What separates the winners from the losers? 

The question took center stage at a panel discussion on skilled nursing at the recent 2019 NIC Fall Conference in Chicago.  The panel included three industry experts and was moderated by NIC Senior Principal Bill Kauffman.  

Though the skilled nursing sector has been through a rough patch, the panelists agreed that winning in today’s complex environment depends on close collaboration with insurers and healthcare partners.  

“Skilled nursing providers must be able to partner with the local hospital system and health plans,” said panelist Dava Ashley, president at Covenant Care.  

Providing context for the discussion, panelist Mark Parkinson, president & CEO at AHCA/NCAL, gave an overview of the sector.  

Operating margins have declined because of dramatic changes in Medicare and the growth of managed care. This has resulted in a shorter length of stay which has had a big impact on the bottom line of skilled operators.  

The promise of a quickly aging population hasn’t helped yet, said Parkinson. The oldest baby boomers won’t turn age 80 until 2025. But demographics are starting to shift in the industry’s favor with a growing population of those ages 82-86. 

Occupancy has started to improve in U.S. skilled nursing facilities which reached 83.7 percent in the first quarter of 2019, representing the first year-over-year increase since January 2015, according to NIC.  “Hopefully margins will show an uptick,” said Parkinson.  

Despite the slowdown in the sector, every local market, no matter how challenging, has its winners, the panelists said.  “It starts and stops with the operators,” noted Dave Sedgwick, COO at CareTrust REIT. “Sophisticated operators figure out a way to succeed.” 

The winning operators have strong local leaders. The most important positions are that of executive director and director of nursing. Effective managers know the market and understand the needs of the local hospital system and health insurance plans. An effective leadership team also results in less staff turnover, said Ashley. “That’s critical.”   

NIC’s Kauffmann asked the panelists how skilled nursing operators can successfully collaborate with managed care organizations and health systems. Here are their top recommendations: 

• Focus on the relationship. Develop a partnership with managed care companies and health systems. “The most successful strategy is to understand what managed care companies want,” said Ashley. Skilled nursing operators need to provide clinical metrics and demonstrate how managed care patients are handled.  Ask the health system or plan what new clinical capabilities could be provided that might help their operations. 
• Tell your story. How will your facility deliver high-quality outcomes in the managed care organization’s timeframe? 
• Transparency. Provide clinical metrics. Transparency helps to build trust which is essential to a solid working relationship.  
• Embrace managed care. It’s not going away. Connect with local managed care organizations, said Sedgwick. “Work with them.”  Aim to capture more of their patients. Skilled operators can become very valuable to managed care partners, resulting in leverage for future contract negotiations on payment rates.  
• Expand types of managed care patients. Hospitals prefer skilled partners with the flexibility to take patients from different health plans.  
• Cluster. Skilled operators with a cluster of projects can leverage those facilities to take more patients from local managed care organizations and hospitals. “It can result in better volume, better pricing and a better relationship,” said Sedgwick.  
• Cost out the patient. Analyze patient needs prior to admission. A fee-for-service patient might be more expensive to treat than one in a managed care plan. For example, a savvy administrator with a good relationship with the managed care company may be able to carve out a patient’s expensive medication.  
• Consider becoming an insurance company. One of the most innovative developments in skilled nursing is the ability of operators to become their own insurer, said panelist Parkinson. “It’s incredibly exciting.” A skilled nursing or assisted living facility can introduce an institutional special needs plan, what’s known as an I-SNP. The facility takes on the risk of their patients or residents, but also can enjoy the savings realized for efficiently managing their population. There are already 62 I-SNPs owned by skilled nursing providers, noted Parkinson. “Every provider should look at this opportunity,” he said. “This aligns the interests of the residents and the facility, and the clinical outcomes are amazing.” Panelist Ashley noted that other hybrid-type arrangements are emerging that partner insurance companies and post-acute nursing facilities. “Skilled providers have the ability to control premium dollars,” she said.  

With record attendance, the 2019 NIC Fall Conference in Chicago last week brought together more than 3,300 participants for three days of networking, educational sessions, receptions, and high-profile speakers such as former Federal Reserve Chair Janet Yellen.   

Programming focused on current market trends and innovations as well as how to best address the disruptions facing the industry. Experts provided insights into effective operational strategies as well as changing capital flows and deal structures. 

Session participation got a boost from new formats including town halls, peer-to-peer exchanges and a seven-minute lighting round of tech innovations. 

New NIC-sponsored research on the growing demand for middle–market seniors housing—“The Forgotten Middle”—was spotlighted along with possible solutions. And NIC Talks returned as eight speakers took the stage to challenge our views on aging.  

“The Fall Conference is instrumental in helping deliver on our mission by providing a platform to connect, educate, and discuss,” said Brian Jurutka, NIC president & CEO.  “It is a gathering that allows key industry stakeholders to share ideas, learn about best practices, and exchange views on where the space is headed.”  

Timely themes included how to recruit and retain good workers, the impact of the ongoing shift to value-based healthcare, and the role of technology. In a continuing effort to improve transparency for investors, NIC announced a new partnership with PointClickCare to further enhance NIC’s rental rate data initiative. 

Other program highlights included: 

• Opening General Session. In a Q&A discussion, former Federal Reserve Chair Janet Yellen provided insights on the economy and interest rates.  
• Active adult. Two sessions addressed the emerging category of rental active adult properties. The segment shows promise to attract baby boomers. 
• Consumers. What do they want? Keynote luncheon speaker Joe Coughlin of the MITAgeLab drilled down into the psyche of the baby boomers. In short, they expect a lot. Another session on consumer insights presented lessons from other industries. 
• Capital. Three sessions brought tougher experts to discuss capital concerns. Topics included sources of debt and equity, valuations, and innovative financial instruments. 
• Workforce development. Labor shortages and rising wages are making employee recruitment and retention a top priority. Operators shared their real-life success stories.  

• Skilled Nursing. As payment reform and changing referral networks take shape, two sessions reviewed current market metrics and addressed the challenges ahead for operators, equity investors and debt providers. 
• Innovations. Presenters highlighted solutions to current challenges, including staff turnover and resident engagement.  
• Demand trends and home health. Panelists explored seniors housing development cycles while another session addressed whether to own or partner with home health providers. 

Attendees will be provided access to video and audio recordings for most of the sessions via nic.org. Publicly accessible highlights and sessions, including NIC Talks, are being posted to NIC’s YouTube page. 

Join us for the NIC 2020 Spring Conference, March 4-6, San Diego.  

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September 16, 2019 

janekadler@gmail.com 

No one ever thinks of anything good coming from a Tsunami. A Tsunami is an unmitigated disaster of unparalleled proportions, that causes mass destruction in its wake. The phrase, “Silver Tsunami,” even as it’s used within the aging field, furthers an old and outdated view of aging; it also undercuts society’s ability to see the opportunities that arise from the incredible achievement of lengthening the average American lifespan by over 30 years just in the past century. This outmoded view of aging is bad for our economy, an enormous loss for our workforce, an even greater loss for our social fabric, and is bad for the health of our elders. Rather than thinking about a catastrophic “Silver Tsunami” we need to be thinking about the potential benefits of a “Silver Stimulus.”  

If you live to 65 today you have a better than 50% chance of living past 85. In other words, millions of “retirement age” Americans have over a third of their adult lives still ahead of them. The greatest barrier to that last third being productive, and of older Americans continuing to contribute to society, is not age at all, but outdated views of aging that no longer fit our new realities. Too often, once an individual turns 65, society views them as past their prime, and no longer of value, and hence “retired” because they no longer have anything to contribute. We need to encourage our elders to “re-fire” their passions, interests, and societal engagement rather than force them to retire because we view them as useless.  

According to a 2015 U.S. Bureau of Labor Statistics report, by 2024, 25% of the U.S. labor force will be over the age of 50 in a trend that has been on the rise since the mid-1990’s. This cohort also accounts for a major part of our economy. European Commission studies find that the economic contributions of over-50 workers, termed the “silver economy,” is today the world’s third largest economy, behind only the U.S. and China. A joint report from Oxford Economics and AARP found that in 2015 Americans over 50 accounted for $7.6 trillion in direct consumer spending and controlled more than 80% of household wealth. Countless studies have shown that increasingly older workers are not only gaining satisfaction and purpose with extended working years but are having a significant positive impact on the world’s economies. The idea that one should retire at 65, and cease to contribute, is an unsupported prejudice; an outdated view that hasn’t been true for decades.  

As we see rapidly declining birth rates, workforce shortages, a shrinking pool of available family caregivers, and a host of social issues that are threatening the very fabric of our society, we must shed the outmoded “Silver Tsunami” attitude that views an aging America as a destructive force. Because today’s 65-year-old is healthier and far more productive than his or her counterpart a few generations back and is likely to want to stay connected to society, we have to change the way we view the coming wave of aging baby boomers. We have to switch our thinking about aging in America from a deficit model, which sees aging almost as a disease, to be avoided at all costs, to a benefit model, that sees the aging of society as an opportunity. 

Look for a more in-depth article on the “Silver Stimulus” in next month’s NIC Insider.

The Labor Department reported that there were 130,000 jobs added in August, below the consensus estimate of 160,000.  About 25,000 of the jobs added were temporary positions associated with the 2020 census.  For the eight months through August, the average monthly increase in total employment has been 158,000, below the average monthly gain of 223,000 in 2018. The private sector added 96,000 jobs in August, weaker than the monthly year-to-date pace of 145,000 and down from an average monthly gain of 215,000 in 2018.

Revisions subtracted 20,000 to the prior two months.  The change in total nonfarm payroll employment for June was revised down by 15,000 from 193,000 to 178,000 and the change for July was revised down by 5,000 from 164,000 to 193,000.   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 August jobs report has garnered special attention since there are broad-based concerns about a slowing national economy amid signs of a weakening manufacturing sectors, slowing business investment and trade-related weakness associated with rising tariffs.  In fact, the Fed lowered interest rates on July 31st for the first time since 2008 as it reacted preemptively to concerns of a potential economic slowdown.  For several months, concerns about trade wars and slowing growth in Europe, China and the U.S. have been on the radar screen of the Fed.  Federal Reserve Chair Jerome Powell said the cut was “intended to ensure against downside risks from weak global growth and trade tensions.” The move is being labeled an “insurance cut” because it is meant to keep the economy’s engine pumping.  The fed funds rate is now targeted at a range of 2% to 2.25%, down 25 basis points from its prior target range. Until July and since late 2015, the Federal Reserve had been gradually raising rates following six years of virtually 0% interest rates (2009 through 2015).  The August jobs report is likely to add pressure to the Fed to lower rates further at its upcoming September 18^th FOMC meeting.

The August unemployment rate was unchanged at 3.7%.  This is still close to the lowest rate in 50 years.  A broader measure of unemployment, which includes those who are working part time but would prefer full-time jobs and those that they have given up searching—the U-6 unemployment rate—rose to 7.2% from 7.0%, reversing a July drop.

Average hourly earnings for all employees on private nonfarm payrolls rose in August by eleven cents to $28.11. Over the past 12 months, average hourly earnings have increased by 3.2%.   For 2018, the year over year pace was 3.0% and in 2017 it was 2.6%.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work was unchanged at 63.2% in August, very low but up from its cyclical low of 62.3% in 2015.  The low rate at least partially reflecting the effects of an aging population.

The NIC MAP® Data Service recently released national monthly data through June 2019 for actual rates and leasing velocity. The NIC Actual Rates initiative is driven by the need to continually increase transparency in the seniors housing sector and achieve greater parity to data that is available in other real estate asset types. Having access to accurate data on the monthly rates that a seniors housing resident pays as compared to asking rates helps NIC achieve this goal.

Key takeaways from the 2Q2019 Seniors Housing Actual Rates Report include:

• Average initial rates for residents moving in were below average asking rates for both majority independent living and majority assisted living properties, with monthly spreads generally larger for majority assisted living properties dating back to April 2015.
• As of June 2019, initial rates for majority assisted living properties averaged 8.3% below their average asking rate, which equates to an average initial rate discount of 1.0 months on an annualized basis, the same as in May and back to the December discount.
• The average discount for majority independent living properties was larger at the equivalent of 1.2 months, which was as high as it has been since NIC began reporting the data in April 2015. This was also notable because the discount has been smaller for independent living than assisted living for nearly the entire time series that began in April 2015. The larger independent living discount began in January 2019.
• Average asking rates for majority independent living properties have exceeded in-place rates since May 2018 and the gap between these rates reached a new high in June 2019 of 4.2% or $136.
• For majority assisted living properties, average asking rates have consistently exceeded average in-place rates.
• In June, the average majority independent living asking rate was 4.9% above its year-earlier level, more than in June 2018 (3.2%), but less than in December 2018 (5.8%). The annual pace of growth for majority independent living in-place rates was less at 1.4% from year-earlier levels, while initial rates fell 1.0% from year-earlier levels, marking the first decline since April 2018.
• For majority assisted living properties, annual growth was strongest for initial rates as of June 2019, at 3.6%. This compares with 3.1% for in-place rates and 2.7% for asking rates.
• The rate of move-ins has exceeded the rate of move-outs for five of the past twelve months for both majority assisted living and majority independent living.

This Seniors Housing Actual Rates Report provides aggregate national data from approximately 300,000 units within more than 2,500 properties across the U.S. operated by 25 to 30 seniors housing providers. Note that this monthly time series is comprised of end-of-month data for each respective month. The operators included in the current sample tend to be larger, professionally managed, and investment-grade operators as we currently require participating operators to manage 5 or more properties.

While these trends are certainly interesting aggregated across the states, actual rate data will be even more useful when it is available at the CBSA level. As NIC continues to work towards growing the sample size to be large enough to release data at the CBSA level, partnering with leading software providers like Yardi and MatrixCare makes it easier for operators to contribute data to the Actual Rates initiative. NIC appreciates our partnerships with software providers and our data contributors and their work in achieving standardized data reporting.

If you are an operator or a software provider interested in how you can contribute to the Actual Rates initiative, please contact Brian Connolly at bconnolly@nic.org.