete. Staffing concerns have led us to hold admissions at times in our assisted living facilities, hurting our already poor occupancy there. At the beginning of October, we put a very substantial wage increase into effect to try to aid our recruitment and retention efforts. We believe it’s beginning to pay some dividends, but somewhat slowly.”
  
• “Regarding SNF census, our percentage occupied is not a result of lack of inquiries, but a direct result of lack of labor.” 
• “It appears deaths due to COVID-19 may have attenuated a modest amount of available high acuity seniors requiring AL/MC. Normal annual move outs in the 40 – 45 percentage range has resumed due to typical death and discharge(s) to skilled nursing. Admissions, while vastly improved since spring, are slow to recover to pre–COVID populations. It may be that our years of continuous wait list may only recover by the end of 2022 to 88 – 90 % stabilization.” 

Wave 34 Survey Demographic

Responses were collected between October 4 and November 7, 2021, from owners and executives of 74 seniors housing and skilled nursing operators from across the nation. Owner/operators with 1 to 10 properties comprise over one-half of the sample (58%). Operators with 11 to 25 and 26 properties or more make up 26% and 16% of the sample, respectively

• One-half of respondents are exclusively for-profit providers (51%); about one-third operate not-for-profit (36%) and 13% operate both. 

• Many respondents in the sample report operating combinations of property types. Across their entire portfolios of properties, 73% of the organizations operate seniors housing properties (IL, AL, MC), 30% operate nursing care properties, and 37% operate Life Plan Communities (aka CCRCs).

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

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

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

NIC Analytics recently released the 2Q2021 NIC Lending Trends report, a free report available now.  The quarterly report tracks over $86.9 billion in senior housing and nursing care loans including construction loans, mini-perm/bridge loans, and permanent loans from the third quarter of 2016 through the second quarter of 2021. The NIC Lending Trends Report helps 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 sector.  

Below are a few  key takeaways from the NIC Lending Trends Report for second quarter 2021. Access the full report on nic.org.  

Takeaways from the 2Q21 report. 

With over 2,400 registrations, the year’s most important senior housing and care conference proved yet again to be a ‘can’t-miss’ event for industry leaders. Despite a lingering pandemic, and strictly observed safety protocols, including required proof of vaccination, as well as hundreds of cancelled flights nationwide, ‘the NIC’ made a triumphant return to in-person networking and thought leadership. Attendees, nearly 70% of whom are in senior executive roles, were, for the first time in 20 months, able to convene to build relationships, make deals, and share the latest data and insights, in person and face-to-face.

Changes to the structure of the event, including the replacement of sit-down table service dining with more flexible, convenient, and safe ‘NIC Market Café’ offerings proved to be popular. Networking was facilitated not only with events, but with large, comfortable dedicated networking areas, featuring passed food and cocktails. Every day, smaller groups could be seen gathering throughout the beautiful Marriott Marquis Houston, where NIC had placed a multitude of convenient seating and working areas suitable for more intimate discussions.

There was no shortage of food, drink, and pampering throughout the event, which took full advantage of the entirety of the beautiful 5-year-old hotel located downtown, just a block from the Houston Astros’ baseball stadium, Minute Maid Park. Some attendees managed to find tickets for Game Six of the 2021 World Series, a coincidental, but, for baseball fans, exciting and memorable treat. Others found time to conduct business poolside, taking advantage of 80-degree sunny days, and a giant Texas-shaped lazy river, as well as an infinity pool with views of the Houston skyline.

A more streamlined program of educational sessions provided attendees both with more time to network, and a more focused program, defined by the most relevant and timely issues facing senior housing leaders today. Sessions were very well attended in a hall featuring a wide variety of comfortable seating options, as well as more productivity-oriented tables set up with ac power outlets and chargers. Many attendees enjoyed sitting in living room-style comfy chairs and couches. Live streaming areas provided additional options to take in the ten-session program. Below are a few highlights and quotes from the sessions, all of which were made available to attendees in high quality video.

As Monday’s first session, “The Investment Market for Active Adult,” kicked off the program, NIC President & CEO Brian Jurutka made a few remarks, saying, “Welcome back!” to a standing room only (but socially distanced) room. The highly anticipated discussion focused on an emerging property type gaining increased interest among investors and developers.

In “Capital for Operations: Aligning Incentives,” a panel of seasoned industry veterans discussed the importance of aligning incentives to manage increased costs, fund growth, and improve operating efficiencies, as well as the value of building relationships with quality operations teams. “The one thing investors know: the quality of services delivered in the facility is directly correlated to the financial performance,” said Brian Beckwith, CEO, Arcus Healthcare Partners.

Two of America’s most accomplished and respected economists discussed macroeconomics even as the Federal Open Market Committee (FOMC) was meeting in Washington, DC. In “Macroeconomic and Capital Market Trends: A Conversation with Paul Krugman and Dr. Lawrence H. Summers” Nobel prize-winning economist Paul Krugman and Former Secretary of the U.S. Treasury Dr. Lawrence H. Summers delivered a master class, and a few opposing, but enlightening, views, on the state of the U.S. economy to kick off another day of relevant, actionable insights at ‘the NIC.’

Both economists appeared concerned about the prospect of high inflation rates as they debated the impact of likely Federal Reserve Board responses. NIC has released a short video of the exchange on its LinkedIn and Youtube accounts, and every registrant is being provided with access to every session’s complete video recording.

The “Policy Impact and Outlook: A Conversation with Industry Leaders” session focused on policy with leaders of the industry’s key associations. “Overwhelmingly, COVID has not had an impact on the consumer’s likelihood to move into one of these communities. I think it is a testament to [our] ability to get out there and change the perception of what was really happening in these buildings,” noted the President of the American Senior Housing Association, David Schless.

As the sector is beginning to experience anticipated occupancy growth, NIC brought a panel of experts together to discuss recovery. “Demand at your Doorstep: Who is Recovering Faster and Why?” featured a presentation of the very latest data and analysis from NIC Senior Principal, Lana Peck, revealing that, while a recovery does appear to be on the horizon, not everyone will necessarily get there at the same time.

Beth Mace, Chief Economist and Director of Outreach for NIC, led a highly anticipated discussion on “The Thesis for Investing in Senior Housing,” featuring Brian Sunday, Managing Director, AEW, John Moore, CEO, Atria Senior Living, and Steven Schmidt, National Director and Production Manager for Seniors Housing, Freddie Mac.

Despite acknowledging challenges, the panel provided plenty of reason to view the sector positively. “If you look at this industry, it was created for a need to take care of the elder population. That’s not going to change. There is a need for this product,” Sunday said, adding, “This industry has proven that it comes out stronger after disruptions.”

NIC’s middle day of sessions concluded with “Debt Market Trends and The Pace for Deal Making.” Lee Delaveris, Vice President, KeyBank Real Estate Capital; Imran Javaid, Managing Director, BMO Harris Bank; Kelly Sheehy, Principal and Managing Director, Artemis Real Estate; and moderator Aaron Becker, Senior Managing Director, Lument; discussed their expectations for inflation and interest rates, the pace of deal making in today’s market, how to look at performance, and the increased demand for bridge products.

The third and final day continued to draw attendees into three final sessions. Robert Kramer, Co-Founder & Strategic Advisor, NIC, and Founder & Fellow, Nexus Insights, began the “Rethinking Community: Places That Will Attract Future Older Adults” session with his observations on how and why the industry must adapt to meet the needs and expectations of a new generations of older adults. On the emerging active adult segment, he said, “Senior housing is care driven…a push market…you’re pushed into it because of your health. Active adult is a pull market.”

Following NIC Senior Principal Ryan Brooks’ presentation of the latest data on the ‘forgotten middle,’ innovators in the space discussed how they are developing solutions, in “Solving for the ‘Forgotten Middle’ Market.”

Tana Gall, President, Merrill Gardens and Truewood by Merrill, and Pilar Carvajal, CEO & Founder, Innovation Senior Living, shared how they are delivering care at reduced cost, renovating or repurposing existing buildings, achieving economies of scale, and more.

NIC concluded the final day of sessions with an entertaining, yet highly informative, take on the popular ‘Weekend Update’ segment of Saturday Night Live. “Property Valuations for Seniors Housing and Skilled Nursing,” featured co-hosts Ben Firestone, Executive Managing Director & Co-Founder, Blueprint, and Zach Bowyer, Managing Director, JLL, and a number of experts, all of whom came up to the stage one by one for ‘interviews’ on their particular perspectives.

Despite concerns over labor, Bowyer reflected a general sense of optimism, which could be felt through the entire program of educational sessions, and many discussions in hallways and meeting rooms. He said, “From an operational standpoint, the industry has transitioned from emergency response to recovery. Stabilized occupancy is rebounding. We’re seeing resurgence of demand, strong economic growth, and strong home sales.” Predicting occupancy rate re-stabilization within the next couple of years, he said, “that’s light at the end of the tunnel.”

Even as some attendees return home, NIC is planning its next major event, the 2022 NIC Spring Conference, to be held March 23–25, 2022, in Dallas, TX. Sign up to be notified when registration opens.

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