Skilled Nursing Occupancy Holds Steady in Q4 as Medicare Advantage Revenues Inch Up

Skilled nursing operators saw static occupancy between the third and fourth quarters of 2018 — a notable, if moderate, bit of good news for an industry that had seen four straight years of declines.

The nation’s nursing homes were approximately 82.4% full during the fourth quarter of last year, according to the most recent set of data from the National Investment Center for Seniors Housing & Care (NIC). That represents no significant change from the third quarter, the non-profit reported, and a drop of about 35 basis below where it was in the fall of 2017.

Still, NIC positioned the news as a win given that the figure has been hovering around 82.5% since April 2018 with no significant drops — though it may be too soon to declare the persistent occupancy declines a thing of the past.

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“I think you can say it’s stabilizing,” NIC senior principal Bill Kauffman told Skilled Nursing News. “We’re not going to predict, but it’s really too early to tell if we’re going to be out of the woods, so to speak, until we still see some more data come through.”

Though the third quarter 2018 report indicated a slight gain to 82.2%, NIC retroactively adjusts its occupancy estimates from quarter-to-quarter, and typically does not compare the exact figures from each report.

Simple demographics have played a role in the moderating trend, Kauffman and NIC chief economist Beth Burnham Mace said, as there are signs of positive momentum among the 83-and-over age cohorts that frequently drive skilled nursing usage — with the faster-growing 75-to-82 age group knocking at the door.

“Over the next few years, even currently, it’s likely to see demand pick up certainly from the Silent Generation, those who are in their 80s now,” Kauffman said. “We’ve kind of come off that low point in terms of the nonexistent growth rate among that cohort.”

NIC isn’t alone in this tentative optimism. Earlier this week, Genesis HealthCare CEO (NYSE: GEN) George Hager declared that he’d seen a small but relevant shift in his company’s occupancy numbers, with slight gains at the nation’s largest skilled nursing chain in the latter part of 2018.

“From the demand side, I think once we’ve hit the inflection point, which it looks like we hit in the fourth quarter of 2018, we should expect to see steady — but not significant — but steady census growth and demand for skilled nursing for the foreseeable future,” Hager said during a Tuesday presentation at the Barclays Global Health Conference in Miami Beach.

The Kennett Square, Pa.-based firm will report its fourth quarter results — including its occupancy stats — early Monday.

Kauffman also acknowledged that skilled nursing occupancy can vary significantly by region; in the fourth quarter, rural SNFs were 80.4% full, while so-called “urban cluster” facilities — those located in areas with more than 2,500 but fewer than 50,000 people — had occupancy of 79.1%.

Medicare Advantage movement

NIC’s most recent set of data showed signs of another potential bucked trend as managed Medicare revenues inched up slightly, gaining a tenth of a percent to $430 per day. That figure remains down from a recent cycle peak in 2012 of $495, and a few dollars less than the same time in 2017 when it clocked in at $437.

“It’s something that we want to monitor for a few quarters before drawing any conclusions there, because as you’ve seen that trend line, it has continued to decline over the last several years,” Kauffman said. “We did see some possible positive signs, but it’s one quarter, and you can’t really draw conclusions.”

Medicare Advantage’s lower per-day reimbursements have been a persistent problem for skilled nursing facilities; for comparison, Medicare paid $521 per patient day in the fourth quarter of last year. A recent study from Plante Moran found that while Medicare margins actually increased between 2016 and 2017, the increase in managed Medicare penetration effectively wiped out those gains.

Public-private Medicare Advantage plans represented 11% of all nursing home revenue in the last three months of 2018, and was the only primary payer type that saw an increase in penetration between the third and fourth quarters.

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