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 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.

A provision in state law cited in a class action lawsuit against a continuing care retirement community only applies to food-related fraud and, therefore, cannot be used by residents and families to secure entrance fee refunds, a court ruled Wednesday.

The refund provision in New Jersey’s Consumer Fraud Act is limited in scope and does not entitle the plaintiffs to full refunds of their entrance fees, monthly fees or services provided during their residence in the life plan community, the New Jersey Supreme Court ruled.

Princeton, NJ-based Springpoint Senior Living is accused of consumer fraud over allegations that it misrepresented the return of entrance fees once residents leave a CCRC. The lawsuit, filed in 2014, alleged violations of the state’s Consumer Fraud Act and the Continuing Care Retirement Community Regulation and Financial Disclosure Act. Springpoint asserted that the right to a refund under the state CFA only applies to a portion of the statute involving food served at restaurants, hotels or lunch counters.

“Those allegations [in the class action suit] pertain entirely to misrepresentations about fees charged by a senior living facility,” Justice Douglas M. Fasciale wrote in a unanimous opinion. “None of the plaintiffs’ allegations are related to misrepresentations of food.”

A Middlesex County Superior Court Judge denied a motion for partial summary judgment in December 2022, rejecting Springpoint’s argument that only the state health department had the right to file a lawsuit to obtain a refund of community entry fees. Springpoint appealed the decision to the state’s high court with the hope of clarifying the limited scope of the refund provision.

The New Jersey Supreme Court’s decision reversed the lower court ruling and remanded the case back to the trial court. DeSimone’s attorney told Law.com that class members would continue to pursue entrance fee refunds under the Continuing Care Retirement Community Regulation and Financial Disclosure Act. 

A Springpoint Senior Living spokeswoman told McKnight’s Senior Living that it was pleased with the state high court’s unanimous decision.

“The opinion clarifies the narrow scope of the Consumer Fraud Act’s refund remedy in the way that the legislature intended when it passed the law in 1980,” the spokeswoman said. “The well-reasoned decision faithfully adheres to the language and legislative history of the statute and resolves inconsistent interpretations by the lower courts.”

Filed in 2014 

William DeSimone filed the lawsuit in 2014 on behalf of his mother’s estate against Springpoint’s New Jersey-based CCRCs at Monroe Village, Springpoint at Montgomery, Springpoint at Crestwood, Springpoint at Meadow Lakes and Springpoint at the Atrium. 

According to court documents, Evelyn DeSimone had paid a $159,000 entrance fee for an independent living unit at Monroe Village. Before moving into her unit, however, she fell and broke her hip and was unable to move in. Instead, she remained in the community’s skilled nursing facility, where she lived until she passed away in April 2010.

After her death, according to the lawsuit, her estate received a refund that amounted to 50% of her initial entrance fee, less than the 90% refund that had been anticipated. 

The lawsuit alleged that Springpoint orchestrated a “bait and switch” scheme through misleading and deceptive advertising, along with “intentional misrepresentations” by sales personnel and an incomplete and misleading disclosure statement. 

The lawsuit also claimed that Springpoint failed to alert prospective residents that it was authorized to offer discounts on the subsequent re-leasing of units or to offer different payment options that effectively could reduce refunds.

The case was dismissed in 2014 for failure to state a claim on which relief can be granted, but it was reinstated in 2015 by an appellate court. The case was certified as a class action in 2021.A bill was introduced in the New Jersey legislature in February 2022 to require CCRCs to return refundable entrance fees to former residents or their estates within a year of the unit being vacated. If passed, the bill also would require that all CCRC agreements “be written in plain English and in language understandable by a layperson.”

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.

“Efficiency and productivity are the chief mandates for life plan communities, assisted living and skilled nursing facilities across the board in 2024, considering the tight labor market and high cost of increasing headcount in the current environment,” Fitch Ratings Director Richard Park said in a press release issued in conjunction with the report.

According to Fitch, the CCRC sector still is experiencing staffing shortages, high wage inflation and payrolls that have not rebounded to pre-pandemic levels. The data show that payrolls at CCRCs and skilled nursing facilities sit at 6.2% and 9.4% below pre-pandemic levels, respectively. Assisted living communities, however, have fully recovered and are 4.9% above pre-pandemic levels, Fitch said.

Year-over-year average hourly earnings growth had decreased in CCRCs, assisted living communities and SNFs to 5.42%, 4.27% and 4.35%, respectively, as of October. That’s compared with peak growth in the first quarter of 2022 of 12.37%, 11.55% and 11.54%, respectively. By comparison, year-over-year average hourly earnings growth in the private sector was 4.04% as of October.

The silver lining, Fitch said, is that rate and occupancy growth have increased sufficiently to offset higher wages. “Fitch expects LPCs, AL facilities and SNFs to continue focusing on efficiency and productivity efforts in 2024 considering the tight labor market and high cost of increasing headcount in the current environment,” the report stated.

Fitch noted that fewer job openings are available in healthcare and social services, down from a peak of 9.3% in March 2022 to 6.4% as of October.

“Despite the decline, the latest rate remains very high compared to the 4.2% from 2010 to 2019,” according to the report.

The quits rate in healthcare and social services remains high, however, according to Fitch; it was 2.3% as of October, compared with the 1.6% average from 2010 to 2019. 

“The tight labor market continues to be in favor of workers in search of higher wages and better work environments,” Park said.

Spending for services provided at freestanding nursing homes and continuing care retirement communities, which represented 4% of overall spending, increased by 5.6% in 2022, to $191.3 billion, after reporting a 7.8% dip in spending in 2021.

“Nursing homes consist of a lot of Medicare and Medicaid spending, and we saw a decline in Medicare spending in 2021,” CMS Economist Ann Martin, a co-author of the report, said Wednesday during a press briefing held in conjunction with the release of the analysis. “Also, what’s really driving that dip in 2021 overall is the decline in other third-party payers and programs.”

The Medicaid program, out-of-pocket payments and Medicare reimbursements accounted for more than three-fourths of total payments to nursing homes and CCRCs and, in 2022, spending for those payers had strong growth following low growth or reduced spending in 2021.

Martin noted that nursing homes also received much pandemic relief in 2020 supplemental federal funding, which declined from $22 billion in 2020 to approximately $3 billion in 2021.

Most of the decline in nursing homes spending stems from that loss, she said.

Spending for services provided by freestanding home healthcare agencies increased 6% in 2022 to $132.9 billion, accelerating from growth of 0.3% in 2021, according to CMS. Private health insurance, out-of-pocket, and Medicaid home health spending contributed to the faster growth, whereas Medicare spending growth for home healthcare services slowed. Home healthcare-related spending represented 3% of overall spending.

Overall spending growth similar to pre-pandemic levels

“The [overall] 4.1% growth in 2022 was similar to the pre-pandemic average annual growth of 4.4% over the 2016 to 2019 period,” Micah Hartman, chief statistician at the CMS Office of the Actuary and lead author of the report, said during the press briefing. “The share of the economy devoted to health was 17.3%, lower for the second year in a row and down from the peak of 19.5% in 2020.”

He added that the 17.3% figure 2022 was more in line with the average from 2016 to 2019 of 17.5%.

Medicaid and private health insurance spending influenced the overall  growth in healthcare spending in 2022. 

“Medicaid spending increased 9.6% in 2022 after growth of 9.4% in 2021 and 9.3% in 2020,” the authors noted.

In 2022, total spending for private health insurance reached $1.3 trillion, which was approximately $71 billion, or 5.9% more than the amount spent in 2021, according to Martin.

“Private health insurance enrollment grew 1.5% in 2022, and this was the fastest growth in enrollment since 2015 and reflected increased enrollment in both marketplace plans and employer-sponsored insurance,” Martin said. “On a per-enrollee basis, spending for private health insurance increased 4.3% which was slower than the growth of 5.9% in 2021.”

She said the slower growth was due primarily to slower growth in per-enrollee spending for employer-sponsored private health insurance. 

According to Martin, Medicaid spending reached $805.7 billion in 2022, an increase of 9.6%. 

“This was approximately the same rate of growth as experienced in 2020 and 2021, and the third consecutive year of growth above 9%,” she added.

Item: Report: Alternative approaches to senior living, LTSS needed for growing older adult population

The gist: A recent story highlighted a report from the Harvard Joint Center for Housing Studies, revealing that only 13% of adults aged 75 or more years, living alone across 97 metro areas, can afford to move into an assisted living community without depleting their assets.

Why this matters: We’re hearing a lot these days about the need to serve the so-called middle market. (I say “so-called” because industry views on the meaning of that range can vary considerably.) What this report makes clear is that the senior living sector more than has its work cut out here. Success is not just going to be a matter of paring options and operating costs to the bone — although that, too, likely will need to be a part of the equation. Essentially, those findings suggest operators will need to re-imagine how to reach this market. And that, my friends, is going to be a very heavy lift.

Item: CCRCs continue to report higher occupancy than other senior living segments

The gist: Continuing care retirement / life plan communities continued to outpace non-CCRCs in senior living occupancy in the third quarter, according to a data analysis from specialty investment bank Ziegler.

Why this matters: At first glance, the implication is obvious: These are good times to be running CCRC / life plan communities. Part of the advantage is that CCRCs often can charge higher entry fees and monthly rates. So everyone should want to become a CCRC, right? Not so fast. Many of these campuses have a 60-acre or larger footprint, which can be a substantial barrier to entry. Moreover, the full-service aspect of CCRCs can backfire, especially if one component of the portfolio — such as skilled care — hits hard times. Then what? It’s worth noting that the things that make CCRCs formidable also can hamper them when times are tough.

In case you didn’t notice, there is no single silver bullet when it comes to ensuring success in senior living.

Probably best to focus on finding many good bullets instead.

John O’Connor is editorial director for McKnight’s Senior Living and its sister media brands, McKnight’s Long-Term Care News, which focuses on skilled nursing, and McKnight’s Home Care. Read more of his columns here.