As occupancy recovery in senior living continues and the pandemic eases, increasing operating expenses may limit the growth of operating margins in the next six months, according to the National Investment Center for Seniors Housing & Care.
For the Wave 38 NIC Executive Survey Insights report, 75% of respondents said they anticipate that operating margins will increase over the next six months, with the majority (55%) anticipating operating margin increases between 1% and 5%. Only 5% said they expect margins to decrease.
Those expectations, however, are hampered by continued labor challenges, which contribute to increasing operating costs, according to NIC Senior Principal Lana Peck.
The survey was conducted Feb. 7 to March 6; respondents were owners and executives from 67 senior living and skilled nursing companies.
Staffing
Staffing continues to be the most significant challenge for providers — almost all respondents reported staffing shortages since last July — with attracting community / caregiving staff (86%) and employee turnover (60%) cited as the most significant staffing challenges. But almost three-fourths of participants said they are optimistic that improvements are coming.
All Wave 38 respondents reported paying overtime hours. Four out of five (81%) said they are tapping agency or temporary staff to counter shortages, and 49% said they don’t expect their reliance on outside agencies to change this year, although 40% anticipate that it will decrease. Just less than one-third (29%) said they expect staffing challenges to improve in the second half of the year, whereas 43% said they believe labor markets will ease next year.
Agency-related price-gouging complaints have rippled through the industry for months, and 90% of survey respondents said they support a federal investigation into anticompetitive practices by nursing and other direct care staffing agencies.
In January, the American Health Care Association / National Center for Assisted Living, LeadingAge and 10 other healthcare organizations sent a joint letter to the White House asking for help due to those anticompetitive practices after asking the Federal Trade Commission last fall to investigate the matter.
Census
Lead volume may be a leading indicator to watch in regard to occupancy recovery, according to NIC, given pent-up demand coming out of the pandemic and “near-historic absorption rates” during the third and fourth quarters of 2021.
More than half (56%) of the survey’s largest organizations said they have reached pre-pandemic lead levels, compared with only 15% of single-site operators. Larger sales teams and marketing budgets, sophisticated online and digital marketing capabilities, and geographic, demographic and economic market diversity are benefits that come with scale, according to NIC.
The pace of move-ins remained strong for assisted living communities and improved for skilled nursing facilities, but it slowed for independent living and memory care communities. Respondents to the Wave 38 survey said the pace of move-ins increased in the past 30 days as the omicron variant peaked and COVID-19 cases began to decline in mid-January.
Since the Wave 36 survey reflecting operator experiences in November 2021, half of organizations with assisted living units reported an acceleration in the pace of move-ins. In contrast, the pace of move-ins slowed for independent living (27%) and memory care (21%). Independent living also reported an acceleration in the pace of move-outs (27%). The pace of move-ins in nursing homes reversed its slowdown in Wave 38.
Seasonality, omicron, staffing and the hospital admission slowdowns were reasons cited by respondents for the deceleration in the pace of move-ins. Fifty-three percent of respondents cited residents moving to higher levels of care as the reason behind the quickening of the pace of move-outs.
