According to recent news, Healthcare Real Estate Investment Trusts (REITs) that focused on post-acute care facilities experienced “disappointingly flat” occupancy rates in the month of November. Read on to learn more about what this means for healthcare at large.
What is going on?
Skilled nursing facilities (SNFs) are facing a massive problem. With the home health eating into their market share, these facilities have experienced a stagnation with regards to overall growth. After a basis points increase worth 40 points, SNF occupancy remained stagnant as the months went on, until November 19, 2023. While this happened, REITs had a decrease of over 10 basis points.
What has caused this?
Changes in the labor market have been pinned as the major factor in the prior gradual increase in occupancy, since January 2021. This included labor shortages and a shift in the market towards home health services. Now that labor issues are slowly getting better, it is less likely that SNFs will see cuts in rent. Coverage for SNFs overall is seen to have “bottomed out” due to these aforementioned market trends. Other market trends, including the aforementioned share loss and regulatory changes (such as the proposed staffing minimum) have played their part in the current situation.
Where do they go from here?
As businesses move away from the pandemic’s bottoms, signs are pointing upwards. Rent coverage and occupancy issues aside, shares overall are steadily growing. Though the federal government’s own funding has diminished since the end of the public health emergency, state governments have stepped up to fund Medicaid. While labor and occupancy slowly improve, the chances for SNF-related rent cuts or deferrals is unlikely.
