Post-Acute Crunch at Non-Profit CCRCs Predicted for 2018

Post-acute concerns could be a thorn in the side of non-profit continuing care retirement community (CCRC) operators next year.

Citing industry-wide declines in census, admissions, and revenues amid changing payment models, Fitch Ratings, Inc. identified skilled rehabilitation care as a main concern for non-profit CCRCs in an otherwise sunny report about the state of the industry issued Wednesday.

In the past, the credit-ratings agency noted, short-stay rehabilitation traditionally served as a solid supplemental business for the CCRCs, which offer a full continuum of senior living options from independent living to assisted living to skilled nursing.


“The robust patient flow and consistent reimbursement led many CCRCs to invest in facilities to attract more short-stay rehabilitation business,” Fitch’s analysts wrote. “This has historically provided a healthy boost to revenues for many CCRCs, helping offset the skilled nursing losses for life-care facilities or the negative impact of lower Medicaid reimbursement for… facilities with large skilled-nursing components.”

Some CCRCs have responded to these pressures by shuttering their short-stay rehab options entirely, or otherwise reducing their overall reliance on the business line.

“Other communities are developing preferred provider networks and continue to evaluate relationships with hospitals and physicians,” Fitch wrote.


The New York-based analysts also identified the tight labor market and uncertainty over the future of Medicaid as potential strains on the overall CCRC market; because non-profit CCRCs generally can offer lower wages than hospitals and health systems, Fitch says, they end up spending more to attract and retain the  most qualified workers.

Aside from the potential skilled nursing drain, Fitch predicted a solid year ahead for CCRCs, awarding them a rating of “stable” for 2018 — specifically citing the robust U.S. real estate market and increased capital spending in the space.

Still, Fitch also warned about the potential impact of tax reform on CCRCs, which could see a key source of tax-exempt financing disappear under the Republican-sposored legislation.

“CCRCs would have to use taxable bank financing and other, more expensive forms of capital that may have less favorable terms and conditions,” Fitch director Paul Rizzo said in a statement. “Additionally, many borrowers may opt to use equity or downsize capital projects that require higher levels of debt.”

Written by Alex Spanko

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