With wage inflation and continued labor market challenges and shortages, skilled nursing operators and owners face steep competition relative to other industries (i.e., indirectly from other service industries such as hotels and restaurants) especially those operating in regions and states where broad labor availability is tight and employer demand is high. Additionally, amid generally low occupancy levels, skilled nursing owners and operators face challenges over the long term with new and proposed staffing mandates and requirements. 

The greatest shortages of healthcare staff continue to be among essential workers such as nursing staff and aides, the backbone of the skilled nursing sector. This blog post explores underlying staffing shortages data among nursing staff and aides in the skilled nursing industry from three perspectives: location (region), property-level occupancy, and the size of the property. Further, it examines how the ongoing staffing crisis affects skilled nursing properties based on these three measures and includes an interactive dashboard to explore the varying combinations of these measures on resulting levels of properties’ staff shortages.

As background, according to the latest Bureau of Labor Statistics (BLS) data, the seasonally adjusted number of employees at skilled nursing properties increased to 1,361,000 in September 2022, up 18,300 jobs from its pandemic low of 1,342,700 in March 2022. Despite these recent job gains, employment in skilled nursing is still 220,200 jobs below pre-pandemic March 2020 levels (1,581,200), equivalent to negative 13.9%, and 312,600 jobs below its peak of 1,673,600 in September 2011, equivalent to negative 18.7%

Staffing shortages likely hit their peak earlier this year in January 2022 and started to ease since. Notably, the share of skilled nursing properties reporting shortages of nursing staff dropped from 28.0% in January 2022 to 20.8% in September 2022, and the share of skilled nursing properties reporting shortages of aides dropped from 29.7% to 21.6% over the same period, according to the Nursing Home COVID-19 Public File (CMS data as of September 18, 2022, compiled by NIC Analytics).

By Region. As Exhibit 1 below shows, no region has been spared the scarcity of nursing staff and aides. However, staffing shortages in the Midwest have been acute. About 37% of skilled nursing properties in the Midwest reported shortages of nursing staff, and nearly 40% reported shortages of aides back in January 2022, the highest levels recorded since the onset of the pandemic, across all U.S. regions. 

By mid-September 2022, as staffing shortages slightly eased, about 30% of skilled nursing properties in the Midwest reported shortages of nursing staff and aides, nearly twice that of the South, Northeast, and West regions.

By Occupancy. The pandemic stretched finances for many skilled nursing operators, and the relatively slow pace of occupancy recovery is an additional challenge. Just like the employment trends, occupancy for skilled nursing properties is recovering but remains far below pre-pandemic levels. The relationship between labor and occupancy and conversely for occupancy and labor is synergistic and a bit of a chicken and egg scenario. In some instances, if labor isn’t available, new patients cannot be admitted, but if patients cannot be admitted, occupancy cannot be improved. The key question is what are the potential solutions to break this challenging cycle and help skilled nursing properties be competitive in attracting staff, improving occupancy, and providing the best and needed care for patients?

Exhibit 2 below shows that the higher the occupancy, the lower the share of skilled nursing properties reporting shortages of nursing staff and aides. Notably, skilled nursing properties with an occupancy rate below 80% had, and continue to have, the highest proportion of properties indicating a shortage in nursing staff and aides. By comparison, skilled nursing properties within higher occupancy cohorts have been reporting relatively lower shares of properties experiencing shortages of nursing staff and aides.

By Property Size. Another way to look at this data is by property size or total units. Interestingly, the highest share of skilled nursing properties reporting staffing shortages has been among small properties (less than 50 units). Exhibit 3 below illustrates that small properties tend to have a higher share reporting shortages of nursing staff and aides, and vice versa. In general, the smaller the property, the more volatile the occupancy due to the impact of just a few moveouts. This may impact staffing as well across these smaller properties, especially if they are not part of a larger portfolio.

Taking just these three variables into account — property location, occupancy, and size — staffing shortages vary substantially. For example, finding and hiring staff can be more challenging for small properties (less than 50 units) in the Midwest, with an occupancy rate less than 80%. In fact, the interactive dashboard below tracks closely these measures and indicates that about 40% of skilled nursing properties within this group reported shortages of nursing staff and aides for the week ending September 25, 2022, the highest share of any other combination of these three measures. 

Conversely, less than 5% of relatively larger skilled nursing properties (100+ units) in the West, with an occupancy rate of 90% or more, reported shortages of nursing staff and aides, the lowest share of any other combination of these three measures. 

To monitor these staffing shortage measures at the state and county levels over time, visit NIC’s Skilled Nursing COVID-19 Tracker.

The U.S. Bureau of Labor Statistics reported that nonfarm payrolls rose by 263,000 in September 2022 and the unemployment rate fell back to its July level of 3.5%. The September increase was well below the year-to-date average of 420,000 and below the monthly average of 562,000 seen in 2021. The monthly gain paints an image of a still growing, but slowing, job market. Revisions added 11,000 positions to total payrolls in the previous two months.

Employment in health care rose by 60,000 in September and has now returned to its February 2020 level. Employment in nursing care facilities was up by 14,300 jobs from year-earlier levels and stood at 1,361,000.

In a separate survey conducted by the BLS, the jobless rate slipped back to 3.5% for September, down from 3.7% in August. The jobless rate is once again equal to its pre-pandemic level of 3.5% seen in February 2020, and well below the 14.7% peak seen in April 2020. At 3.5%, the jobless rate matches its 50-year low seen before the pandemic. Among the major worker groups, the September unemployment rates were 3.4% for adult women, adult men (3.3%), teenagers (11.0%), Whites (3.1%), Blacks (5.8%), and Asians (2.5%).

Average hourly earnings for all employees on private nonfarm payrolls rose by $0.10 in September to $32.46. This was a gain of 5.0% from year-earlier levels, still high, but lower than in August (5.2%). Notably, on a three-month annualized basis, wages rose by a slower pace of 4.4%.

The labor force participation rate slipped back to 62.3% in September from 62.4% in August and was below the February 2020 level of 63.4%.

Earlier this week, the BLS released its JOLTS report that showed the number of job openings fell 10% in August to a seasonally adjusted 10.1 million from 11.2 million in July. That left job openings at their lowest level in one year, but still well above their pre-pandemic level in 2019 when they averaged 7.2 million

These combined reports support the Federal Reserve’s intention of continuing to raise interest rates further following the 75-basis point hike in the federal funds rate in late September. Already, the Fed has increased interest rates five times this year to a current target range of 3% to 3.25%, its highest range since early 2008. Another two rate hikes are anticipated for 2022. Further, a majority of the Federal Open Market Committee (FOMC) members see the fed funds rate reaching a level of between 4.5% and 5.0% in 2023.

According to quarterly NIC MAP^® data, released by NIC MAP Vision, demand, as measured by the change in occupied units, largely outpaced new supply while marking its sixth consecutive quarter of positive increases, with a net absorption gain from the prior quarter of more than 8,700 units, or 1.6% for the NIC MAP Primary Markets. This advance pushed the share of senior housing units vacated during the pandemic that have been re-occupied to near-full recovery (95%). If this pace of demand growth continues into the next quarter, senior housing may soon start filling new inventory added during the pandemic, on a net basis.

As a result of supply/demand trends, the exhibit below shows that the all-occupancy rate for senior housing for the NIC MAP Primary Markets increased for the fifth consecutive quarter to 82.2% in the September 2022 reporting period, up 1.0 full percentage point (pps) from the June 2022 reporting period on a three-month rolling basis, with a small gain of 0.1pps from August 2022. From its time series low of 77.9% in June 2021, occupancy increased by 4.3pps but remained 5.0pps below pre-pandemic March 2020 levels of 87.2%.

By Majority Property Type. At 84.7%, the all-occupancy rate for majority independent living (IL) properties for the NIC MAP Primary Markets increased 0.9pps from June 2022, with a gain of 0.2pps from August 2022. For majority assisted living properties (AL), the all-occupancy rate for the NIC MAP Primary Markets remained unchanged from August 2022 but was up 1.1pps to 79.7% from June 2022. Occupancy for both independent living properties and assisted living properties remained 4.9pps below March 2020 levels.

All-occupancy increased or remained stable in 27 of the 31 Primary Markets for IL in the September 2022 reporting period compared with June 2022. At 82.2%, Miami saw the largest quarterly improvement in September 2022, up 2.4pps from June 2022. Orlando IL occupancy fell 1.6pps in September 2022 to 84.5%. Orlando had the largest quarterly decline among the 31 NIC MAP Primary Markets.

All-occupancy rose or remained stable in 29 of the 31 Primary Markets for AL in September 2022 compared with June 2022. At 78.4%, Phoenix occupancy saw the largest increase since June 2022 and gained 2.8pps quarter-to-quarter. Seattle’s occupancy remained unchanged from August 2022 but fell by 1.4pps from June 2022 to 77.5%. Seattle had the largest quarterly decline among the 31 NIC MAP Primary Markets.

Keep track of the most timely comprehensive 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, even as senior housing markets sustain a fast pace of evolution and adaptation, amidst an apparent recovery. 

The October 2022 IQ Snapshot report will be released on nic.org on Thursday, November 10, 2022, at 5:00pm.

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.

Senior housing and care’s premier event delivered on three days of connections, learning, and engagement.

Bringing together more than 2,800 industry participants, the 2022 NIC Fall Conference surpassed turnout expectations as attendees explored the near-term challenges of the senior housing and care sector, and the long-term opportunities as a demographic wave of older adults begins to arrive. The Conference was held September 14-16 at the Marriott Marquis in Washington, D.C. Highlights included:

• • A detailed economic and industry specific outlook.
  • The inaugural Women’s Networking Meetup.
  • Insightful educational sessions.
  • A NIC white paper defining the emerging active adult segment.
  • New research underscoring the integration of healthcare and housing.
  • Multiple daily, formal and informal, networking opportunities.

More than 70% of all those at the event were executives at the C-suite or managing director levels. Attendees also represented a good balance of both senior living operators and capital providers. Notably, the Conference drew 637 first-time attendees.

In opening remarks, NIC Board Chair Kurt Read, managing director at RSF Partners, noted that NIC is much more than a conference. Rather, he said, “NIC is the collective expression of the passionate commitment to create better environments now and in the future for our nation’s elders and those who serve them.”

The Fall Conference theme— “Forward Together”—highlighted the resilience and perseverance of the industry and the importance of building effective partnerships among operators, healthcare providers, investors, and other capital sources.

“The pace of change is frantic,” said NIC President and CEO Brian Jurutka, who listed the big industry challenges of rising expenses, a workforce shortage, ongoing pandemic-related issues, and the needs of a growing elderly population. “NIC is a platform and resource to help the industry move forward together,” he said.

Valuable Connections

As the premiere industry event, the 2022 NIC Fall Conference engaged attendees in three days of results-oriented networking, information sharing, and timely educational sessions. Industry leaders shared their perspectives and insights on a wide range of topics including the emerging active adult segment, the new consumer, capital market trends, and how to successfully scale operations, among other issues.

NIC Chief Economist Beth Mace was the featured speaker at the inaugural Women’s Networking Meetup, where nearly two hundred women executives exchanged ideas and made connections. Mace offered her insights and advice on the changing role of women in the industry. One tip: Be open to change.

Actionable Content

The Conference offered 10 stand-alone educational sessions. (High quality videos of all educational sessions are available to attendees in the Conference mobile app.)

Attendees packed the Marriott Marquis ballroom for the keynote session, “Economic and Financial Market Outlook.” Financial forecaster Jason Schenker delivered a lively, data-rich analysis of the economy’s bright spots and current risks.

“More people are working than ever before,” said Schenker, president of Prestige Economics and chairman of The Futurist Institute. But wages are rising, and inflation is up 8.3% annually, the highest rate since 1981.

Demographics are a big plus for senior living. “We will have a steady stream of residents,” he said. The healthcare needs of an aging population will greatly impact the workforce. In fact, he noted that 5 of the top 10 areas for job growth are in health-related occupations.

“The next 2-3 years will be tough,” predicted Schenker, citing expense pressures, rising interest rates, and worker shortages. But he was generally optimistic about conditions 24-36 months from now. His advice to attendees: “Plan for long-term upside opportunities.”

Several sessions addressed the new consumer and the growing active adult segment. NIC presented a white paper defining the property type. Key components include age-eligibility, majority market rate, rental, and lifestyle focused.

A panel of experts discussed the investment case for active adult in the aptly titled session: “Rational Exuberance.” Investors like the demographic profile of residents and their extended length of stay.

The panelists parsed the differences between active adult, senior housing, and multifamily properties. The operation of active adult properties is more like that of multifamily projects. But the sales cycle is more akin to that of senior living. “We’re very bullish on the sector,” said panelist Joseph Fox, co-founder and co-CEO, Livingston Street Capital.

Separately, a panel of industry leaders analyzed the new customer—a group much different from the population the industry has been serving. Baby boomers are harder to please than their predecessors. The panelists agreed that baby boomers are seeking an experience, not just a place to live.

“We are too wrapped up in the real estate,” said William Swearingen, senior vice president, marketing and sales, Spectrum Retirement Communities. It’s important to showcase the active lifestyle and the cultural reference points that baby boomers understand, he advised, “Take a chance.”

A CEO roundtable provided a big picture perspective on operations, the new customer, and workforce issues. In a separate panel discussion on repositioning, Tana Gall, president, Merrill Gardens, detailed how the company refashioned a portfolio for the middle market, now named Truewood by Merrill. Other speakers shared strategies on unit mix, tapping untapped workers, and how to reconfigure floor plans to boost staff efficiency.

The session, “Stay Focused and Keep Working: Effectively Scaling Your Operations,” mapped out successful approaches. Experts explored the pluses and minuses of acquisitions, new developments, and management assignments. “You need a plan to scale and grow,” noted panel moderator Bryan Starnes, CFO, ALG Senior.

New research, funded by NIC, was introduced at the Conference. It shows that senior housing residents average more than a dozen chronic conditions. The research was conducted by NORC at the University of Chicago. The study also highlights the opportunities to integrate healthcare and housing to improve health and cut costs.

A number of speakers at the Conference emphasized that the pandemic has secured a place for senior living in the healthcare continuum. Partnerships, in various forms, are growing quickly between senior living providers and healthcare systems.

The investment-focused sessions were well-attended. A panel discussion on environmental, social, and governance (ESG) strategies highlighted its growing role among institutional investors. Speakers also discussed the push for diversity, equity, and inclusion (DEI) initiatives.

Other popular sessions detailed the state of the capital markets and deal-making as operators rebuild occupancy. The consensus was that capital is available for the right product in the right place. Echoing much of the buzz at the Conference, speaker Julie Ferguson, executive vice president at Ryan Co. said, “We believe in the long-term value of senior living.”

“In addition to managing occupancy and staffing challenges, skilled nursing operators need to be laser-focused on reimbursement at the state level as Medicaid represents 51% of revenue.”

– Bill Kauffman          

NIC MAP Vision released its latest Skilled Nursing Monthly Report on September 29, 2022. The report includes key monthly data points from January 2012 through July 2022.

Here are some key takeaways from the report:

Skilled nursing property occupancy was relatively flat in July. It ended the month at 78.1%. In the last five months, skilled nursing occupancy has hovered in the range of 78% which is the highest occupancy level since April 2020, at which time occupancy began to fall rapidly due to the onset of the pandemic. Occupancy continues to recover since the pandemic low of 72.9% set in January 2021 but has encountered challenges such as new COVID-19 variants and staffing shortages. Staffing shortages continue to create difficulties within skilled nursing properties limiting the ability to admit new residents in some markets. However, the current occupancy trend does suggest that demand for skilled nursing properties is recovering, given the 148-basis point increase from January to July this year (2022). Occupancy has increased 151 basis points from one year ago and 517 basis points from its pandemic low.

Managed Medicare revenue per patient day (RPPD) continued its decrease in July. It decreased from $460 to $458 in July and is down 1.1% from last year in July 2021. It has decreased $112 (19.6%) from January 2012. The persistent decline in managed Medicare revenue per patient day continued to result in an expanded reimbursement differential between Medicare fee-for-service and managed Medicare, which accelerated during the pandemic until January 2022. The difference between Medicare fee-for-service and managed Medicare RPPD in January 2022 was $127. Pre-pandemic, in February of 2020, the differential was $95. However, the difference has decreased since January 2022 to end July 2022 at $115. Meanwhile, managed Medicare revenue mix was flat from June to July at 10.5%. It is up, however, 21 basis points from last year and has increased 244 basis points from the pandemic low of 8.1%. The increase from the pandemic low is likely due to growth in surgeries that require rehab, which typically creates additional referrals to skilled nursing properties.

Medicare revenue mix declined 25 basis points to end July at 21.9%. After increasing to start 2022, from December 2021 (20.7%) to January 2022 (24.8%), it has now decreased 308 basis points from the 2022 high (25.0%) set in February. The increase at the start of 2022 was likely due to the elevated number of COVID-19 cases in January and suggests there was a significant uptick in the utilization of the 3-Day Rule waiver as COVID-19 cases increased. 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 cases declined, the Medicare revenue share has declined as well. Meanwhile, Medicare revenue per patient day (RPPD) decreased to the lowest level of 2022 to end July at $574, which is down 2.6% from January. One possible explanation is there has been lower reimbursement due to relatively fewer COVID-19 cases compared to January 2022. Additional reimbursement is needed for COVID-19 positive residents, which requires additional measures of care to be implemented.  

Medicaid revenue mix increased 99 basis points from June to end July at 51.0%. It has increased 307 basis points since February. Some of this increase is related to what was mentioned above, regarding the decline in COVID-19 cases since the winter months and patients have now moved from Medicare patient days back to Medicaid, after utilizing the 3-Day Rule waiver. Meanwhile, Medicaid revenue per patient day (RPPD) increased from June to end July 2022 at $258. It is up 4.9% from the pre-pandemic period (February 2020) as many states embraced measures to increase reimbursement related to the number of COVID-19 cases to support skilled nursing properties, in addition to fiscal year increases.

To get more trends from the latest data you can download the Skilled Nursing Monthly Report. 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 this participation form. NIC maintains strict confidentiality of all data it receives.