Skilled Nursing’s Positive Occupancy Trend Doused by Federal Staffing Mandates
Occupancy saw positive momentum throughout 2022 and has increased 77 basis points since December 2022.
The intersection of staffing shortages and federally and state-driven staffing mandates for skilled nursing communities issued recently by CMS could thwart the continued, gradually improved occupancy numbers the industry saw in June.
According to NIC Map Vision, occupancy climbed 31 basis points from May to the end of June and sits at 81.2%.
There was positive momentum in occupancy throughout 2022 and it has increased 77 basis points since December 2022, writes NIC’s Bill Kauffman.
It is up 6.6 percentage points since the low (74.6%) point reached in January 2021.
“However, staffing in the sector is still a significant burden on skilled nursing operators and is limiting additional admissions in many markets around the country,” according to Kauffman.
Skilled nursing property wage growth expense has declined, which may provide some relief to operators, however, higher debt costs are a concern, he said.
Occupancy is 7.5 percentage points below the pre-pandemic rate of 88.8% in February 2020.
Gideon Orion, a Managing Director and Investment Sales Brokers specializing in Skilled Nursing at Walker & Dunlop, tells GlobeSt.com, “From an investment sales perspective, where the recent occupancy growth has been tied to an increase in cash flow is providing my clients optimism and sustaining strong valuations for marketed facilities, with interest from existing operators and new market entrants.”
Orion added that more than the recent occupancy trend, his clients are having important conversations surrounding the recent CMS minimum staffing mandate.
Orion believes that the current labor shortages in the industry, combined with the in-place and proposed staffing mandates are counterintuitive to providing access and quality care to the more than 1 million residents in need of skilled nursing care in the US.
“The tone my clients are striking is that the staffing mandates are already hurting the industry and will limit skilled nursing supply, but there is overall optimism that occupancy is growing and will exceed pre-pandemic levels by the time the proposed CMS federal mandates are implemented,” he said.