Non-Profit CCRCs Can Expect Tailwinds to Persist Into 2019

The 12-month outlook ahead for non-profit continuing care retirement communities (CCRCs) looks steady, with continued demand for this type of senior living.

Specifically, non-profit CCRCs are expected to benefit from favorable demographic trends and healthy residential real estate markets, both of which are pushing up demand for those communities, according to a new report from Fitch Ratings.

Like last year’s report, the overall 2019 outlook for non-profit CCRCs is stable, according to Paul Rizzo, director and CCRC sector leader for Fitch.

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“[This year’s] outlook is very similar to last year’s,” Rizzo told Senior Housing News. “We were stable on the sector, and stable on the ratings side.”

Fitch’s analysts expect capital spending to remain active into 2019, as continued operating profitability, solid independent living occupancy and steady demand for senior housing services are forecast to continue. That, in turn, is likely to help drive more capital investments, including independent living unit expansions or repositioning projects focused on adding private units or new services to assisted living and skilled nursing wings.

While historically low senior housing occupancy persisted in the third quarter of this year, independent living occupancy held static at a rate of 90.2%, according to the National Investment Center for Seniors Housing & Care (NIC).

Despite the stable outlook, the credit ratings agency identified a few potential challenges to watch for in the year ahead. Those include tight employment markets driving up operational costs, increased competition from some for-profit senior care providers and rising construction costs.

And on the skilled nursing side, there will likely be financial pressure from the Centers for Medicare and Medicaid Services’ (CMS) new patient-driven payment model, which goes into effect Oct. 1, 2019 — though the degree to which CCRCs feel the pressure varies depending on their payer mix and volume of outside post-acute admissions, the report noted.

Another trend Fitch sees continuing is the increasing alignment among senior housing and care providers, hospitals and health care systems, exemplified by recent transactions such as Sanford Health’s merger with the Evangelical Lutheran Good Samaritan Society and the $4.4 billion merger between skilled nursing giant HCR ManorCare and non-profit health system ProMedica.

Written by Tim Regan

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