Senior care facilities are not catching a break. Labor costs have soared, even when not accounting for staffing agency costs, and won’t come back down. Occupancy is slowly recovering, but a long winter and a bad flu season will set the sector back. Food and other supply costs are high. Plus, inflation, higher interest rates, a weaker housing market and potential recession all make it harder for seniors to afford senior care services and certainly to cover another year of 8-12% rental rate increases necessary for communities to even maintain their operating margins.
But another thorn in the sector’s side has been insurance costs, both property and liability, which are rising and eating into bottom lines across the country. And if inflation and higher interest rates are a short-term problem, liability insurance costs could remain elevated simply because more and more seniors will hopefully move into our communities and facilities, enlarging the potential plaintiff pool. And we aren’t holding our breath for any major tort reform or other help from Washington on the matter.
The industry became an easier target for lawsuits following the pandemic and a lot of finger-pointing on COVID deaths from the media and politicians. And now soaring premiums add yet another consideration for buyers and lenders to lower their bids or not jump into the bidding process altogether. And realistic buyers and lenders should prepare for permanently lower margins, even if it means dealmaking takes a hit, as sorry as we are to say.
