Jordan Parnell and Gerald Stoll headshots
Jordan Parnell, left, and Gerald Stoll
Jordan Parnell and Gerald Stoll headshots
Jordan Parnell, left, and Gerald Stoll

The pressures on the senior living sector only abated marginally in 2023, as operators tried to maintain their balance in a precarious business and economic environment. And any significant reversal in fortunes is unlikely to occur until 2025, as political volatility in 2024 will continue to influence the regulatory and interest rate environment.

Managing against countervailing forces has been an ongoing struggle that’s not going to ease much in the new year.

There’s good news, for example, in that senior living occupancy rates are coming back from the pandemic’s devastation. And in nursing homes, occupancy reached 82.3% in August, topping 82% for the first time since April 2020. Regardless of setting, however, providing adequate resident care is a challenge given severe staff shortages amidst the worst job losses of any healthcare sector.

And although cooling inflation is a positive, it’s still running above the Federal Reserve’s 2% target and has not yet resulted in relief on costs. Interest rates are stubbornly high, and operators should be worried about the impact on the cost of long-term debt coming due, not to mention revolving credit lines.

Plus, unlike other sectors, parts of the industry can’t just offset inflationary costs by raising its fees — assisted living operators that rely heavily on Medicaid, for instance, and nursing homes, most of which depend on Medicare and Medicaid reimbursements, which are based on data two years behind and not adjusted for inflation.

Managing the risks is do-able, if difficult. One area where senior living and care organizations can help themselves in 2024 is by staying open to and leveraging risk mitigation and transfer strategies and solutions.

Meeting the staffing challenge

In early 2023, more than 70% of assisted living communities and 80% of nursing homes reported staffing shortages, and for some operators, the situation only has gotten worse as the year progressed. Providers have been forced to ask current staff members to work overtime or additional shifts, depend on temporary agency staff, or limit new move-ins.

Minimum staffing requirements proposed for nursing homes by the Centers for Medicare & Medicaid Services may further sap the industry given associated costs of some $6.8 billion, according to one study. And the effects of that proposal, if it is implemented, will be felt by assisted living operators and others.

The pace at which the population is aging and pressuring the system suggests that better pay alone is not the answer. Still, many are watching California to see whether its new $25 minimum wage for healthcare workers moves the needle.

Equally important may be balancing out a tough working environment by providing a quality employee experience built around individualized benefits. By offering benefits that respond to where people are in their personal and professional lives, employers can make their work environments stand out.

More than just health benefits, this means those benefits that simplify and improve employees’ lives or help them save money, including auto, home or renters’ insurance. Or that improve their lives, like mental health services or emergency backup services. Or even other benefits that might demonstrate the value that is placed on employees, such as recognition and motivation programs. Such benefits may be no or low-cost but can yield big returns for the investment.

Two coverages to transfer hard and soft risks

The healthcare industry continues to be a top target for cyber intrusions, and the senior living and care sector is just as vulnerable as the big hospital systems. The good news overall is that the number of healthcare data breaches dropped 15% through 2023’s first half. The bad news, though: a new record of 40 million individuals were affected.

The issue is not going away in 2024, and senior living and care providers should take heed. Cyber breaches often stem from human error, which is more likely to occur with the pressures of staff shortages. Plus, most communities and facilities are underinsured for the risk, with policies that leave big exposures. When cash-strapped, they’re not likely to want to think about better coverage against the risk, even with more moderate rate increases of about 10% ahead. That should make improved digital security controls an imperative.

A softer risk, but one that’s no less costly, is workplace violence, and particularly active shooter incidents. These incidents have occurred this year in senior living and care facilities from California to Texas to Florida, involving family members, workers and outsiders. It makes the case for workplace violence coverage, which is a relatively inexpensive business interruption protection.

The Mother Nature effect

A continuing concern for every business sector, including senior living, has been the pressured market environment for property insurance. Building valuations still are escalating on top of pure rate changes.

Blame Mother Nature, and not just for the cost of hurricanes, winds and storms, particularly in coastal areas. Add in scorching heat, which stands to cost the United States $100 billion in lost productivity, even as it causes mortality and disrupts business continuity.

Looking ahead, communities and facilities in more vulnerable regions can expect double-digit rate increases, whereas those less exposed will see rates stay flat.

Moving into 2024…

Now is the ideal time for senior living and care management to enlist its brokerage partners to undertake a thorough assessment of how much risk they are comfortable with and the cost of transferring that risk. That should lead to a better understanding of whether it would make financial sense to put alternative risk structures in place.

When there’s a financial squeeze from the perspective of cash flow, profitability and insurance cost, it’s time to reassess how if dollars spent on insurance are rendering the most profitable outcome. Now is the time to be asking those questions, because status quo no longer works.

Gerald Stoll is the US senior care segment leader with global insurance brokerage Hub International. He specializes in developing comprehensive insurance and risk management solutions for the long-term care industry, including independent living, assisted living, nursing homes, clinics and urgent care centers.

Jordan Parnell is the healthcare practice group leader for Hub International’s Gulf South Region. The practice group consults, designs risk management programs and brokers insurance transactions. He also is involved in the national healthcare team that brokers complex multi-state and international healthcare transactions.

The opinions expressed in each McKnight’s Senior Living marketplace column are those of the author and are not necessarily those of McKnight’s Senior Living.

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