Baby boomers may not be ready for assisted care, but they may be ready for something else. But what? Do they want an active adult-type development with certain amenities? Or is it more about seeking a place that offers a sense of community and a personalized lifestyle?

Thought leaders in the fields of aging and longevity explored the question at the 2021 NIC Fall Conference in Houston during a session aptly titled: “Rethinking Community: Places that Will Attract Future Older Adults.”

For the most part, baby boomers are healthy and don’t feel old. They aren’t looking for the care-based housing model that they may have experienced vicariously through their parents. They’re not passive. Instead, they ask themselves, “How do I live my next chapter?” Baby boomers want choice, independence, and a place tailored to their preferences.

“The boomers are finally here,” said panel participant Bob Kramer, NIC co-founder & strategic advisor, and founder & fellow at Nexus Insights. “They are looking for places, activities, and programs to help them repurpose themselves to live with satisfaction and purpose.”

The discussion was led by Susan Barlow, co-founder, managing partner and COO at Blue Moon Capital Partners. Other panelists included Ryan Frederick, founder & CEO, SmartLiving 360; Jake Rothstein, founder & CEO, UpsideHōM; and Sara Zeff Geber, founder of LifeEncore.

Kicking off the session, Barlow asked: “What do baby boomers want?”

Kramer put the discussion in context, noting the huge growth in the number of baby boomers, those in the 65-84 age group. “The demographic wind is at our back,” he said. But instead of looking at demand in terms of age and income, he cited a study on rethinking demand in terms of life expectancy. While the industry mostly cares for people in the last five years of life, baby boomers are not yet customers for a care-driven product.

When rethinking demand, developers and investors should consider what consumers can afford. Baby boomers want health and longevity, but they also want to have the dollars to support themselves. They wonder if their lifespan will match their health span, and their wealth span. Kramer noted that NIC’s study on the “Forgotten Middle” shows that a large number of baby boomers will not be able to afford a traditional community.

Kramer emphasized that baby boomers want to avoid assisted living. Instead, they want experiences that make life worth living for the next, as he put it, “8,000 days.”

Panelist Geber observed that baby boomers seek a sense of community. Her work focuses on “solo agers”—those elders, mostly women, without children or those aging alone for other reasons. In fact, one in five baby boomers is childless. This group does well living alone because they’ve created a community or social network of friends and family for support. “They do not want to give that up,” said Geber.

Communities that offer opportunities to remain active and help provide a sense of purpose will attract these boomers. “Solo agers will need senior housing that appeals to the lives they live today,” she said.

Place Matters

Panelist Frederick emphasized that “active adult” is a product type, not a consumer. He authored a book titled, “Right Place, Right Time.” It looks not just at the physical dwelling space but also the individual’s neighborhood, wider community, financial security, physical and mental health, and sense of purpose. He suggested that developers and operators ask themselves: “Are you in the senior housing business, or are you in the business of creating places and services to help people thrive?”

Frederick cautioned senior living providers about the changing competitive landscape. Active adult projects for baby boomers are only a small sliver of housing options. There are multifamily, multi-generational projects. Co-housing arrangements can facilitate a sense of community. Pocket neighborhoods in walkable locations are another option.

Technology will play a role. UpsideHōM is a technology platform that connects people to housing and services that have been vetted by the company. “Technology can drive positive experiences,” said panelist Rothstein.

The UpsideHōM platform connects older adults to age-diverse apartment communities. The older adult is assigned a personal assistant or navigator to help manage day-to-day life and maintain community connections. Services are tailored to the individual. “No one size fits all,” said Rothstein. Seniors can get food delivered or transportation, but only if they want or need it. “Think about how to customize service and support,” he suggested.

What does this mean to the investor? Kramer noted that it’s crucial to understand the customer and take a wider view. The demand pool of baby boomers is broad, but thin for any particular type of development. Product categories will be highly segmented based on the personal preferences. “This is about the consumer and what they want,” said Kramer.

Moderator Barlow asked the panelists about market risks and what’s ahead.

Frederick noted that the world is more complicated, and people have more choices. “Housing for older adults will be a matter of trial and error,” he said.

Rothstein believes technology will be essential to create a meaningful end-user experience. “We have to be thoughtful about using technology to drive meaningful engagement,” he said.

Solo agers want to continue their lifestyle and may consider a congregate living arrangement if it is presented to them in a way that makes them feel comfortable. Small neighborhoods make more sense for them than big high-rise buildings.

The panelists agreed that the senior living market for baby boomers will be fragmented and diverse. Innovative approaches and new ways of thinking will be needed to meet the demand. “Huge change is coming to our industry,” said Kramer.

Introduction

A growing number of senior housing operators and capital providers are expressing interest in the “Forgotten Middle,” a term coined by NIC in 2019 in its seminal research to describe the large middle-income seniors cohort by its demographic characteristics as well as its housing and healthcare needs. The middle market includes Americans who have too much wealth to qualify for government support programs such as Medicaid, but not enough financial resources to pay most private pay options for very long. Identifying the right balance of hospitality, services, and care delivery, while still maintaining a monthly rental price that can be paid for by this group, is the cornerstone to a successful middle-market strategy.

In 2014, there were 7.9 million seniors aged 75 or older who were in the middle-income cohort. By 2029, that number is projected to increase to 14.4 million. A variety of social and demographic trends are causing the size of this cohort to grow at a rapid and steady pace. Foremost is the aging of the baby boomers who are turning 75 every day (baby boomers were born between 1946 and 1964 and as this cohort ages, the middle-income senior population will nearly double). By 2029, middle-income seniors will make up 43% of all seniors. These trends will only grow over the next 20 years since the oldest baby boomer is 83 in 2029. Further, a shift away from pensions and defined benefit plans, an increasing likelihood of being unmarried, and fewer available family caregivers are other key factors influencing this cohort. More than half of this cohort are projected to not have the financial resources to pay for traditional average-priced seniors housing and care in 2029.

Looking at the health characteristics of the projected cohort of 14.4 million middle-income seniors, it becomes clear that a significant portion of this group will require care as they age that may present challenges to living at home. Roughly 8% of this group will have some form of cognitive impairment, 60% will have mobility limitations, and 20% will have high needs – defined as having three or more chronic conditions and one or more functional limitation.

Further, it is likely that the COVID-19 pandemic has increased the size of this cohort, supporting additional consumer interest in moderately-priced senior housing options. To be viable, however, operators and their capital partners need to think through a variety of considerations in formulating a middle-market strategy. What follows are some key factors to consider for operators and capital providers interested in serving the middle-market segment that NIC has gleaned from conversations in the years since the study’s publication. Please note that this is intended only to serve as the groundwork for further discussion and is not intended to be a comprehensive list of all factors affecting middle-market senior housing.

Key Factors When Considering a Middle Market Strategy

Understand Your Consumer

The most important first step to consider in providing care and housing to the “Forgotten Middle” is to understand the resident that is likely to live in the property. Focus groups have revealed that middle-market consumers are not that interested in high-end services, such as luxury amenity spaces, elegant meals, and customized services. The middle-market consumer desires value, peace of mind, and independence. This suggests a host of considerations that may differ from higher-end senior housing and care. This group does not automatically want to pay for weekly housekeeping, dining room servers, and full-time fitness instructors. This may also mean that there are fewer high-end finishes such as granite countertops and less robust food menus. This is a group of seniors who are used to parking their own cars and carrying their own bags.

Marketing and sales teams should take the approach of marketing the value proposition of senior housing. This includes safety, security, socialization, engagement, room and board, care coordination and lifestyle.

Expense Item Scrutiny and Unbundling to Offer à la Carte Services

Powerful business intelligence (BI) tools have enabled a new approach to senior living pricing. These new pricing approaches are key for middle-market operators looking to understand how frequently certain services are rendered and how delivering those services impact the time and effort of a labor force.

For example, for communities that are positioned within walking distance to shops and restaurants, or near public transportation, it may not make financial sense to continue operating a shuttle that gets little use. The cost of gas, vehicle maintenance, insurance, and the driver’s time may be more effectively used elsewhere, or even to simply reduce the monthly rent. Moreover, the common and easy use of Uber or other on-demand transportation services may make transportation less necessary.

More broadly, à la carte services in general are likely more appealing to the middle-income cohort, where they can choose the frequency or apartment cleaning, meal plans and other services.

Maintain a Universal Workforce & Utilize Volunteers

The single biggest line-item expense for senior housing operators is labor, and it is also most often the real cost that drives up monthly fees for consumers. Unfortunately, the COVID-19 pandemic only exacerbated the labor challenge and brought with it a wave of higher labor costs.

For middle-market operators in particular, labor cost management is a crucial tenet to maintaining affordability. Some operators may find success by not having workers focus on one singular task or rather use the so-called universal worker. The workforce potentially needs to be managed in such a way that allows them to shift to where the needs are greatest. Gone are the days of a dedicated front desk or reception area employee. No longer can employees be dedicated as drivers only.

The labor force for middle-market operators needs to be agile, flexible, and able to repurpose themselves to where the demands are – whether that be making rounds, answering phones, delivering meals, or leading a class. Workers need to be cross-trained to perform multiple duties.

Volunteerism is another concept for middle-market operators to embrace. Some operators have found success in reducing staffing and overhead costs by having residents volunteer as a requirement of residence. Volunteering can be a way for residents to maintain engagement. Oftentimes, residents will be able to volunteer doing something that they love – assisting in the library, running the book clubs, or tending to the gardens and landscaping. Not only does resident volunteerism reduce the operating costs, but it provides residents another avenue for both purpose and socialization. In fact, volunteer requirements in some communities can even be seen as an attraction to residents.

Utilize Partnerships for Low-Cost Support Services

Location and proximity to restaurants, cafes, shopping, theatres, and entertainment can create a range of no-cost support services for the middle-market consumer, ranging from dining to socialization. Partnerships with dining establishments can serve as a win-win situation for both restauranteurs and operators alike. If operators can guarantee a minimum, predetermined order amount, restaurant owners may be willing to offer discounted meals to residents. A partnership in this sense, at the very least, reduces the need for cafeteria labor and potentially the build-out of a full commercial kitchen. With the right dining partnerships, perhaps the need for an on-premises dining option is eliminated altogether.

When it comes to delivering home care services, middle-market operators can work closely with a home care agency which can assign a few dedicated staff persons who can share care responsibilities among many different residents. In this way, care can be delivered to residents where they reside, and it can be affordable to residents because they are only paying for the services that they need. These services do not have to be paid for or subsidized by the operator, which would thereby lower operating costs. But an operator can ensure that a resident gets care by partnering with a home care agency who specializes in best-in-class care provision.

There are also acuity limitations that need to be considered when filling a unit. Consider some of the frailer or less healthy middle-income seniors. When thinking about what a higher-acuity, middle-income senior is going to require, it becomes clear that a community cannot provide all the supports and services that are needed and continue to remain affordable. As such, clear guidelines may be needed to set limits on what type of resident can be served in the community. Residents with multiple comorbidities, ambulatory challenges, or those requiring assistance with one or more activities of daily living (ADL) may not appropriate for middle-market property needing to maintain costs at an affordable level.

New Development, Repurposed Building, or Distressed Asset Acquisition?

It may not be possible to build new construction and still meet the needed price-point for the middle-market given the costs of entitlement, land values and pandemic-related surge in materials and soft costs. Keeping acquisition or development costs and related debt low is key to achieving success in the middle-market arena. Purchasing distressed assets – senior housing properties facing bankruptcy due to low occupancy rates or alternative property types such as motels, shopping centers, and offices could potentially reduce the cost basis.

For situations where development may pencil out, a strategy of developing multiple sites and replicating a building model and design that has been shown to work may be cost-effective. Incorporating middle-market buildings into existing communities can be done by converting existing, often older, units to more affordable options. Moderately priced buildings may need to be designed or retrofitted differently and not include elaborate common spaces. Providing smaller units or having double occupancy with higher density may also lower the price-point for middle-market seniors.

Indeed, the concept of roommates sharing quarters in senior housing had been trending in the years leading up to the COVID-19 pandemic. This trend allowed for more affordable senior living through cost sharing. Unfortunately, the practicality of offering housing in such a way could now be more problematic, with the emphasis on infection control and contagion prevention.

Operators and capital providers will also want to pay close attention to market demographics when choosing to develop a middle-market property. Areas with a high concentration of seniors with annual incomes of less than $75,000 a year may generate the most demand. It is also important to remember, however, that incomes can vary widely between different market areas and as such, so too should rental rates that target middle-market seniors.

When looking to identify the most appropriate market, another factor to consider may also be Medicaid assisted living waivers that are available in select states. According to the Medicaid and CHIP Payment and Access Commission, 29 states use Medicaid Home- and Community-Based (HCBS) waivers to cover services in residential care settings. In some states, assisted living is specifically identified as being covered by Medicaid, while in others assisted living services are only covered for individuals with certain health conditions, such as Alzheimer’s Disease or related dementia.

Conclusion

Because of the increasing demand, targeting the middle-market can be a successful strategy for senior housing operators and investors. But when beginning the middle-market journey, it is vital to remember that throughout each stage, the goal is to make the project more economical to build and operate. This process begins with design and construction but must remain consistent through the planning of amenities and services as well. There are of course other aspects to consider – like how to effectively finance these developments – but this article is intended to serve as a starting point for discussion on how to move from theory to reality in the middle-market senior housing sector, by outlining the key considerations that have been identified through our ongoing conversations related to the “Forgotten Middle.”

Available Resources:

• The Forgotten Middle: Many Middle-Income Seniors Will Have Insufficient Resources for Housing and Health Care
• LeadingAge Virginia’s Middle Market Playbook
• International Council on Active Aging (ICAA) Forum: Wellness Attracts the Middle-Income Market
• Genworth Financial 2020 Cost of Care Survey
• LeadingAge White Paper – Addressing the Gap in Senior Housing Today: Creating Opportunities in the Mid-Market

Weekly virus cases among residents and staff within skilled nursing facilities (SNFs) had been somewhat steady since the vaccine rollout in December 2020. However, the fast-spreading omicron variant has changed the narrative once again and prompted worries around worsening staffing shortages. SNFs are once again faced with rising COVID-19 cases among both residents and staff on top of a reportedly bad flu season compared with 2020.

Weekly Cases Within SNFs Rising at Fastest Rate Ever. Fatalities Remain Relatively Low.

SNFs – NIC’s Skilled Nursing COVID-19 Tracker featuring CMS data as of January 2, 2022, shows that weekly COVID-19 cases within SNFs are rising steeply. Virus cases among staff jumped 475%, from about 5,800 on December 19, 2021, to over 33,400 new cases on January 2, 2022, the highest rate since CMS began reporting data in June 2020. The CDC Nursing Home COVID-19 Dashboard shows that weekly COVID-19 cases among staff set a new record for the week ending January 9, 2022 with over 57,000 new cases, double the peak of fall 2020 cases for COVID-19 (roughly 29,000 reported cases on December 13, 2020).

Over the same period, weekly cases among residents increased dramatically by 240%, from over 4,200 on December 19, 2020, to about 14,400 new cases on January 2, 2022. At the same time, the per-resident rate of new COVID-19 infections rose to 1.33% (133 in 10,000 residents tested positive on January 2) and surpassed levels seen at the height of the Delta variant in September 2021 (0.47%). Per resident rate of new COVID-19 infections is now at levels seen one year ago (1.55% of residents tested positive on January 24, 2021). Newly confirmed cases among residents continued to climb higher through the week ending January 9, 2022, with over 32,000 reported cases.

Regionally – SNFs in the Northeast region reported the highest per-resident rate of new COVID-19 infections at 1.64%, followed by the South (1.43%), the Midwest (1.39%), then the West (0.49%), according to CMS data as of January 2, 2022, compiled by NIC’s Skilled Nursing COVID-19 Tracker. Further, 24% of U.S. SNFs reported newly confirmed cases among residents for the week ending January 2, 2022, nearly three times the share of facilities recorded on December 19, 2021, of 9%.

U.S. – Similarly, weekly cases among the general population rose by 221%, from 968,000 on December 19, 2021, to over 3.1 million cases on January 2, 2022. Weekly cases among the general population continued to rise higher through the week ending January 9 to set new records with 4.9 million cases, averaging about 700,000 new cases daily and nearly triple the peak of January 2021 (U.S. COVID-19 cases topped 1.7 million for the week ending January 10, 2021), according to CDC data compiled by NIC’s Skilled Nursing COVID-19 Tracker.

Fatalities (SNFs) – While the spread of the omicron variant pushed cases off the charts, fatalities among SNF resident remain relatively low. Notably, the per-resident rate of new COVID-19 fatalities averaged about 0.03% weekly since March of 2021 (3 in 10,000 residents died from COVID-19 weekly since March 2021) when most residents and staff in SNFs were vaccinated. For the week ending January 2, 2022, fatalities as percent of residents stood at 0.04%, 50 basis points below the highest level recorded on December 20, 2021 (0.54%).

Other Countries – Interestingly, COVID-19 data from other countries where Omicron has reached its peak, such as the U.K., show that fatalities associated with the Omicron variant are five times fewer than during the Fall 2020 wave. The big disconnect between infections and fatalities in the U.K. reveal an optimistic signal for the U.S. that the Omicron variant may not be as fatal.

Prior Waves – Exhibit 1 below shows that during the fall 2020 wave prior to widespread vaccinations, infections in the country and within SNFs peaked and then fell at the same pace. In other words, it took approximately 12 weeks for recorded cases to peak and a subsequent 12 weeks to decline. Similarly, the Delta variant surge took about eight weeks to peak and eight weeks to decline. The Omicron wave in the U.S. has thus far had a duration of about five weeks, but the data do not yet reveal a trend reversal indicator. However, infections in the U.S. and within SNFs will likely follow the same trajectory as the U.K. and fall at the same pace from which they peaked. In fact, COVID-19 cases in the U.K. are falling very fast and at the same pace in which they peaked.

Since December 2020, vaccinations have made a significant contribution to mitigate the risk of severe illness and fatalities among skilled nursing residents, even during the Delta variant surge in recent months. However, it is still important to realize that skilled nursing facilities need vaccinations in combination with other interventions, including more frequent testing, physical distancing, and adherence to masking guidelines. These interventions continue to be an effective and vital tool to limit the spread of both current Omicron variant and flu cases among residents and staff until cases in the country decline and return to lower levels and until booster shots are more widely distributed.

Exhibit 1 – Weekly COVID-19 Cases (SNFs vs. U.S.) and Fatalities Among SNF Residents

Vaccinations and Boosters (SNFs vs. U.S.)

Exhibit 2 below shows that as of January 2, 2022, 87.0% of residents within SNFs have been fully vaccinated, 54% of residents received a COVID-19 vaccine booster and 1.5% have been partially vaccinated, according to CMS data compiled by NIC’s Skilled Nursing COVID-19 Tracker.

For staff, 81.6% have been fully vaccinated. Unfortunately, staff booster shots are lagging behind, with only 22.6% of staff having received a COVID-19 vaccine booster, 31 percentage points below the rate of residents (54%) who received a vaccine booster. Additionally, 3.5% of staff are partially vaccinated.

More broadly, at the national level, only 62.8% of Americans have been fully vaccinated, 37.5% of fully vaccinated Americans received a booster shot, and 11.9% are partially vaccinated, as of January 13, 2022, according to CDC data.

Exhibit 2 – Vaccination Coverage (SNFs vs. U.S.)

Staffing Shortages Could Get Much Worse and Impact the Near-term Outlook

The impact of staffing shortages on limiting admissions has become evident in recent months, with anecdotal stories of more and more facilities reportedly being concerned about having to limit admissions or temporarily close due to workforce challenges. These labor supply constraints will further challenge the sector’s demand recovery and may impact the near-term outlook for occupancy.

Exhibit 3 below depicts the share of SNFs reporting staffing shortages. For the week ending January 2, 2022, 24.5% of SNFs reported shortages of aides, 22.8% reported shortages of nursing staff, and 13.7% reported shortages of other staff, according to CMS data compiled by NIC’s Skilled Nursing COVID-19 Tracker.

Additionally, the charts below show that high infection rates among staff are driving staffing shortages up within skilled nursing facilities. For example, the largest shares of facilities reporting staffing shortages among hands-on essential workers (aides and nursing staff) are among facilities with high staff infection rates (5%+). Among this cohort, 26.9% of facilities reported shortages of aides and 25.2% reported shortages of nursing staff. Facilities with low infection rates among staff (0-1%) are reporting relatively smaller shares with 23.6% of facilities reporting shortages of aides and 22.0% reporting shortages of nursing staff. The same pattern holds for other staff (15.8% vs. 12.9%).

Drilling deeper into the data by property size, the largest shares of skilled nursing facilities reporting staffing shortages were among small facilities (less than 50 units) with 30.7% reporting shortages of aides, 27.6% reporting shortages of nursing staff, and 17.8% reporting shortages of other staff, while large facilities (100+ units) were reporting the smallest share of facilities experiencing staffing shortages among aides (21.7%), nursing staff (20.7%) and other staff (12.1%). This suggests that small facilities may be facing heightened recruiting and retention challenges than large facilities.

Exhibit 3 – Share of SNFs Reporting Staffing Shortages – By Staff Infection Rates and Property Size

Staffing shortages will likely persist in 2022 and attrition rates may get worse in the near term due to rising infections. The prolonged levels of anxiety and grief that workers have experienced during the pandemic, must be influencing workers’ decisions on staying in place at their current jobs. Nationally, the quit rate among all workers is at a record high, according to the November 2021 JOLTS survey conducted by the BLS.

Improving workers’ experience and building strong staff-resident relationships will be critically important in 2022. Further, maintaining consistency with nursing staff and aides is crucial for the well-being of both residents and staff. High tenure workers tend to have strong relationships with residents and patients, which in turn leads to excellent health and custodial care services for the patient and better job satisfaction for workers.

The staff-resident relationship within the skilled nursing sector is much stronger than the staff-patient rapport in hospitals, simply because the SNFs residents’ length of stay is much longer. This nurse-resident relationship is unparalleled and could serve as a competitive edge to attract and retain workers in skilled nursing facilities.

Staff-to-Resident Ratio vs. Occupancy (CMS)

Exhibit 4 below shows that since June 2021, occupancy (based on CMS data) has been steadily improving. Notably, occupancy increased by 1.8 percentage points, from 70.6% on June 13, 2021, to 72.4% on December 19, 2021. The staff-to-resident ratio has also increased from 1.51 on June 13 to 1.58 on November 28.

However, in the past two weeks following the surge in cases within SNFs, occupancy fell by 0.6 percentage points, from 72.4% on December 19 to 71.8% on January 2, 2022. The staff-to-resident ratio took a downward trend and is now at 1.55.

The staff-to-resident ratio and occupancy will likely continue to fall in the next few weeks due to rising cases further exacerbating staffing challenges and limiting new admissions. However, as Omicron fades away and cases move back to normal levels, these metrics should begin to balance out.

Exhibit 4 – Staff-to-Resident Ratio vs. Occupancy (CMS Data)

To gain in-depth insights and track vaccination coverage, U.S. weekly cases, and the week-over-week change rate for new resident cases and fatalities of COVID-19 within skilled nursing facilities at the state and county levels, visit NIC.org.

One-half of respondents (52%) in Wave 36 anticipate their organization’s operating margins will improve in the next six months. One-third (32%) expect a 1% to 5% increase, and an increasing share (16%) anticipates growth between 6% and 10%. However, labor costs will continue to be a mitigating factor. Nearly all respondents since July have been paying staff overtime, and the use of expensive agency/temp staff is growing, with nine out of ten organizations (89%) now tapping agency/temp staff. The ability to hire from outside of the seniors housing and care industry has grown modestly from 11% to 25% since the Wave 33 survey Factors supporting NOI growth going forward include anecdotal reports of operators beginning to implement rate increases to counterbalance pandemic and recovery-related cost pressures. About one-half (47%) of respondents are currently offering rent concessions (most frequently in the form of rent discounts and free rent for a specific period of time). Single site operators are significantly less likely to offer rent concessions than their larger competitors.

–Lana Peck, Senior Principal, NIC

NIC’s Executive Survey of operators in seniors housing and skilled nursing is designed to deliver transparency into market fundamentals in the seniors housing and care space as market conditions continue to change. This Wave 36 survey includes responses from December 6, 2021, to January 9, 2022, from owners and executives of 66 small, medium, and large seniors housing and skilled nursing operators from across the nation, representing hundreds of buildings and thousands of units across respondents’ portfolios of properties.

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

Wave 36 Summary of Insights and Findings

• The pace of move-ins in independent living declined over the past four waves of survey data, while the pace picked up in assisted living and memory care, suggesting a slight slowdown for choice-based seniors housing and an increase in needs-based moves. (The slowdown in independent living may be due to typical patterns of seasonality). Roughly one-half of organizations with assisted living and/or memory care units reported an acceleration in the pace of move-ins (51% and 49%), compared to just over one-third with independent living units (37%). Fewer organizations with nursing care beds reported an acceleration in the pace of move-ins since the previous survey (33% vs. 44%).

• Considering the pace of move-outs in the past 30-days, no change was reported by the majority of organizations across care segments (65% to 68%). More organizations with assisted living units have seen a deceleration in the pace of move-outs than in recent surveys. However, roughly one-quarter of organizations with nursing care beds and/or memory care units reported an acceleration in the pace of move-outs typically due to discharges, natural attrition, and moves to higher levels of care.

• Although the pace of move-ins across care segments was brisk during the past two quarters, and occupancy rates as reported by NIC MAP Vision improved, only around one-third of organizations (29%) indicated that their leads volume were at pre-pandemic levels in Wave 36–down from 36% in the prior survey, but higher than 20% in Wave 26 conducted April 5 to April 18, 2021.

• In Wave 36, nearly two-thirds of organizations (61%) with assisted living units reported increases in occupancy from prior surveys, and nearly one-half (47%) of organizations with nursing care beds saw recent improvement. However, about one-third (32%) of organizations with memory care units noted declining occupancy—down from roughly one-half in Waves 35 and 33 (48% and 55%, respectively). 
• Similar to the pattern shown for the pace of move-ins for the independent living segment, the share of organizations reporting occupancy increases in independent living declined over the past four survey waves from roughly 60% to roughly 40%. 
• Although one-half (50%) of organizations with independent living units noted no change in occupancy compared to one month ago, between one-quarter and one-third (27% and 33%) of organizations with memory care units and/or nursing care beds reported declining occupancy in Wave 36.

• The expected timeframes for occupancy recovery have lengthened among operators. In Wave 36, one-half of respondents expect their organization’s occupancy to return to pre-pandemic levels in 2022 (52% down from 73% in Wave 33), and just over one-third now believe it will recover by 2023 (38% up from 8% in Wave 33).

• Nearly all operators responding to NIC’s Executive Survey Insights conducted since July (98% – 100%) reported staff shortages. In the Wave 36 survey, four out of five organizations with multiple sites (83%) reported staff shortages in more than half of their properties—up from roughly one-half (46%) in the Wave 24 survey conducted mid-March. Attracting community/caregiving staff and employee turnover remain significant challenges for survey respondents.
• When asked how they are backfilling staffing shortages, 97% – 100% of respondents cited overtime hours since Wave 25 (data collected between March 22, 2021, and January 9, 2022). And the use of expensive agency/temp staff is growing. Currently, 89% of organizations are tapping agency or temp staff—up from 77% in the prior survey. In Wave 36, approximately one-quarter (25%) indicated that their use of agency/temp staff increased more than 75% in 2021.
• While the use of volunteers remains relatively low, the ability to hire from outside of the seniors housing and care industry has grown from 11% to 25% since the Wave 33 survey.

• Offering rent concessions to new residents often helps drive increases in occupancy. Currently, about one-half (47%) of respondents are offering rent concessions to attract new residents. Of those offering rent concessions, three-quarters are offering rent discounts (76%) and more than two-thirds are offering free rent for a specific period of time (69%).  
• The chart below breaks out the 47% of responding organizations currently offering rent concessions by the size of the organization. Single site operators are significantly less likely to offer rent concessions than larger organizations. In Wave 36 only 14% of single-site providers were offering rent concessions.

• In Wave 36, one-half of respondents (52%) anticipate their organization’s operating margins will increase—up from one-third (35%) in the Wave 33 survey conducted in September. One-third (32%) expect margins to increase 1% to 5%, and a growing share of organizations anticipate growth between 6% and 10%.

Wave 36 Survey Demographics

• Responses were collected between December 6, 2021, and January 9, 2022 from owners and executives of 66 seniors housing and skilled nursing operators from across the nation. Owner/operators with 1 to 10 properties comprise roughly one-half (47%) of the sample. Operators with 11 to 25 and 26 properties or more make up the other half of the sample (31% and 26%, respectively).
• Approximately one-half of respondents are exclusively for-profit providers (54%), one-third operate not-for-profit seniors housing and care organizations (33%,) and 13% operate both.  
• Many respondents in the sample report operating combinations of property types. Across their entire portfolios of properties, 75% of the organizations operate seniors housing properties (IL, AL, MC), 28% operate nursing care properties, and 33% operate CCRCs (aka 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.

The current survey is available and takes 5 minutes to complete. If you are an owner or C-suite executive of seniors housing and care and have not received an email invitation to take the survey, please contact Lana Peck at lpeck@nic.org to be added to the list of recipients.

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

Senior Living investors and operators discuss innovative approaches.

The pandemic has been a stress test like no other for owners, operators, and lenders alike. Lessons have been learned. But what’s the best way to align incentives among the stakeholders for success going forward?

A panel discussion at the 2021 NIC Fall Conference explored the possibilities. The session, “Capital for Operations: Aligning Incentives,” was moderated by Torey Riso, managing director at Huron Consulting. He was joined on the panel by Brian Beckwith, CEO, Arcus Healthcare Partners; Mercedes Kerr, president, Belmont Village Senior Living; Fee Stubblefield, CEO & founder, The Springs Living; and Chris Taylor, managing director, Capital One Healthcare.

Considering the events of the last 20 months, Riso asked: “What kinds of incentive structures between operators and capital sources are now most sustainable to produce returns and best serve the interests of the resident populations?”

The panelists agreed that capital providers have been patient during the pandemic. “Lenders stepped up,” said Beckwith. They adjusted agreements as needed to keep operators afloat as they struggled with occupancy, cashflow, and labor issues.

Stubblefield echoed that sentiment. “We could not have gotten through this without our financial partners,” he said. “This was tough.”

Kerr noted that capital partners have been patient because the fundamentals of the business represent a great opportunity amid the growing demographic wave of older adults. Capital One’s Taylor said, “We’re in this for the long term.” He added that as a lender he wants to align with the right owners and operators.

Even so, the panelists acknowledged several issues currently confronting the industry, especially the rise in expenses and the shortage of labor. “The industry needs a coordinated effort around labor,” said Beckwith.

Management Fees in Flux

Riso asked if the standard 5% management fee is still the right number.

“The 5% fee is broken,” said Taylor. He explained that investors and operators are coming up with creative alternatives to provide care.

Beckwith said there are cases where the 5% formula might work if a particular facility is in an attractive location and does not need a lot of resources. But investors understand that the quality of the services provided is directly correlated to financial performance. Negotiating which party spends what amount on which resources means that the investor has to understand the operator and what they need to make the facility successful, according to Beckwith.

Stubblefield’s company doesn’t take fee managed assignments. Instead, the company co-invests with its capital providers or owns the properties outright. “We have to be vertically integrated all the way to build incentives,” he said.

Riso asked whether senior living projects can be valued like a cash flow business rather than as real estate.

“Investors in this space recognize this is operationally intensive,” said Kerr. She noted the importance of investing in operations. For example, the pandemic has resulted in innovations such as telemedicine which is improving efficiencies.

Stubblefield sees the pandemic as a “great pivot point.” Owners and operators have had to align their interests to reach the best long-term result for the community. But he added, “We have to make our case to capital providers. We have to point out what we need.”

Beckwith noted that the separation of the real estate from operations has provided an efficient source of capital that has been great for the industry. “It’s a challenge to make sure the operations side and real estate mesh,” he said.

The panelists foresee a lot of experimentation with capital structures to align operational and investment interests.

“There doesn’t have to be one answer,” said Kerr. Some structures provide an opportunity for the operator to share in the upside based on performance benchmarks. But those arrangements don’t work when faced with an unexpected event like a pandemic.

Kerr thinks senior living performance standards could evolve in a way similar to that of the hotel industry where an operator’s results are judged against the performance of its peers. “More data transparency and benchmarking might be an answer to the question of how to hold an operator accountable,” she said.

Beyond financial performance, there are other ways to create alignment among partners by sharing cultural or aspirational objectives, noted Kerr. “Parties driving toward a goal together is a great motivator,” she said.

Beckwith said that the industry is trying to figure out what works best. Compressed margins are impacting valuations, making it a balancing act to generate returns while allowing the operator to make the right decisions.

Capital providers can see the value of investing in operations to deliver the best product. But, Stubblefield observed: “Operators have to lead the way.”