The skilled nursing industry set another record low in occupancy during the second quarter of 2018.
Skilled nursing facilities were 81.7% full during the quarter, according to the most recent set of data from the National Investment Center for Seniors Housing & Care (NIC), down 79 basis points from the first quarter and 137 basis points from the 83.1% figure seen at the same time last year.
Back in March, NIC reported a record-low occupancy figure of 81.6% for the first quarter of 2018; the data generally cannot be compared release to release due to changes in the exact groupings of facilities that submit data to NIC.
While NIC noted that the census declines were seen across the country, rural facilities were hit particularly hard, with an 89-basis-point drop between the first and second quarters. Still, there were some bright spots for non-urban providers during the last quarter: NIC health care analyst Liz Liberman pointed out that rural providers captured the greatest share of private-pay patient days with fewer managed Medicare days — 3% penetration as compared to 7.7% in urban areas.
Both managed Medicare and private payors tend to offer higher per-day reimbursements than Medicaid, making them more desirable for operators outside of the highest-paying Medicare residents. But in urban areas, competition for the relatively small crop of private pay residents is fiercer than in smaller rural markets, giving the providers there an advantage despite the lower occupancy numbers; in addition, rural operators derived 13.9% of their entire revenue from private payors in the second quarter.
“In some ways, the trends may look worse for rural areas, but in certain instances, there are optimistic tones as well,” Liberman told SNN.
The Annapolis, Md. firm’s quarterly release also revealed an interesting trend for managed Medicare, which has been blamed for occupancy declines as the public-private plans demand shorter lengths of stay and overall lower costs. Penetration of these plans – which include the Medicare Advantage program – actually declined slightly by 4 basis points, seeming to buck the overall trend upward across the country generally. However, NIC senior principal Bill Kauffman noted that those two trends aren’t necessarily at odds: Because NIC tracks the share of patient days rather than individual admissions, a flat line could simply indicate that Medicare Advantage plans are achieving their goals of depressing lengths of stay, he told SNN.
“The more you talk to operators, you certainly don’t hear about pressure on length of stay letting up or easing,” Kauffman said. “That’s likely a factor. Not to say that admissions on the Medicare Advantage side have slowed down, but the actual patient days that are being used, there still might be pressure on that because of the length-of-stay pressure.”
Supply vs. demand
Kauffman also tried to frame the occupancy number as slightly more complicated than simply another record low for an industry in distress. He pointed to the declining number of skilled nursing beds on the marketplace: For instance, between the second quarter of 2017 and the second quarter of 2018, the bed count dropped by more than 2,000 among freestanding facilities in primary markets with a majority of nursing care beds, according to data from the NIC MAP Data Service provided to SNN. Since the second quarter of 2010, that number has fallen by nearly 7,000 to the 486,787 available during the most recent quarter.
That constrained supply — the result of legislative restrictions such as Certificate of Need (CON) laws in certain states — amid lower demand contrasts with the assisted living and memory care industries, Kauffman observed, which have struggled with a glut of properties amid census pressure in certain markets.
“Over the long term, if you believe in the demographics playing out — and there’s a a high probability that they will — over time, you should see occupancy picking up,” Kauffman said. “Exactly when that will happen, you don’t know .. But I do think that the supply conversation should be discussed a little more as well, and not just the demand side.”
Written by Alex Spanko