Favorable demographic trends, with more Americans reaching retirement age, the ability to absorb cost inflation and good access to capital markets, will keep the continuing care retirement / life plan communities industry growing for decades, Margaret Johnson, , senior director and US life plan community group head at Fitch Ratings, said Thursday during a webinar.
“Pandemic-related pressures have evolved from healthcare and demand risk to risks involving expense inflation and staffing shortages,” Johnson said previously.
Positive news, she said Thursday, is that CCRCs are better positioned than hospitals to continue economic recovery. CCRCs can raise fees or eliminate skilled nursing beds to offset cost inflation, she added, whereas hospitals are more limited in the actions they can take.
“Most of our [life plan communities] have absorbed cost inflation successfully so far by raising rates, reconfiguring healthcare units and adjusting other amenities and services,” Johnson said, noting that “favorably, entrance fee increases at Fitch’s rated [life plan communities] have not kept pace with [the] rapid home price acceleration we’ve witnessed over the past couple of years in many areas of the country.”
Capital markets remain supportive of CCRC growth, in spite of construction costs and supply-chain disruptions, she said.
“Even during the height of the pandemic, we saw examples of private bank offerings to support local [life plan communities],” Johnson said.
To remain competitive, CCRCs may need to invest in developing additional independent living units and tap into capital for expansion projects, she said. Fitch also sees an accelerated need for information technology investments, particularly related to marketing, care coordination, socialization and cyber risk. Operators also might need to make changes in amenities and services to meet the needs and expectations of prospective residents.
Johnson said she expects to see a heightened level of consolidation and mergers and acquisitions activity in the future.
“The most recent M&A activity has mostly been smaller [life plan communities] that were owned by larger organizations being folded into an obligated group. …But we definitely think there is an opportunity for further consolidation across the industry,” she said.
In-home healthcare has grown significantly since the pandemic, with more older adults looking to age in place, Johnson noted. In response, she said, “at home” programs or in-house homecare divisions are starting to crop up in some CCRCs “and have been fairly successful at counteracting this trend.”
Despite economic stressors, Johnson said, it appears that demand for the CCRC business model remains robust for the foreseeable future.
