Nursing homes have disproportionately suffered during the COVID-19 pandemic, housing some of those most vulnerable to the virus. Over the past year, the rate of new COVID-19 cases among skilled nursing residents moved nearly in tandem with the rate of new cases within the nation as a whole. However, the distribution and administration of vaccines looks to be having an impact on this susceptible population.

Within a few weeks of the launch of the Long Term Care (LTC) vaccination program administered through the Pharmacy Partnership Program, with the Pfizer-BioNTech vaccine on December 21, 2020 and the Moderna vaccine on December 28, new COVID-19 cases within skilled nursing properties have been sharply lower than the U.S overall new cases at any previous point. Various reports show that residents overwhelming opt in to receiving vaccinations, whereas during a similar time less than 10% of the U.S. population had received at least one vaccine shot. These initial results are promising and provide another potential data point on the effectiveness of vaccinations in preventing new COVID-19 cases.

As of February, over 30 million people have been inoculated in the U.S. and the vaccines appear to be safe and effective. According to the latest NIC Executive Survey Insights (Wave 20), which collected survey results from January 11 – 24, 2021, “two-thirds of residents (66%) and nearly one-half of staff (47%) have had their first dose.” Increasingly, there is support for the idea that as the number of people who are vaccinated increases, the number of hospitalizations should potentially decrease, as was indicated in a study of trends in Israel and its high vaccination rates.

Since CMS began reporting data in late May, newly confirmed cases within skilled nursing properties have followed the same pattern as the U.S. overall new cases, as reported by the CDC. For the week ending December 20, both overall new cases in the U.S. and within skilled nursing properties reached new peaks before slipping back in late December. In fact, U.S. new virus cases reached a seven-day moving average of about 220,000 on December 20, while the per-resident rate of new COVID-19 infections set a record at 3.03% at the same time, according to data compiled by NIC’s Skilled Nursing COVID Tracker.

However, in recent weeks, there has been a noticeable divergence in these trends as the vaccines have been administered and distributed to skilled nursing properties. NIC’s Skilled Nursing COVID Tracker featuring the latest CMS data update as of January 24, 2021 shows that case counts of COVID-19 and fatalities at skilled nursing properties have started to decline. Although, new cases in the U.S. (7-day moving average) reached levels higher than the prior December peaks by January 10 (244,702), newly confirmed cases within skilled nursing properties continued falling steadily and remained far below the previous peak seen on December 20, with a one percentage point decline recorded over four weeks from 3.03% on December 20 to 1.96% on January 17.

Similarly, new coronavirus fatalities among skilled nursing residents have flattened and slightly decreased from December 20 levels, while U.S new fatalities (7-day moving average) continued to climb at a faster pace. For the week ending December 20, fatalities in skilled nursing properties accounted for approximately 31% of overall new fatalities in the U.S. By January 17, the skilled nursing new fatalities as a share of total fatalities in the U.S. dropped to 21%.

“It’s only through having access to representative data that we can begin to understand the impact of policies and actions. The transparency provided by the CMS data set is helpful in understanding the impact prioritizing skilled nursing has had since it provides for a longitudinal view of the impact COVID-19 has had relative to the broader U.S. The decrease in new cases and fatalities in skilled nursing properties relative to trends in the total U.S. is encouraging, particularly given the timing relative to widespread distribution of the vaccine to long term care properties,” said NIC president and CEO, Brian Jurutka.

As background, NIC has been publishing a regular updated weekly surveillance report since June 2020 on the incidence of COVID-19 cases and fatalities among residents in the nation’s nursing care properties. Using data collected and reported by the Centers for Medicare & Medicaid Services (CMS), NIC’s Skilled Nursing COVID-19 Tracker (Tracker) reports CMS nursing home data and provides insights into the rate of virus spread within skilled nursing properties.

The Tracker shows where cases are spreading, slowing, or remaining flat. In addition, the Tracker depicts the incremental week-over-week change rate in four important metrics on a same-store basis, i.e. the same nursing properties are tracked each week across regions, sub-regions, states, and counties. The metrics include: (1) new COVID-19 confirmed cases per same store properties, (2) new COVID-19 confirmed cases as a share of residents, (3) new COVID-19 fatalities as a share of residents, and (4) occupancy rates (based on CMS Data). Importantly, the Tracker allows users to drill down to a smaller market or a specific property and access the underlying data.

To gain in-depth insights and track the week-over-week change rate for new resident cases and fatalities of COVID-19 within skilled nursing properties at the state and county levels, visit NIC.org. You can also access the Skilled Nursing COVID-19 Tracker along with a rich trove of analysis and insight on the NIC COVID-19 Resource Center.

For more reading on the effects of COVID-19 in skilled nursing properties, see the following report:
https://www.nic.org/wp-content/uploads/pdf/SNCT-Insights-Report-Special-Issue.pdf

NIC is committed to provide timely data, analyses and insights that increase transparency and understanding of the sector, especially in this difficult time of COVID-19. We strongly support all actions and efforts that prioritize distribution of COVID-19 vaccines, testing, and availability of PPE to protect frontline workers and residents.

NIC Leadership Huddles are back. The popular live webinar series, which NIC initially launched as part of its response to the COVID-19 pandemic last year, launched anew on January 27, with a very timely focus on policy, just a week after the swearing in of President Biden. The new series, which offers a complimentary new Leadership Huddle twice each month into July, seeks to retain the same level of relevance, and quality of discussion, which drew thousands of industry decision-makers to the Leadership Huddles in 2020.

The new series comes with a few tweaks. Upon registration, attendees can sign up not only for the webinar, held via GoToWebinar, but can opt to attend a facilitated peer-to-peer group discussion within Zoom, immediately afterwards. Attendees are also encouraged to pose a question or two during registration for prospective discussion during the webinar sessions. Access to the peer-to-peer group discussions is offered on a first-come, first-served basis, to ensure an appropriate number of participants for the collective discussions.

While COVID-19 will likely feature prominently in many Leadership Huddle Webinars and associated discussions, the series will cast a broader net, to include all of the major issues impacting the sector today. Titled, “Policy Outlook: A New Administration & A New Congress,” this series-first Leadership Huddle focused, appropriately, on the key policy issues impacting the seniors housing and skilled nursing sectors; what actions the new Administration and new Congress are likely to take; and the funding decisions that are critical for advancing integrated care and services for America’s seniors.

The fast-paced webinar covered a great deal of ground concerning policy impacts on the industry, leaving attendees hungry to delve into more detail in the peer-to-peer discussion session, which was moderated by Juniper Communities Founder and CEO, Lynne Katzmann. But first, NIC Co-Founder and Strategic Advisor, and President, Nexus Insights, Bob Kramer, moderated the webinar. He kicked it off by observing that the new administration and new Congress have hit the ground running, saying, “It seems like every few hours there’s a release, a report, an announcement, dealing with the topics we want to talk about today.”

Expert panelists Dan Mendelson, Founder and former CEO of Avalere Health, and Anne Tumlinson, Founder, ATI Advisory, offered insights on a broad range of policy-related topics, many of which can be expected to have a significant impact on the seniors housing and care industry, both in the long- and short-term.

The discussion kicked off with assessments on the vaccination goals of the Biden administration. Mendelson said investors and operators in the space should “should strap on their seatbelts because there’s going to be a lot of activity coming out.” Pressed by Kramer on whether we’ll meet the administration’s 100-day goal on vaccinations, Mendelson said, “I think we’ll exceed it, if the people on this call get into gear and really facilitate the change. This is not something that’s just going to happen because someone else does it.”

Another major policy movement is Biden’s proposed $1.9 Trillion stimulus package, designed to revive the economy, protect businesses, and combat the pandemic. Both panelists agreed that, unlike previous packages, this one is designed to put money directly into the hands of individuals. Nevertheless, the package, which is quickly going through Congress, is likely to flow resources into the sector as a means to combat the pandemic.

Panelists also tackled the expansion of Medicaid and Medicare coverage, minimum wage increases, and a variety of “lightning round” questions on the public health emergency, the three-day hospital stay rule, telehealth, and scrutiny on assisted living. An in-depth recap of the full discussion is available in this month’s NIC Insider.

You can register to attend upcoming NIC Leadership Huddles, including both the live webinars as well as the optional, first come, first served participation in peer-to-peer discussions, within the Events tab on www.nic.org. Registrants are provided with a recording of the event, compliments of NIC, and our generous sponsors and partners.

The Labor Department reported that nonfarm payrolls inched up by 49,000 in January and that the unemployment rate fell 0.4 percentage points to 6.3%. The consensus estimates for January had been for a gain of 105,000 jobs. Through January, 9.9 million jobs have been lost since February. 

Health care declined by 39,000 jobs in January, with losses in nursing care facilities (down 19,000), home health care services (down 13,000) and community care facilities for the elderly (down 7,000). Since February, health care employment is down by 542,000.

The share of employed people who teleworked because of the coronavirus was 23.2% in January. This data refers to employed persons who teleworked or worked at home for pay at some point in the prior four weeks due to the pandemic. Separately, an estimated 14.8 million people reported that they had been unable to work because their employer closed or lost business due the pandemic. This was 1.1 million less than in December. 

The unemployment rate fell 0.4 percentage point to 6.3% in January from 6.7% in December. It remains 2.8 percentage points above the pre-pandemic level of 3.5% seen in February, but well below the 14.7% peak seen in April. The number of long-term unemployed (those jobless for 27 weeks or more) was little changed from December at 4.0 million and accounted for 39.5% of the total number of unemployed persons. The underemployment rate or the U-6 jobless rate fell to 11.1% in January from 11.7% in December. This figure includes those who have quit looking for a job because they are discouraged about their prospects and people working part-time but desiring a full work week.  

Average hourly earnings for all employees on private nonfarm payrolls rose by $0.06 in January to $29.96, a gain of 5.4% from a year earlier. These increases largely reflect the disproportionate number of lower paid workers in leisure and hospitality who went off payrolls, which put upward pressure on the average hourly earnings estimates. The large employment fluctuations over the past several months–especially in industries with lower-paid workers-complicate the analysis of recent trends in average hourly earnings.  

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work was 61.4% in January and was 1.9 percentage points lower than February 2020.  

The change in total nonfarm payroll employment for November was revised down by 72,000 from 336,000 to 264,000 and the change for December was revised down by 87,000 from a loss of 140,000 to a loss of 227,000. Combined, 159,000 jobs were removed from 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.

The limited job gains in January stem from pandemic-related restrictions in business operations and reflects the large number of newly diagnosed COVID-19 infections. Many states have re-imposed lockdowns. Widespread distribution of vaccines is needed to allow for a more complete re-opening of the economy and a recovery in jobs. Congress needs to act to implement further fiscal stimulus to support a recovery, although the effects of the $900 billion federal relief package enacted in December have not been broadly felt yet. Without further fiscal stimulus, the economy is likely to sputter until a vaccine can be safely and widely distributed.

As the leading data provider for the seniors housing and care sector, the NIC MAP^® Data Service (NIC MAP) tracks occupancy, asking rents, demand, inventory, and construction data for independent living, assisted living, memory care, nursing care, and continuing care retirement communities (CCRCs), also referred to as life plan communities. This data is collected for more than 15,000 properties across 140 metropolitan areas. NIC MAP currently tracks 1,208 not-for-profit and for-profit entrance fee and rental CCRCs in these 140 combined markets (1,137 in the 99 combined Primary and Secondary Markets).

The following analysis examines current conditions and year-over-year changes in inventory, occupancy, and same store asking rent growth—by care segments within CCRCs (CCRC segments) compared to non-CCRC segments in freestanding or combined communities to focus a lens on the relative performance of care segments within CCRCs.

Current CCRC Occupancy by Payment Type and Profit Status

In the fourth quarter of 2020, CCRC occupancy fell 90 basis points from the third quarter to 85.7%, its lowest level since NIC MAP began reporting the data in 2006. The cumulative drop in occupancy was 350 basis points since the pandemic began to have an impact on occupancy rates. Prior to 2Q 2020, CCRC occupancy oscillated around 91% for 22 consecutive quarters.

Non-CCRC occupancy averaged 76.6% in 4Q 2020—a very wide 9.1 percentage points lower than CCRC occupancy (85.7%). Entrance fee CCRC occupancy was 6.3 percentage points higher (88.0%) than rental CCRCs (81.7%), and not-for-profit CCRC occupancy was 6.1 percentage points higher (87.3%) than for-profit CCRCs (81.2%).

CCRCs vs. Non-CCRCs: Care Segment Detail

The table below compares each of the care segments—independent living, assisted living, memory care, and nursing care—in the Primary and Secondary Markets. The table shows the 4Q 2020 total open units, occupancy and average monthly asking rent—and year-over-year changes for CCRCs and non-CCRCs.

The CCRC independent living care segment (which represents 55.5% of CCRC units) garnered the highest occupancy in the fourth quarter of 2020 (89.6%), as well as the least year-over-year drop in occupancy falling 3.2 percentage points. The current nursing care segment occupancy rate in non-CCRCs, which represents 51.9% of non-CCRC units, was much lower at 74.9%, and fell 11.2 percentage points year-over-year.

Higher occupancy at CCRCs

The CCRC independent living care segment had the highest 4Q 2020 occupancy (89.6%), followed by CCRC assisted living and memory care (84.2%, respectively), and CCRC nursing care (78.5%). Among non-CCRCs, the independent living care segment had the highest 4Q 2020 occupancy (80.9%), followed non-CCRC assisted living (77.8%), memory care (76.7%) and nursing care (74.9%).

The difference in 4Q 2020 occupancy between CCRCs and non-CCRCs was the highest for the independent living segment (8.7 percentage points), followed by the memory care segment (7.5 percentage points), the assisted living care segment (6.5 percentage points), and the nursing care segment (3.6 percentage points).

Occupancy declined from year-earlier levels for each of the care segments. However, CCRCs had lesser declines in occupancy than non-CCRCs. Among CCRCs, independent living care segment occupancy declined the least (-3.2 percentage points), followed by memory care (-5.9 percentage points), assisted living (-7.3 percentage points), and the nursing care segment (-10.2 percentage points). Among non-CCRCs, memory care and independent living segment occupancy declined the least (-6.8 and -6.9 percentage points, respectively), followed by assisted living (-7.9 percentage points), and the nursing care segment (-11.2 percentage points).

Higher annual, same store asking rent growth at CCRCs

Overall, CCRC same store year-over-year asking rent growth in the fourth quarter of 2020 was 2.4%, down from the time series high of 4.7% reached in the first quarter of 2019, but slightly higher than the time series low of 2.1% at the end of 2010, the end of 2013 and beginning of 2014. Year-over-year asking rent growth did not vary significantly across the CCRC care segments unlike the non-CCRC care segments; the variation was only 30 basis points for CCRCs but 220 basis points for non-CCRCs. Among CCRCs, the highest year-over-year asking rent growth was 2.1% in the independent living segment; among non-CCRCs it was highest in the nursing care segment (1.9%). The lowest year-over-year asking rent growth was noted for CCRCs in the assisted living care segment (1.8%); in non-CCRCs it was noted for the independent living care segment (-0.3%).

Significantly weaker inventory growth at CCRCs

Non-CCRCs had higher rates of inventory growth (year-over-year change in inventory) by segment than CCRCs, with the exception of the nursing care segment. The highest rates of inventory growth were reported for non-CCRCs in the memory care and independent living care segments (4.4% and 3.8%); the lowest were reported for both CCRCs and non-CCRCs in the nursing care segment (0.0% and -0.3%, respectively). Negative inventory growth can occur when units/beds that are temporarily or permanently taken offline, or converted to another care segment, outweigh added inventory.

Occupancy rates vary by region and payment type

Seniors housing and care communities in the Pacific, Northeast, and Mid-Atlantic regions, which were more significantly impacted earlier in the pandemic than other regions, currently have the strongest CCRC occupancy rates ranging from 87.9% to 87.6%. The weakest CCRC and non-CCRC occupancy is in the Southwest region at 80.0% and 69.7%, respectively. That said, the greatest difference in CCRC and non-CCRC occupancy was in the Mid-Atlantic region—a 10.8 percentage point difference.

The difference in fourth quarter occupancy rates between entrance fee and rental CCRCs was the greatest in the Mountain region (8.6 percentage points), followed by the Pacific (7.6 percentage points), and the East North Central region (7.0 percentage points).

Looking specifically at the independent living care segment by payment type, the difference in fourth quarter occupancy rates between entrance fee and rental CCRCs was the greatest in the Pacific region (8.0 percentage points), followed by the West North Central region (7.1percentage points), and the Mountain region (7.0 percentage points).

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

To learn more about NIC MAP^® Data Service, and the latest metro-level data they can provide to support your organization through their various product offerings, schedule a meeting with a product expert today.

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It may take a while before the transaction process itself returns to normal.

Despite the major disruptions caused by the pandemic, transactions have still been closing though at a slower pace compared to 2019. Underwriting terms for financing have generally tightened and lenders are still cautious. But as effective vaccines are being rolled out, deal-making is expected to pick up, especially in the second quarter of 2021.

“Investors are showing more confidence in the market because of the vaccine announcement,” said Ryan Maconachy, vice chairman of Healthcare and Alternative Real Estate Assets at Newmark, a commercial real estate services firm. “Stabilized properties are in a great position.”

Maconachy added that in the last two months the number of bidders for seniors housing properties, mostly private equity firms, has increased. He projects that Newmark will close deals totaling $2.5-$3 billion in the first quarter of 2021.

Transactions fell steeply in 2020, according to numbers compiled by NIC MAP^® Data Service and, Real Capital Analytics. The all-time high of 174 transactions was tallied in the fourth quarter of 2019 falling to 67 deals in the third quarter of 2020, marking a sharp slowdown in sales activity as the pandemic widened.

For now, cap rates and pricing are holding steady, according to Ben Firestone, executive managing director and co-founder at Blueprint Healthcare Real Estate Advisors. He said that pricing could dip prior to a rebound in revenue in 2021.

Investors are rethinking liability insurance on the operating expense side and scrutinizing short-term lease-up projections on the revenue side, said Firestone. “The outlook remains strong over the long term. Private, patient capital is buying right now.”

The deal-making process itself has changed, a situation unlikely to return to its pre-pandemic mode until vaccines are widely deployed, the disease subsides, and the economy picks up.  

Maconachy said that a lot of the deals in 2020 were very targeted to a select group of investors that stayed in the market. Properties were not shopped to a wide array of potential buyers. As a result, the transaction process last year was somewhat streamlined, resulting in faster closings despite the drawbacks of not being able to tour properties. He added that he doesn’t expect tours to resume for at least a few months, depending on the speed of the vaccine roll-out.

The 30-Day Deal

Stakeholders addressed the challenges of deal-making in the COVID era at the 2020 NIC Fall Conference. The session was titled “30 Days from Start to Finish; Getting a Deal Done During the Pandemic.” The panel was led by Steve Schmidt, national director, Seniors Housing Group, Freddie Mac. Speakers included Brian Cannella, managing director, Kayne Anderson Real Estate; Lori Coombs, managing director, group head seniors housing, Wells Fargo; and Thomas Schissler, managing director, Wells Fargo Multifamily Capital.

Taking a creative spin on deal-making, the session’s format mimicked TV’s Jeopardy gameshow. Schmidt acted as the host and the panelists answered questions from categories on the game board, racking up mock dollars for correct responses.

Questions related to a Kayne Anderson transaction of six best-in-class assets in Florida. Wells Fargo and Freddie Mac provided the $233 million debt package.

Several trends emerged during the discussion. Lenders said they are focused on high-quality owners and operators. For underwriting, lenders require strong protocols to prevent disease transmission. Borrowers have been required to detail their policies and procedures around infection control. “We want to see best practices,” said Coombs.

In the case of the Florida transaction, the operator, Discovery Senior Living, was well known to the lenders. That provided a level of comfort, knowing that there would be continuity of operations.

In general, senior living occupancy has been a concern throughout the pandemic. Senior housing occupancy hit a new low of 82.1% in the third quarter of 2020, according to NIC.

Lenders are looking closely at occupancy trends. They want to know how far occupancy can decline before the borrower/operator can no longer cover the debt service.

Schmidt said that Freddie Mac has been underwriting loans with the expectation of declining occupancy. But he added that each loan is underwritten based on its own merits and situation. Even today as the virus continues to spread, Freddie Mac looks at each owner, operator, and property on an individual basis. “We underwrite accordingly,” said Schmidt.

Freddie Mac structures a 12-month debt service reserve to bridge the gap due to a drop in net operating income. A pre-funded reserve provides another layer of protection, according to Cannella at Kayne Anderson.

Inspections have been a challenge since physical visits to properties have been restricted. In the case of the Florida portfolio, Kayne Anderson had previously owned the assets and knew them well. They also reviewed engineering reports, analyzed CapEx reports, and conducted virtual inspections.

Closing the Florida transaction in 30 days was a big challenge, according to Cannella. “Tough times call for good relationships,” he said, crediting the working rapport among the parties for the speedy conclusion. As a precaution, Kayne Anderson structured a parallel short-term bridge loan in case the deal didn’t come together on time. “The dual tracking gave us the confidence to deliver for the seller and investor,” said Cannella.

Looking ahead, Schmidt said a community whose residents and staff are 90% or more vaccinated will be a strong factor in determining stabilization. “We expect to underwrite occupancy in place once a community can show it has stabilized,” he said.

The lenders agreed that seniors housing has a bright long-term outlook. But they emphasized the importance of flexibility because of the continuing uncertainty around the pandemic and how it will play out. They thought it would take some time to win back consumer confidence, but an effective vaccine will help. “Hopefully, we are on our way out,” said Cannella.