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 SNF Occupancy Posts First Year-on-Year Increase in Four Years

Data in the latest Skilled Nursing Report issued by the National Investment Center (NIC) for Seniors Housing and Care said 83.7 percent of skilled nursing facility (SNF) beds were occupied on average for the first quarter of 2019, marking the first time since January 2015 that average occupancy levels experienced a year-on-year gain.

The latest positive news extended a mini-trend that has seen SNF occupancy advances since June 2018, NIC said.  

Bill Kauffman, senior principal at NIC, said the continued upward trend for the first three months of 2019 point to more than just the traditional uptick for flu season. “Occupancy was also up between March 2018 and 2019, suggesting supply and demand are becoming more closely aligned,” he said.

NIC said overall SNF occupancy increased 77 basis points from the fourth quarter of 2018 to 83.7 percent in the first quarter of 2019, the highest rate since the first quarter of 2018. Year-on-year occupancy also increased 28 basis points from March of 2018 to March of 2019, the report said. The occupancy trend was the same in both rural and urban areas as it increased on both a quarterly and yearly basis.

“The quarterly occupancy increase was more pronounced in urban areas, however, as it increased 100 basis points from the fourth quarter to 84.9 percent at the end the first quarter 2019,” NIC said.

First-quarter 2019 skilled mix increased from the fourth quarter of 2018 as well. NIC said the gain was driven by the increase in managed Medicare, although Medicare mix rose, too. “This suggests that higher-acuity patients were a driver in the first quarter as they are often admitted during the winter/flu season, which in turn often drives an increase in overall occupancy,” the report said.

Skilled mix increased 84 basis points from the fourth quarter 2018 to end the first quarter 2019 at 26 percent. However, skilled mix was down 103 basis points compared with the first quarter of 2018 when it was at 27 percent.

In looking at revenue issues, NIC said overall managed Medicare revenue mix ended March 2019 at 12.1 percent. This revenue mix increased 106 basis points from the fourth quarter of 2018 and 169 basis points from the first quarter of 2018, when it was 10.4 percent.

“This continued growing influence on operator revenue further demonstrates the importance of the managed Medicare payer within the skilled nursing sector,” the report said. “This trend is evident across both the urban and rural areas.”

But, the revenue mix is highest in the urban areas, where penetration is more evident due to the density and managed care opportunity, as it ended the first quarter 2019 at 14.0 percent.

Managed Medicare revenue per patient day (RPPD) pressures appeared again in the latest data as it decreased from $439 in the fourth quarter 2018 to $432 as of March 2019. It was down $14, or 3.2 percent, compared with a year ago when the RPPD was $446.

This trend is evident in both urban and rural areas as the RPPD decreased on a quarterly basis and yearly basis in both geographies. It ended the first quarter 2019 at $436 in urban areas and $408 in rural areas. The RPPD decrease in the rural areas likely has less of an impact on the business as the managed Medicare penetration is smaller than in urban areas, the report said. The managed Medicare patient day mix in rural areas is only 3.4 percent compared with the 8.6 percent in urban locales.

NIC said Medicaid patient day mix decreased to 65.8 percent in the first quarter 2019 compared with the 66.4 percent in the fourth quarter 2018. The decrease is likely due to the increase in other payer sources, such as Medicare and managed Medicare, rather than a fall in patient admissions, as occupancy increased overall in the first quarter 2019.

NIC said, however, that with the prevalence of Medicaid patients in SNFs, the pressures are considerable on providers because Medicaid reimbursement in many states has not kept up with the cost of care.

This, among other factors, is contributing to the recent spate of facility closures. “Skilled nursing is increasingly reliant on Medicare Advantage and Medicaid for revenue, which is challenging many facilities’ financial well-being,” said Beth Mace, NIC’s chief economist. “Reimbursement rate pressures, competition from other care settings, and high personnel costs are also impacting the sector.”

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