After years of challenges, the road ahead now looks a little brighter for non-profit life plan communities.

Life plan communities are seeing more stable occupancy and operational trends than in the past, likely leading them to increase capital expenditure spending in the future. On the whole, “recovery building blocks [are] emerging” for the sector, according to Fitch.

Senior Director Margaret Johnson told Senior Housing News the continued improvement in occupancy and abating expense pressure allowed for operational stabilization and recovery in the life plan community sector during the fiscal year of 2023.

According to the Sept. 16 report, the median occupancy rates for life plan community unit types in 2023 were 93.3% for independent living, 89.2% for assisted living and 84% for skilled nursing.

In a press release from Fitch Ratings, Johnson said improvements in the national real estate market have been a benefit for life plan communities as residents are getting more out of selling their homes to afford the entrance fees.

Life plan communities are expected to further increase CapEx spending in 2024, and “most projects financed in recent years have successfully filled.”

As of Aug. 29, Fitch’s median rating for the 159 life plan communities it tracks was “BBB,” with 77 communities receiving the rating. Another 31 received an “A” rating.

Despite the gains the sector is seeing, expenses are also anticipated to be on the rise, particularly for life plan communities with a heavy skilled nursing component. Johnson noted these communities tend to have lower ratings and “have experienced the most severe rating downgrade pressure since the pandemic,” largely due to wage and staffing pressures.

“Government reimbursement, particularly Medicaid rates, has not kept pace with heightened expenses related to staffing SNFs, even at abated levels. Newly announced federal standards around minimum staffing ratios will only exacerbate this operational pressure,” the report’s authors wrote.

These communities also have less flexibility to remove skilled nursing beds, which “constrains operating flexibility,” Johnson said.

Looking ahead, Fitch Ratings is anticipating additional increases in capital expenditures as well.

“Following these signs of operational recovery, we expect capital expenditures will start to tick up in fiscal 2024 for LPCs,” Johnson said.