NIC MAP^® Data Service released its latest Skilled Nursing Monthly Report on March 4, 2021, which includes key monthly data points from January 2012 through December 2020.

Key takeaways from the report are available below.

Occupancy

Skilled nursing property occupancy continued to be pressured through year-end 2020, hitting a new low of 71.7% in December. This was down 1.4 percentage points from November (73.1%) and 13.3 percentage points from February 2020 (84.9%), the month before the pandemic started. The pandemic has significantly impacted skilled nursing operations across the country creating challenges for patient census. However, since the vaccine rollout began in December and continues to date, there is an expectation that COVID-19 cases will continue to decline, and occupancy will pick up. The question remains, however, of how quickly this bounce back will occur.

Managed Medicare

Managed Medicare patient day mix increased 41 basis points from November to 6.9% after hitting a 12-month low during the pandemic of 5.4% in May. However, it was down 24 basis points since February (7.1%). The increase since May suggests managed Medicare is playing an increasing role in overall operations, but this is all in the context of a significant drop in occupancy. Managed Medicare admissions are likely significantly below levels prior to the start of the pandemic given the decline in elective surgeries and competition from home health care. In addition, managed Medicare revenue mix was off its 12-month low of 8.0% set back in May. As of December, it was at 8.8% but down 230 basis points since February.

Medicare

Medicare revenue mix continued to increase as 2020 closed, ending at 23.3% in December and up 67 basis points from November. Medicare revenue mix has held up relatively well since the pandemic began in March compared with other payors. It is up 186 basis points since March compared to managed Medicare (down 150 basis points) and private pay (down 254 basis points). As overall occupancy has declined dramatically during the pandemic creating significant pressure on skilled nursing operators, Medicare patient days likely did not decrease as much as they would have given that the Centers for Medicare and Medicaid Services (CMS) waived the 3-Day Rule. The rule waives the requirement for a 3-day inpatient hospital stay prior to a Medicare-covered skilled nursing stay.  

Medicaid

In contrast to the Medicare experience, Medicaid revenue mix hit a new low in December, ending at 43.7%. It has decreased 8.4 percentage points since March when it was 52.2%. This suggests total Medicaid patient days have dramatically decreased since March, due to lower overall admissions and some Medicaid patients who may have converted to Medicare due to the waiver of the 3-Day Rule during this crisis period. Medicaid revenue mix was down 9 percentage points from year-earlier levels.

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 in order 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.

The NIC MAP^® Data Service recently released national monthly data through December 2020 for actual rates and leasing velocity. In this release, NIC also provided data on three metropolitan areas:  Atlanta, Philadelphia, and Phoenix.  

A few key takeaways from the 4Q2020 NIC MAP Seniors Housing Actual Rates Report are listed below. Full access to the reports and other takeaways is available to NIC MAP^® Data Service clients.  

• Average initial rates for residents moving into independent living, assisted living and memory care segments were below average asking rates, with monthly spreads generally largest for memory care. Care segments refer to the levels of care and services provided to a resident living in an assisted living, memory care or independent living unit.
• The average discount for the memory care segment was the largest of the three care segments in December 2020 and averaged 10.2% below average asking rates. This equates to an average initial rate discount of 1.2 months on an annualized basis, the highest level of discounting for memory care since April 2020.
• As of December 2020, initial rates for assisted living care units averaged 7.1% ($364) below average asking rates. This equates to an average initial rate discount of 0.9 months on an annualized basis, even with one year earlier.
• The average annualized discount for independent living segments was 0.8 months in December 2020, more than in December 2019 at 0.6 months.
• Average in-place rates for residents in assisted living and memory care segments were below average asking rates. The discount was smaller for in-place rates than initial rates compared with asking rates.
• The rate of move-outs has exceeded or equaled the rate of move-ins for each of the prior twelve months for both the independent living and assisted living segments, and for five of the last twelve months for the memory care segment as of December 2020. The difference between the pace of move-outs and move-ins was widest in the immediate aftermath of the pandemic start in the March, April, and May period.

The NIC Actual Rates Data 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. Now, more than ever, in the world of the COVID-19 pandemic, having access to accurate data on the actual monthly rates that a seniors housing resident pays compared to property level asking rates helps the sector achieve this goal.

About the Report

The NIC MAP Seniors Housing Actual Rates Report provides aggregate national data from approximately 300,000 units within more than 2,600 properties across the U.S. operated by 25 to 30 seniors housing providers. 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. Note that this monthly time series is comprised of end-of-month data for each respective month.

While these trends are certainly interesting aggregated across the states, actual rates data is even more useful at the metro level. NIC is continuing to work towards reporting more markets.

Interested in Participating?

The Actual Rates Data Initiative is an effort to expand seniors housing data and we are looking for operators who have five or more properties to participate. We have expertise in extracting data from industry leading software systems, such as Yardi, PointClickCare, Alis and MatrixCare, and can facilitate the process for you.

Your organization benefits through:

• More informed benchmarking, strategic planning, and day-to-day business operations,
• Increased transparency, aligning with other commercial real estate assets in terms of data availability, and
• Enhanced investment and efficiency across the sector.

Learn more by visiting nic.org/actual-rates.

Lorem Ipsum

The Labor Department reported that nonfarm payrolls rose by 379,000 in February and that the unemployment rate edged lower to 6.2% from 6.3% in January. The jobless rate remains 2.7 percentage points above the pre-pandemic level of 3.5% seen in February 2020, but well below the 14.7% peak seen in April. Despite the February increase, job levels are 9.5 million below the pre-pandemic levels of February 2020 (6.2%), with 3.5 million of that gap in the leisure and hospitality sectors. The consensus estimates for February had been for a gain of 200,000.

Private service-producing jobs increased by 513,000, led by a rise of 355,000 jobs in leisure and hospitality payrolls as pandemic-related restrictions began to be relaxed and restaurant re-openings occurred. Health care added 20,000 jobs in January; this followed a loss of 85,000 in January. Nursing care facilities lost 12,000 jobs in February.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed from January at 4.1 million but is 3.0 million higher than year-earlier levels, suggesting that this continues to be a very challenging time for many Americans. Long-term unemployed persons account for 41.5% of the total number of unemployed persons.

The underemployment rate or the U-6 jobless rate was unchanged at 11.1% in February. 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.

Average hourly earnings for all employees on private nonfarm payrolls rose by $0.07 in February to $30.01, a gain of 5.3% from a year earlier. These increases largely reflect the disproportionate number of lower paid workers in leisure and hospitality who went off payrolls, which put upward pressure on the average hourly earnings estimates.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work was steady at 61.4% in February.

The change in total nonfarm payroll employment for December was revised down by 79,000 from a loss of 227,000 to a loss of 306,000 and the change for January was revised up by 117,000 from 49,000 to 166,000. Combined, 38,000 jobs were added to the original estimates. 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 February data is promising and reflects a gradual reopening of parts of the economy and some of the effects of the $600 stimulus checks. The ongoing drop in COVID cases, the widespread distribution of vaccines, and a shift in consumer confidence is needed to allow for a more complete re-opening of the economy and a fuller recovery in jobs. If the $1.9 trillion stimulus package becomes law, further economic activity and additional job growth can be expected in the coming months.

The most successful businesses are a blend of art and science. Data provides a solid foundation. Creativity delivers the innovative solutions.

Mark Bultman’s approach to seniors housing finance combines art and science. You can’t have one without the other.

As senior vice president of sales, Bultman is a leader on the seniors housing lending group at Capital One. NIC Chief Economist Beth Mace recently talked with Bultman about his approach and whether the market is headed for an upturn after a difficult year. Here’s a recap of their conversation.

Mace: What’s your role at Capital One?

Bultman: I work in the long-term care real estate lending group at Capital One. We provide financing in the seniors housing space for independent living, assisted living, memory care, and to a lesser extent, skilled nursing properties.

Mace: How active is Capital One in the sector?

Bultman: Our team has been lending in the space for close to 20 years and has been very active as a balance sheet transactional lender and as a longer-term agency lender. While we’ve still seen activity since COVID-19 hit, there have been fewer trades across the market as a whole.

Mace: Did business pick up in 4^th quarter of last year compared to previous quarters?

Bultman: Yes, we’re seeing more deals as 2021 gets started, but activity is down overall and a far cry from 2018-19 and first quarter of 2020.

Mace: Are you anticipating greater deal flow as 2021 progresses?

Bultman: I’m optimistic that there will be more deal opportunities in 2021. We are on the phone with owners and operators weekly, if not daily, and I think there will be a greater desire to transact, buy and sell, and refinance loans. There are a lot of factors at play that will dictate the level of deal flow as we move forward—the vaccine roll out, state and operator-specific rules for visits and move-ins, trends in the property-level workforce, just to name a few.

Mace: A lot of lenders worked hand-in-hand with their borrowers during 2020 to help them through the challenges they were facing. Will that continue into 2021?

Bultman: Absolutely. We’ve worked closely with our borrowers to help them navigate their individual situations. The pandemic has been really tough for the industry, and not just in terms of lost revenue and higher expenses. When you talk to customers on a weekly basis, you can hear the strain in their voices. You can feel the struggle for the staff and the residents. You have to take that into consideration, and we’ve been committed to supporting them through this difficult stretch.

Mace: Is there any difference in the way you underwrite and view seniors housing compared with other asset types within your healthcare real estate business?

Bultman: I would say we’re fairly data-driven in our underwriting approach. There’s a ton of data out there, and we use it all. We look at recent trades and industry trends to assist with the science of real estate underwriting. But we also look at the art of underwriting. Are we aligned with the borrower? Are we aligned on the long-term outlook for the property and the market? Our underwriting philosophy is a blend of the art and the science. Seniors housing is an operating platform on top of a piece of real estate. The hard part is figuring out both parts of the business and aligning with the right players in the industry.

Mace: Do you finance acquisitions, refinancings, re-positionings and new development?

Bultman: We finance all of the above. Our group has been financing seniors housing for close to 20 years. Right now, we’re more focused on acquisitions, refinancings, and agency lending. That’s been our core competency over the past few years and where our expertise lies. We finance a limited amount of new construction and repositionings but will continue to look for the right opportunities across all deal types.

Mace: What do you look for in a sponsor?

Bultman: Aligned interests. We are committed to the industry, and we’re looking for sponsors also interested in being in seniors housing for the long term. We aren’t looking for a buy-and-flip type of sponsor, or one that’s chasing yield. Over the years, we’ve been financing the biggest REITs in the space, the smaller owner operators, and everything in between. We are always looking for sponsors and owners that are focused on operations. Seniors housing is a boots-on-the-ground business and that determines success in this industry. Our customers have historically been well- known and well-regarded sponsors who partner with top operators. We’ve been very successful in lending to these types of groups over the years.  

Mace: How do you decide what lending product is the right fit for a borrower?

Bultman: In a perfect world, we are able to present multiple lending options for our customers and then work with them to find the best fit. That being said, there are situations where it’s fairly obvious that one type of product will better meet the needs of the customer. If the borrower wants a longer-term deal and the property is stabilized, then an agency loan might be the clear choice. A shorter-term deal or the purchase of a pool of assets with different exit strategies, capex needs, etc., might be a better fit for a balance sheet loan. We are fortunate to have the ability to offer multiple lending solutions, and it’s been a big factor in our success. We were proud to be named the top Freddie Mac seniors lender in 2020 – a fantastic accomplishment and a testament to our industry presence and best-in-class agency lending team.

Mace: What else would you like our readership to know about Capital One?

Bultman: At Capital One, our goal is to find ways to add value for our customers and the market, and to build relationships. We have had tremendous success as transactional lenders in seniors housing, and we will continue to be leaders in the space. One exciting thing we are working on this year is improving and expanding our traditional bank product offerings (treasury services, depository services, payment cards, etc). There’s a need in the industry for banking services tailored to seniors housing, and we’re utilizing our industry knowledge and banking expertise to bring better solutions to market.

One last thing, if I may, Beth. It’s been hard to watch how this pandemic has affected our industry. For someone who’s been in seniors housing for 20 years, this is the worst year that I’ve seen in terms of the overall impact on the properties themselves. I’m thankful for all the hard work being done to figure this out in real time, to keep residents and staff safe and uphold the industry’s reputation. Seniors housing is a fantastic industry and great product, and I’m thankful and fortunate to be a part of it.