For SNF operators, particularly those operating under REIT master leases, the proposed mandate’s 3.0 HPRD threshold, 24-hour RN requirement, and exclusion of LPNs from qualifying hours all have direct implications for payroll-based journal (PBJ) reporting, workforce composition, and contract labor strategy.
Minimum Staffing Regulations Unlikely to Lower US 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.
— Fitch Ratings, September 20, 2023
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.
The experts said they expect to see similar results when the staffing minimum goes into effect. They added that with the staffing minimum, operators have time to plan for the ramp-up, as opposed to the rapid loss of labor that occurred during the pandemic.
— McKnight’s Senior Living, September 22, 2023
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.
“Time and time again, the shortages with respect to staffing continue to be a recurring theme and key element of diligence inquiry with respect to would-be investors, partners and buyers. That’s only going to escalate.”
— McKnight’s Long-Term Care News, September 26, 2023
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.
“CMS has recently taken steps to improve the transparency of nursing home ownership by, for example, publicly releasing additional ownership data as of 2022. However, the extent to which CMS’s ownership data can be used to identify private equity ownership is unclear. Clarifying any linkages between quality of nursing home care and ownership characteristics, including private equity ownership, is challenging in part because of the complexity and limitations of the transparency of nursing home ownership arrangements.”
— Skilled Nursing News, September 26, 2023
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.
“REITs have built-in tax benefits, as they are required to distribute at least 90% of their taxable income to shareholders. That means REIT investors receive a consistent stream of dividends derived from rental income or property sales.”
— McKnight’s Senior Living, September 29, 2023
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. If licensed practical nurses (LPNs) end up being included in the 3.0 hours per day of resident care (HPRD), BMO analysts said 51% of REITs would meet the staffing target — still less than the industry average at 60%.
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.”
— Skilled Nursing News, October 20, 2023
