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.

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.

Fitch is unwavering at this time in its “deteriorating” outlook for the sector, citing decelerating real estate price growth and inflationary operating expense pressure among the sector’s biggest impediments. According to the report, to revise the outlook to “neutral,” the sector would have to demonstrate improvement in staffing numbers as well as the efficacy of measures leading to “stable” or “improving” ratings.

“Demographics are still supportive of healthy demand in terms of [life plan community] occupancy, though staffing is still very much a sore spot contributing to much of the expense pressures for [life plan communities],” Fitch Senior Director Margaret Johnson said Monday in a statement.

Johnson noted that although life plan communities have experienced flexibility relative to hospitals in responding to staffing challenges, the Centers for Medicare & Medicaid Services’ proposed minimum staffing ratios for nursing homes are expected to exacerbate staffing pressures, “though not enough to adversely affect ratings.”

CCRCs have so far been able to pass along higher costs to residents. For example, communities with significant skilled nursing components have reduced their number of beds to help keep finances in the black. 

“However, occupancy and demand could soften if rate increases continue above historical norms or if cost-cutting erodes service quality. Decelerating growth in real estate pricing may also slow the current strong pace of independent living unit (ILU) sales and limit an LPC’s ability to raise entrance fees to absorb cost inflation and pay refunds,” according to the report.

Keep an eye on mergers and acquisitions activity heading into 2024, according to Johnson.

“Inflationary and economic pressures are driving smaller providers to seek the benefits of partnering with a larger system to shore up the benefits of economies of scale,” she said.

Newsweek and global market research and consumer data firm Statista this morning are recognizing 250 US continuing care retirement / life plan communities via the announcement of their first-ever “America’s Best Continuing Care Retirement Communities 2024” rankings.

Topping the list is Valle Verde, a HumanGood community in Santa Barbara, CA, with a score of 91.7% out of 100%. Close behind at No. 2 is Edgemere, located in Dallas, with a score of 91.66%. As of mid-June, Edgemere is owned by Bay 9 Holdings LLC, an affiliate of Lapis Advisers LP, and is managed by Long Hill at Edgemere LLC, a wholly owned subsidiary of United Methodist Homes.

“This recognition is a testament to the strong, innovative culture created by our passionate HumanGood team members and residents in each of our communities,” HumanGood CEO John Cochrane told McKnight’s Senior Living. “It is an honor to be included in this ranking and share our mission to help inspire the best life for all of our residents, team members, families and friends.”

Newsweek published news of its plans for the rankings in August when it posted links to two surveys — one for residents and prospective residents and their friends and family members, and the other for CCRC workers and those whose jobs associated them with CCRCs — on its website. (Read more about the surveys here.) Data were collected through Sept. 26, and an analysis of the findings accounted for 90% of each CCRC’s score. The other 10% of the score was determined by whether a community was accredited by CARF International.

“Building on the interest in our nursing home ranking, Newsweek wants to help readers make informed choices with the important decision of selecting a CCRC,” Josh Smith, Newsweek’s director of rankings, told McKnight’s Senior Living in September. “We recognize the changing landscape of eldercare and aim to help consumers find the right facility for themselves or a loved one.”

That changing landscape of eldercare, according to Newsweek, involves a growing population of Americans aged 65 or more years and the expectation that “the request for retirement housing that offers various levels of care options will increase over the next decades.”

Newsweek and Statista expect their rankings to become an annual undertaking.

Data, according to the two companies, were collected about CCRCs in the 20 states that have the most communities: California, Florida, Illinois, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Washington, Wisconsin, Iowa, Kansas and Virginia.

The rankings, which include for-profit and not-for-profit communities, represent a fraction of the almost 2,000 CCRCs in the United States.

The top 10 CCRCs on the list, and their scores:

1. Valle Verde (HumanGood), Santa Barbara, CA (91.70%)
2. Edgemere, Dallas (91.6%)
3. Willow Valley Communities, Willow Street, PA (88.88%)
4. Friendship of Bloomington (Lifespace Communities), Bloomington, MN (87.92%)
5. River’s Edge (RiverSpring Living), Riverdale, NY (86.50%)
6. Freedom Pointe at the Villages (managed by Life Care Services), The Villages, FL (82.95%)
7. The Admiral at the Lake (currently a Kendal affiliate), Chicago (82.41%)
8. Moorings Park, Naples, FL (81.43%)
9. Landis Homes, Lititz, PA (80.99%)
10. The Hearthstone at Green Lake, Seattle (80.91%)

Several organizations with CCRCs ranked in the top 10 have additional communities in the rankings as well. Altogether, LCS has a total of 18 CCRCs on the list, HumanGood has seven, Lifespace Communities has six, and Kendal has five affiliates that are recognized. Additionally, No. 3 Willow Valley has a strategic alliance with Acts–Retirement Life Communities, which has two communities on the list.

Additional organizations with two or more ranked CCRCs:

• Ohio Living (seven communities on the list), 
• Erickson Senior Living (six), 
• Front Porch (five), 
• Vi Living (five), 
• Brookdale Senior Living (four), 
• Otterbein SeniorLife (three),
• Pinnacle Living (three), 
• PMMA (Presbyterian Manors of Mid-America) (three),
• Beaumont Commons (two), 
• Buckner Retirement Services (two), 
• Concordia Lutheran Ministries (two), 
• Country Meadows (two), 
• Lutheran Senior Services (two), 
• National Church Residences (two), 
• Presbyterian Senior Living (two) and 
• Sunrise Senior Living (two).

The full rankings and details about the methodology appear on the Newsweek website.

Rankings versus ratings

The new CCRC rankings differ from US News & World Report’s “Best Senior Living” lists of senior living communities. The US News effort, which was publicly announced in 2021 and first published in 2022, rates various types of communities — independent living, assisted living, memory care and CCRCs — as “best” if they meet certain criteria based on the results of consumer satisfaction surveys of residents and their families conducted at participating communities. The communities are not ranked.

By contrast, the Newsweek and Statista “America’s Best Continuing Care Retirement Communities” effort focuses on CCRCs, ranks them and includes feedback from the surveys, which were open to anyone choosing to participate who met certain criteria and were willing to provide demographic information and email addresses for data validation purposes.

Smith said that Newsweek did not contact providers directly about the “America’s Best Continuing Care Retirement Communities 2024” effort, although Statista said that the surveys were promoted on various social media channels.

The Newsweek / Statista program is one of a growing number of recognition programs designed to help senior living communities stand out from their competition as consumers search for options. In addition to the aforementioned US News program, for instance, Fortune’s “Best Workplaces for Aging Services” lists and J.D. Power’s Senior Living Satisfaction Study both were launched in 2018, NRC Health’s “Customer Approved” and “Employee Approved” awards began in 2019 (but have since been disbanded), and Caring.com’s “Caring Stars” program has been around since 2012.

Continuing care retirement / life plan communities continued to outpace non-CCRCs in senior living occupancy in the third quarter, with the independent living and assisted living segments within CCRCs showing the biggest occupancy gains, according to a data analysis from specialty investment bank Ziegler.

Based on NIC MAP data from more than 1,164 not-for-profit and for-profit entrance-fee and rental CCRCs, the communities’ collective independent living segment had the highest occupancy (90.5%) in the third quarter, followed by their collective assisted living (87.5%) and memory care (86.5%) segments. 

Not-for-profit CCRCs also had higher occupancy rates than for-profit CCRCs across all regions of the country, except the Pacific region. The largest differences in third-quarter occupancy between not-for-profit and for-profit CCRCs were in the Mid-Atlantic states (5.4 percentage points), followed by the Northeast (4.9 percentage points), and the South and West North Central regions, each of which reported 4 percentage points. 

The Mid-Atlantic (92.2%), Northeast (91.5%) and Pacific (89.1%) regions reported the strongest occupancy rates among not-for-profit CCRCs in the third quarter, whereas the Southwest region had the lowest occupancy among not-for-profit CCRCs, at 86.1%.

On the for-profit side, the Pacific (90.9%), Mountain (86.9%) and Mid-Atlantic (86.8%) regions had the strongest occupancy rates, with the Southwest again lagging with the lowest occupancy rate, at 82.1%.

Breaking down the data another way, entrance-fee retirement communities had higher occupancy rates than rental CCRCs across all regions. The most significant differences were reported for the West North Central region, where entrance-fee CCRC occupancy was 5.4 percentage points higher than rental CCRC occupancy, followed by the Mountain (4.9 percentage points difference) and the Southeast (4.8 percentage points) regions. 

The Mid-Atlantic, Northeast and Pacific regions had the strongest entrance-fee CCRC occupancy rates, all higher than 90%. Rental CCRCs in those three regions also had the highest occupancy rates, running from 87.4% to 88.7%. 

CCRCs also reported higher monthly fees than non-CCRCs, with CCRCs recording the largest annual rate growth in their assisted living (5.3%) and memory care segments (5.8%). 

The non-CCRC independent living segment reported the highest year-over-year inventory growth (3.4%), followed by memory care (2%). 

Whether in a CCRC or not, memory care and skilled nursing saw the highest occupancy gains, whereas independent living, overall,  had the smallest occupancy gains in the quarter.