Fitch: CCRCs Expected to Weather the Storm of Skilled Nursing Cuts

For continuing care retirement communities (CCRCs), the recent 11.1% cut to Medicare reimbursements to skilled nursing that took effect in October will not derail ratings for the communities, Fitch Ratings reported Monday.

The global ratings agency said that a material number of downgrades are not expected for the CCRCs that it rates, citing the composition of CCRC revenue and the lack of reliance on Medicare as a dominant payor for the services that the communities provide.

Continuing care retirement communities typically have three revenue producing service lines, only a portion of which is impacted by the Medicare cuts, Fitch noted. It considers the steady flow of privately paid, monthly service fees from assisted living and independent living units, which it says “will help blunt the impact of the Medicare cuts.” Skilled nursing-only facilities suffer from this, on the flip side, Fitch says.


Additionally, the fact that Medicare is not a dominant payor, at 12% of the skilled nursing payor mix for investment-grade CCRCs and varying from zero to 40%. Also, the report notes, Medicare remains a solid payment sources for short-term rehab services in spite of the cuts, and Fitch expects CCRCs to continue seeking to grow their businesses in that area.

As far as the the senior living sector overall, Fitch maintains a negative outlook.

“The main credit driver behind Fitch’s negative outlook on the sector remains the poor state of the housing market and its effect on occupancy and net entrance fee receipts,” said the report. “Fitch has seen independent living occupancy, which had been mostly in the mid- to high-90% range prior to the housing crisis, decline to the high-80% range for many of the CCRCs that it rates.”


Written by Elizabeth Ecker