Making senior housing work means getting beyond what is considered strictly healthcare, some investors are saying. Part of the mix means looking at the needs of those who need skilled nursing facility (SNF) beds as well as people who are better off with independent living (IL) units.

Finding the proper balance between the two segments is a challenge as skilled nursing beds can have a negative impact on life plan communities (LPCs) operating performance, according to a new report from Fitch Ratings. LPCs with a lower SNF-to-IL ratio performed better. The higher the ratio, the more SNF expenses — understandably significantly higher than IL facilities — spilled over into the independent living business lines.

"SNF-heavy LPCs, considered by Fitch as those LPCs where SNF beds comprise more than 20% of total units, experienced operational stress in Fitch's rated portfolio in 2023, with labor costs, inflation, tighter reimbursement and heightened government oversight pressuring skilled nursing expenses and revenues," they wrote.