The senior housing market appears well-positioned for a steady and ongoing recovery, with occupancy levels expected to reach/exceed pre-pandemic levels in 2024, barring unforeseen challenges. 

Demand. According to third quarter 2023 NIC MAP® data, released by NIC MAP Vision, senior housing demand, as measured by the change in occupied units, continued to outpace new supply, marking its ninth consecutive quarter of growth with a net absorption gain for the NIC MAP Primary Markets of 7,853 units or 1.3% from the prior quarter and 24,627 units or 4.3% from year-earlier levels. Senior housing occupied stock is now 2.6% or 15,026 units above the pre-pandemic 1Q 2020 level.  

Supply. In the third quarter of 2023, the inventory of senior housing properties in the NIC MAP Primary Markets increased by 0.4% or 2,806 units from the prior quarter and 1.3% or 9,230 units from year-earlier levels. Additionally, within the NIC MAP Primary Markets, construction starts continued to be limited compared with pre-pandemic levels. Notably, over the four-quarter period ending in the third quarter of 2023, senior housing starts totaled 11,133 units, marking a level not seen since 2012 and representing less than half of the starts reported during the four quarters of 2019.  

AIV Ratio. The AIV (Absorption-to-Inventory Velocity) ratio for senior housing in the third quarter of 2023 remained above the AIV threshold and stood at 28:10 for the NIC MAP Primary Markets, which implies that for every 10 newly added units, 28 were absorbed. This indicates that the senior housing market has been able to absorb a significantly higher number of units than were added during the third quarter of 2023. 

Occupancy. As a result of this trend of positive demand coupled with a moderate pace of new supply and reflected in the recently strong absorption-to-inventory velocity ratio, the senior housing all-occupancy rate for the NIC MAP Primary Markets increased for the ninth consecutive quarter to 84.4% in the third quarter 2023, up 0.8 percentage points (pps) from the prior quarter. From its time series low of 77.8% in second quarter 2021, occupancy increased by 6.6pps but remained 2.7pps below pre-pandemic first quarter 2020 levels of 87.1%.  

When Might Senior Housing Occupancy Return to 1Q 2020 Levels? 

Just to provide context. While we often use 1Q 2020 as a benchmark to gauge the senior housing occupancy recovery, dynamics within the industry have evolved significantly. The occupancy level of 1Q 2020 may no longer serve as the benchmark for many operators due to the transformative impact of the pandemic. 

Based on the analysis below of absorption rates and inventory growth from 3Q 2021 to 3Q 2023, representing the last two years of recovery, it is projected that the senior housing occupancy rate will likely reach/exceed 1Q 2020 levels in 2024. This optimistic outlook is underpinned by the robust demand, limited supply growth, and the strong absorption-to-inventory velocity ratio observed in the market. 

It’s interesting to note that had the pandemic not occurred, the senior housing occupancy rate would have likely reached today’s mid-80% level. This projection is derived from modeling the occupancy growth trajectory from 1Q 2017 to 1Q 2020, the three years leading up to the pandemic. During this period, inventory growth was outpacing absorption, which resulted in a prolonged phase of declining occupancy before the pandemic struck. 

However, it’s important to acknowledge potential limitations and risks of this projection. Downside risks related to less robust demand, which could hinder the attainment of the projected occupancy rate of 88% include economic recession, rising interest rates, fluctuations in consumer confidence, and unpredictable public health conditions which taken to an extreme could be similar to the pandemic. Additionally, downside risks to supply, although unlikely, could emerge if inventory growth were to accelerate. However, current capital market conditions and the resulting lending environment, today’s relatively limited construction pipeline, and elongated delivery timelines of new projects suggest that supply growth is manageable and is not expected to outpace demand through 2024. 

Note that occupancy recovery timelines vary by property type, with assisted living occupancy rebounding at a relatively faster pace compared to independent living. This divergence reflects the unique dynamics within each property type of the senior housing market. 

By majority property type. At 86.1%, the all-occupancy rate for majority independent living (IL) properties for the NIC MAP Primary Markets increased by 0.7pps from the second quarter 2023. For majority assisted living properties (AL), the all-occupancy rate for the NIC MAP Primary Markets was up 0.9pps to 82.6% in the third quarter 2023.  

From pandemic-related lows, occupancy for assisted living increased by 8.7pps, nearly twice the increase for independent living (up 4.6pps since second quarter 2021). However, occupancy for both independent living properties and assisted living properties remained 3.4pps and 2.0pps below their respective first quarter 2020 levels.  

Notably, the occupancy rate for majority assisted living properties in the 68 NIC MAP Secondary Markets (84.3%) has fully recovered and surpassed its 1Q 2020 levels of 84.2% by 0.1pps. This remarkable recovery reflects a rebound of 9.8pps from the depths of the pandemic. Part of the explanation for this speedier recovery has to do with limited inventory growth and more restrained supply pipelines. 

Reflecting on the Future. The effects of the pandemic continue to reverberate within the industry, impacting operators in various ways. However, the overall trend suggests that the senior housing market is on a positive trajectory, with a renewed sense of its value proposition and purpose in serving the needs of older adults. 

One notable and positive shift brought about by the pandemic is the increased recognition of the value proposition that senior housing offers. This includes room and board, security, socialization, engagement, care coordination, and lifestyle. Indeed, the industry is gaining a heightened level of recognition, with more adult children and their aging parents appreciating the benefits a senior housing setting provides. This newfound awareness is reflected in the remarkable strength of demand dynamics, which have remained robust for nine consecutive quarters. The pandemic, while posing significant challenges to operators across the industry, has also highlighted the resilience and adaptability of senior housing operators.  

Notably, new research from NORC at the University of Chicago, funded by a grant from NIC shows that vulnerability – as defined by “frailty levels” of residents – rises in the months leading up to a move into a senior housing and care community, however, approximately three months following move-in, vulnerability plateaus and thereafter improves.  

Occupancy Changes in the Third Quarter 2023 Across Select NIC MAP Primary Markets.  

All-occupancy increased or remained stable in 27 of the 31 Primary Markets for IL in the third quarter 2023. At 90.5%, Minneapolis saw the second largest quarterly improvement, up 1.8pps from the second quarter 2023. San Jose IL occupancy had the second largest quarterly decline among the 31 NIC MAP Primary Markets and fell 0.6pps in the third quarter 2023 to 90.1%. Other markets such as Las Vegas, San Jose, Los Angeles, and Dallas experienced occupancy declines but not exceeding negative 1.0pps. 

All-occupancy rose or remained stable in 26 of the 31 Primary Markets for AL in the third quarter 2023. At 82.0%, St. Louis AL occupancy saw the largest increase and gained 2.6pps quarter-to-quarter. Portland, Philadelphia, Baltimore, and Atlanta experienced occupancy declines in the third quarter of 2023, but with declines less than 1.0pps.  

Keep track of the timely review of the sector’s market fundamentals and trends. The NIC Intra-Quarterly Snapshot monthly publication, available for complimentary download on our website, continues to provide a powerful and closely watched means to stay ahead of industry trends. 

The October 2023 Intra-Quarterly Snapshot report will be released on our website on Thursday, November 9, 2023, at 4:30 pm.   

Interested in learning more about NIC MAP Intra-Quarterly data? To learn more about NIC MAP Vision data, schedule a meeting with a product expert today.  

What technology is right for your business? How can artificial intelligence improve operations? 

Technology is changing the senior living industry. The promise is that innovative solutions will boost operational efficiency and resident satisfaction. The risk is that technology can’t or won’t deliver on that promise because it doesn’t really work or quickly becomes outdated as new solutions emerge.  

Two thought leaders will address the promises and risks of new technology at the upcoming 2023 NIC Fall Conference. They will speak during the popular NIC Talks session. 

An attendee favorite, NIC Talks will feature four dynamic speakers. Each will give a 12-minute TED-style talk on innovative approaches to senior living. In addition to the topic of technology, attendees will learn about a radical and successful approach to customer service and how to leverage healthcare to improve occupancy and resident satisfaction.  

“NIC Talks is designed to challenge the status quo,” said Bob Kramer, NIC Co-Founder/Strategic Advisor and Founder at Nexus Insights. “Attendees will gain new perspectives that can truly jumpstart growth opportunities.”  

The 2023 NIC Fall Conference will be held October 23-25 at the Sheraton Grand Hotel in Chicago. NIC Talks will be a featured Main Stage session on Tuesday, October 24. Kramer will curate the session.  

The two speakers on technology recently previewed their talks for NIC. Former Apple executive Dhaval Patel will present a framework to help operators decide which technologies to deploy amid a growing and sometimes confusing array of options. Speaker Hahn Brown will detail how the arrival of artificial intelligence will transform the senior living business.  

Start with the End User

Necessity was the mother of invention for NIC Talks speaker Patel. The title of his talk is “Smart Technology Isn’t Everything. Believe Me, I’m an Apple Inventor.”  

Despite his work at Apple creating smart technology, Patel had his own ah-ha moment when he couldn’t easily get out of bed to turn off the lights because of a knee injury. That led him to rethink how technology products are designed.  

Patel is now an advocate for human-centered design. Technology should be designed to be used by everyone no matter their age or abilities. “Start with the end user,” said Patel, founder and CEO of Lotus, a company that has invented user-friendly smart home technology.    

The same thinking can be applied by senior living providers overwhelmed with new technology choices. How can they sort through the options to know which technologies are the best choices for their business, and for residents?  

Patel suggests that owners and operators first ask themselves what problem they’re trying to solve. What will help residents? “Think intuitively,” he said. A smart investment in technology results in a solution that addresses a problem or pain point.  

Attendees will learn what questions to ask to evaluate a new technology. Was it created for people with mobility or cognition issues? Is the technology going to work, and work easily? Will it be adopted by residents and staff?  

“Ask how the technology was designed,” said Patel. “That’s how you know what to look for.” 

The Promise of AI 

Artificial intelligence will have a profound impact on senior living. Hanh Brown, founder and CEO of ThinkAi6 and the Boomer Living Podcast, will explore the impact of AI on the customer experience, workforce, and sales and marketing. She will also provide key tips for getting started. Her talk is titled, “The Digital Transformation of Senior Living through Generative AI.”  

Hahn was a performance manager at General Motors working on Corvettes but her mother’s battle with dementia redefined her understanding of senior living. Now she’s focused on the cutting-edge technology that will change the senior living industry.  

In a preview of her talk, Brown highlighted how different stakeholders will benefit from the AI transformation.   

For senior living providers, AI can be used to personalize the customer experience by tailoring programming for the individual based on their preferences. Services and care plans can more easily be customized. Personalized programs can help increase customer satisfaction, sales, and brand loyalty. This approach will become more important as baby boomers who value independence and choice enter the senior living market. 

Smart tools will help boost staff productivity. For example, AI-powered language engines, such as ChatGPT, can answer resident questions quickly and improve response times.  

Employee training is another area where AI will make a big difference. Caregivers can have access to training modules tailored to their needs depending on their understanding of the job. AI generated training can also help set a career path for employees to progress into different or more advanced roles.  

For sales and marketing, AI can be used to segment audiences based on their preferences. “We can reach out to prospects with customized messages,” said Brown.   

New types of AI-generated content for marketing materials are growing in sophistication. AI-generated art has made huge advances providing images that resonate with potential residents and families.  

Brown emphasized that AI output is based on data input. AI algorithms work best with a large volume of data. “The heart of AI is your data,” said Brown. Though the thought of utilizing AI can seem intimidating, she noted that the technology is evolving so rapidly that providers cannot afford to ignore the possibilities. “We have to get on board. This is a great time of innovation,” she said. 

NIC MAP Vision released its latest Skilled Nursing Monthly Report on September 28, 2023. The report includes key monthly data points from January 2012 through July 2023.

Here are some key takeaways from the report:

Occupancy

Skilled nursing occupancy held steady in July after increasing in June. Occupancy has hovered in the 81% range since January and ended July at 81.5%. However, occupancy has increased 82 basis points since December 2022. There was positive momentum in occupancy throughout last year (2022) and it is up 668 basis points since the low (74.8%) point reached in January 2021. Although occupancy was relatively flat from May 2022 through September 2022, it did increase 277 basis points from January 2022 to January 2023. The staffing crisis in the sector is still a significant burden on many skilled nursing operators, especially as the acuity level of patients has increased along with the demand for nurses. As staffing and general inflation pressures persist, operations for many operators will be under pressure but the long-term demand for skilled nursing services is expected to grow over time.

Medicaid

Medicaid revenue mix increased 143 basis points ending July at 54.3%. It is up 218 basis points from one year ago when it was 52.2% in July 2022. One element of the Medicaid revenue share of a property’s revenue is revenue per patient day (RPPD) and that was up 1.1% from June. It is up 2.6% since last year in July 2022 and is now at $278. Medicaid reimbursement has increased more than usual as many states embraced measures to increase reimbursement related to the number of COVID-19 cases throughout the pandemic, but many states have continued to increase reimbursement. Medicaid has increased 7.4% since February 2020. On the other hand, covering the cost of care for Medicaid patients is still a major concern as reimbursement does not cover the cost of care in many states. In addition, the compounding impact of inflation growth since the pandemic and elevated interest rates have created expense pressure for many operators around the country.

Medicare

Medicare revenue per patient day (RPPD) decreased from June to end July at $589. This was a 1.0% decrease from its recent high of $595 in December 2022, which was its highest level since June 2020 when the federal government began implementing many initiatives to aid operators of properties for cases of COVID-19, including increases in Medicare fee-for-service reimbursements to help care for COVID-19 positive patients requiring additional care. Medicare RPPD is up 1.94% from one year ago in July 2022 and some of that increase can be attributed to the fiscal increase for 2022-2023. Meanwhile, Medicare revenue mix trended down in the month of July, decreasing 85 basis points from 18.0% to end the month at 17.2%. It is down 399 basis points compared to one year ago in July 2022, and it is down 7.1 percentage points from February 2022 which was when the country had an elevated number of COVID-19 cases, and the data suggests there was a significant uptick in the utilization of the 3-Day Rule waiver as COVID-19 cases increased last year. The 3-Day Rule waiver was implemented by Centers for Medicare and Medicaid Services (CMS) to eliminate the need to transfer positive COVID-19 patients back to the hospital to qualify for a Medicare paid skilled nursing stay, hence increasing the Medicare census at properties. As the cases decline, the Medicare revenue share declines, all else equal.

Managed Care

Managed Medicare revenue mix decreased 38 basis points from June to end July at 11.6%. However, this is up 243 basis points from the pandemic low set in May 2020 of 9.2%, which was a time when elective surgeries were suspended and created less referrals from hospital to skilled nursing properties. Meanwhile, Managed Medicare revenue per patient day (RPPD) increased from $491 to $492 in July. Compared to its year-earlier value of $492, it is up 0.1% but it is down $120 (19.6%) from January 2012. It continues to create pressure on operators’ revenue as managed Medicare enrollment continues to expand its reach and coverage around the country. However, some operators see an opportunity to capture patient volume with the growth of managed care. The persistent decline in managed Medicare revenue per patient day continues to result in an expanded reimbursement differential between Medicare fee-for-service and managed Medicare. Medicare fee-for-service RPPD ended July 2023 at $589, representing a $97 difference. For context, the differential one year ago was $86 and two years ago it was $84.

To get more trends from the latest data you can download the Skilled Nursing Monthly Report here. There is no charge for this report.

The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. NIC continues to grow its database of participating operators to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form here. NIC maintains strict confidentiality of all data it receives.

New research from NORC at the University of Chicago, funded by a grant from the National Investment Center for Seniors Housing and Care, sheds light on older adults’ vulnerability to declining health outcomes before and after entering a senior housing and care property.

The results of the study provide insights into understanding current and growing demand for senior housing. The study is the first in a four-part research series that assesses the health and well-being of seniors housing and care residents. Subsequent studies will provide insights on access to health care providers, longevity, and health outcomes of residents in senior living settings.

Research findings show that vulnerability – as defined by “frailty levels” of residents – rises in the months leading up to a move into a senior housing and care community. Approximately three months following move-in, however, vulnerability plateaus and thereafter improves. These outcomes are consistent across all senior housing and care property types – independent living, assisted living, memory care, nursing care, and continuing care retirement communities (CCRCs).

While conclusions from this study show that vulnerability improves following a move to senior housing and care, findings do not specifically identify the direct causes for the improvement. Senior housing offers supportive services that can lead to greater resident vitality and quality of life. Indeed, non-medical services provided within senior housing and care settings – social engagement, community involvement, balanced nutrition, transportation, and access to exercise – are likely vital contributors to improving resident health.

The change in vulnerability shortly after moving into a senior housing and care property speaks to one of the many value propositions provided by senior housing settings that are offered to residents.

The findings from this research are foundational and set the table for subsequent studies to examine the impacts of access to healthcare providers, the role senior housing and care plays in resident longevity, and how health outcomes for older adults differ from congregate to non-congregate settings.

Other findings from this study confirm what many operators already understood – vulnerability to declining health outcomes, as defined by “frailty levels” of residents, is highest in communities with the most intensive available support services. Put another way, the proportion of increasingly vulnerable residents increases with expected community acuity.

Vulnerability of older adults is an important concept in senior housing and care research, because it suggests that vulnerability is not a permanent condition, but rather a temporary state of being that can be corrected with the proper interventions. Senior housing and care operators routinely assess residents to mitigate risk and improve health, as even older adults who are relatively healthy could be one incident away from needing higher levels of care.

The methodology for the study utilizes an academically-designed data linkage approach which ties property information from the NIC MAP® Data Service, powered by NIC MAP Vision, with Medicare Current Beneficiary Survey (MCBS) data and comprehensive administrative and claims data. These data sets, combined with Harvard University’s Claims-Based Frailty Index, provide valuable insights into the health and well-being of seniors housing and care residents.

With few data sources available to analyze the health needs of senior housing residents, this nationally representative survey allows senior housing and care stakeholders to better understand the changes in vulnerability that occur after moving to a congregate setting.

To view the complete slide deck of findings, including methodology, vulnerability levels by property type, common conditions, illustrative vignettes, and future planned research, download the Research Report.

CLICK HERE TO ACCESS THE RESEARCH REPORT

Session speakers kickstart inspiration.  

Radical customer engagement can drive business growth. Healthcare and senior living can co-exist to open new possibilities. 

These are just two of the provocative topics to be explored during the NIC Talks session at the 2023 NIC Fall Conference. Four dynamic speakers will each give a 12-minute TED-style talk on innovative approaches to senior living. Other topics include the effective use of artificial intelligence and how to sort through technology offerings.  

“Attendees will hear ideas that challenge established ways of thinking,” said Bob Kramer, NIC Co-Founder/Strategic Advisor and Founder at Nexus Insights. “Innovative perspectives can create new opportunities.”   

The 2023 NIC Fall Conference will be held October 23-25 at the Sheraton Grand Hotel in Chicago. NIC Talks will be a featured Main Stage session on Tuesday, October 24. Kramer will curate the session.  

Two speakers recently previewed their talks. Caroline Pearson will relate a personal experience to explain how connecting healthcare and housing can boost move-ins and margins. Speaker Gerard van Grinsven will detail how to create a hospitality-inspired strategy—an experience blueprint—to outperform customer expectations and deliver superior results. 

Van Grinsven, renowned for his extensive luxury hotel industry experience, passionately emphasizes the importance of crafting an irresistible value proposition that renders customers indispensable. He articulates his unwavering customer-centric philosophy, by urging businesses to embrace a paradigm-shifting mindset. 

With executive stints at the Ritz-Carlton organization, the Henry Ford West Bloomfield Hospital, and the Cancer Treatment Centers of America, van Grinsven unveils the key to his remarkable success: a resolute departure from conventional thinking, guided by his steadfast commitment to satisfying customers’ unexpressed desires. 

During his tenure at Henry Ford Hospital, van Grinsven dedicated an immersive six-month period to personally visiting local families before the hospital’s grand opening, unearthing their deepest healthcare preferences—unlike conventional focus groups which often fail to capture the subtleties of unspoken aspirations. Instead, he embarked on in-home journeys with prospective customers, unearthing their needs and true desires. The outcome catapulted the hospital to the pinnacle of national rankings for patient engagement scores. 

Moreover, van Grinsven underscores the importance of extending this ethos of engagement to the employees, an imperative made even more pressing in today’s challenging workforce landscape. He strongly encourages organizations to earnestly explore avenues to enrich workplace culture with unwavering trust, respect, and dignity. 

As he embarks on the launch of a visionary luxury lifestyle boutique hotel management company, van Grinsven reiterates the importance of valuing team members, a commitment that both curtails turnover rates, and engenders a deeper emotional connection with customers. 

Van Grinsven anticipates his NIC Talks presentation will inspire attendees to vigorously reassess their modus operandi, by severing the shackles of conventional thinking and embracing innovation and dedication to customer-centricity.” 

Housing and Healthcare Can Co-Exist 

NIC Talks speaker Pearson has long been puzzled by the divide between healthcare and housing in the senior housing market. She is currently the Executive Director of the Peterson Center on Healthcare. Pearson is already familiar to the NIC audience. She was formerly the Head of Healthcare Strategy at NORC at the University of Chicago, a research organization, and led the seminal NIC study, “The Forgotten Middle.”  

Based on her work on the middle market, Pearson views healthcare as an integral component of the senior housing value proposition. “It’s particularly true for those who do not have the resources to easily afford senior housing,” she said.  

Many older people believe they want to age in place, but they reconsider when health, cognition, and mobility issues arise. The stairs are hard to climb. It’s difficult to get to the doctor’s office. “The industry continues to sell lifestyle, community and purpose, which are critically important, but we should embrace what people also need which is a safe caring environment to help them live well.”  

For senior living providers, specific changes might include creating a clinic space on the property for healthcare providers to see residents, and a system to easily handle virtual doctor visits. “Those are huge value adds,” said Pearson.  

Healthcare services, in some form, represent a huge opportunity to broaden the senior housing market, she added. Also, the healthcare system will benefit by closing its gaps in care. The healthcare workforce isn’t large enough to deliver healthcare individually to people in their homes. “Senior housing operators have the geographic efficiency of having residents together,” she said.  

The senior living industry doesn’t want to be seen as the sick care industry. They want to be the place where the vibrant last stage of life can take place. But, Pearson noted, “Those two ideas do not have to be in conflict if operators embrace the integration of housing and healthcare.”