Key Takeaways:  

Data from the recently released 2Q 2024 NIC MAP Vision Actual Rates Report show that independent living: 

• Saw the most notable slowdown in the year-over-year growth for initial rates (move-in rates). 

• Reported the highest discounts. 

• Showed the greatest improvement in the pace of move-ins. 

• Achieved the largest differential between move-ins and move-outs. 

These factors help explain the relatively larger occupancy gains reported in the independent living segment compared to assisted living and memory care (31 NIC MAP Primary Markets) in the second quarter of 2024. 

In the second quarter of 2024, the year-over-year growth in initial rates slowed across all senior housing segments, with the independent living segment experiencing the most notable decline. 

 In June 2024, the year-over-year growth for initial rates (move-in rates) in independent living was negative 0.1%, down from 4.1% in March 2024 and 8% in June 2023. A similar decline was observed with the initial rates for the assisted living segment which grew by 1.8% year-over-year in June 2024, a sharp decline from 9.9% in the previous year.  

Meanwhile, the memory care segment recorded the highest year-over-year increase in initial rates among the three care segments, with a 5.1% growth in June 2024. However, this was still lower than the growth rate reported one year ago.   

Discounts between asking rates and initial rates for all care segments reached new highs in the second quarter of 2024, with independent living reporting the largest discounts. 

• For the independent living segment, discounts between asking rates and initial rates averaged about 16% in the second quarter of 2024. The June 2024 discount was $781, equivalent to 2.1 months of “free rent” on an annualized basis compared to the asking rate, which is up from $463 or 1.4 months in June 2023.  

• Discounts between asking rates and initial rates in the assisted living segment averaged 9.4% in the second quarter of 2024. The June 2024 discount reached a new high of $723, equivalent to 1.3 months of “free rent” on an annualized basis compared to the asking rate. 

• In the memory care segment, the average discount for asking rates compared with initial rates was 10.3% in the second quarter of 2024. The dollar discount ($884) in June 2024 was equivalent to 1.2 months of “free rent” on an annualized basis compared to the asking rate. 

Move-ins exceeded move-outs in the second quarter of 2024 across all care segments, with independent living properties reporting notable improvements. 

• In the independent living segment, the pace of move-ins accelerated in the second quarter of 2024. In June 2024, move-ins averaged 2.6% of Inventory, while the pace of move-outs averaged 1.6%. The resulting 1.0 percentage point difference between move-ins and move-outs was the largest since at least 2019. 

• For the assisted living segment, move-ins remained unchanged and averaged 3.1% of inventory in the second quarter of 2024 compared to 3.2% in the first quarter of 2024. 

• Move-ins for the memory care segment averaged 3.6% of inventory in the second quarter of 2024 compared to 3.7% in the first quarter of 2024. 

Additional key takeaways are available to NIC MAP Vision subscribers in the full report.   

About the Report   

The NIC MAP Vision Seniors Housing Actual Rates Report provides aggregate national data from approximately 300,000 units within more than 2,700 properties across the U.S. operated by 35 to 40 senior housing providers. The operators included in the current sample tend to be larger, professionally managed, and investment-grade operators as a requirement for participation is restricted to operators who manage 5 or more properties. Visit NIC MAP Vision’s website for more information.  

As the industry continues to put COVID in the rear-view mirror, Skilled Nursing is in a transition period, addressing new challenges. From staffing shortages and the looming new minimum staffing mandate to the increasing influence of Medicare Advantage plans, operators must find innovative ways to enhance efficiency, manage costs, and deliver better quality care to a population that expects and deserves it. Additional pressures include navigating a landscape shaped by evolving regulations and shifting reimbursement models. These headwinds also come at a time when the sector is making great strides in occupancy and facing growing demand from the aging demographic.  

Ongoing Workforce Headwinds 

Like many other industries, Skilled Nursing operators are challenged with staffing shortages which are a result of the increased care needs among higher-acuity residents, high employee turnover, and the increased competition for the existing labor pool. A logical first step in combating these labor shortages is offering competitive compensation and benefits. This is essential in attracting and retaining the higher quality staff needed to provide top-notch care that the market strives for.  

While important, compensation is not the primary corollary to success with recruitment and retention. Operators are also turning their focus to workforce development and training programs to quickly upskill both new hires and current employees. These initiatives can be in the form of continuing education programs, on-site training, or partnerships with local educational institutions. Having a staff that is better trained and more educated puts the operator in a better position to handle the increased regulatory pressures many are experiencing post-pandemic.  

Another key is improving the overall work experience, which is being done through employee recognition programs which celebrate accomplishments and promoting work-life balance to combat burnout.   

Managing Reimbursement Challenges 

As the industry shifts from Medicare Part A to Part C (Medicare Advantage), operators must adapt to lower reimbursement rates, stringent prior authorization processes, and tougher utilization management. To ensure healthy margins, operational efficiencies must become a key focus as cost reduction will help offset the lower reimbursement rates. Enhanced case management also comes to the forefront to ensure operators are being reimbursed for all services provided. As Medicare Advantage plans put a high emphasis on quality metrics and outcomes, skilled nursing operators must enhance their focus on data driven care that improves the overall quality, patient satisfaction and reduces rehospitalization rates. Hitting those metrics not only provides for better care for the resident, but also results in a higher reimbursement rate under the Medicare Advantage value-based payment models.  

Other initiatives include looking to the hospitals and health systems to find ways to create a more synergistic care continuum. Alternative models such as bundled and capitated payments, and diversifying the payer mix to hedge the reliance on the MA plans, can be viable strategies. 

As the population’s desire to stay at home is increasing, operators are increasingly offering telehealth services such as remote patient monitoring and teletherapy to meet that need. Using this, skilled nursing operators can offer follow-up care, chronic disease management and virtual therapy to current and past residents. Some skilled nursing operators are also repurposing parts of their buildings for specialty care, such as memory care units, ventilator units or offering behavioral health services. Expanding in these ways can offer higher reimbursement, bring in additional funding and meet specific needs within a community.   

Industry Tailwinds 

While the workforce and reimbursement pressures remain, there are positive signs for the skilled nursing sector. NIC MAP data for the second quarter of 2024 showed continued improvement in skilled nursing occupancy, coming in at 84.3%, an increase of 0.4 percentage points from the first quarter of the year and well above the pandemic low of 73.9%.  

There has also been progress in select states to improve Medicaid reimbursement rates, which is encouraging. Additionally, there has been increased acknowledgement of the labor shortages among federal and state officials, which has resulted in circumstances whereby states have provided meaningful funding to train, upskill and financially reward direct care staff serving older adults.  

Last, it is important to acknowledge the demographic tailwinds in play. There will continue to be great demand for skilled nursing services with many individuals who will not have a family caregiver to provide around-the-clock support or the ability to pay for private-pay senior housing.  

These compelling demand trends and improving market indicators continue to make investment in the skilled nursing space viable and attractive to buyers who have the scale and sophistication to operate effectively in the current environment. 

Proactive Planning for the Future 

In a look towards the future, operators are exploring the concept of a “Super SNF,” which is a new model of care that combines traditional skilled nursing services with advanced clinical capabilities traditionally provided by a hospital. The goal is to eliminate the need for high-acuity patients to be transferred to a hospital as they would be able to receive their complex care within the four walls of the skilled nursing property.   

Success in the post pandemic world requires innovation and the ability to adapt. With a focus on quality outcomes, strategic partnerships, and diversification, the future of skilled nursing can be one of growth, improved care, and greater financial sustainability. 

With the 2024 NIC Fall Conference just one month away, now is the time to prepare to make the most of your time in D.C. NIC Fall Conference Program Committee Chairs, Joe Daniels, Vice President of Business Development at Direct Supply/Aptura, and Tana Gall, President, Merrill Gardens, offer advice on can’t miss sessions and highlights to expect.

Most would agree that we are in interesting times from a capital, demographics, and political standpoint. How will the NIC Fall Conference provide greater insight and clarity into these key issues?

Joe Daniels: The NIC Fall Conference will bring a great speaker lineup, data-driven insights, and terrific networking opportunities to discuss the challenges and opportunities ahead for our industry.

Tana Gall: NIC has always been the leader in providing valuable information for leaders in our industry and we need that knowledge now more than ever. Hearing from and networking with key leaders is critical as we look for new ways to best serve residents.

What are you most excited about as we look ahead to the conference in September?

Joe Daniels: The NIC conference has always had a different energy level to it, which will be even higher this year due to the timing of the recovery and the election. I’m  anticipating this will create a lot of excitement.

Tana Gall: I always look forward to embracing old friends and making new ones. The chance to learn and share is so valuable – each year I walk away from this conference with a new sense of excitement about our mission to serve seniors.

Are there any sessions that you consider do-not-miss opportunities?

Joe Daniels: Election 2024: Political Implications for Senior Living and Strategic Roadmap for Technology Integration and Deployment are at the top of my list – but there are a lot of really good ones!

Tana Gall: All the sessions are intriguing, and I will try to attend as many as I possibly can. I am very interested in the Election 2024 Political Implications for Senior Living – with things changing so rapidly on the political landscape I can’t wait to hear the latest and how it relates to our industry. I also will be sure to attend the Economic Outlook for Senior Living and (shameless plug) I hope to see lots of attendees at Harnessing Resident Technology to Enhance Operations since I am the moderator!

Do you have any advice for newcomers to this year’s NIC Fall Conference?

Joe Daniels: Take advantage of the opportunity. Attend as many sessions as you can and talk to as many people as you can. Ask a lot of questions and gain a lot of new contacts. Finally, take action based on the insights you gain!

Tana Gall: Soak it all in! Attend as many sessions as you can and network, network, network. One of the things I love about our industry is that while we are competitors, we are also collaborators. A rising tide lifts all boats, and the chance to share and learn from each other is so important right now. 

Senior housing posted a positive total return of 0.91% in the second quarter of 2024, outperforming the broader NCREIF Property Index (Expanded NPI), which posted a total return of -0.22% in the second quarter. Positive income returns for senior housing (+1.29) were partially offset by negative appreciation (-0.38%), resulting in overall positive returns for the quarter.  Year-to-date , senior housing returned 0.81%, outperforming the Expanded NPI by nearly 200 basis points.

By senior housing property subtype, both independent living (+1.37%) and assisted living (+0.51%) posted positive total returns in the second quarter. Over the longer term, independent living has outperformed assisted living on a total return basis over the one-, three-, and five-year periods. This outperformance may be driven by higher margins typically generated in lower acuity settings such as independent living, which require less staffing and labor expenses than higher acuity settings such as assisted living.

The senior housing income return in the second quarter was 1.29%, in line with the residential sector (+1.11%) and the overall Expanded NPI (+1.18%). The senior housing appreciation (capital/valuation) return was -0.38% in the second quarter but better than the residential sector (-0.96%) and the overall Expanded NPI (-1.40%). The appreciation return is the change in value net of any capital expenditures incurred during the quarter. During the quarter, economic and capital market conditions drove negative appreciation returns in all sectors except for hotel (+0.18%). 

On a longer-term basis, the 6.63% annualized ten-year total return for senior housing was the strongest of the main property types, except for industrial (+13.45%) and self-storage (+12.09%), outperforming the Expanded NPI ten-year annualized total return of 6.17%. Income returns for senior housing (+4.91%) surpassed the Expanded NPI (+4.55%), as did appreciation returns (+1.67% vs +1.57%) over the ten-year annualized period.

The performance measurements cited above for senior housing reflect the returns of 215 senior housing properties valued at $11.39 billion in the second quarter. Overall, the number of senior housing properties tracked within the Expanded NPI has grown significantly from the 56 properties initially tracked beginning in the third quarter of 2003.

Demand for senior housing units continued to outpace new supply, with second quarter 2024 senior housing market fundamentals showing a continued recovery in occupancy rates in the 31 Primary Markets, according to data released by NIC MAP Vision. As a result, the occupancy rate for senior housing stood at 85.9%, up half a percentage point from the prior quarter.

There was a 0.7 percentage point increase in the independent living occupancy rate and a 0.5 percentage point increase in the assisted living occupancy rate, which was a change in pattern from prior quarters which had higher assisted living occupancy growth. Overall, the relatively steady improvement in market fundamentals coupled with a record number of occupied units illustrates that today more older adults than ever before are residents in senior housing properties.

Source:  NCREIF

Note: FTSE Nareit All Equity REITs returns as of July 31, 2024.

NIC’s Board of Directors is responsible for developing policies and guidelines that enable the CEO and NIC staff to facilitate the effective operation of the organization. Each Director brings extensive knowledge, experience, and passion to their work on the Board. The Board recently re-elected the following directors to serve a one-year term as officers on its Executive Committee:

• Susan Barlow, Chair – Cofounder and Managing Partner, Blue Moon Capital Partners LP
• Ken Segarnick, Vice Chair, Communications – CEO, Harmony Senior Services
• Fee Stubblefield, Vice Chair, Strategy – Founder & CEO, The Springs Living
• Imran Javaid, Treasurer – Managing Director, BMO Harris Bank
• Aron Will, Assistant Treasurer – Vice Chairman, CBRE
• John Rijos, Secretary – Co-founder & Operating Partner/CEO, CPF Living Communities, Chicago Pacific Founders
• Bre Grubbs, Assistant Secretary – Partner & Chief Strategy Officer, Leisure Care

Chair Susan Barlow shared her thoughts on serving: “As a capital provider, I am passionate about serving on NIC’s Board of Directors, especially as our industry is evolving in so many exciting ways. NIC provides the forum for capital providers and operators to participate in change making discussions relating to the rapid advancement in technology and innovative approaches to care delivery just to name a few of our focus areas. I am excited to work with the operators and other capital providers on the NIC Board to do what we can to expedite that change and innovation.”

NIC extends a heartfelt thank you to the officers and the entire Board for their commitment to serving our organization and the industry at large.