Johnson was addressing investors at a Thursday webinar moderated by Kevin Holloran, senior director and sector leader of the not-for-profit healthcare group in Fitch’s public finance department. 

Earlier this month, Fitch Ratings assigned the CCRC sector a rate of “deteriorating” for the second year in a row, indicating that the company anticipates that credit pressures will worsen this year amid persistent labor and cost pressures.

The sector would have to demonstrate improvement in staffing numbers as well as the efficacy of measures leading to “stable” or “improving” ratings if it is to revise the outlook to “neutral,” according to Fitch, the McKnight’s Business Daily previously reported. 

CCRCs “still face a number of considerable headwinds heading into 2024,” Johnson said. “Cost inflation in terms of supplies and labor, higher interest rates and volatility in the housing sector all contributed to the ‘deteriorating’ or ‘negative’ outlook. But by far, the biggest driver of the ‘deteriorating’ outlook is continued wage pressure.” 

CCRC payrolls are below pre-pandemic levels, whereas wages are at a historic high, Johnsonn said, “meaning it’s taking more and more money to hire workers and even then, [CCRCs] overall remain understaffed.”

This situation is especially true in communities that offer skilled nursing services, she said. 

The good news, Johnson said, is that most of the CCRCs that are a factor in the Fitch outlook have more independent living units than skilled nursing units and are able to take nursing beds offline and adjust staffing levels.

Doing so “allows them to limit the use of more expensive agency nurses and also positions them well to withstand the effects of possible new regulation around minimum staffing ratios that’s been getting some air time at the federal level,” she said, adding, “They also have the ability to pass through rate increases to their independent living residents to offset these high labor and supply costs.”

Demographics also favor the sector, Johnson said.

“I’d say the [CCRC] model of communal living has a distinct competitive advantage over aging at home and other models of senior living. And this is especially in light of a recent Surgeon General advisory about the negative health impacts of loneliness and isolation, especially among seniors,” Johnson said.

She added that the communal living model appeals to baby boomers — those born between 1946 and 1964 — which is on the brink of forming the largest cohort of demand for senior living and care over the next decade.

Against the backdrop of the strong demographics, Johnson said, it is possible for the sector to change its outlook to “improving” or “stable” over time.

“But until we get to a situation where we have a significant stabilization of labor availability, wages and housing prices, so that [CCRCs] can move away from double-digit rate increases and back to their historical norms of 2% to 5% rate increases per year, I think the best we can probably hope for for the sector is ‘stable,’” Johnson said.

The long-term care-related11  transactions that were closed ranged in size from $2 million to $89 million, largely for skilled nursing, a personal care home facility and assisted living operators, the lending organization announced Tuesday.

“Heading into 2024, Oxford remains well-positioned to continue its current expansion trend into the new year and beyond,” the company said. 

In the first half of the year, Oxford closed on $131.35 million in transactions related to long-term care facilities. At that time, Oxford Finance said that its pipeline for the remainder of the year was “active.”

Transactions for the first half of 2023:

• In Texas, a $14.25 million revolving line of credit to finance working capital needs for 29 skilled nursing facilities.
• In Pennsylvania, a $34.1 million term loan, a $2.5 million mezzanine loan and $2 million revolving line of credit recapitalized two SNFs and one personal care home.
• In northern California, a $16.6 million term loan and a $3 million revolving line of credit went to finance the acquisition of two SNFs.
• In Illinois, a $53.9 million term loan and a $5 million revolving line of credit were extended to finance the acquisition of 11 SNFs and one independent living community.

In the second half of the year, Oxford Finance closed in its largest deal of the year. The company provided a $75 million term loan, a $4 million capital expenditure line and a $10 million revolving line of credit to finance the acquisition of five SNFs and refinance existing debt at five additional SNFs for an Alabama operator.

In addition, Oxford provided a $50 million term loan and a $10 million revolving line of credit to finance the acquisition of two SNFs for an expanding regional operator. 

Lastly, in Florida, Oxford provided a $67.4 million term loan and a $15 million revolving line of credit to finance the acquisition of three SNFs and three assisted living communities for an established multi-region owner in partnership with a local operator.

The CCRC identified the need for an on-site clinic “just in talking to our residents, what their concerns are, what their needs are. You know, more and more people want to age in place, and they just need that level of care,” St. Mark Village CEO and President Jeff Gorddard told the McKnight’s Business Daily. 

“The regulations are not making us do it, but we knew it needed to happen because of the acuity people we get now,” Vice President of Healthcare Services Randall Rees added.

The CCRC sits on 12 acres in Pinellas County and offers independent living, short-term and long-term skilled nursing, assisted living and memory care. The clinic is available for primary care and urgent care for residents at all levels of care and operates independently from the CCRC. Curana Health rents space from the community.

“So not only can they [residents] stay in the building to go to their appointment; if needed, the physician can go to their apartment and see them, do house calls,” Gorddard said.

Residents may sign on to have Curana Health as their primary provider, but it is not required, Gorddard said. They also can use the services as needed and keep their own physicians if they prefer, he said. 

“We have some residents who’ve been with their physician for 20, 30, 40 years. We’re not asking them to give that relationship up. This just supplements that for a need,” Rees said.

The Curana Health Clinic at St. Mark Village offers a variety of services, such as blood pressure checks, ear cleanings, lab draws, therapeutic injections, medication management and refills, and wound care, for example, according to the CCRC. The clinic bills insurance companies directly.

Anthony Washington III, MD, and Teresa Clark, APRN, FNP-C, staff the clinic and typically see people within 24 hours of a request, Rees said.

“And then they’re really seeing them every day that’s needed. Some people, that means every day. Some people, it’s just a couple days a week,” Rees said. “But the presence is just raising our level of care, or our quality of care significantly.”

The Curana Health clinic is an added benefit for St. Mark Village employees. Its presence on campus may cut down on absenteeism in the long run as well, Rees noted, because employees won’t have to take time off for appointments, but rather can schedule them at their convenience without ever leaving the building.

“I think it was the second day that my executive assistant had a cough and Teresa came down with the stethoscope and listened to her and diagnosed her and got her medication, and she’s doing better and didn’t have to miss any time,” Rees said.

The skilled nursing part of St. Mark Village recently earned a five-star rating in all three healthcare categories by the Centers for Medicare & Medicaid Services. The organization also was recognized by US News as a 2023-2024 Best Independent Living, Memory Care, and Continuing Care Retirement Community in 2023. Most recently, St. Mark Village ranked fourth among CCRCs in the Sunshine State and 22nd in the nation by the first-ever list of America’s best CCRCs compiled by Newsweek and global market research and consumer data firm Statista.

OSHA’s maximum penalties for “serious and other-than-serious violations” will increase from $15,625 per violation to $16,131 per violation. The maximum penalty for “willful or repeated violations” will increase from $156,259 per violation to $161,323 per violation.

States that operate their own Occupational Safety and Health Plans are required to adopt maximum penalty levels that are at least as effective as federal OSHA penalties. Currently, 22 state plans cover both private-sector and state and local government workers, and seven state plans cover only state and local government workers. Civil penalties might differ in those states with their own plans.

“In North Carolina, for example, employers may be surprised to learn that the maximum penalties more than doubled in 2022 — and these penalties will now increase every January to match the maximum penalties available to federal OSHA,” wrote Fisher Phillips attorneys Travis Vance and Curtis Moore.

Under the Federal Civil Penalties Inflation Adjustment Act Improvements Act passed by Congress in 2015, agencies are required to publish “catch-up” rules that adjust the level of civil monetary penalties and make subsequent annual adjustments for inflation no later than Jan. 15 of each year. Because Jan. 15 fell on a federal holiday this year, however, the new OSHA penalty amounts became effective Jan. 16.

“Congress believed that increasing the penalty amounts each year was necessary to maintain a ‘deterrent effect.’ The practical effect, however, is that if an employee incurs an amputation or an injury serious enough to require admission to a hospital, a citation alleging a serious violation with the maximum penalty amount for that alleged violation is often issued, regardless of employee fault,” according to attorneys at Constangy, Brooks, Smith and Prophete, LLP.

“As penalty amounts increase, it is even more important for employers to design and implement an effective safety program that includes significant monitoring of employees’ compliance with safety rules and consistent enforcement of those rules through discipline,” they said.

Stamford, CT-based Land & Buildings has put forth three candidates for Ventas’ board of directors to be voted on at the Chicago-based real estate investment trust’s next annual meeting of stockholders, Ventas said Thursday in a press release.

The release was issued in response to an article published by Reuters, according to a spokesman for Ventas. The REIT has not announced the date of its stockholder meeting, the spokesman confirmed.

Ventas and Land & Buildings both declined to provide a copy of the letter to the McKnight’s Business Daily. The nominations were filed privately, according to a Land & Buildings spokesman.

The shareholder did not issue a press release, but Land & Buildings’ founder and Chief Investment Officer Jonathan Litt shared a link to the Reuters article on X, the social media platform formerly known as Twitter. The article states that the company is “arguing that change is needed to improve performance” at the REIT.

Further, the article identifies the three proposed board candidates as Nori Gerardo Lietz, who teaches at the Harvard Business School and is the founder of real estate advisory firm Arete Capital; Ted Bigman, who led the global listed real assets business at Morgan Stanley; and John Guinee, who worked at Stifel, Nicolaus & Co. and is a member of the board of Plymouth Industrial REIT.

A link in Litt’s tweet sent followers to a document that indicates that Land & Buildings “intends to file a preliminary proxy statement and accompanying universal proxy card” with the Securities & Exchange Commission related to the slate of candidates.

Ventas shared Litt’s tweet in its own filing with the SEC late Thursday.

In its press release, Ventas said it would evaluate the candidates put forth by Land & Buildings “consistent with its established practices” and would file with the SEC its formal recommendation regarding the nominees in its proxy statement before the stockholders’ meeting.

“The Ventas Board of Directors and management team are committed to acting in the best interests of the Company and all shareholders. Ventas shareholders today benefit from a strong, diverse and experienced board composed of 11 highly qualified directors, 10 of whom are independent, with significant leadership, investment, financial and operating experience across real estate, healthcare, development, REITs and public companies,” Ventas said in a statement.

The activist shareholder owns approximately $50 million worth of stock in the REIT, amounting to a stake of less than 1%, the Wall Street Journal previously reported.

This is not the first time Land & Buildings has challenged Ventas’ management and board. 

In March 2022, the public real estate activist hedge fund accused Ventas of “long-term underperformance” and announced Litt’s own nomination for the board, but that nomination was withdrawn a month later.

In an April 2023 letter to shareholders, Litt announced his intention to vote against the election of James Shelton, lead independent director, and Ventas Chair and CEO Debra Cafaro, the two longest-serving directors, at the REIT’s 2023 shareholder meeting.

Again in September 2023, Litt challenged Ventas leadership in a public letter in which he described Ventas’ recent financial performance as “lackluster” and called for “substantial change.”

According to Cafaro, however, the REIT performed well in 2023.  

“We are pleased to improve our 2023 outlook and to see that while we certainly have more work to do, our total returns to shareholders over the last one- to three-year period, and since the beginning of 2022, have outperformed healthcare REITs and the REIT industry,” she said during third-quarter earnings call.

The company’s senior housing operating portfolio saw double-digit same-store cash net operating income growth for the fifth consecutive quarter in the third quarter of 2023, according to Justin Hutchens, the REIT’s chief investment officer and executive vice president of senior housing,

In December, Ventas declared a quarterly dividend of $0.45 per common share, which will be paid Jan. 18 to stockholders of record as of the close of business on Jan. 2.

Ventas noted in Thursday’s press release “the importance of ongoing refreshment” and said that it already has a director succession and search process in place.

“This includes annual director evaluations, feedback from our investors and support from third-party search firms. To that end, the board has appointed four new independent directors in the last four years,” the REIT said.

“Long-term care in America is broken. It’s marked by nursing home bias, too little home care, dubious access and quality, inadequate caregiver shortages, stressed out unpaid family caregivers and growing complaints of structural racism,” said Stephen Moses, president of the Center for Long-Term Care Reform and author of “Long-Term Care: The Problem” and “Long-Term Care: The Solution.”

The center promotes universal access to quality long-term care by encouraging private financing as an alternative to Medicaid for most Americans.

“Everyone bewails these problems, but few ask or explain their cause. Most jump to solutions that involve more government money and regulation, but arguably government money and regulation cause these problems,” Moses said. 

The lure of “social insurance,” he said, has prevented policymakers from thinking clearly about potential market-based options.

According to Moses, Medicaid created a “moral hazard” that discourages consumers from using their private savings to pay for their long-term healthcare needs, and it places the burden on taxpayers to pay for such expenses.

“Keeping Medicaid long-term care easy to get while preserving exempt wealth but with later estate recovery as an incentive to plan did not work,” Moses previously told the McKnight’s Business Daily.

The solution, he added is for Medicaid to be used only as a “safety net” for lower-income and indigent individuals. 

“To achieve that objective, we propose to end all Medicaid rules that enable people with substantial income and assets to qualify,” Moses said Tuesday. 

Richard W. Johnson, senior fellow and director of the Program on Retirement Policy at the Urban Institute, noted that “about half the population will never use paid long-term care.” But for those who do need professional care, he said, the risks are not spread evenly across the population.

“Women are more likely to need care than men. People of color are somewhat more likely to need care than non-Hispanic white adults and, importantly, less-educated and lower-income adults are more likely to need care than those with more education and more financial resources,” Johnson said. 

“One thing I would emphasize is the heterogeneity among the older population, and in particular, that there’s a lot of people who are going to be just fine, but there’s a small group who are going to develop serious long-term care needs, and many of them simply do not have the funds to prepare themselves for that eventuality,” he added.

Mark J. Warshawsky, senior fellow at the American Enterprise Institute and former deputy commissioner for retirement and disability policy at the Social Security Administration, said that he largely agreed with Moses’ assessment of the public funding challenge.

“I think he has accurately identified the Dr. Jekyll / Mr. Hyde aspect of Medicaid for long-term care benefits,” Warshawsky said. 

“Although on the one hand, it is marketed and it’s understood in the public mind and among policymakers as a program for the poor, when it comes to long-term care, the reality is that it’s a program for not just the poor, but for the middle class, the upper middle class, and even the wealthy,” he added. “You just look on the internet and type in Medicaid planning, and you’ll get literally hundreds of lawyers that will tell you how to do it. But even without hiring a lawyer, there are some very simple ways of becoming eligible for Medicaid with significant income and assets.”

Although flaws in the Medicaid program may need to be addressed, Johnson said that he doesn’t think that doing so will completely solve long-term care financing issues.

Only not-for-profit hospitals and higher education joined life plan communities with “deteriorating” sector outlooks in Fitch Ratings’ 2024 Public Finance Compendium, published Monday. Such a rating indicates that Fitch anticipates that credit pressures will worsen this year amid persistent labor and cost pressures.

“While Fitch expects demographic trends to continue to support healthy demand, decelerating real estate price growth and cost inflation are significant headwinds that will continue to stall the sector’s recovery,” Fitch Senior Director Margaret Johnson stated.

Although healthy demand exists for CCRCs, other key drivers of credit quality, such as decelerating real estate price growth and inflationary operating expense pressures have not improved year over year, according to the credit ratings and analysis company. 

Last month, the McKnight’s Business Daily reported that, according to Fitch, the sector would have to demonstrate improvement in staffing numbers as well as the efficacy of measures leading to “stable” or “improving” ratings if it is to revise the outlook to “neutral.” Fitch repeated the sentiment in Monday’s report.

The sector would need to overcome labor challenges, show that higher-than-average rate increases are effectively counteracting inflationary cost pressures, and improve expectations for stable or improving real estate market performance, Fitch maintains.

The Centers for Medicare & Medicaid Services’ proposed minimum staffing ratios for nursing homes are expected to exacerbate staffing pressure, which would affect already increased operating costs as well as exacerbate the headwinds in the CCRC sector, the report noted.

Additionally, according to Fitch, keep an eye on mergers and acquisitions activity in the life plan community sector heading into 2024.

“Provider affiliations and industry consolidation are going to remain key themes as providers seek the benefits of economies of scale,” the report noted.

Long-term care-related defaults had been decreasing as of May. 

Hilltop surveyed 125 market participants. Half of the respondents to the Hilltop Securities High Yield Impact Survey were investors; bankers and advisers accounted for 16%; sell side intermediaries accounted for 9%; and bond counsel, insurers and rating analysts contributed 16% of the responses. Other market participants (including bond evaluators and researchers) contributed the remaining 9%.

The top three sectors in which participants said they expect to see defaults are in senior living, skilled nursing and project finance. Those top three were the same as in 2022, Hilltop noted, although higher education was No. 4 in 2023 compared with hospitals in 2022; “​​some of the extreme labor and revenue pressures in the hospital sector have begun to moderate,” the company said.

“Generally, responders assigned little to no concern to the behavioral health, hotels, workforce housing sectors, or the impact that work from home will have on credits,” according to Hilltop. 

The company noted that pre-pandemic occupancy levels haven’t returned to most senior living communities, which face continued revenue challenges that could affect muni bonds. According to NIC MAP Vision and the National Investment Center for Seniors Housing & Care, however, sustained supply-demand trends could drive those occupancy rates to return to pre-pandemic levels this year.

But experts are somewhat pessimistic in general about some muni bond yields this year, Bloomberg reported.

“Junk muni bonds posted a 9.2% advance for the full year, the most since 2019. Returns were buoyed by a lack of high-yield supply and a widespread market rally starting in November,” according to the media outlet. 

“The market could look different this year if the Federal Reserve cuts interest rates and muni issuers rush to borrow. A slowing US economy also doesn’t bode well for a sector that’s largely made up of nursing homes, tobacco bonds and charter schools,” John Flahive, head of fixed income at BNY Mellon Wealth Management, told Bloomberg.

According to the Hilltop survey, the green bond designation has little effect on investors. Hilltop has asked a question about the bond type in its three most recent annual surveys. Less than 1% of respondents said that the green bond designation was a priority for them. Investors conveyed that although the designation is a nice thing to have, they aren’t willing to pay extra for it.

“Green bond designation does not help my recovery when a deal defaults. Equity does,” one respondent said.

Nursing home care spending grew by 7.8% for the same period, after having in September represented one of the fastest-growing categories of national health spending; spending on home care, on the other hand at that time, however, showed the slowest growth rate.

The Altarum brief expands on the official estimate of Medicare and Medicaid expenses in 2022, as reported by the Centers for Medicare & Medicaid Services in the January issue of the journal Health Affairs. Altarum expanded on CMS’ research to include data through October 2023.

Growth rates in both home care and nursing home care spending exceeded overall growth in national health expenditures in 2022, which was 4.1%, Altarum Fellow and Senior Researcher George Miller told the McKnight’s Business Daily.

Year-over-year prices for nursing home care grew by 5.1%; prices for home healthcare increased by 4.6%. 

“Both exceeded the overall growth in prices for healthcare, which was 3.1% in October, year over year,” Miller said. “Price growth in November was somewhat lower, at 4.3% for home healthcare and 4% for nursing homes, year over year, according to our HSEI estimates.”

Personal healthcare spending growth in October was 7.7%, year over year. That growth was driven by increased use rather than price increases, according to Altarum. 

Job growth

Meanwhile, in November, the healthcare sector added 76,800 jobs, tying July for most jobs added in a month over the past year, according to Altarum. Most of the increase came from ambulatory care settings, which collectively added 35,800 jobs, and hospitals, which added 23,700 jobs.

Employment in nursing and residential care facilities grew by 6.7% in November, year over year, “representing one of the highest growth rates among healthcare components,” however, Miller said. “Employment in home health care grew by 4.4% over the same period.”

Nursing and residential care facilities added 17,300 jobs in November. Nursing homes added 5,700 of those jobs, with other nursing and residential care settings adding 11,600 jobs.

Healthcare employment growth is showing signs of slowing, however, according to the latest Bureau of Labor Statistics data.

Wage growth in healthcare settings was highest in nursing and residential care, at 4.7% year over year in October, followed by hospitals at 4% and ambulatory care settings at 3.2%, according to the brief.

The job count is up from the previous report, which showed 103,000 jobs added in November.

“We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” ADP Chief Economist Nela Richardson said in a press release issued in conjunction with the monthly report. “While wages didn’t drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared.”

The report analyzes the payroll transactions of more than 25 million US workers. The data, produced by the ADP Research Institute in collaboration with the Stanford Digital Economy Lab, showed a service sector gain of 155,000 jobs overall, with education / health adding 42,000 jobs (compared with 44,000 added the previous month). The biggest gains were seen in the leisure/hospitality sector, which added 59,000 jobs in December.

By US region, private employers in the West had the biggest job gains last month, at 109,000, followed by the Northeast, with 94,000 additional jobs. The South lost 7,000 jobs, and the Midwest lost 21,000.

Firms with 500 or more employees gained 40,000 jobs overall, whereas companies with 50 to 499 workers added 53,000 jobs. Businesses with one to 49 employees collectively expanded by 74,000 jobs.

Pay gains slow

“Pay for job-stayers rose 5.4% in December, slowing from 5.6% a month earlier and continuing a deceleration that began in September 2022,” according to the report.

Firms with one to 19 workers saw the smallest median change in annual pay, at 4.6%. The change was 5.6% for companies with 20 to 49 employees, 5.7% for businesses with 50 to 249 workers, 5.5% for employers with 250 to 499 employees and 5.4% at firms with 500 or more workers.

Unemployment claims drop

Meanwhile, initial filings for unemployment for the week of Dec. 30 decreased by 18,000 from the previous week’s revised level, according to data released Thursday by the Department of Labor.

“The number of Americans filing new claims for jobless benefits dropped to a two-month low last week, pointing to underlying labor market strength even as demand for workers is easing,” Reuters reported. By comparison, in November, new jobless claims had reached a three-month high.