Rising operating expenses now surpass staffing challenges as the most frequently cited response to the question from Wave 44 which asks about “the biggest challenge facing my organization today.” Employee turnover and attracting community and caregiving staff (which have traditionally been cited as the top challenges among survey respondents) are now coming in as the 2nd and 3rd biggest challenges organizations are confronted with. That said, a promising sign of relief to the long-standing labor market issues may be that 15% of responding organizations anticipate their staffing challenges will improve in the second half of 2022 and half of respondents (47%) anticipate their staffing challenges will improve in the first half of 2023.

–Ryan Brooks, Senior Principal, NIC

NIC’s Executive Survey of senior housing and skilled nursing operators was implemented in March 2020 to deliver real-time insights into the impact of the pandemic and the pace of recovery. In its third year, the “ESI” has transitioned away from the COVID-19 crisis to focus on timely industry topics. While some standard questions will remain for tracking purposes, in each new survey wave, new questions are added.

This Wave 44 survey includes responses from July 25 to August 21, 2022, from owners and executives of 55 small, medium, and large senior housing and skilled nursing operators across the nation, representing hundreds of buildings and thousands of units across respondents’ portfolio of properties. More 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.

The timeline below, demonstrating the share of organizations reporting an increase in the pace of move-ins during the prior 30-days, shows that the share of organizations reporting an increase has remained close to 40% since Wave 42 conducted in June 2022.

Rising operator expenses are now the top-cited challenge of survey respondents. Eighty-six percent of respondents cite rising operating expenses as the biggest challenge currently facing their organization. This is an increase from the Wave 41 survey, conducted in May 2022, where 80% of responding organizations claimed rising operating expenses as the biggest challenge.

Staffing challenges – turnover and attracting community and caregiving staff – remain among operators’ most significant challenges, but nearly three-quarters of respondents are optimistic that improvements are on the horizon. Since July 2021, nearly all operators (96% – 100%) responding to NIC’s Executive Survey Insights have reported staff shortages. Although no longer the top-cited challenge, employee turnover and attracting community and caregiving staff remain as significant challenges for survey respondents (80%).
When asked about backfilling staff shortages, nearly all respondents (96%) reported paying overtime hours in Wave 44, and three out of four respondents are currently tapping agency or temp staff (74%). Of those organizations, about one-half (55%) do not expect their reliance on agency or temp staff to change in the remaining months of 2022; however, 37% anticipate it will decrease.

A promising sign of relief to the long-standing labor market challenges may be that 14% expect staffing challenges to improve in the second half of this year. Approximately one-half believe labor markets will ease in the first half of 2023, 16% believe staffing challenges will improve in the second half of 2023, and one in four anticipate it will take until 2024 or beyond before staffing challenges ease.

Wave 44 Survey Demographics

• Responses were collected between July 25 and August 21, 2022, from owners and executives of 55 senior housing and skilled nursing operators across the nation. Owners/operators with 1 to 10 properties comprise roughly two-thirds (62%) of the sample. Operators with 11 to 25 properties account for 25%, and operators with 26 properties or more make up the rest of the sample with 13%.
• Three-fifths of respondents are exclusively for-profit providers (58%), approximately one-third operate not-for-profit seniors housing and care properties (36%), and 5% operate both.
• Many respondents in the sample report operating combinations of property types. Across their entire portfolios of properties, 76% of the organizations operate seniors housing properties (IL, AL, MC), 33% operate nursing care properties, and 27% operate CCRCs – also known as life plan communities.

Owners and C-suite executives of seniors housing and care properties, please help us tell an accurate story about our industry’s performance. 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 Ryan Brooks at rbrooks@nic.org to be added to the list of recipients.

NIC wishes to thank respondents for their valuable input and continuing support for this effort to provide the broader market with a sense of the evolving landscape as we recover from the pandemic. This is your survey! Please take the Wave 45 survey and suggest new questions for Wave 46.

A New Customer Arrives

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 is publishing a bi-weekly series detailing each key driver. View the first three installments of the “Six Key Driver” blog series. What follows is an analysis of the third key driver: a new customer.

Over the next 10 years, it is essential to our industry’s success to recognize that a new senior living customer is arriving with a different take on longevity. This means we must rethink our approach to the next generation of senior living residents.

We need to do more than just reinvigorate or even recast our product for this new customer. Rather, the challenge and the opportunity for us is to fundamentally reframe our expectations around aging itself. We must offer a vision to the new senior living customer of what it means to age well. We must adopt an aspirational model and language focused on personal growth and engagement. That is our challenge for the next decade.

Our new customers are the first generation in history to have witnessed their parents living longer than anyone had anticipated. They have also witnessed how society reacted to and provided for their elders. That experience has profoundly shaped what these customers want for themselves, which stands in stark contrast to what was offered their parents.

The first generation of private pay senior living customers, the residents we’ve served for the last several decades, experienced what I call accidental longevity. They never expected to live as long as they did. They were grateful to survive and took whatever society provided for them during their unexpected old age.

Take, for example, my father-in-law, Sam. He was a World War II U.S. Army veteran and New York school teacher who retired after a heart attack at age 62. He died 31 years later at 93. When he was 89, he said to me, “Bob, can you believe I’m still alive? Isn’t it amazing?”

Sam represents a group, our current customers, who have experienced accidental longevity. But what they were offered and accepted was a declinist view of aging. What do I mean? It means that your experience of aging and retirement is defined and shaped by inexorably ever-increasing deficits, by continually losing what makes life worth living.

When you retire, you disengage and disconnect from your office or work, and colleagues. That starts an inevitable period of decline as you gradually disappear from life, people, and importance with the ultimate disappearance being death. It’s not a cheery, optimistic hopeful view but a declinist view.

The medical doctor and bioethicist Zeke Emanuel wrote at age 57 an article, “Why I Hope to Die at 75,” for The Atlantic. His argument was that society, families and the older adult would be better off if nature took its course swiftly and promptly. He says he’ll be finished then, and better off leaving society because he can no longer make a positive contribution. His unsentimental argument attracted wide attention.

I once gave a talk to students and brought birthday cards designed for people at age 40, 50, 60, and 75. In this talk, I showed them the cards, which are funny, but highlight the progression of the declinist view of life. The card for the person at age 40 featured black balloons and black crepe. The message: You’re starting to lose it. After age 40, it’s all downhill from here. You’re losing the qualities that made life fun and worth living. Each card was more depressing than the last. This attitude is part of the basic notions of our culture, nowhere better seen than in Hallmark birthday cards for people as they reach successive milestones.

Our society is, frankly, built for people to retire and die in their 60s and 70s.

Our norms and expectations around retirement and aging, not to mention our social insurance system, are not designed for the longevity reality that we’re facing today as a society.

What Do Baby Boomers Want?

The declinist view stands in contrast to what our new customer wants, expects, and will demand. This new customer is among the first generation ever to experience purposeful longevity, not accidental longevity. They know they’re likely to live a long time, but they’re not going to approach longevity the way their parents did. My wife and I are great examples. Having gone through this process with our parents, we’re asking all the questions now about the next steps around where and how we want to live.

Purposeful longevity means our new customers are determined to thrive. They are looking for community and a sense of connection. I call it the “engagement” concept of retirement and aging which focusses on purpose, experience, and enjoyment. Paraphrasing a report by the McKinsey Health Institute, which I’ll reference again later, our customers aren’t just looking to add years to their lives but add life to their years.

Joe Coughlin at MIT’s AgeLab asks: What will I do with the next 8,000 days of my life? The average American at age 65 has nearly two decades to live (82 for men and nearly 85 for women). Those with a college education are likely to have 22 or more years (nearly 87 for men and 89 for women). That’s 8,000 days. What are you going to do with those days?

Baby boomers want to know how what you’re offering is not just going to enable them to age longer but to age better.

Our new customers want “next stage” living, not “end stage” living. “Next stage” living is about possibility. It’s about growth. It’s about the opportunity presented by living longer. In contrast, “end stage” living means being put in a place by society that takes care of me and keeps me safe because I’ve lived longer than I was supposed to.

That won’t cut it with the baby boomers. They want their health span to, as nearly as possible, match their lifespan, or as Lynne Katzmann at Juniper Communities describes it, they want “wellspan.”

I participated on a panel on aging at my Harvard 50th reunion. As part of the planning group and in response to the panel, we’ve had fascinating discussions. Almost all of the people have graduate degrees, and some said if they have to go through the experience of their parents, they’d rather not live that long. It’s staggering and it’s not about money. They have plenty of money. It’s rather about their life expectations and what that life looks like ahead of them.

If you’re interested in some of the research on this dynamic, I would refer you to the “New Map of Life,” a report by the Stanford Center on Longevity on planning for the 100-year life.

Another resource is the newly launched McKinsey Health Institute, which I mentioned previously. Their first study is titled, “Adding Years to Life and Life to Years.” What’s insightful is that their target audience is Gen Z because they will live the longest, and could otherwise be condemned to functional irrelevance, if attitudes don’t change.

Yale psychologist Dr. Becca Levy recently released a book, Breaking the Age Code: How Your Beliefs About Aging Determine How Long and Well You Live. It spotlights a revolutionary paradigm shift in how we think about aging. She has pioneered research that reveals how our mindset and beliefs shape our behaviors, our ability to heal, and our lifespan, in invisible but powerful ways.

This new mindset speaks to our new customers who have a different take on longevity. Our current value proposition has been that we have the care you need when you absolutely can’t live any longer without our help. There will always be a market for that.

However, the vast majority of baby boomers won’t be needing care-dominated senior living properties until their late 80s.

To borrow a phrase from Marc Freedman, the founder of Encore.org, which helps people 50+ find meaning in new careers, retirement for boomers will be one part purpose, one part passion, and one part paycheck, in varying combinations, depending on their position in life.

Some boomers will have to work because a paycheck will be a necessity. Others will seek a sense of purpose, perhaps to make a difference in people’s lives by volunteering. For others, they will be driven by passion as they explore new or delayed interests, such as learning to play a musical instrument.

We must change our value proposition. The options for our products are as varied as the interests and affinities that will attract new customers. But we need to ask ourselves: What personalized experiences that are metaphors for being alive or make life worth living will we offer our customers? That is our challenge for the next decade as a new customer arrives.

Next Up—Key Driver #4: Reframing Health and Healthcare. The focus will be on well care, not sick care. Senior living, healthcare providers and insurers will partner to proactively keep our residents out of the expensive acute care system.

Subscribe today to be notified when each blog in this series is published. 

The following analysis examines occupancy and year-over-year changes in inventory, and same-store asking rent growth—by care segment—within CCRCs and non-CCRCs in the 99 combined NIC MAP Primary and Secondary Markets. The analysis also highlights occupancy by payment type (entrance fee CCRCs vs. rental CCRCs), and the relative performance of for-profit CCRCs and not-for-profit CCRCs during the second quarter of 2022—by region.

NIC MAP^®, powered by NIC MAP Vision, collects primary data on occupancy, asking rents, demand, inventory, and construction for more than 15,000 independent living, assisted living, memory care, skilled nursing, and continuing care retirement communities (CCRCs—also referred to as life plan communities) across 140 U.S. metropolitan markets. The dataset includes 1,173 not-for-profit and for-profit entrance fee and rental CCRCs in these 140 combined markets, including 1,097 in the 99 combined Primary and Secondary Markets.

2Q 2022 CCRC Market Fundamentals. CCRC occupancy increased to 86.0% in the second quarter of 2022 for the 99 NIC MAP Primary and Secondary Markets aggregate, up 0.5 percentage points (pps) from the prior quarter, a level 6.9pps above the occupancy rate for non-CCRCs (79.1%).

From its time series low of 84.2% reached in the second quarter of 2021, CCRC occupancy increased by 1.9pps but remained 5.5pps below its pre-pandemic level of 91.5% in the first quarter of 2020. Alternately, non-CCRC occupancy gained 4.0pps from year-earlier levels but still has the most room to make up with a gap of 6.7pps from pre-pandemic level.

In the first quarter of 2020, before the pandemic began to influence the senior housing sector, the gap between CCRC and non-CCRC occupancy rates was 5.8pps. In the second quarter of 2022, the gap between CCRC and non-CCRC occupancy rates stood at about 7.0pps, down 2.8pps from its pandemic high of 9.7pps in the first quarter of 2021 but still 1.1pps wider than it was pre-pandemic.

By Payment Type. In the second quarter of 2022, entrance fee CCRC occupancy (88.3%) was 6.2pps higher than rental CCRCs (82.1%). Compared with the first quarter of 2020, entrance fee CCRCs are now 4.7pps lower, while rental CCRCs remained far below pre-pandemic levels by 7.0pps.

While possible recession scenarios continue to develop, senior housing occupancy continues on the road to recovery, reinforcing confidence and optimism among senior housing constituents. As background, the recently released NIC Intra-Quarterly Snapshot report featuring NIC MAP data, powered by NIC MAP Vision (available for download), showed that the occupancy rate for senior housing (majority independent living and majority assisted living properties) for the 31 NIC MAP Primary Markets increased to 82.0% in the July 2022 reporting period, up 0.7pps from the June 2022 reporting period (2Q 2022) on a three-month rolling basis. This was the largest monthly gain since October 2021.

By Care Segment – CCRCs Maintained Higher Occupancy Rates but Relatively Smaller Asking Rent Growth Compared with Non-CCRCs

The table below illustrates the relative market performance of CCRCs compared with non-CCRCs by care segment in the second quarter of 2022 and includes year-over-year changes in occupancy, inventory, and asking rent growth. Note that CCRCs often offer both entrance fee and rental contracts to give residents financial choice and flexibility. NIC MAP categorizes CCRC communities by the contract type held by the majority of residents.

Occupancy. Overall, occupancy for CCRCs continued to outpace that of non-CCRCs across all care segments. The difference in second quarter occupancy between CCRCs and non-CCRCs was largest for the independent living segment (7.7pps), and smallest for the nursing care segment (2.2pps).

The CCRC independent living care segment had the highest occupancy (89.1%) in the second quarter of 2022, followed by CCRC assisted living and memory care (84.8% and 84.0%, respectively). Although in terms of occupancy improvements from one year ago, the independent living segment had the smallest gain across all care segments for both CCRCs and non-CCRCs.

Asking Rent. While monthly average asking rent for CCRCs across all care segments remained higher than non-CCRCs, non-CCRCs experienced stronger asking rent growth in the past four quarters, with assisted living reporting the highest year-over-year asking rent growth in the second quarter of 2022 of 4.2%, and nursing care reporting the lowest (2.5%).

Similarly, the highest year-over-year asking rent growth for CCRCs was noted in the assisted living segment (3.5%). Note, these figures are for asking rates and do not consider any discounting that may be occurring.

Inventory. From year-earlier levels, inventory for CCRCs decreased (or shifted) across all care segments except memory care, while non-CCRCs saw increased inventory in all but nursing care. Nursing care inventory for both CCRCs and non-CCRCs decreased by 3.4% and 1.0%, respectively. Negative inventory growth can occur when units/beds are temporarily or permanently taken offline or converted to another care segment, outweighing added inventory.

Historically, CCRCs had reported lower rates of inventory growth (year-over-year change in inventory) by segment than non-CCRCs. In the second quarter of 2022, the highest year-over-year inventory growth was reported for the non-CCRC independent living and memory care segments (5.4% and 3.0%, respectively).

Not-for-Profit CCRC Occupancy is Relatively Higher Compared with For-Profit CCRCs

Among the 1,097 CCRCs spread across the 99 Primary and Secondary Markets tracked by NIC MAP Vision, approximately 70% are operated as not-for-profit, and 30% are operated as for-profit.

In the second quarter of 2022, not-for-profit CCRC occupancy (87.3%) was 5.0pps higher than that of for-profit CCRCs (82.3%) within the NIC MAP Primary and Secondary Markets. As shown in the table below, not-for-profit CCRCs have higher occupancy rates than for-profit CCRCs across all regions except in the Pacific. The largest differences in the second quarter occupancy between not-for-profit CCRCs and for-profit CCRCs were in the West North Central (11.8pps), followed by the Southwest (10.0pps), and the Southeast (6.8pps).

For not-for-profit CCRCs, the Mid-Atlantic (89.7%), West North Central (89.5%), and Southeast (88.1%) regions had the strongest occupancy rates in the second quarter of 2022. The East North Central region had the lowest occupancy at 83.9%.

For for-profit CCRCs, the Pacific (90.0%), Northeast (83.9%), and Mid-Atlantic (83.7%) regions had the strongest occupancy rates in the second quarter of 2022. The Southwest region had the lowest occupancy at 76.6%.

Look for future blog posts from NIC to delve deep into the performance of CCRCs.

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It’s simple, right? Increase revenue or decrease expenses. Those are the two ways to boost net operating income (NOI). Ideally, senior housing and skilled nursing operators can do both.

But in today’s inflationary economic environment, increasing NOI and profitability can be a challenge. Higher wages and the cost of supplies are cutting into NOI. Occupancies are still recovering from the fallout of the pandemic, though operators do report some pricing power with recent rate hikes.

“We are looking at ways to create operating efficiencies, increase occupancy and drive rates,” said Adam Kaplan, CEO at Solera Senior Living.

Kaplan spoke on a panel at the 2022 NIC Spring Conference titled, “How to Increase NOI Today, Tomorrow and into the Future.” He was joined by Lynne Katzmann, president & CEO at Juniper Communities, and Peter Longo, managing partner at Cantex Continuing Care Network. The session was moderated by Joel Mendes, senior director, Seniors Housing Capital Markets at JLL.

Each panelist showcased their proven strategies to boost NOI.

Solera positions itself as the price leader in the market. “We are focused on quality and being the best in every market where we operate,” said Kaplan. Solera provides a premium level of services, high-quality food options, robust engagement programs, and the latest technology.

The strategy has helped to sustain high occupancy levels along with the ability to raise rental rates by as much as 7-10%. Kaplan added that local supply and demand dynamics determine how much rents can be raised. “We take a very granular approach,” he said.

Efficient building designs help drive top line results and generate attractive yields for investors, Kaplan said. For example, new Solera properties have a single community entrance for all levels of care. The design creates a better resident experience and reduces expenses — only one entrance has to be staffed.

Juniper Communities leverages care integration to increase length of stay and augment care charges to boost NOI. Katzmann noted that care coordination is not the same as care integration. The approaches have some commonalities such as developing care plans and monitoring residents around the clock.

Care integration also includes primary care practitioners on site. Juniper’s Connect4Life model integrates onsite primary care, pharmacy, and lab services. “We started our own primary care practice,” said Katzmann. The practitioners can note changes in resident health and take quick action. They also serve as a support for the community team.

Primary care practitioners enter their notes into an electronic system at the community, so coordination is seamless. “We act as a bridge between chronic care management and the medical system,” said Katzmann. “Our resident outcomes are better which impacts NOI.”

Higher NOI, Higher Value

Juniper conducted research on the impact of care integration on NOI. Juniper compared its population to the general population and found that the hospital readmission rate was 80% lower among its residents. The use of the emergency department was 15% lower.

The study showed an increase in NOI of $113,000 a year per property, Katzmann said. Assuming an 8% cap rate, for example, property value would be increased by $1.4 million.

Juniper also introduced a Medicare Advantage Plan. This allows Juniper to be paid for care integration from the savings it produces for Medicare.

Panelist Longo at Cantex, which owns and operates a number of skilled nursing facilities, started a Medicare Advantage plan for residents. “It’s had a major impact on how we deliver care and the outcomes,” he said. Residents can sign up for the Medicare Advantage plan. Nurse practitioners deliver care. Cantex is rewarded for better outcomes since healthier residents need less care and fewer expensive interventions.

Practitioners can coordinate home health and hospice care for residents not in the plan. Another benefit: The staff at the building has embraced the approach. “Nurse practitioners proved their worth during the pandemic,” said Longo.

Session moderator Mendes posed a question to the panelists: How much does it cost to set up a Medicare Advantage plan?

“You need capital,” said Longo, adding that it could cost $1 million or more depending on state regulations and other requirements. Scale is also necessary. He said that 60-80 residents are needed for it to make sense to hire a nurse practitioner. About 5-10 facilities should be geographically clustered to share services and circulating nurse practitioners.

Kaplan agreed that a wellness approach is integral to a high-quality operation. At Solera, nurses are available 12 hours a day, every day. But the healthcare operations run in the background. “We focus on lifestyle,” he said. “We are at the intersection of healthcare, real estate and hospitality.”

As the session concluded, panelists agreed that technology, while expensive, is a must-have to boost NOI. The right technology allows the company and the staff to operate efficiently. The ability to capture and communicate real time data is also critical to demonstrate value to partners.

The 2022 NIC Fall Conference is coming up next month. See upcoming sessions and register today.

NIC Analytics released the 1Q2022 NIC Lending Trends Report today. The quarterly report, available for free to NIC’s constituents, currently tracks $86.5 billion in senior housing and nursing care loans. The report includes data for over five years of construction loans, mini-perm/bridge loans, and permanent loans from 3Q2016 through 1Q2022.

While there was a 39.4% quarter-over-quarter increase in new senior housing construction loans closed in first quarter 2022, new nursing care construction loans closed increased quite notably (over 600% on a same-store quarter-over-quarter basis). Though this increase is partially explained by a very small number of new nursing care construction loans closed in the prior quarter, it is still the largest same-store quarter-over-quarter increase for nursing care new construction loans in the recorded time series to date. This blog discusses the key takeaways from the first quarter report.

Takeaways from the 1Q22 NIC Lending Trends Report.

• Nursing care new construction loan closings were very strong in first quarter 2022 following a weak fourth quarter 2021. Partially due to the low fourth quarter, the quarter-over-quarter same-store growth for nursing care new construction loan closings was 645.8% in first quarter 2022. Senior housing new construction loan closings also picked up in first quarter 2022 from fourth quarter 2021 at a growth of 39.4% on a same-store quarter-over-quarter basis. However, the senior housing new construction loan volume closed was below its recent peak in third quarter 2021.
• Delinquencies were quite flat in first quarter 2022. Nursing care delinquencies remained unchanged from fourth quarter 2021, and senior housing delinquencies had a modest increase of 5.0% on a same-store quarter-over-quarter basis. This increase for senior housing was less than half of its increase in fourth quarter 2021 (13.6%). Delinquencies for both senior housing and nursing care were below 1.5% of total loans (1.1% for senior housing, 1.4% for nursing care). There were no foreclosures for the sample in first quarter 2022.
• New mini-perm/bridge loans closed for senior housing were down in first quarter 2022 from their recorded high in fourth quarter 2021, but were still well above the levels from second quarter 2020 through third quarter 2021. On a same-store basis, the quarter-over-quarter decline was 50.7% for senior housing. Nursing care mini-perm/bridge loan closings remained at a high level, but also had a decline in first quarter 2022 from the fourth quarter 2021. However, the decline for nursing care mini-perm/bridge loan closings was more modest at 7.2%. Last quarter we posited that the heightened mini-perm/bridge loans in combination with the lowered permanent loans may reflect that some lenders may currently be more comfortable issuing a mini-perm over permanent loan for some deals.

These data are not to be interpreted as a census of all senior housing and skilled nursing lending activity in the U.S., but rather reflect lending activity from participants included in the survey sample only.

The 2Q2022 NIC Lending Trends Report is scheduled be released in mid-November 2022.

Interested in participating? The NIC Lending Trends Report helps NIC Analytics to deliver on NIC’s mission to enable access and choice by further enhancing transparency of capital market trends in the senior housing and care sectors. We very much appreciate our data contributors. This report would not be possible without them.

If you would like to participate and contribute your data, please contact us at analytics@nic.org. As a courtesy for providing data, data contributors receive this report early before publication on the website. The information provided as part of the survey will be kept strictly confidential. Individual answers will be combined with the answers of all other respondents. Data acquired from this survey will only be reported in the aggregate, and therefore, the resulting aggregated data will not be attributed to you or your company upon distribution.