Wage inflation remains a headwind continuing care retirement / life plan communities and skilled nursing facilities, according to Fitch Ratings in its latest about the sector.
“High fee increases at [life plan communities] will help alleviate wage pressures, but this practice is not sustainable over the longer term to maintain profit margins,” Director Richard Park said Monday in a press release issued in conjunction with the report.
“[Life plan communities] and communities with a significant SNF component will have to execute on productivity enhancements, cost savings and manage skilled nursing admissions to successfully operate through the current reality of tight staffing conditions and higher unit labor costs,” Park said.
Labor data for CCRCs and SNFs show that wage inflation for the early months of 2023 still is “well above recent historical averages after peaking in early 2022,” according to Fitch.
Average hourly earnings growth of 5.7% and 4.6% at CCRCs and SNFs through April are more than double the 2.1% and 1.9% averages from 2010 to 2019, respectively. At the same time, assisted living communities’ wages have decelerated to 2.7% this year, which is in line with the 2.6% average from 2010 to 2019.
The report noted that staffing challenges have continued in the healthcare sector. More than 16% of nursing homes are reporting a shortage of nurses and aides, according to Fitch.
The health services and education sector lost 29,000 jobs in May, as McKnight’s previously reported. Among the services-providing sectors, only the financial activities sector fared worse.
“Despite the decline, the latest job openings rate remains very high compared to the 4.2% average job openings rate from 2010 to 2019” for life plan communities and skilled nursing facilities, according to the Fitch report.
The number of quits in the healthcare and social assistance sector remains high, at 2.4%, as of April, compared with the 1.6% average from 2010 to 2019, Fitch noted.
“The tight labor market continues to be in favor of workers in search of higher wages and better work environments,” Park said.
