The CARES Act establishes a new $349 billion Paycheck Protection Program

As part of NIC’s mission to provide links between operators and sources of capital, one important new source of capital during this COVID-19 crisis is the Paycheck Protection Program from the Small Business Administration (SBA). The $2 trillion CARES Act signed into law by President Trump on March 27, 2020 established a new $349 billion Paycheck Protection Program, which will provide relief that is essential to millions of small businesses so they can sustain their businesses and keep their workers employed. The summary below provides information that business leaders in the seniors housing and care sector should be aware of. Business leaders are encouraged to go to the SBA link below or talk with their banking relationships for guidance.

The CARES Act offers aid to individuals and businesses that are impacted by the economic fallout from COVID-19. The Paycheck Protection Program specifically provides approximately $350 billion in loans to help small businesses with their payroll and other business operating expenses. The capital provided to businesses will be without any requirements for collateral, personal guarantees, or SBA fees and all with a 100% guarantee from SBA. Importantly, businesses eligible for the Paycheck Protections Program must have fewer than 500 employees, where employees are defined as those individuals employed on a full-time, part-time or other basis.

Seniors housing and care operators and businesses that qualify will notice some welcome aspects of the loans including the fact that all loan payments will be deferred for six months. More importantly, the portion of loan proceeds from the SBA that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest will be forgiven. The new program will be retroactive from February 15, 2020 through June 30, 2020 so that employers can hire back the employees that were recently laid-off.

There are still questions about certain details and qualification but here are the loan terms and conditions:

• Eligible businesses: All small businesses, including non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees, or no greater than the number of employees set by the SBA as the size standard for certain industries
• Maximum loan amount up to $10 million
• Loan forgiveness if proceeds used for payroll costs and other designated business operating expenses in the 8 weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs)
• All loans under this program will have the following identical features:
• Interest rate of 1.0%
• Maturity of 2 years
• First payment deferred for six months
• 100% guarantee by SBA
• No collateral
• No personal guarantees
• No borrower or lender fees payable to SBA

As the government continues to get feedback from trade associations, businesses, and constituents, there are additional relief packages expected in the coming weeks. NIC will continue to communicate as necessary to the seniors housing and care sector as more information becomes available. The link below can be useful for information from the SBA:

https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp

The Labor Department reported that there were 701,000 jobs lost in March. This was the first decline in jobs after 113 consecutive months of job gains and heralds more losses in the months ahead as businesses shed jobs due to the COVID-19 pandemic.

Yesterday, the Department of Labor reported that 6.6 million Americans filed for unemployment insurance benefits in the week ending March 28, 2020. In the past two weeks, 6.5% of employed people or nearly 10 million people have filed claims according to Bloomberg analysis.

Analysts had anticipated that there would be a loss of 100,000 jobs in March. The reason for the discrepancy between jobless claims and the loss in jobs reflects the timing of today’s survey, which took place in mid-March before stay-at-home orders began to be implemented.

Separately, the March unemployment rate increased by 0.9 percentage point to 4.4% from a 50-year low of 3.5% in February.This was the largest over-the-month increase in the rate since January 1975 when the increase was also 0.9 percentage point. The underemployment rate rose to 8.7% from 7.0%. The number of unemployed persons rose by 1.4 million to 7.1 million in March.

The Congressional Budget Office earlier this week indicated that its projections have the unemployment rate rising to 10% for the second quarter of 2020 and to remain at 9% at the end of 2021. Other analysts project even higher rates. In the last recession, the unemployment rate peaked at 10%. The highest monthly unemployment rate on record, going back to 1948, is 10.8% set in late 1982.

Revisions also subtracted thousands of jobs in the prior two months. The change in total nonfarm payroll employment for January was revised down by 59,000 from 273,000 to 214,000 and the change for February was revised up by 2,000 from 273,000 to 275,000. Combined, 57,000 jobs were subtracted to the original estimates. Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors. After revisions, job gains averaged 245,000 per month for January and February.

Employment in health care fell by 43,000 in March. In the prior 12 months, health care employment had grown by 374,000.

Average hourly earnings for all employees on private nonfarm payrolls rose in March by eleven cents to $28.62. Over the past 12 months, average hourly earnings have increased by 3.1%. Over the past 12 months, average hourly earnings increase by 3.1%.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work fell 0.7 percentage point to 62.7%. Total employment, as measured by the household survey fell by 3.0 million to 155.8 million.

Today’s report is a precursor of future weak employment reports as the effects of the coronavirus reverberates through the economy. Most economic forecasters are projecting a significant contraction in GDP in the second quarter as the economy shuts down in response to social distancing and the pandemic even with the $2 trillion fiscal stimulus package signed into law by President Trump

A NIC report developed to provide timely insights from owners and C-suite operators on the pulse of seniors housing and skilled nursing sectors.

This is the first in a series of findings from NIC’s weekly Executive Survey of operators in seniors housing and skilled nursing. This week’s sample includes responses collected March 24-31, 2020 from owners and C-suite executives of 180 seniors housing and skilled nursing operators from across the nation.

Key Findings

1. Roughly half to two-thirds of organizations reporting on their care segment units—across their respective portfolios of properties—saw no change in occupancy rates from one month prior to the time they responded. The exception was nursing care where about half saw declines.
2. Most organizations also reported no change in the pace of move-outs; 40%-50% reported decelerations in the pace of move-ins.
3. The majority of organizations indicate that their properties are back-filling staffing shortages by increasing overtime hours, and they are supporting property staff by providing flexible work hours.
4. About 40% of organizations expect no change in their development pipeline going forward.

 Survey Demographics

• Slightly more respondents in the sample exclusively operate for-profit properties (49%) than exclusively operate nonprofit properties (45%), and 7% operate both for-profit and nonprofit properties.
• Owner/operators with 1 to 10 properties comprise 63% of the sample. Operators with 11 to 25 properties make up 23% while operators with 26 properties or more make up 14% of the sample.
• 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), 42% operate CCRCs (Life Plan Communities), and 25% operate nursing care properties.

Summary of Results

Change in Occupancy by Care Segment

Respondents were asked: “Considering the entire portfolio of properties, overall, my organization’s occupancy rates by care segment are… (Most Recent Occupancy, Occupancy One Month Ago, Percent 0-100)”

• Roughly half to three-quarters of organizations reporting on their care segment units—across their respective portfolios of properties—saw no change or an increase in occupancy rates from the time they responded to one month prior, the beginning of the COVID-19 pandemic. Conversely, anywhere from one-quarter to one-half of organizations reported decreases in occupancy by care segment.

Pace of Move-Ins and Move-Outs

Respondents were asked: “Considering my organization’s entire portfolio of properties, overall, the pace of move-ins and move-outs by care segment in the past 30-days has…”

• Most respondents report that the pace of move-in rates decelerated over the past 30-days. The largest percentage of slowing move-ins was reported for assisted living and independent living (55% and 53%).
• The majority of respondents noted no change in move-outs.
• Nursing care beds had a higher pace of accelerated move-ins and move-outs compared to other care segments.

Mitigation Strategies for Labor Shortages

Respondents were asked: “My organization is back-filling property staffing shortages by utilizing… (Choose all that apply)”

• In response to back-filling staffing shortages, respondents indicated the following:
  • 84% are increasing overtime hours
  • 45% are hiring agency or temp staff
  • 32% are hiring professionals from other industries
  • 10% are using volunteers

Supporting Property Staff

Respondents were asked: “My organization is supporting property staff who may be experiencing challenges by providing… (Choose all that apply)”

• To support property staff who may be experiencing challenges, answers with the highest number of responses included the following:
  • 76% are providing flexible work hours
  • 63% are providing remote work
  • 47% are offering additional paid sick leave
  • 33% are providing to-go meals for families
  • 22% are reimbursing childcare
  • 11% are providing on-site childcare
• Answers with lower response rates included increased wages and retention bonuses, hazard pay and additional shift fulfillment, staff meals, more flexible use of PTO, and providing basic home essential supplies.

Development Pipeline Considerations

Respondents were asked: “My organization’s projected development pipeline going forward is expected to… (Choose all that apply)”

• When asked to describe expectations about their organization’s development pipeline going forward:
  • 41% expected no change
  • 25% expected it to decrease
  • 18% expected it to increase
• Uncertainty is the main reason for expected decrease in the development pipeline (88%). Nearly one out of five (18%) cite supply chain disruptions, and 3% cite lack of construction labor. Other reasons include COVID-19, capital markets/debt availability, conserving cash, economic stress during the pandemic, and concerns about consumer buying strength.
• For those who expected their organization’s development pipeline to increase, some cite lower interest rates as a reason (25%). Others anticipate greater future demand or already have development planning underway.

If you’d like to participate in the current Executive Survey, please click here for the online questionnaire.

NIC released its fourth quarter 2019 Skilled Nursing Data Report, which includes key monthly data points from January 2012 through December 2019.

Here are some key takeaways from the report:

1. The occupancy rate for skilled nursing continued to stabilize as the year closed out in 2019. Occupancy was essentially flat from the third to the fourth quarter, decreasing by only 4 basis points and ending the fourth quarter at 83.8%. This was an increase of 24 basis points from December 2018, when occupancy was 83.6%. Notably, the occupancy rate is up 48 basis points from the time-series low set in June 2018. The fourth quarter occupancy trend varied by geographic area, with urban areas experiencing a slight decrease of 3 basis points, while rural areas decreased 26 basis points and urban cluster areas increased 4 basis points from the third to fourth quarters of 2019. The occupancy rate ended 2019 at 82.2% in rural areas and 85.0% in urban areas, representing a difference of 283 basis points. That difference was larger one year ago in the fourth quarter 2018, when it was 297 basis points. 
   
2. Skilled mix increased 41 basis points to 25.0% in the fourth quarter of 2019 from the prior quarter. This increase from the third to the fourth quarter is not unexpected as historical data has shown skilled mix to hold relatively steady this time of year, even though there has been continued pressure on skilled mix since 2015. Skilled mix declined, albeit slightly, from December 2018 (25.1%), but the fact that there was only a decrease of 5 basis points is somewhat of a positive given the prior yearly comparison showed a decline of 48 basis points. The 40-basis point increase to 6.6% in managed Medicare patient day mix from the prior year suggests managed Medicare is preventing a larger year-over-year decline in skilled mix, since Medicare patient day mix continued its overall downward trend by decreasing 82 basis points from the prior year to 11.3%. The skilled mix trend varied by geography as it decreased in rural areas from the prior quarter and the prior year. Urban areas, however, were flat from the prior year but up compared to the third quarter of 2019.
3. Medicare revenue per patient day (RPPD) increased in the fourth quarter of 2019 by 4.6%, ending the year at $544. This was expected for many operators given the new Patient Driven Payment Model (PDPM) that began October 1, 2019 because the new payment reimbursement model is structured for the total care of patients, therefore potential for more reimbursement, instead of a therapy-driven payment model. It is important to keep in mind that this increase was seen in the first quarter that PDPM became effective and it remains to be seen if this is a one-time adjustment or the beginning of a trend. We will have to wait to see how the operating expense part of the equation evolves before making general conclusions. Medicare RPPD also increased from the prior year, with the 3% increase mostly driven by the fourth quarter 2019 new payment model. The increase was consistent across geographies, as both rural and urban areas saw quarterly and yearly increases in RPPD. Meanwhile, managed Medicare RPPD showed some stabilization from the third to the fourth quarter of 2019 and increased 0.9% to end the year at $441.
   
4. Medicare revenue mix increased 74 basis points from the third quarter of 2019 to end the year at 21.5%. It also increased from the prior year, suggesting the increase in Medicare RPPD from PDPM played a role as Medicare patient day mix decreased from the prior year. However, Medicare revenue mix is down 504 basis points from January 2012, with competition from other care settings, growth in managed care, and length of stay pressure challenging the Medicare fee-for-service business. Meanwhile, Medicaid ended 2019 with over 50% of revenue mix as managed Medicare revenue mix decreased 95 basis points to end the year at 9.9%

   To get more trends from the latest data you can download the NIC Skilled Nursing Data Report here. There is no charge for this report.

   The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. NIC continues to grow its database of participating operators in order to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form at nic.org/skillednursing. NIC maintains strict confidentiality of all data it receives.

The Department of Labor reported that 6,648,000 Americans filed for unemployment insurance benefits in the week ending March 28, 2020 as the COVID-19 pandemic continues to shut down many businesses and much of the economy.  This was an increase of 3,341,000 from the previous week’s upwardly revised level of 3,307,000.  While last week’s report shattered records, this week’s report was even more shocking due to the magnitude of the increase.  The speed and scale of the job losses is unprecedented.  In the past two weeks, 6.5% of employed people or nearly 10 million people have filed claims according to Bloomberg analysis.  It was the highest level of initial claims in the history of the series.  At its worse during the Great Recession, there were 665,000 first-time claims filed in the week ended March 28, 2009.  That was second only to the week ended October 2, 1982, when 695,000 first-time claims were filed. 

Continuing claims for regular benefits, which are reported with an extra week’s lag, rose 1,245,000 to 3,029,000. 

The largest increases in initial claims for the week ending March 21 were in Pennsylvania, Ohio, Massachusetts, Texas and California. Many states reported increased layoffs in service-related industries broadly and in the accommodation and food services industries specifically, as well as in health care and social assistance, and the travel and transportation industries.

The increase in unemployment claims is a preview of the March unemployment rate to be announced by the BLS tomorrow, on April 3^rd.  Most analysts expect it to rise from its February 2020 50-year low of 3.5%, but the larger impact will likely show up in the figures in the April employment situation report due to the timing of the surveys. The majority of the reported layoffs occurred after the Labor Department’s reference week in the March report.   In response to the expected sharp slowdown in the economy, the President signed into law a $2 trillion economic stimulus rescue package that broadly expands unemployment benefits.