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 NIC Says SNF Occupancy Rates Increase in 3Q, Surprising Analysts

In at least a temporary reversal of fortunes for skilled nursing facilities (SNFs), new data showed the number of beds filled on the rise in the third quarter of 2018. Average occupancy rates increased 14 basis points to 82.2 percent from 82.1 percent in the second quarter of this year (figures are rounded), according to the National Investment Center for Seniors Housing and Care, or NIC.

Analysts at NIC described the new data as “notable” given the trend in recent years for decreased occupancy in the third quarter, and the more general pressure on SNFs from shorter lengths of stay, a push for home health care over institutional care, and demographics that have reduced the number of nursing care-aged seniors.

But even if this new report is not a trend by itself, the information displays a stabilization in SNF occupancy levels, says Bill Kauffman, principal for NIC.

“The last six months since April through September have seen some stability in occupancy,” he tells Provider. “Certainly there has been some fluctuation from month to month, but we have seen some relatively stable occupancy data since April, and so I think that is notable.”

The fact the slight uptick in average occupancy occurred in the third quarter is a key as well, Kauffman says. “Also notable is the seasonality perspective because over the last three years we have not seen occupancy increase from the second to third quarter. So, there are some hints there [of a stabilizing or improving market] from our perspective,” he says.

Since the data for the third quarter is only for three months, Kauffman says there should be no rush to call the improvement a trend. “We are going to have to go through flu season and through the end of the fourth quarter. Before we call this a trend we really want to see some data going into the spring of 2019,” he says.

In a broader look at the SNF profession, Kauffman says despite the pressures on occupancy there are supply and demand factors that are likely underpinning occupancy levels now and more notably into the future when more baby boomers age well into their 80s.

“As we know there is an aging demographic, and certainly a cohort in that aging demographic of 83- to 87-year-olds is starting to grow and will continue to grow over the years to come. Maybe that is playing a role,” he says.

On the supply side, shrinkage in the number of beds available is also a factor that plays in the favor of stable occupancy levels, says Beth Burnham Mace, NIC’s chief economist, citing Certificate of Need laws and recent moratoriums in some areas on new SNF beds.

Other findings from NIC’s quarterly Skilled Nursing Report show the share of revenue from Medicare Advantage (MA) patients is up over the prior quarter at 10 percent in the third quarter of 2018, with a larger portion coming from urban areas (12 percent) than rural (4.7 percent). They note that rural areas are seeing MA plan growth, but more slowly than in urban areas.

“As Medicare Advantage continues its rapid growth, we’re seeing it become a larger contributor to skilled nursing revenue, while at the same time possibly contributing to occupancy declines with shorter lengths of stay,” Mace says. “With the influx of older seniors, we may start to see skilled nursing shortages as facilities close, but the numbers of potential occupants rise.”

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