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When it comes to occupancy trends for skilled nursing and assisted living communities, the numbers don’t lie. The market is on average softer, prompting providers to fight harder than ever to fill rooms and recalibrate budgets to account for the new realities they face.

 

 

 

The diminishing market, experts say, is due to value-based care entities like accountable care organizations (ACOs) often skipping facility-based care and sending patients home sooner to save money. Added to that, acute-care hospitals are eating up Medicare-stay days skilled nursing facilities (SNFs) traditionally use, managed care is squeezing costs for all facility-based care, and current policies favor people being cared for in their homes.

 

 

 

 

 

 

 

As a result, the national average occupancy rate is below 90 percent for SNFs and assisted living and has been for years. Second-quarter 2018 data from the National Investment Center for Seniors Housing & Care (NIC) placed assisted living average occupancy rates at 85.2 percent, while occupancy for skilled nursing was 82.1 percent as of March 2018, the latest data available at press time.

 

 

But, the numbers fail to tell the whole story of the uneven nature of occupancy across the country and, more notably, the ways in which owners and operators are responding to a hyper-competitive environment for seniors housing and care.

 

 

As with any measurement of a national industry, the seniors housing sector offers national-scale data, which are made of anomalies and mini-trends reflecting the uniqueness of each locality from which they are drawn. Beth Burnham Mace, chief economist and director of outreach at NIC, says there is no denying the trend in SNF occupancy is moving lower, a fact that has been the case for several years.

 

 

 

In March of this year, for instance, occupancy for skilled buildings dropped to 82.1 percent, a decline of 1.6 percent from 83.7 percent in March 2017. “Typically, we expect to see an uptick in occupancy, particularly at the beginning of the year because of seasonal factors like the flu, but that did not actually occur,” she says.

 

 

 

Whatever factors may move the needle on a month-to-month basis, the wider picture offers a general clue for the downward direction.

 

 

 

“Stepping back, the biggest challenge in the skilled nursing sector is probably the same thing that has been going on since 2015,” Burnham Mace says. “And, that is the shift to value-based care and the sector adjusting to strong growth in managed Medicare. There is also a supply and demand imbalance when it comes to available Medicare days.”

 

 

 

Wage pressures and the labor shortage are also economic factors weighing on SNFs, a bias that is affecting the national economy as well, she says.

 

 

NIC data have not offered relief for assisted living providers either, with that sector seeing the same trendline as SNFs, even if some of the reasons differ. “They are also seeing pressure, both on the demand side and the supply side. A fair amount of new product is being developed in assisted living, which is not the case for SNFs,” Burnham Mace says.

 

 

 

Development activity for assisted living is much more geographic-specific, with some areas of the country affected by an influx of new properties and plenty of construction and other locales less so.

 

 

 

“There is a pretty wide range of occupancy rates across the country, with the higher occupancy rates in more supply-constrained markets, such as San Jose, for example, and lower rates in markets like San Antonio,” Burnham Mace says.

 

 

 

It is not that unusual to see a disparity in seniors housing real estate because in general there is more development activity in the South, for example, with its lighter barriers to entry, she says. “The regulatory restrictions are fewer, and the cost of business is lower than you have in a market like San Jose, where seniors housing may not be the highest and best use of precious land in California.”

In asking a longtime leader about the occupancy trend issues, Bob Siebel, president and chief executive officer of Carriage Healthcare Companies based in Lakewood, Colo., makes it clear that he expects to see more of the same in the coming years.

 

 

“I think it is entrenched. I think the national occupancy numbers are getting close to somewhere in the 80 percent area, and obviously that varies from state to state,” he says. “I don’t think those numbers are going to change dramatically, and, if anything, I think they are going to keep declining at least for the next five or six years until the gross numbers start getting bigger” when older baby boomers swell in numbers.

 

 

For Siebel, the fundamental change causing this lighter number of residents in facility-based care has been the growth in the home care market, which has the goal of saving costs and meeting consumer demand, which is going to keep impacting the long term and post-acute care profession.

 

 

But, this has happened before, just not to SNFs and assisted living providers. “There was an era where acute-care hospitals never had an empty bed. You prayed that there was one when you needed one,” Siebel says. “And, then they suddenly had to learn to operate at 70 to 80 percent occupancy. And they did, and they adapted, and we are going through that same fundamental shift where we are going to be operating permanently at lower occupancy levels.”

 

 

 

 

As to how to assess why occupancy is down, besides the increasing availability of home-based care, he says, it is not hard to see how bundled payment programs and ACO organizations, along with managed Medicare, or Medicare Advantage plans, have all had a significant impact.

 

 

“This is because all of them have as one of their cornerstones to decrease institutional stays at every level. Acute care, long term SNF care, any level of institutional care…the basic underlying premise is that it all has to be reduced as a matter of policy, and payers have been very successful in doing that,” Siebel says.

 

In that same vein, Emily Gadbois, PhD, a researcher at Brown University’s Center for Gerontology and Health Care Research, tells Provider that while working on a paper about the relationship of rehospitalizations to collaboration between SNFs and hospitals, the SNFs “did tend to describe feeling left aside from the table.”

 

 

She adds that it also became apparent from her research that SNFs that collaborated more formally with hospitals were receiving more patients from them, but that much of the work to build these ties rests on hospitals. “There is a real lack of resources among SNFs in many cases, in terms of time and money,” Gadbois says.

 

 

For Siebel and Carriage Healthcare, the way to confront the occupancy challenge is to change and not take on a “sky is falling” frame of mind. This marks a wider trend in which SNFs and assisted living providers deploy new strategies to win business by bolstering existing operations and branching into new offerings.

 

 

“Our little company has done just that,” he says. “We now have two Medicare-certified home health agencies, and we are working on a third, and we are currently exploring a new division of home care. This is not home health care, but simply services provided in the home for bathing, grocery shopping, nonskilled services that are not government-reimbursable but are needed services as more and more stay at home.”

 

 

Siebel says many providers around the country have diversified, with the first wave years ago when a lot of SNFs went into assisted living.

 

 

“And, now it’s increasingly into moving where the people are—and people are increasingly at home—and so you have to move your services to where your market is,” he says.

 

 

 

Beyond looking for new revenue streams, successful providers take what they have to offer and make improvements in order to fill rooms and care for new customers.

 

 

This is what Monica Hunter, director of business development for Tealwood Senior Living in the Greater Minneapolis area, says her group is doing in marketing her company’s facility-based care amid intense competition for such services.

 

 

Yes, even as occupancy levels retreat in parts of the long term and post-acute care segments, there is a

lot of new development in the assisted living area, creating even more pressure to be a 24/7 player.

 

 

“It is more and more competitive by the day as we see more communities being developed,” Hunter says.

 

“We are going to have to be hyper-vigilant on how we manage the incoming census traffic. Where we used to be able to miss a phone call or maybe not be as vigilant with our follow-up and customer service, we don’t have that option anymore.”

 

 

It is also about transforming with the times via new technology, while maintaining the old school “hustle” that has always been required to succeed, she says.

 

 

“We must be cognizant every time the phone rings. So, we have moved to a more automated platform where we are auto-capturing, and we have written code into our website where we can gather information as somebody visits. We are running marketing campaigns and have them auto-populate into our customer relations management system.”

 

 

 

Another big thrust of the effort to differentiate Tealwood’s assisted living communities from the competition is on the social media front. Without an endless budget, the company is always looking at return on investment in all marketing sales areas, and for social media a lot of this focus is on Facebook.

 

 

“We require our facilities to be posting two to three times a week—community-based activities, pictures of residents—and we provide filler for the rest of the week to support onsite people,” Hunter says. “That is very important. It keeps your Facebook page looking very professional.”

 

 

Keeping its Facebook page current, along with other efforts to market the company’s communities, has paid off, with demand high for assisted living and memory care in the campus-like setting service line. But, the growth is not universal, with rural buildings struggling.

 

 

“We have seniors relocating to areas where their adult children are working. So that rural community where everybody used to just stay, we are not seeing that as much anymore,” Hunter says. “Adult children are not moving to Mabel, Minn., for example.”

 

 

On the opposite track, Tealwood’s more metropolitan communities are “running really well right now,” with solid occupancy, she says.

 

 

No matter the new tools being used to fill its facilities, Hunter says the basics remain the same. “What we are trying to do from a sales and marketing perspective is to effectively promote the amazing work that our people do in our buildings,” she says.

 

 

“What we are really built for is the care, taking care of people, our nursing acumen and service acumen. We have to be able to promote it effectively and contact the consumer. So we are building in efficiencies to do that.”

 

 

 

For Karen Messick, executive director, United Church Homes Management, and current interim administrator at the company’s Pilgrim Manor facility in Grand Rapids, Mich., the path to surviving the occupancy declines was to integrate.

 

 

Pilgrim Manor, which used to be an independent skilled and assisted living provider, since 2016 has been part of the United Church Homes family of service for seniors, including skilled, assisted, independent, and affordable housing, after finding itself in need of a major retooling and refurbishing. The larger company has provided assistance to the tune of a $4 million renovation of Pilgrim Manor.

 

 

“In order for us to be sustainable and have capacity moving forward, we needed to find a partner, so we spent considerable time, four years as a matter of fact, and figured out what that needed to look like,” Messick says. “And, what we found was an amazing partner in United Church Homes.”

 

 

As the occupancy trend means some providers look to add to their marketing or their clinical offerings or to diversify, others like Pilgrim Manor chose another path. “That was the answer for us in this market,” she says. 

 

 

 

 

Another important part of the equation on how to react to occupancy pressures is the movement among competitors, Messick says. “As of the first of this year, about 10 percent of the skilled beds in the Grand Rapids area were taken offline by various providers, some have transitioned whole buildings to HUD [Housing and Urban Development] affordable housing, for example,” she says. Another provider had opened a “beautiful brand-new skilled nursing, short-term rehab facility a couple of years ago,” but has since transitioned it to assisted living memory care.

 

 

The fuel for these changes in the Grand Rapids market is the change in the way the hospitals operate, with the push of two of the potential referral sources into ACOs and a large push by acute-care to keep patients in their own care systems, she says.

 

 

“The biggest challenge to our occupancy is that we have seen a huge shift in people who would have normally come to skilled nursing for short-term rehab and stay versus what we see now is them going home and getting that care from outpatient therapy,” Messick says.

 

 

Has the integration worked for Pilgrim Manor’s occupancy? Messick says the numbers are a little better for the community in the first two quarters of the year. And, with the new-look assisted living available, those numbers are improving.

 

 

“The newly renovated space has filled up quickly,” she says. “I mean the huge trend in the market is to independent living and assisted living, and a lot of that is happening in line with the aging-in-place discussion and bringing those resources to the individual in those home environments as well.”

 

 

 

In another take on the answer to the occupancy challenge, communication with acute-care hospitals is key, according to Teri Tift, executive director of quality and compliance for Eskaton, based in Carmichael, Calif.

 

 

“We have been meeting with our hospital partners to explore how we can assist with their ‘pain points,’” she says. “In other words, how we can help the hospital to transition those patients that no longer require acute care but are difficult to place in SNFs for a variety of reasons. Collaboration with our hospital partners is key to keeping census up.”

 

 

Like other SNFs, Eskaton has implemented ancillary services to boost referrals, like onsite dermatology, availability of wound physicians, and psychiatry services. “And, we are also in the process of exploring options such as telemedicine and in-house dialysis.”

 

 

Eskaton is also unique in that the provider has a centralized admission center that provides 24/7/365 access to hospital discharge planners. This allows the company to make an immediate decision to admit a patient to one of the company’s four SNFs.

 

 

“Hospital discharge planners are continually working to prepare their patients for discharge. They don’t have time to wait for a SNF to get back to them with an answer about whether they have an open and appropriate bed for their patient,” Tift says.

 

 

“In most cases, we are able to make that decision immediately, thereby allowing the discharge planner to assist more patients.”