4 Tough Questions for Senior Living Operators in 2023

Earlier this week, Omega Healthcare Investors (NYSE: OHI) announced a lease restructuring with Maplewood Senior Living, which is experiencing a modest cash crunch.

The news underscores just how uncertain the year ahead is for senior living. Maplewood is a luxury operator with healthy occupancy and has pushed through notable rate increases, yet lease-up issues and rising costs are creating problems.

Maplewood is certainly not alone. Although the industry has made great strides righting operations gone wrong during the pandemic, certain areas have remained tricky. At the dawn of 2023, many operators are still grappling with staffing and margins — not to mention the lingering effects of a smoldering pandemic.


Still, many top executives expressed optimism in the 2023 outlooks that they recently shared with SHN. In the words of HumanGood CEO John Cochrane, the industry has lived the last two years in a kind of “crisis mode,” pivoting from one challenge to another. With the arrival of 2023 comes a new chance to turn things around, and put the crisis mindset in the past.

“We cannot live in crisis mode any longer,” he recently said in the Senior Housing News 2023 Executive Forecast. “The good news is we don’t have to.”

While I do think the industry has a chance to substantially clear the deck of its challenges in 2023, providers must find answers to several difficult questions to succeed.


In this week’s exclusive, members-only SHN+ update, I analyze the state of the industry and outline four big questions I think the industry will need to answer before it can move forward:

  • Can operators regain pre-pandemic margins?
  • What do the baby boomers really want?
  • What will move the needle on labor?
  • Will there be another Covid curveball?

Can the industry regain pre-pandemic margins?

Early on in the pandemic, as occupancy plummeted across the industry, many senior living operators assumed that they could regain lost revenue and thus decompress margins simply by getting more residents to move in.

Fast-forward to 2023, and occupancy rates have for many operators risen back to pre-pandemic levels. Margins, on the other hand, have not. Much of that has to do with the fact that many of the industry’s most crucial line items — food, supplies and staffing — have remained high in cost.

Those costs may not be falling anytime soon. In fact, some in the industry see elevated costs, particularly in staffing, as a kind of new normal.

“I think that labor costs associated with having talent in the building will not return to pre-pandemic levels,” Aviva Senior Living Southeast COO Tod Petty told SHN last year. “I’m referring to the wages necessary to keep the team in place — paying people what they probably should have been paid.”

This year and last, the industry enacted its highest rate increases in recent memory. But even that has not sufficiently decompressed margins as many operators had hoped as cost inflation has outpaced rent growth.

One recent example of this trend at work lies with Maplewood. In the years leading up to the pandemic, the operator saw a high occupancy rate in its tech-forward upscale communities in urban locations.

Though that occupancy rate slipped during the pandemic, it has since rebounded, according to data shared by Omega. Maplewood also was able to enact robust rent increases in that time. In theory, higher occupancy and higher rates translate into a better financial position.

But that did not stop the senior living operator from running into a modest cash crunch in the fourth quarter of 2022, as landlord Omega noted in a business update this week. The REIT is now seeking to restructure the lease arrangement for the 17-community portfolio.

Frankly, it was somewhat surprising to see an operator with luxury-focused communities — including the award-winning Inspir community in New York City — fall into liquidity challenges. In particular, if the lease-ups of Inspir and a new community in Princeton are lagging, it shows that healthy demand for senior living reflected in NIC data is no guarantee that new projects are filling.

And if operators with good reputations such as Maplewood can fall into a financial rut despite regaining occupancy and raising rates, there are potentially many more out there feeling a similar level of pressure.

There is no easy answer to the question of how to achieve margin expansion this year. Providers will be hoping for inflation to ease, but they also will have to get creative with operating efficiencies and perhaps new revenue streams. Moves to create new group purchasing solutions, more cost-effective referral partnerships, technology to support more sensitive a la carte pricing, and creative concessions that burn off quickly but accelerate lease-ups are among the strategies in play.

What do the baby boomers really want?

To be fair, this is a question the industry has asked itself every year for the last half-decade. And every year, the industry seems to get a little closer to the answer.

But given that the industry is at a crucial crossroads and that the development cycle is counted in years, now is the time to try and answer that question. Though it is seven years away, 2030 — the year when all of the boomers will be at least 65 years old — will come sooner than operators think.

As Legend Senior Living CEO Tim Buchanan pointed out in his executive forecast for 2023, the boomers have driven many trends over the years, from apartment booms in the ‘70s to condos in the ‘80s. And in 2023, he asks: Why will senior housing be any different?

“It seems today boomers are returning to smaller homes, condominiums and multifamily type-living options designed with them in mind,” he said. “The growth in these segments has not yet peaked.”

Some operators, like Chicago-based Vi, have already engaged in efforts to answer this question. The company is conducting a study with older boomers to understand their wants and needs later in life.

“We want to make sure that we are developing programs and amenities that will be attractive to this increasingly important segment,” said President Gary Smith.

Consumer studies and surveys will no doubt be useful in answering this big question, but providers may struggle if they consider the boomer generation as too monolithic. Personalization of services is another accelerating trend. So, the answer to “what the boomers want” will surely vary in different locations and among different sub-groups. Determining which part of the boomer market to target in any given location will be critical to creating niche offerings and affinity communities.

What will move the needle on labor?

Staffing was a significant burden to senior living operators in 2022. For the industry to truly emerge from its labor challenges, operators will need to staff their buildings to an adequate level but in a way that doesn’t break the bank. But how the industry gets there is very much an open question.

Over the last two years, the senior living industry has tried to entice more workers into the industry through a variety of means, including higher wages, more flexible schedules and creating career paths.

And to that end, the labor picture does appear to be getting better. According to a labor market analysis from research firm Altarum, nursing and residential care added 10,400 jobs in the month of November.

But those efforts haven’t resulted in across-the-board improvements in labor, either. According to the latest survey of senior living executives from the National Investment Center for Seniors Housing & Care (NIC), the vast majority of respondents — 90% — reported experiencing staffing shortages of some kind.

One-third of those who said they were seeing a staffing shortage reported it was in all of their communities, while 29% said more than half of their company’s portfolio was experiencing staffing shortages.

Senior Lifestyle CEO Jon DeLuca said that, while staffing shortages have improved over the last four months, competition from other employers will in 2023 still impact hiring for caregivers, waitstaff, and housekeepers.

“Operators will continue to see a competitive labor environment in 2023, in part due to the fact that the workforce has shrunk since March 2020, and that many people are not re-entering the labor pool,” DeLuca added in his executive forecast for this year. “In fact, the labor pool continues to shrink every month, and thus the current unemployment rate is understated.”

One event that could change the landscape for staffing is an economic recession. Should a recession hit, it could force other employers to trim jobs and slow or even halt wage growth. Although that would be generally bad for workers, senior living operators would in theory have more leverage with which to fill open positions.

It’s also not a certainty that the U.S. economy will even enter a recession in 2023. After all, how many articles were written in 2022 warning of a recession just over the horizon?

Technology may play a bigger role in staffing in the future, particularly from companies like ShiftKey, a platform that connects health care workers with clinics, hospitals and communities that have open shifts to fill. Other companies in the workforce tech platform space include Kare, which is more senior living focused.

On Wednesday, ShiftKey announced a $300 million fundraise, a sign that there are more opportunities to expand flexible, temporary staffing solutions.

The bottom line for the industry is that plans to grow and evolve in 2023 will hinge on their ability to hire and keep staff. And although how operators will do so is still to be determined, efforts underway now may answer this question in the year ahead.

Will there be another Covid curveball?

Walk into any senior living industry happy hour and you will hear that Covid is largely in the rear-view mirror, that programming and dining are largely back to normal, that residents and their families can visit to their heart’s content.

I have seen some of the industry’s biggest challenges fade since the start of the pandemic, but Covid-19 is still a wildcard in my eyes.

While a new variant is not a certainty — and on the whole, operators are not feeling the sting of the pandemic nearly the same way as they did in 2020 or 2021 — the pandemic is still not over. Almost 44,000 new cases were reported in the U.S. as of Jan. 9, according to the New York Times.

Some in the industry, like The Springs Living CEO Fee Stubblefield, are planning for the possibility of a new Covid strain in 2023 that puts the industry back into lockdowns. While senior living operators may not ultimately have to sequester residents in their rooms in 2023, they will likely still deal with an elevated number of staff callouts as the pandemic ebbs and flows.

The pandemic’s effects are felt in other ways, as well. The cost of personal protective equipment (PPE) is still a burden on senior living budgets, and that will likely be true for as long as there are cases of Covid. The pandemic also generally adds uncertainty to the industry’s future.

The flip side to these sustained challenges is that operators now have almost three years of experience dealing with the pandemic, and are now wielding tools to stop its spread. Some operators have even said they have effectively eliminated the spread of Covid in their buildings, with only one-off cases.

That is not to mention successful vaccines, which have been a game-changer since their arrival in 2021. There is also new evidence that the newest Covid vaccine boosters are helping keep older adults out of the hospital. So, while I think the industry is not out of the Covid woods yet, it also now has a better array of tools to deal with it than ever before. That may make a big difference, provided operators can effectively wield those tools.

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