The not-for-profit continuing care retirement / life plan communities sector has “broadly recovered” from pandemic stressors, but challenges lie ahead. That’s according to a new report from Fitch Ratings.
The latest Fitch Analytical Comparative Tool contains financial data for 158 life plan communities that can be benchmarked against peers, medians and self-defined peer groups, along with historical statistics and metrics going back to 2017. The report is a follow-up to Fitch’s 2022 Median Ratios for Not-for-Profit Life Plan Communities that was published Sept. 6.
“Fiscal 2021 was a recovery year for [life plan communities],” Margaret Johnson, senior director and US life plan community group head, said Tuesday in a press release issued in conjunction with the report. “Performance during the year featured across-the-board improvement in all ratio categories. Liquidity, operating and capital-related metrics all reflected recovery within the [life plan community] sector from the pressures of the coronavirus pandemic, which included higher expenses, lower revenues and pressured cash flows.”
Pandemic-related stressors on the sector have slowed, but inflation and staffing issues remain.
Should these inflationary pressures persist beyond 2022, life plan communities may encounter resistance to the substantial rate increases that may be required to offset the added cost pressure, which could pressure operating performance and future demand.
Communities with a skilled nursing component may face greater operating stressors because government subsidies limit their ability to raise rates compared with the independent living component where residents are predominantly private-pay. Therefore, some CCRCs have eliminated some of their skilled nursing beds, at least temporarily, to offset costs, according to the previous report.
Fitch also is keeping a close eye on potential financial market slowdowns, in particular slowing real estate price growth, according to the press release.
