Downside risks may finally be fading with occupancy for skilled nursing facilities showing improvements in June.

That’s the view according to BMO Capital Market analysts, who noted recent occupancy data put out by the Centers for Medicare & Medicaid Services (CMS). CMS’ data showed a monthly jump of 40 basis points in occupancy rates between June and July.

But, such risks shouldn’t be underestimated given residual labor challenges and a slow occupancy recovery to date, the analysts said in their investor note. Share loss, thin margins, regulatory uncertainty and declining government support are all lingering uncertainties, BMO analysts said, with federal minimum staffing requirements being the “key unknown.”

Multi-year recovery is still in the cards as the nursing home industry faces accelerating demographics and limited supply, although from May to June, occupancy levels for the SNF sector were down 20 basis points, analysts said.

Moreover, almost half of operators with a nursing care segment have said their occupancy numbers have returned to pre-pandemic levels, according to executive survey insights collected and published by the National Investment Center for Seniors Housing & Care (NIC).

“As staffing challenges can limit the number of new residents a community can intake, the anticipated occupancy recovery timeframes of respondent organizations are noteworthy,” Ryan Brooks, senior principal at NIC, said in a statement.

About 44% of NIC respondents with a nursing care component said their occupancy numbers were back up to numbers not seen since February 2020.

NIC’s survey includes responses from June 1 to July 5 from owners and executives of 39 senior housing and skilled nursing operators from across the country, and of varying sizes. NIC will continue to collect responses through July 31 for this survey.

Of note, NIC cited lower respondent numbers for nursing care communities for this particular executive insights survey, precluding them from highlighting these specific results in the survey. Only one-sixth, or 15% of respondents, operated nursing care properties, according to the NIC survey.

Meanwhile, almost half of respondents said they anticipated staffing challenges to improve in the second half of 2023, despite uncertainty surrounding the federal staffing proposal.

“Staffing and labor related issues are still cited as challenges, but not as the issues that are currently garnering the most focus and attention,” Brooks said in the report. For the second month in a row, rising operator expenses were the most-cited challenge facing respondent organizations at 72%. Also, attracting community and caregiving staff was the next most severe challenge for 64% of the respondents. And, staff turnover was listed as the third greatest challenge for 59% of the respondents.

About 26% anticipate that recovery will happen in the latter half of 2024, while 15% expect recovery to take place in the first half of next year.