Skilled Nursing Occupancy Increases Slightly, May Be First Sign Of Recovery

December 18, 2018, Jeff Shaw, REBusiness Online - The skilled nursing occupancy rate saw a slight uptick in the third quarter of 2018, increasing 14 basis points to 82.2 percent, according to data from the National Investment Center for Seniors Housing & Care (NIC).

Despite the increase, occupancy is still a full percentage point below year-earlier rates and has been on a sharp slide for the last three to four years.

NIC is an Annapolis-based nonprofit data firm serving the seniors housing industry.  The skilled nursing occupancy data is gleaned from 1,449 reporting facilities in 47 states.

NIC experts expressed surprise at the increase, given that occupancy typically declines or stays flat between the second and third quarter of a year.  The increase may be the first signs of recovery on the horizon.

“The 83 to 87 age cohort over the last couple years was decreasing as far as growth rate.  Starting 2018 that cohort is now growing,” says Bill Kauffman, senior principal at NIC.   “From a seasonality perspective we generally do not see an increase from the second quarter to the third quarter.  That’s notable.  We won’t call it a new trend yet — we want to see more data over the next year, particularly as we go through the flu season.  Once we get into the spring of 2019 we can shed more light.”

Although the baby boomer generation is still quite a few years away from reaching the appropriate age for skilled nursing, there was a spike in population growth in the late 1930s as the Great Depression waned.  That demographic shift will offer a boost to today’s skilled nursing operators, according to Beth Burnham Mace, chief economist for NIC.

“We have turned the corner now away from a decline in those key age cohorts into an increase in those categories,” says Mace.

Additionally, because of the recent headwinds, skilled nursing has actually seen a decline in bed count over the past few years.  This will offer a boost to occupancy rates as demand goes up, but supply goes down.

“Unlike the private-pay seniors housing sector where there’s a lot of development, that’s not the case in skilled nursing,” says Mace.  “Hopefully that will support the sector.”

Changing usage patterns have been a major factor in the recently depressed skilled nursing occupancy rates.  Factors that may be at play include:

  • Medicare Advantage is gaining ground and encourages shorter lengths of stay.
  • Medicaid is encouraging seniors to tap home- and community-based services for care over skilled nursing.
  • Hospitals are increasingly discharging patients to their homes rather than qualified skilled nursing facilities.

Despite these headwinds, both Medicare and Medicaid revenue saw an increase in the third quarter and year over year, another sign of potential recovery, says Kauffman.  This trend is particularly notable in urban areas, where Managed Medicare revenue not accounts for 10 percent of revenue.

Lastly, Mace called for more skilled nursing providers to partner with NIC in order to improve the accuracy and transparency of the organization’s data.

“NIC is proactively trying to get more data contributors to make our numbers more robust,” says Mace.  “Ultimately we want to produce this report at the state level, and we need more contributors to do that in a statistically viable way.”

To view the full third-quarter skilled nursing report, click here.