This blog post provides a NIC Analytics review of data that highlights and quantifies the number one issue facing operators of skilled nursing facilities: staffing shortages. Labor shortages are particularly acute for nursing staff and aides who are often the hands-on workers with direct and intimate relationships with residents and patients. Staffing has generally been a challenge for the sector but since the onset of the pandemic staffing shortages have become pervasive across the industry.

Some have called the current skilled nursing labor shortage the worst the sector has ever seen, and many are worried it will intensify. To be fair, many sectors of the economy are experiencing significant labor shortages for a multitude of reasons such as a reduced pandemic-related labor force, worker fear of catching or spreading COVID-19, childcare and elder care responsibilities, and generous pandemic-related unemployment insurance benefits (many of which have recently rolled off). There is some debate about the causes of labor shortages across the country, but one thing that is certain is many sectors of the economy are being impacted in ways that are creating major operational hurdles.

Skilled nursing facilities (SNFs) face an all too familiar dilemma in competing with other industries in retaining and recruiting workers to provide care for high acuity residents. Further, the industry is challenged with maintaining operating margins due to very low occupancy rates, elevated operating expenses, and the often-inadequate Medicaid payment rates in many states.

Staffing shortages are a critical part of the much bigger story of today’s aging society. In 2020, the American population over 75 was estimated to be 23 million, according to the Bureau of Labor Statistics (BLS). By 2025, this figure will rise to 29 million (up 26% from 2020 levels), and by 2030, this figure will rise to 34 million (up 48% from 2020 levels). At the same time, other broad demographic trends suggest labor force challenges as older adults reach retirement and as they are not fully replaced by younger experienced workers.

According to the Demographic Drought Report released by EMSI, a leading provider of labor market data, “the US labor force participation rate (LFPR), which measures people working or actively seeking work, has dropped to lows we haven’t seen since the recession of the mid-1970s.” The report also highlighted the mass exodus of baby boomers and the lowest birth rates in U.S. history. Notably, the number of baby-boomer retirees increased by over a million in 2020, and the national birth rate hit a 35-year low in 2019. These demographic trends suggest a tightening labor market ahead, and that a large and growing labor pool of essential workers are needed today and in the foreseeable future.

What healthcare workers are in high need and have the biggest shortages within the skilled nursing sector?

Exhibit 1 below depicts the share of skilled nursing facilities reporting shortages of nursing staff and aides since CMS began reporting this data in May 2020. The highest shortages of staff reported by SNFs have been among aides and nursing staff. Further, nursing staff and aides represent the largest share of all SNF staff. Indeed, according to the BLS Employment & Wage report compiled by NIC MAP®, powered by NIC MAP Vision, nursing staff and healthcare support occupations, including aides, represent over 60% of all staff within the skilled nursing sector.

Following the launch of the long term care vaccination program in December 2020, the share of SNFs reporting shortages of hands on essential workers started trending down and reached a low level of 15.9% for aides in March 2021, 14.8% for nursing staff and 12.8% for both nursing staff and aides. Since then, the proportion of SNFS reporting shortages began to rise again as move-ins and occupancy rates increased, although these percentages remained below the high levels seen in December 2020 prior to the vaccine rollout (20.6% for aides, 19.0% for nursing staff and 16.7% for both nursing staff and aides).

Unfortunately, a surge in COVID-19 delta variant cases within U.S. skilled nursing facilities in July 2021 as well as the recent vaccine mandate announcement in August 2021 exacerbated shortages of on-hand essential workers. By the end of September 2021, 23.2% of SNFs reported shortages of aides (up 7.3 percentage points from March 2021 levels), 20.5% reported shortages of nursing staff (up 5.7pps over the same period), and 19.0% reported shortages of both nursing staff and aides (up 6.2pps since March 2021). These are the highest levels seen since May 2020.

What impacts do shortages of nursing staff and aides have on SNF residents, SNF performance and the recovery of the sector as a whole?

Staffing shortages have likely not hit the peak yet and may get worse in the next few months. Indeed, a recent survey by the American Health Care Association and National Center of Assisted Living (AHCA/NCAL) shows nearly all the nursing homes participating in the survey are currently asking staff to work overtime or extra shifts and more than half are limiting new admissions due to staffing shortages. The survey also highlights that 78% of the nursing homes surveyed admitted to being concerned about having to close their facility due to workforce challenges.

The ripple effect on residents and the performance of SNFs is even more profound. Since CMS began reporting data in May 2020, skilled nursing facilities experiencing shortages of both nursing staff and aides have been reporting relatively higher per-resident rates of new COVID-19 infections and lower occupancy rates compared with SNFs reporting no shortages of these hands-on essential workers.

Notably, in December 2020 and prior to the vaccine rollout, infection rates peaked at 4.76% on a 4-week moving average (476 in 10,000 residents tested positive) for SNFs reporting shortages of nursing staff and aides, nearly double that of SNFs reporting NO shortages of hands-on essential workers (2.54%, equivalent to 254 in 10,000 residents tested positive). This suggests that shortages of staff translate into lower staff-to-resident ratios and consequently increase “one-to-many” interactions between available staff and residents. These “one-to-many” interactions could lead to higher virus transmission among residents.

The occupancy chart featured in Exhibit 1 below shows that SNFs reporting shortages of hands-on essential workers (in this case, defined as nursing staff and aides) have also had somewhat lower occupancy rates compared with SNFs reporting no staffing shortages since May 2020.

The widening gap in the last four months is something to watch going forward. By the end of September 2021, as staffing shortages intensified, the occupancy rate for SNFs reporting shortages of nursing staff and aides was 70.5% (4-week moving average, based on CMS data), 1.7pps below the occupancy rate for SNFs reporting no shortages (72.2%). Back in April 2021 when staffing shortages and virus cases within SNFs were relatively low, the occupancy rate for SNFs reporting shortages was 69.1%, only 0.2pps below the occupancy rate for SNFs reporting no shortages (69.3%).

The recovery in demand in the last few months is promising but staffing shortages could slow down the occupancy recovery for the sector and limit the improvement for SNFs experiencing staffing shortages.

Exhibit 1 – Staffing shortages vs. per-resident rate of new COVID-19 infections and occupancy

Staffing shortages and the impact on vaccination rates

The effects of staffing shortages continue across vaccination rates, which have been relatively low among nursing staff and extremely low among aides. In September 2021, 67.2% of all healthcare workers had been fully vaccinated, up 8.7pps from 58.5% in June 2021. Vaccination coverage has certainly improved in the last three months, but the disparity in vaccination rates among healthcare workers in SNFs has been dragging down the overall vaccination rate among staff and could be leading to higher virus transmission among residents.

Exhibit 2 below shows that the highest rate of fully vaccinated staff was among licensed independent practitioners at 88.6%, followed by therapist employees (77.1%), and other healthcare personnel (72.6%). However, vaccination rates among aides are still lagging, with only 57.2% of aides having been fully vaccinated, 11pps below the vaccination rate of nursing staff (68.2%) and 10pps below the overall staff vaccination rate of 67.2%, and even below the vaccination rate of all healthcare workers recorded three months ago in June 2021 (58.5%).

Staggering as this disparity in vaccination rates among SNFs healthcare workers is, none of this comes as a particular surprise. Aides and nursing staff represent the largest number of workers within the skilled nursing sector, and both have the highest shortages and most likely the highest turnover and churn rate. Recent studies have shown high turnover and churn rate among staff at nursing homes.

Skilled nursing facilities keep recruiting and losing these critical workers. In addition to the time and effort of recruiting and training these -hands on essential workers who interact directly with patients, a higher turnover rate is likely having a significant impact on operational costs, productivity, and infection control protocols to prevent virus transmission among residents.

Exhibit 2 – Vaccination rates among SNFs workers

Shortages of nursing staff and aides vary by state

Exhibit 3 below shows that shortages of nursing staff and aides vary by state. In September 2021, over 40% of SNFs reported to be experiencing shortages of both nursing staff and aides across several states, including Maine, Kansas, Wyoming, and Minnesota.

While the majority of states are currently experiencing high staffing shortages, there are some states where staffing shortages have been comparatively very low among both nursing staff and aides. These states include California, Texas, Connecticut, New Jersey, and Massachusetts. Some of these states may have access to a larger labor pool. However, having access to a large labor pool doesn’t necessarily mean high retention rates among hands on essential workers (aides and nursing staff). Retention seems to be a real challenge facing all SNFs, regardless of labor availability.

Staff availability and retention may become the leading factors in identifying a competitive market or property for senior housing and skilled nursing constituents, and key attributes for residents in choosing between facilities.

Exhibit 3 – Share of SNFs reporting shortages of aides vs. nursing staff – By state

In this NIC analysis, we examined what group of workers and roles are in high needs and have the largest labor shortages within skilled nursing facilities, and the impact that shortages of these essential workers (aides and nursing staff) have on SNF residents, SNF performance, and the recovery of the skilled nursing sector.

Forthcoming analysis will examine what’s driving labor shortages among these critical and essential workers. and explore potential solutions and limitations to address this major issue.

The Social Security Administration announced they will raise Social Security and Supplemental Security Income (SSI) benefits by 5.9% for approximately 70 million Americans – 64 million Social Security beneficiaries and 8 million SSI recipients. This adjustment is set to take effect with benefits that Social Security beneficiaries receive beginning in January 2022.

The announced increase in benefits will mark the highest one-year bump in almost four decades. For comparison, the cost-of-living adjustment (COLA) was 1.3% in 2020 and 1.6% in 2019.

The elevated COLA comes as a result of steep price increases as the U.S. economy emerges from the COVID-19 public health emergency. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index (CPI) as determined by the Bureau of Labor Statistics (BLS). The most recent BLS CPI report indicates that over the last 12 months, the all-items index increased 5.4%.

Experts caution, however, that seniors utilizing Medicare Part B will see substantially less than the 5.9% bump, as Medicare Part B premiums are expected to increase 6.7%, from $148.50 to $158.50 in 2022. Medicare Part B premiums are tied to seniors’ income and deducted from beneficiaries’ checks.

Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. The Social Security Administration has provided a fact sheet showing the effect of the various adjustments.

“In the Wave 33 survey, roughly 50% of respondents with senior living residences report that the pace of move-ins accelerated in the past 30-days—a notable increase from the prior survey. The shift was smaller for nursing care. Increased resident demand was the primary reason for acceleration in move-ins. Operators have suffered pandemic-related vacancies and myriad unplanned expenses and NOI has been pressured. In the Wave 33 survey, respondents were asked how much they expect their operating margins to increase or decrease in the next six months. Roughly half of respondents (49%) indicated they expect operating margins to increase with about one-third (31%) anticipating an increase between 1% and 5%.”

—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 33 survey includes responses collected September 7 to October 3, 2021, from owners and executives of 67 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 33 Summary of Insights and Findings

• In the Wave 33 survey (representing operator experience in the month of August) roughly 50% of respondents with independent living, assisted living and/or memory care units report that the pace of move-ins accelerated in the past 30-days—a notable increase from the Wave 32 survey a month earlier. The shift was smaller for nursing care where 37% saw the pace of move-ins accelerating in the past 30-days, up slightly from 31% in the prior survey. Increased resident demand was the primary reason for acceleration in move-ins as the COVID-19 Delta variant’s pace of infection began to slow in many areas of the country.

• Illustrated in the chart below, the share of organizations with residents waiting to move in was nearly 35% in November 2020 during the third peak of the virus (Wave 16 conducted Nov. 9 – 22, 2020). After the COVID-19 vaccine became available through the Long-Term Care Vaccination Program in the latter half of December the backlog of move-ins began to ease for many operators. Organizations reporting an increase in the pace of move-ins remained robust until the Wave 32 survey (August 9 – September 6, 2021), and has since improved.

• During the summer, as the Delta variant primarily affected unvaccinated individuals, the share of organizations experiencing a backlog of residents waiting to move in grew slightly. The chart below shows the full time-series of the pace of move-ins for the assisted living care segment. It is interesting to note the similarities of the shares of organizations reporting a deceleration in the pace of move-ins (orange segments below) compared to the shape of the line chart (above) depicting backlog of residents waiting to move in.

• Despite the temporary decline in the momentum in the pace of move-ins experienced by some operators in Wave 32, optimism regarding occupancy recovery is strengthening. Nearly three-quarters of respondents (73%) currently expect their organization’s occupancy to return to pre-pandemic levels sometime in 2022–up from 57% in the Wave 25 survey (March 22 – April 4, 2021).

• In Wave 33 between roughly 50%-60% of organizations with independent living, assisted living and/or memory care units reported an increase in occupancy across their portfolios of properties in the past 30-days. About 40% of organizations with nursing care beds saw an increase in nursing care occupancy, up from one-third (32%) in the prior survey but still significantly below Wave 30 (June 14 – July 11) when three-quarters of organizations with nursing care beds saw occupancy increases in the 30-days prior (76%).

• In Wave 33, the share of organizations with independent living units reporting an increase in occupancy (57%) was equivalent to the peak reached in the Wave 28 survey (May 3 – 16, 2021). However, as shown in the chart below, most occupancy increases were relatively small for the independent living care segment (about 40% between 0.1 and 3 percentage points). Of note, between roughly one-quarter and one-third of organizations with assisted living, memory care and/or nursing care units saw occupancy increases of three percentage points or more.

• Staffing shortages that were experienced by many seniors housing and care operators prior to and exacerbated by the pandemic persist. As recently as this summer, as the COVID-19 virus Delta variant spread across the country, nearly all operators responding to NIC’s Executive Survey Insights conducted since July reported that their organizations were experiencing staffing shortages. Additionally, all respondents were paying staff overtime hours, and four out of five organizations were tapping expensive agency/temp staff to fill gaps in schedules and replace workers who left the labor force during the pandemic.
• In recent surveys, respondents were asked to rate the biggest challenge facing their organization today. By August, the share of organizations that cited attracting community and caregiving staff as their biggest challenge had risen from about 75% to roughly 90%.
• Typically, wages and benefits are significant operating expenses for a senior housing property (comprising up to 60% of overall expenses). Since the beginning of the pandemic, operators have sustained myriad unplanned expenses. And considering the losses of revenue associated with a pandemic-related decline in occupancy rates NOI has been pressured for many operators and their capital partners. In the Wave 33 survey, respondents were asked how much they expect their operating margins to increase or decrease in the next six months. Roughly half of respondents (49%) indicated they expect operating margins to increase. While about one-third (31%) anticipate an increase between 1% and 5%, one-quarter (25%) expect a decrease between 1 and 5%.

• While rent concessions often help to drive increases in occupancy, the shares of organizations offering rent concessions has not varied significantly since last summer (2020) when NIC began tracking the data. Currently, one-half (51%) of respondents are offering rent concessions to attract new residents. Fewer are offering rent discounts than in previous surveys (59% vs. 78% in Waves 27 and 29), however more are incentivizing with free rent for a specific period (69%).

Wave 33 Survey Demographics

• Responses were collected between September 7 and October 3, 2021, from owners and executives of 67 seniors housing and skilled nursing operators from across the nation. Owner/operators with 1 to 10 properties comprise one-half (50%) of the sample. Operators with 11 to 25 and 26 properties or more make up 25% of the sample, respectively.
• Under two-thirds of respondents are exclusively for-profit providers (62%); under one-third operate not-for-profit (29%) and 9% operate both.
• Many respondents in the sample report operating combinations of property types. Across their entire portfolios of properties, 74% of the organizations operate seniors housing properties (IL, AL, MC), 26% operate nursing care properties, and 29% 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 under ten 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.

In tune with NIC’s mission of educating the market on the opportunities and challenges of investing in seniors housing and care properties, The NIC Investment Guide: Investing in Seniors Housing & Care Properties, serves as a primer on the senior housing and care sector.

The Sixth Edition of the NIC Investment Guide, based on year-end 2019 time-series data, serves as a benchmark to the sector prior to the COVID-19 pandemic. Takeaways from this edition include:

• The investment-grade senior housing and care market is estimated to have a nationwide inventory of nearly 24,500 properties inclusive of more than 3.0 million units, and its overall market value is estimated at $474.5 billion.
• The market value estimate is based on an average $210,000 price per unit for senior housing properties and an average $81,000 price per bed for nursing care properties.
• The largest owner category of senior housing and care properties are private for-profit entities with ownership of 55.4% ($2 billion) of units in senior housing properties and 67.2% ($78.6 billion) of units in nursing care properties. Publicly traded REITs own 11.6% ($41.4 billion) of units in senior housing properties and 6.5% ($7.5 billion) of units in nursing care properties.

The technical chapters of the NIC Investment Guide include a detailed description of each senior housing and care community type. The community type descriptions incorporate resident profiles, supply data, industry operating structures, operating economics, and current trends. The Guide also discusses underwriting criteria, the development and construction of new properties and the acquisition of existing properties, debt and equity sources, and valuations, returns, and loan performance.

As in prior editions, the Sixth Edition features a chapter on Emerging Trends and Observations written by members of NIC’s Future Leaders Council (FLC). Drawing upon the acumen of industry participants to make observations and discuss emerging trends for which contemporaneous, empirical data may not be available, the topics put forth are forward-looking considering operating strategies, capital markets, joint venture preferences, labor shortages and the rising costs of labor, fragmented senior housing regulation, provider partnerships, and the growing market share for Managed Care, just to name a few. It also includes detailed appendices related to alternative housing and services, active adult communities, factors affecting demand, trends in technology, risks and mitigating factors, and the collaboration between housing and healthcare.

The large and growing middle market is also addressed. In 2019, The Forgotten Middle: Middle Market Seniors Housing Study was completed with results of the analysis published as a manuscript in Health Affairs. The study defined the middle-income cohort as people aged 75 and older who do not qualify for government assistance for senior housing—such as Medicaid—but are not wealthy enough to afford traditional private pay, market-rate senior housing for a meaningful amount of time. As shown below, the study determined that 54% of middle-income seniors will not have sufficient financial resources to cover projected average annual costs of approximately $60,000 for assisted living rent and other out-of-pocket medical costs by 2029.

Additionally, through NIC’s strategic alliance with Real Capital Analytics, the NIC Investment Guide provides pricing and volume metrics on closed sales transactions of senior housing and care properties throughout the U.S. for the prior 10 years, and cap rates by property type. When comparing valuations among different senior housing property types, the use of cap rates and price per unit (PPU) are common measures. As shown by the exhibit below, development cap rates have historically been 250-500 basis points higher than those of existing properties, although recently those spreads have narrowed.

A reflection of NIC’s mission to provide data, analytics, and connections, all of which advance the access and choice of seniors housing and care for America’s elders, examples such as these and more are widely accessible through NIC’s Investment Guide. The Executive Summary of the NIC Investment Guide is available free of charge as a PDF download from nic.org. The full NIC Investment Guide, Sixth Edition is available both as a PDF file priced at $50 per copy and as a print publication priced at $100 per copy. Both can be found at store.nic.org.

The Labor Department reported that nonfarm payrolls rose by a disappointing 195,000 in September 2021. The consensus had been for an increase of 500,000. This was a deceleration from August when jobs grew by an upwardly revised 366,000 (originally reported as 235,000) and from July when jobs increased by 1,091,000, up from 1,053,000 as originally reported. The three-month moving average of nonfarm payrolls was 550,000 as of September, versus 806,000 in August and 889,000 in July, still strong but signaling some slowing in momentum. Nonfarm payrolls remain down by 5.0 million from pre-pandemic levels of February 2020.  

Interestingly, the labor force contracted by 183,000 and was 3 million less than at its pre-pandemic level. Many had speculated that the labor force would increase since enhanced unemployment benefits had largely expired and schools largely reopened.

The data show that the U.S. recovery from the pandemic continues, but at a slower pace. The COVID-10 Delta variant may be weighing on the economy as evidenced by the limited growth in the high-contact leisure and hospitality sectors (up only by 74,000) which had been expanding rapidly prior to August. Businesses may be holding off hiring and workers may be holding off taking jobs amid heightened fear of the Delta variant. 

Today’s report is important as the Federal Reserve wants to see “substantial progress” in the economy before it shifts monetary policy and begins “tapering” when it will purchase fewer long-term securities for its balance sheet and before it starts to shift toward a higher interest rate regime. While disappointing from what the markets had anticipated, the report is likely strong enough that the Fed will begin tapering its asset purchases next month. That said, the growing evidence of upward pressure on wages suggests that the Fed will remain concerned about inflationary pressures. 

Indeed, average hourly earnings for all employees on private nonfarm payrolls rose by $0.19 in September to $30.85, a gain of 4.6% from a year earlier and up from a revised 4.3% in August. September marked the fifth consecutive month of increases. The data suggests that rising demand for labor associated with the recovery from the pandemic is putting upward pressure on wages. The large annual increase also occurred despite the return of lower-wage leisure and hospitality workers which theoretically should be depressing the overall increase. That said, the Labor Department warns that the pandemic has affected the ability to fully interpret the wage data due to the wide swings in employment trends.

Job levels continued to contract for nursing and residential care facilities which fell by 38,000. Overall employment in health care is down by 524,000 since February 2020, with nursing and residential care facilities accounting for about 80% of that loss.

Separately and from a different survey, the Labor Department reported that the unemployment rate fell by 0.4 percentage point to 4.8% in September and the number of unemployed persons fell to 7.7million, still higher than the 5.7 million persons prior to the pandemic. The jobless rate is now 1.3 percentage points above the pre-pandemic level of 3.5% seen in February 2020, but well below the 14.7% peak seen in April 2020. The underemployment rate or the U-6 jobless rate was 8.5% down from 8.8% in August 2021. This figure includes those who have quit looking for a job because they are discouraged about their prospects and people working part-time but desiring a full work week.