The American Seniors Housing Association, together with HealthTrust, contacted over 30 seniors housing operators that operate more than 180,000 units about what has happened to their occupancy levels, revenues, expenses and additional costs pertaining to the pandemic between March 1 and June 30. The results were eye-opening.
One interesting result was that despite being the most need-driven, assisted living and memory occupancy dropped by 661 and 651 basis points, respectively, compared with 404 basis points for independent living in the four-month period. In addition, large operators (more than 3,500 units) appeared to fare worse than small (less than 2,000 units) or medium-size (2,000-3,500 units) providers.
Obviously, when census drops so do revenues. Overall, the total group suffered an 8.23% decline in revenues compared with their budgets, with the upper quartile (the worst performers) suffering the largest plunge of 14.05%. But with regard to revenues, the small operators felt the impact more (-11.67%) than the others, most likely because they started with a lower base.
Perhaps the most shocking numbers in the research report were the impact on actual net operating income in just four months. For the whole group, actual NOI was $273.8 million lower in the four-month period compared to budgeted NOI, representing a 31.2% plunge. Small and large operators fared about the same (-34%) compared with medium-size operators with a -17% decline. The upper quartile of the group had a 55.1% plunge in NOI. Think about it, making half as much cash flow with which to make rent or mortgage payments compared to their budgets in just four months. This is tough.
COVID expenses have been with us for nearly eight months now, and they are not going away anytime soon. As a percent of revenues, COVID expenses in this four-month period came in at 6.55%, with the majority coming from labor and PPE costs. However, not all operators reported increased labor costs, and we suppose either they were the lucky ones, already had a stable staff or were already a bit over-staffed, although this last one would be the least likely.
Finally, when breaking down the composition of the net operating income loss as a result of the pandemic, 60% was the result of lower revenues, which certainly makes sense. The next largest component was PPE expenses (18%), followed by labor (16%) and sanitation (6%). The conclusion, of course, is that getting occupancy stabilized is the top priority and then figuring out how to get it to rise and how long that will take. Thank you, ASHA and HealthTrust, for providing these statistics, numbing as they may be.
