NIC: Skilled Nursing Occupancy Remains Weak

Skilled nursing occupancy rebounded in the third quarter from historic lows—but the bounce may be short-lived, according to the latest Skilled Nursing Data Report from the National Investment Center for Seniors Housing & Care (NIC).

The report, released Thursday, is based on data from just under 1,500 skilled nursing properties in 47 states, from October 2011 through September 2016.

Skilled nursing occupancy clocked in at 82.5% at the end of the third quarter of 2016—an increase from the five-year low of 82.3% in July 2016, but still lower than the occupancy recorded in the third quarter of 2015.

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Despite slight gains, skilled nursing occupancy has most likely reached its peak in 2016, barring an early flu season, the report says. In other words, don’t expect the fourth quarter occupancy numbers to show continued improvement.

That’s because, historically, skilled nursing’s lowest occupancy month tends to be in the third or fourth quarter, and the highest occupancy month tends to be in the first quarter, when seasonality factors boost demand.

Right now, skilled nursing occupancy is “stabilized,” according to NIC Senior Principal Bill Kauffman.

“The question is, is that going to hold? It will be interesting to see over the next few quarters,” Kauffman told Senior Housing News.

Revenue sources in flux

Skilled mix also continued to trend downward in the third quarter, the report shows, fueled by the low third-quarter Medicare mix that may be due to fewer Medicare patient days.

“Skilled mix continues to be a challenge for operators, and given the fact that higher reimbursement rates are associated with skilled mix, the downward pressure on that mix can play a significant role in profitability,” Liz Liberman, healthcare analyst at NIC, said in a prepared statement.

With these challenges, Liberman said, Medicaid plays a key role as the biggest source of revenue from a single payor. This is despite the fact that many SNFs have in recent years added more short-term rehab to boost Medicare revenues.

“Medicaid is not a high dollar reimbursement, but it is a steady source of revenue for operators,” she said.

Managed Medicare has grown to be a significant payer, and on this front, there is some good news.

The decline in managed Medicare revenue per patient day (RPPD) actually slowed for the second quarter in a row, the report shows. That’s noteworthy, according to Kauffman.

“I think one of the main takeaways from this current report is the fact that for managed Medicare, the actual revenue per patient day has been declining for the last few years, but over the last couple quarters, that decline has really come to an end,” Kauffman told SHN.

Private-pay RPPD, meanwhile, grew, increasing year-over-year at 2.1%. This marks the largest increase since the third quarter and fourth-quarter of 2013.

Private RPPD increases have outperformed inflation on a consistent basis since February 2016, and have also matched or outperformed inflation since the fourth quarter of 2014, the report notes. 

Written by Mary Kate Nelson

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