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 Softer SNF Occupancy Rates Continue in Second Quarter: NIC

Fresh quarterly data from the National Investment Center for Seniors Housing & Care (NIC) released on Sept. 13 show occupancy rates at skilled nursing facilities (SNFs) down to a new record low of 81.7 percent in the second quarter of 2018. NIC experts point to policy changes related to reimbursement and shortened lengths of stay as well as competition from assisted living and home health as reasons for the continued slippage.

The NIC 2Q2018 Skilled Nursing Data Report featured these key findings:

--The SNF occupancy decline for the second quarter amounted to a decrease of 79 basis points to 81.7 percent from the first quarter of 2018. Year-over-year occupancy retreated 137 basis points from 83.1 percent recorded in the second quarter of 2017. NIC said the sharpest decline was in rural markets, which dropped 89 basis points quarter-over-quarter.

--Quality mix (the total number of Medicare, managed Medicare/other, and private days divided by total number of actual patient days) fell 127 basis points on a national basis to 34 percent for the second quarter, the lowest level within the time-series data, which dates back to October 2011. NIC said the main factor driving the decrease is the fact the Medicare patient day mix was down 129 basis points quarter-over-quarter and is now at a time-series low of 12.1 percent. Medicare patient day mix has declined 452 basis points since October 2011.

--Managed Medicare patient day mix decreased 41 basis points to end at 6.4 percent for the second quarter of the year. When compared with the second quarter of 2017, the data show that the growth in managed Medicare patient mix has been relatively flat, with a 4-basis point decrease, something NIC called “an interesting trend considering the discussions about the increase in managed Medicare throughout the sector.” This movement could reflect the renewed pressure on length of stay from managed Medicare, resulting in lower overall patient days, NIC said.

--Private patient day mix at the national level increased slightly from the first quarter to the second quarter, but the longer-term trend remains downward, with a year-over-year decline of 78 basis points to 8.8 percent. Of note, the private patient day mix is highest in rural areas at 15.4 percent. “Revenue mix also reflects the importance of private pay for rural skilled nursing properties, with 13.9 percent of their revenue coming from private pay as of the second quarter 2018,” NIC said.

Beyond the latest numbers, NIC experts tell Provider there are many facets of the current downtrend in occupancy. Bill Kauffman, senior principal at NIC, explains that the movement to value-based care, the growth in managed care, and the supply-demand imbalance for SNFs in the Medicare space are all pressure on occupancy levels.

“We will continue to see softer occupancy until supply-demand comes back into balance,” he says. But, there could be even more downward momentum when the new Patient-Driven Payment Model (being established by the Centers for Medicare & Medicaid Services for the Medicare program) goes into effect October 2019, Kaufman says, pointing to the possibility for more incentives to shorter lengths of stay and possibly bypass SNFs.

But, Kaufman says the much-talked about demographic benefits of an aging baby boomer population in the coming years is real and is part of a potential positive trend for skilled nursing owners and operators.

“Headwinds could turn into tailwinds,” he says, adding that not only will there be a large increase in older boomers, but there is also the supply picture to consider. “In our sector, the number of beds has decreased along with the demand,” Kaufman says.

In addition, there are rather tough barriers to getting into the SNF business, with bed moratoriums and Certificate of Need programs playing major roles. “If demand picks up there is a bright future there,” he says.

Liz Liberman, NIC’s health care analyst, says there is also the generally strong economy to consider when it comes to outside factors hitting the SNF occupancy outlook.

“One piece of why we are seeing the occupancy decrease is the increased competition from alternatives that have been enabled by the turnaround of the economy,” she says. One example is the ample and growing supply of assisted living properties since the recessionary years of 2008 and 2009.

“The growth in assisted living as a competitor to skilled nursing could be impacting market share, as the economy is going well, it makes it easier to get projects off the ground.”

Unlike in the SNF world, where it is rare to build from the ground up, assisted living properties are almost entirely created from the ground up, Liberman says.

The robust economic environment could also be enabling strength in the home health and home care sectors as more technology via the Internet is introduced to make it easier to both supply care and to bring advances to the person where they live, versus being in a facility, she says. This could come in the form of telehealth or simply a greater supply of home care providers.

Read the full NIC report at www.nic.org.

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