Las Vegas ranks 31st of the NIC MAP^® 31 Primary Markets in size, with roughly 4,400 units situated in 36 properties. In the fourth quarter of 2019, it had a seniors housing occupancy rate of 84.1%, fourth lowest among the 31 markets (Phoenix, Atlanta and Houston were lower). Stabilized occupancy was considerably higher at 88.9%, pushing its rank to 20th among the Primary Markets, and Las Vegas’ median occupancy rate was even higher at 91.3%, giving it a rank of 18th among the Primary Markets. The wide disparity in occupancy rates reflects both the large number of units recently opened but that remain empty and some properties with very low occupancy rates that are dragging down the average.

The distribution chart below highlights some of these points. In the fourth quarter of 2019, 11 of 36 Las Vegas properties had occupancy rates between 95% and 100% while 10 properties had occupancy rates between 90% and 95%; this helped pull the median occupancy higher. On the other end of the spectrum, 7 properties had occupancy rates less than 80%, which pulled the average lower. For benchmarking purposes, some investors and operators prefer to measure themselves against the median occupancy rate, assuming that the properties that support a higher median rate are of higher institutional quality.

It’s notable that the difference between the median occupancy rate and average occupancy rate is more than seven percentage points in Las Vegas, more than that of the nation and further underscoring the wide disparity in property performance in Las Vegas. In Las Vegas, it’s a tale of many properties with two distinctly different occupancy performances within the metropolitan market.

Occupancy Distribution Varies Widely Across Las Vegas

It’s also interesting to note that Las Vegas is a market that tends to have significant vacant inventory. Its average occupancy rate has only been 83.2% since NIC MAP began reporting the data. In contrast, the Primary Market average has been 89.0%. This is important in developing business plans or in establishing plans for development and may influence assumptions related to stabilized property occupancy rates for a property. Historical average stabilized occupancy rates were a bit higher at 84.8% for Las Vegas, which compares with 90.3% for the Primary Markets, and 87.4% for median occupancy, which compares with 92.5% for the Primary Markets.

4Q 2019 Median Occupancy in Las Vegas was More Than Seven Percentage Points Higher Than Total Average Occupancy

However, there is room for improvement in the occupancy trends, and some of that improvement is already evident today. Indeed, in the fourth quarter of 2019, the average occupancy rate in Las Vegas was 84.1%, stabilized occupancy was 88.9%, and median occupancy was 91.3% − all better than the historical long-term 14-year averages.

On the surface, Las Vegas is a market that an investor, operator or developer may shy away from. It ranks near the bottom of the pack for average occupancy rates from a historic perspective as well as from recent data. But digging deeper reveals some interesting observations regarding occupancy rates.

The stabilized occupancy rate in Las Vegas ranks higher than does the average occupancy rate, and the median occupancy rate ranks significantly higher than the average occupancy rate. The distribution of occupancy rate skews right and toward properties with higher occupancy rates.

Further, and not mentioned in this blog, is the fact that population growth is strong − more than double the national pace. And importantly, demographic data from NIC MAP’s Site Information Report shows robust growth in the 75-plus cohort through at least 2024. In addition, construction activity has recently stalled. Market penetration rates are low. Rent growth is relatively robust, especially for some properties. Some properties are hitting it out of the park, while others…well, less so.

This analysis suggests that further investigation into what factors create a successful property in Las Vegas may be in order.

A No-Cost At-Home Pedicure for Mom?

Imagine a world where your mom could have regularly scheduled pedicures in her own home. Now imagine that there is no out-of-pocket cost for this service, as it is in fact a benefit provided to her by her insurance plan.

That doesn’t sound like the real world does it?

What I learned at The Third Annual Medicare Advantage Leadership Innovations conference last month is that this may not be such a fantastical idea. The insurance plan provides this special supplemental benefit because your mom is diabetic, and this regular check-in allows them to monitor and manage her diabetic foot pain in a way that they otherwise couldn’t. Medicare Advantage insurers are increasingly demonstrating their creativity as they continue to think about ways to establish touch points between their beneficiaries and their health providers.

Notice that I said health providers, and not healthcare providers. That’s because Medicare Advantage insurers are beginning to focus on population health, including social determinants of health like community environments and lifestyle behaviors. This is true now more than ever, with the rollout of of the CHRONIC Care Act’s Special Supplemental Benefits for the Chronically Ill. Because  population health is intrinsically a long-term strategy, these plan providers are beginning to think more like health managers than health insurers.

With the push for value-based care and a focus on preventing the need for expensive acute care settings, MA plan providers are deploying new tactics. These include strategic partnerships with home- and community based organizations, addressing food insecurity and social isolation, and cultivating a keen understanding of what supplemental benefits are desired and needed by their beneficiary populations.

The most recent CMS data indicates that approximately 24 million seniors and people with disabilities are enrolled in such MA plans. Savvy seniors housing operators may be wondering how they can affiliate themselves with these insurers to provide both better care and a better experience to their residents. Bolder seniors housing operators may even find themselves starting their own MA plans, considering the ways in which they could oversee care delivery to their own residents and get ­­­­­direct access to the healthcare premium dollars.

In-Home Care Improves Outcomes and Reduces Hospitalizations

It’s commonly thought that one of the most vulnerable times for any patient is the transition home from the hospital. Several challenges might lie ahead. In the hospital, patients are checked on every two hours, but that ends at discharge. Transportation challenges such as getting to followup appointments and being able to pick up new medications can appear. There may be nutrition challenges such as ensuring the food in the refrigerator hasn’t expired or having access to fresh food. Mobility challenges exist such as navigating steps or simply getting into the bathroom or shower safely. All these challenges greatly increase the risk of rehospitalization to the patient.

Medicare Advantage insurers are now deploying home health aides to member homes within 24 hours following discharge from the hospital. Frequent check-ins by aides, with immediate, real-time reporting has been shown to improve health outcomes.

Medication adherence following hospitalization can be problematic. New medications are often prescribed, while previous ones are discontinued. New routines must be established to ensure all medications are taken on a timely basis. This challenge creates an amazing opportunity for these home health aides. While they aren’t “hand to mouth” pill givers, they can report on whether the patient is taking their medications. They can tell if patients are taking too much or too little of their medications. They are also often told by patients why they aren’t taking a medication, perhaps because of an unwanted side effect.

All the insights obtained during this face time with patients can be reported back as actionable information. These aides are helping to mend a fragmented care system and allow for more timely deployment of interventions to patients.

Addressing Food Insecurity

If Medicare Advantage insurers are really interested in preventing ED utilization and hospitalizations, starting with food insecurity can be a big win. Food insecurity refers to a lack of access to enough food for an active, healthy life and uncertain access to or availability of nutritionally adequate foods. A review of Feeding America’s“Mind the Meal Gap” food insecurity map shows that this problem exists in every community, and food insecure patients are more likely to develop chronic conditions, such as diabetes, hypertension, and cardiovascular disease. A recent JAMA publication shows that nearly 1 in 10 Medicare enrollees age 65 and over experiences food insecurity and that food insecure individuals often report making trade-offs between food and medication.

Humana decided to address the food insecurity problem after identifying that it was the leading cause of their members’ unhealthy days. What Humana understands is that by addressing the needs of the whole person, they can avoid the much costlier alternatives. By piloting programs early, creating physician toolkits to screen for food insecurity, and developing food insecurity predictive models, Humana was able to effectively reduce the acute-care utilization of its members. For each one-day change in unhealthy days, they realize a reduction of ten hospital admissions per 1,000 patients.

Addressing Social Isolation and Loneliness

Social isolation is second only to food insecurity in creating unhealthy days for MA plan members. Social isolation and loneliness can lead to increased disease burden (particularly Alzheimer’s disease), higher risk of depression, greater chance of premature death, and an overall increase in ED and hospital utilization. Yet, 43% of adults report being lonely.

Enter organizations like Papa. Papa pairs motivated college students with older adults and families who need companionship and assistance with everyday tasks. Papa partners with health plans not only to address loneliness, but to provide transportation for appointments, medication pick up, and church or gym attendance.

Some Medicare Advantage insurers have even used a “two birds, one stone” tactic to address both food insecurity and loneliness. Partnerships with organizations like Meals on Wheels or Hunger Action Alliance rely on meal deliverers to do more than simply drop food off. They engage with members, reporting back on home conditions, medication adherence, and other concerns identified during their visit. Making the most out of existing resources again demonstrates the out-of-the-box thinking being highlighted by the conference.

Takeaways

The Medicare Advantage landscape includes both seasoned insurers and new startups. Whether you are an insurer covering several million lives or several thousand, the key takeaway from my attendance at MA Leadership Innovations is that if you want to foray into the value-based landscape of Medicare Advantage, you must be prepared to address all of the contributing factors to health, not just those deemed to fall within the “healthcare” slice. Tactics must include strategic partnerships with home- and community-based health organizations, ways to address food insecurity and social isolation, as well as a keen understanding of what supplementary benefits are needed by your beneficiary population.

For senior living providers, the possibilities to bring care coordination and care delivery directly to your residents where they live are exciting. You can choose to partner with major Medicare Advantage plans or with health provider organizations that focus on high need, high cost seniors. Or, you can form your own MA plan with other senior living organizations. Each is an opportunity to have your residents receive benefits paid for by their health insurance, enabling them to stay out of the ED and the hospital and live longer in your community. That is a game changer!

Average seniors housing price per unit reaches over $200,000 for first time.

There was no shortage of activity in the U.S. seniors housing and care transactions market in 2019. The story of abundant liquidity continued throughout the year with the number of closed transactions reaching a time-series high going back to 2008. Indeed, there was no sign of reduced interest from investors and the transaction market continued to show significant activity once again which, barring any economic or capital market shocks, is most likely to continue into 2020.

Seniors housing and care closed transactions volume in 2019 registered $15.7 billion, which includes $11.1 billion in seniors housing, and $4.7 billion in nursing care. The total volume was up nearly 6% compared with 2018 volume of $14.9 billion. However, the yearly comparison  differs when looking at the sectors separately as seniors housing dollar volume was up and nursing care volume was down compared to 2018. Seniors housing saw a 19% increase in volume from $9.3 billion in 2018, and nursing care volume was down 17% from $5.6 billion last year.

For closed transactions, the yearly count reached a time-series record going back to 2008. The number of deals closed in 2019 totaled 617, which was up 15% from the 535 closed in 2018, and up 22% from the 505 transactions closed in 2017. This new record of transactions closed is another indicator of the high level of interest from investors, especially the private buyers in the market.

In the bar chart below, note that the private buyer has been consistent in terms of closed transaction dollar volume over the past three years, ranging from $6.1 billion in 2018 to $7.1 billion closed in 2019. This buyer type registered a solid year in 2017 as well with $6.3 billion in closed transactions. The private buyer represented almost half of the dollar volume in 2019 with 45% of closed volume, up from the 41% share of volume in 2018. The 2019 private buyer volume was up 16% from 2018 and 13% from 2017.

Not many significant-sized transactions, for example over $500 million, were tallied. But many transactions closed for smaller portfolios and single properties within the private buyer category, which can include owner/operators, family offices, and other private partnerships whose primary focus is operating, developing, and/or investing in real estate.

Seniors Housing and Care Pricing

Seniors housing pricing had been trading in a range capped at the $180,000 mark since 2015.  But in the second half of 2019 that changed as the third quarter of 2019 saw a price per unit over $200,000 for the first time in the time-series since 2008. In the fourth quarter, price per unit increased 2.6% from $204,300 to finish 2019 at $209,600.

The blue colored line at the top of the graph below shows the uptick as 2019 closed. On a year-over-year comparison, seniors housing price per unit was up significantly as it increased 29.5% from $161,800 in the fourth quarter of 2018.  Also, worth noting is that from its low point, in 2010 of $58,500, price per unit is up over 250%.

In terms of nursing care pricing, represented by the orange line on the bottom, the story is much the same for increases in 2019. The price per bed is now back above $80,000 for the first time since the second quarter of 2018 when pricing took its latest downturn. Price per bed increased in the fourth quarter 2019 by 4.3% from $77,800 in the third quarter to end 2019 at $81,100. On a year-over-year comparison, nursing care price per bed was up 23% from $65,900 in the fourth quarter of 2018. From its low point in 2009 of $48,700, pricing per bed is up only 65%, which underscores the volatility in nursing care, as seen in the line graph below, especially in 2011.

In summary, pricing in both seniors housing and nursing care have seen a very positive upswing in 2019, based arguably on the stabilization of fundamentals for both, especially on the occupancy front. Labor continues to be a challenge for both, but absent a significant shock in 2020, for example a significant increase in interest rates or an economic downturn, we expect the fundamentals to continue to stabilize which should bode well for pricing. Of course, capital availability is a key driver as well, though that seems plentiful for now.

Scott Brinker, president and chief investment officer of Healthpeak, the nation’s third largest healthcare REIT, recently expressed frustration with the limitations of seniors housing data, that fails to provide insights into rate discounting. In Healthpeak’s fourth quarter, 2019 earnings call, Brinker said, “From where we sit today, occupancy across the sector is generally flat, which is certainly an improvement from where it’s been the past three years or four years. But too often, I think that occupancy is coming at the expense of discounting and incentives, and those aren’t being picked up by the [National Investment Center for Seniors Housing & Care] {asking rate} data that a lot of people like to focus on.”

During a time in which the market pressures Brinker describes are challenging investors, the meaningful transparency that actual rates data provides could hardly be more important to the sector. Brinker’s comments serve to underscore the importance, therefore, of NIC’s Seniors Housing Actual Rates Initiative, a program several years in the making, that is now beginning to report out exactly the type of local market data that seniors housing investors need to develop proformas, underwrite transactions, develop business plans and monitor portfolios.

For several years, NIC has been reporting seniors housing actual rates data at the national level, but in the past few months NIC’s data team has begun to roll out this data at the metropolitan level. Now, NIC MAP^® clients and providers of actual rates data can access key data on the actual rates residents are paying for their units, along with move-in and move-out rates, in Atlanta, Philadelphia and Phoenix. This new data provides investors, owners, operators, developers, and other stakeholders a powerful new metric to benchmark, analyze, and improve property underwriting and assessment within these markets. In Atlanta, for example, a market that has seen extensive new supply coming on line, Actual Rates data reveals discounting on assisted living units equivalent to two months’ rent upon move-in as of December 2019.

NIC Data Principal Brian Connolly has been working on the Actual Rates Initiative since coming to NIC over four years ago. In the early days, the effort faced a couple of major challenges. “When we came into this, there was a lot of collaborating with each operator to get their data reported in a standard format so NIC could process it and put it into an aggregate data set for analysis,” said Connolly. That wasn’t the only potential roadblock. “Asking for the specific rates actually being paid for individual units is sensitive. That was a bit of a challenge to overcome. Knowing that the data contributors are kept confidential and that the data is reported only in the aggregate, however, has alleviated such concerns among the data contributors,” he explained.

To facilitate easier and more efficient participation by operators in contributing their data, NIC decided to approach software providers in the space for help. “We wanted to work with them, so that they could program, on behalf of their respective clients, the standardized data contributing reports required by NIC. Then, an operator could simply go into a familiar software system they already use, download a report, and hit a button to submit it to NIC,” explained Connolly. The certification of Yardi as NIC’s first Actual Rates Partner, was followed by the additions of Matrix Care Senior Living and Point-Click-Care, and more will follow. “Now, any operator using software from one of our partners can, after an initial configuration, click a button to contribute their actual rates data to NIC. That really makes it easier for NIC to recruit more operators.”

As more operators participate, more metropolitan markets will meet NIC’s threshold for property participation, which ensures confidentiality. Once enough properties in any given metropolitan market are reporting their data, NIC will begin to report on that market. That reality, combined with the relative ease of reporting, will hopefully encourage more operators to participate in this initiative, in order to gain valuable tools and insights where they operate.

NIC’s intention is to provide data down to the metropolitan market level. As Connolly sees it, “Our ultimate goal is that this Actual Rates data will be available from nationwide coverage to specific markets, enabling data users to benchmark to market averages and compare trends across markets.” With Atlanta, Philadelphia, and Phoenix already reporting metro-level actual rates data, NIC is on its way to achieving that vision, which should encourage investors and capital providers such as Healthpeak’s Brinker – and motivate operators to participate.

Look for the expanded article on this topic in the upcoming NIC Insider newsletter, published monthly on nic.org.

To learn more about participating in NIC’s Actual Rates Initiative, visit www.nic.org/actual-rates or contact bconnolly@nic.org.

NIC has a virtual treasure trove of data related to the seniors housing and care sector that can provide insights into operations for both operators and investors. In the coming months, as we begin a new year and decade, NIC’s Analytics and Research Teams will provide such insights. This is a condensed version of NIC’s first Actionable Insight article, published in the February NIC Insider newsletter, and serves as a preview of more to come. As always, we appreciate feedback and commentary on this article as well as our monthly NIC Insider articles and our two frequently updated blogs—NIC Notes Blog and Senior Care Collaboration Blog.

ACTIONABLE INSIGHT: For this article, NIC’s analysis shows that on a rolling four quarter basis, the average time to construct a new seniors housing property—either assisted living or independent living—takes nearly two quarters longer today than it did in 2014. This suggests that when underwriting a new seniors housing property development, a longer time frame should be considered between the time when a project breaks ground and the time when it is opened for occupancy.

EXECUTIVE SUMMARY: Construction, delivery pipelines, and development are hot topics in the seniors housing sector. Anecdotes abound regarding the time to opening from the time ground is broken on a new property. This commentary uses NIC MAP® data to investigate the anecdotal comments that new property development projects are taking longer today than they did in 2014. The reasons could include but are not limited to changing unit mix and complexity of projects, rising construction costs, changing regulatory environments, and limited availability of trained subcontractors—especially for those who specialize in subtrades that require more skill.

KEY FINDINGS: Key findings from NIC’s analysis include:

• The rolling four quarter average number of quarters between when a new property breaks ground to when it is open for occupancy has increased since 2014. Data from 1Q 2014 through 4Q 2019 for both majority independent living (IL) and majority assisted living (AL) properties for the NIC MAP® 99 Primary and Secondary Markets supports this anecdote.
  • • For majority IL properties, the analysis showed that the rolling four quarter average number of quarters from groundbreaking to opening increased by 1.7 quarters from 6.1 quarters in 1Q 2014 to 7.8 quarters in 4Q 2019.
    • For majority AL properties, the rolling four quarter average number of quarters from groundbreaking to opening increased by 1.6 quarters from 5.1 quarters in 1Q 2014 to 6.7 quarters in 4Q 2019.
• Over this time period for the 99 Primary and Secondary Markets on a rolling four quarter basis, majority IL consistently took longer on average from ground break to opening than majority AL did.
  

EXPLANATION OF FINDINGS: Potential factors affecting these observations include but are not limited to:

• Freestanding memory care (MC) properties are a subset of the majority AL properties. Freestanding MC properties tend to have smaller unit counts. If the size of a property is a contributing factor to how long it takes for a property to be built, freestanding MC properties may be a playing a role in majority AL averaging a shorter time to open than majority IL through the time series.
• Continuing care retirement communities (CCRCs, also known as life plan communities) also tend to be majority IL properties and tend to be larger properties. Again, if the size of a property is a driving factor in time to opening, CCRCs could be a contributing factor to majority IL properties having longer times to opening.
• Unit counts and/or unit sizes may be getting larger and elongating the construction process, thereby lengthening the time from groundbreaking to opening. Projects may be getting more complex in terms of having more amenities and finishes as well as more common space, therefore taking longer to construct. Additionally, it is common to have two to three product types in each building, which may add to the complexity of the project.
• In general, there are fewer majority IL properties opened in any rolling four quarter period during this time period than majority AL properties. Majority IL averaged 40.3 properties per rolling four quarter period since 1Q14 (i.e., on a quarterly basis, this averaged as 8.8 new majority IL properties per quarter). Majority AL averaged 195.2 properties per rolling four quarters (i.e., on a quarterly basis, this averaged 41.4 new majority AL properties per quarter).

Other external factors contributing to a longer length of time to opening may include:

• Rising costs of construction for all types of construction, residential and commercial, including seniors housing.
• Increased competition for construction labor, especially for the subtrades that require certain skills. During the Great Recession, some workers in the subtrades left the industry and have not come back. This has led to a shortage of trained workers and has made scheduling projects particularly challenging. Often one delay leads to others, as one’s place in the scheduling queue shifts.
• With some areas across the nation experiencing heightened volumes of construction activity and new supply, licensing, approval and regulatory departments have backlogs, which often contribute to delays in construction schedules. Anecdotally, it is becoming more common that a completed project can wait four to six weeks to open due to inspector delays.
• More recently, hurricane and natural disasters have also delayed certain projects for emergency work and repair, ex., electrical hook ups.

LIMITATIONS AND CAVEATS. It is important to note that construction data is revised. NIC occasionally finds out that a project has broken ground after it has done so or that a property indicated groundbreaking prematurely. Occasionally, a property will open sooner than estimated or indicate a shift in the open date. This means that over time there may be shifts to what cohort a property falls into or occasionally potential shifts to length of time under construction before being open for business.

Future analyses could investigate questions around unit mix, frequency of phased openings, and other questions around inventory trends like the relationship between project size and time to opening. Future analyses could also investigate whether the trend observed in the current data continues over time.

CONCLUSION: The rolling four quarter average length of time from a new seniors housing property breaking ground to having open units has increased since 2014 for both majority IL and majority AL in the 99 Primary and Secondary Markets. As of 4Q19, majority IL properties have a rolling four quarter average of 7.8 quarters from ground break to opening. Respectively, majority AL properties have a rolling four quarter average of 6.7 quarters from ground break to opening. These numbers reflect the aggregate trend for the 99 Primary and Secondary Markets, and there is likely variability at the metropolitan market level. Some markets may not be not seeing an elongation of the construction cycle, while other markets are possibly experiencing longer delays (potentially markets with a larger number of projects underway). When putting together plans for development, it makes sense to consider today’s environment of a more elongated construction cycle.