‘Tepid’ Occupancy Recovery Continues with Flat Month for Post-Acute Care

Occupancy for post-acute care was flat on a month-over-month basis as of April 9, 2023, according to a data analysis from BMO Capital Markets.

The news is dimmer for the real estate investment trusts (REITs) covered by the firm, most of which saw sequential declines, according to a note issued Friday. The analysts mapped REIT property addresses against the Centers for Medicare & Medicaid Services (CMS) SNF database to determine occupied versus available beds.

“Given continued labor challenges and tepid occupancy recovery, we can’t rule out continued rent cuts/deferrals and remain cautious given lingering SNF uncertainties (share loss, thin margins, regulatory uncertainty, fading government support) with minimum staffing requirements the latest challenge on the horizon,” the analysts wrote.

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Overall, CMS occupancy has increased 865 basis points since a mid-January 2021 trough, with typical monthly gains of 30bps through April 9 of this year, according to the BMO note. National weekly occupancy was hovering around 76% as of earlier this month.

That roughly comports with occupancy data tracked by Zimmet Healthcare Services Group, utilizing Centers for Disease Control & Prevention National Healthcare Safety Network data. That showed Q1 2023 occupancy at around 75.5%, although Zimmet CEO Marc Zimmet said the actual occupancy likely was closer to 72% when adjusted for operational versus certified beds.

Skilled nursing rent coverage for REITs likely is near a bottom, the BMO analysts believe, but they emphasized “limited visibility” due to factors such as the scheduled end of the public health emergency on May 11, and a proposed minimum staffing standard coming from CMS.

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The proposal will be released this spring, CMS Deputy Chief Medical Officer Dr. Shari Ling confirmed on Thursday, at the Skilled Nursing News CLINICAL conference in Washington, D.C.

Operators are concerned about any staffing mandate in the midst of an ongoing staffing crisis. Among other negative effects, the labor market challenges have created a drag on post-acute occupancy recovery, as some facilities have been forced to limit admissions due to lack of workers.

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