News Digest: How does private equity investment affect nursing home staffing and minimum staffing requirements
BMO: Only 6% of REIT Nursing Home Assets Meet Proposed Federal Staffing Mandate
Only 6% of real estate investment trust (REIT) assets are in compliance with the federal minimum staffing proposal for nursing homes, compared to the industry average of 19%.
This difference is due at least in part to less nonprofit representation in REITs, BMO Capital Markets analysts said in a note on Thursday. The BMO analysts calculated the REITs’ staffing levels utilizing data from the Centers for Medicare & Medicaid Services (CMS).
Nonprofit SNFs tend to have higher average staffing levels, the analysts wrote, which “may be [weighing] on REIT results relative to the overall national average.”
Stulick, Amy. “BMO: Only 6% of REIT Nursing Home Assets Meet Proposed Federal Staffing Mandate.” Skilled Nursing News, 20 Oct. 2023, skillednursingnews.com/2023/10/bmo-only-6-of-reit-nursing-home-assets-meet-proposed-federal-staffing-mandate.
REITs focused on long-term care are ‘unsung heroes’ of investing, asset manager says
Real estate investment trusts with portfolios heavy in skilled nursing and senior living assets are being called the “unsung heroes” among investments by the author of one online post.
As the large Baby Boom generation continues to age, “the proportion of older adults in the US population is projected to increase, leading to a higher number of seniors in need of healthcare services, assisted living and retirement communities, and other age-related solutions,” wrote Kate Stalter, a Series 65-licensed asset manager, in an article posted on MarketBeat. “That, combined with their income potential means nursing home REITs could be lucrative investments for the long haul.”
Gaivin, Kathleen Steele. “REITs Focused on Long-term Care Are ‘Unsung Heroes’ of Investing, Asset Manager Says.” McKnight’s Senior Living, 29 Sept. 2023, www.mcknightsseniorliving.com/home/news/business-daily-news/reits-focused-on-long-term-care-are-unsung-heroes-of-investing-asset-manager-says.
Mandate will ‘escalate’ buyer concerns about SNF operations
A proposed federal staffing mandate has the potential to scare off investment that is badly needed in the skilled nursing sector, a seasoned investment banking and restructuring expert tells McKnight’s.
In this episode, Matt Caine, managing director of SOLIC Capital Advisors, warns there is “no question” the rule and its launch during a broad-scale healthcare labor crisis would lead to more skepticism about the market.
Stubbs, Foster. “Mandate Will ‘Escalate’ Buyer Concerns About SNF Operations.” McKnight’s Long-Term Care News, 25 Sept. 2023, www.mcknights.com/resources/newsmakers-podcasts/mandate-will-escalate-buyer-concerns-about-snf-operations.
GAO Estimates 5% Of Nursing Homes Owned By Private Equity, But Calls Out ‘Limitations’ in CMS Data
At least 5% of the nation’s nursing homes had private equity ownership in 2022, according to a new report issued by the Government Accountability Office (GAO), which also noted “limitations” in the federal government’s data on nursing home ownership.
The congressional watchdog based its analysis on a review of the Centers for Medicaid & Medicare Services’ (CMS) data on nursing home ownership, supplemented with other sources. Nursing homes that meet certain ownership thresholds are required to report ownership data to CMS. However, GAO said these thresholds might need to be reassessed to give a more accurate picture of nursing home ownership. CMS’s nursing home ownership data do not list all owners and were not designed to identify private equity owners, the GAO report said.
Besides calling out the thresholds and the reporting criteria, GAO also suggested that the available tools used in determining ownership structures needed to be more accessible.
Siddiqi, Zahida. “GAO Estimates 5% of Nursing Homes Owned by Private Equity, but Calls Out ‘Limitations’ in CMS Data.” Skilled Nursing News, 26 Sept. 2023, skillednursingnews.com/2023/09/watchdog-estimates-5-of-nursing-homes-owned-by-private-equity-but-calls-out-limitations-in-cms-data.
Healthcare REIT ratings expected to hold despite staffing mandate, Fitch says
Real estate investment trusts that own skilled nursing facilities are not likely to see their ratings affected by a minimum staffing rule that will affect most nursing homes across the country within the next three years, according to a new report from Fitch Ratings.
If the draft rule released earlier this month by the Centers for Medicare & Medicaid Services is implemented as written, non-rural nursing homes will be required to provide a minimum of three hours per patient day of direct care — 0.55 hours of that care by a registered nurse and 2.45 hours by a nurse aide — within three years. Rural nursing homes will have five years to implement the overall hourly rate.
“Further up the chain, healthcare REITs with SNF exposure are more insulated from individual operator stress given long-term master leases and their own ability to flex spending and funding sources in order to manage their balance sheets within Fitch’s sensitivities,” wrote the experts at Fitch. “REITs also tend to be diversified into other asset types, such as senior housing, and have the ability to re-tenant properties to replace stressed operators with stronger ones.”
Gaivin, Kathleen Steele. “Healthcare REIT Ratings Expected to Hold Despite Staffing Mandate, Fitch Says.” McKnight’s Senior Living, 22 Sep. 2023, www.mcknightsseniorliving.com/home/news/business-daily-news/healthcare-reit-ratings-expected-to-hold-despite-staffing-mandate-fitch-says.
Minimum Staffing Regulations Unlikely to Lower U.S. Healthcare REIT Ratings
Fitch Ratings expects the minimum nursing home staffing standards proposed by the federal government are likely to raise operating costs and pressure margins for nursing centers; however, the effect to the U.S. healthcare real estate investment trusts (REITs) that own skilled nursing facility (SNF) assets will be manageable within existing ratings.
Some individual nursing operators have the ability to mitigate increased operational expenses from minimum staffing requirements by reducing the number of skilled nursing beds in service. Further up the chain, healthcare REITs with SNF exposure are more insulated from individual operator stress given long-term master leases and their own ability to flex spending and funding sources in order to manage their balance sheets within Fitch’s sensitivities. REITs also tend to be diversified into other asset types, such as senior housing, and have the ability to re-tenant properties to replace stressed operators with stronger ones.
Long-term care facilities that receive funding from Medicare and Medicaid would need to have a registered nurse on site at all times under the rule proposed by the Centers for Medicare and Medicaid Services (CMS) within two years from implementation, with limited exceptions. Facilities would also need to provide a minimum of 0.55 registered nurse hours per resident per day (HPRD) and 2.45 certified nurse aide HPRD within three years from the final rule publication, or five years in rural areas. CMS estimates approximately 75% of nursing homes do not meet these requirements.
