Analysts tend to size up markets as being either “bearish” or “bullish.” Bear markets are identified by declining values, while the opposite holds for the bulls.
There’s not much doubt about which animal is preferred, at least among investors. After all, there aren’t any statues of bears to be seen near Wall Street.
As I write this, some observers are insisting the nation’s overall economy is starting to enter a bear market phase. That may or may not be true. We’ll know soon enough. But what about the long-term care market? Is this a time to view it as bearish or bullish?
There have certainly been more than a few challenging developments lately. There has been practically no new skilled care construction to speak of in recent years. COVID-19 has driven down occupancy while driving up costs. Inflation and interest rates are on the rise. And staffing remains a perennial challenge.
Earlier this year, the White House challenged the quality of care that nursing homes deliver, while suggesting private equity’s role needs a closer look. Then last week, the Centers for Medicare & Medicaid Services announced that it had overpaid operators by about $1.7 billion in Medicare PDPM rates, adding that next year’s funding would be reduced accordingly, leading to a net $320 million cut.
Collectively, those items would seem to paint more of a bearish picture.
But at the same time, it’s not like the industry is standing still. As never before, operators are taking on risk and expanding service portfolios in ways that would have been unimaginable a decade ago. These efforts hold the promise of better days to come, financially and otherwise.
Then there is the greatest playing field leveler of all: demographics. Our nation is making old people at an unprecedented pace. The first wave of the Baby Boomers are now turning 76, and there’s a lot more where that came from. Granted, 76 is still a bit young for most to receive skilled care services. But it’s a safe bet demand will jump off the charts in the next decade.
Small wonder investors are lining up to get a piece of the action.
Which gets us back to the earlier question: Is this a bull or bear market for long-term care? I recently had an opportunity to put this question to AHCA President and CEO Mark Parkinson, and his reply nailed it. Short-term, he said, these are challenging times. But long-term? Things are looking very good.
So hang in there, operators. Better days are coming. And that’s no bull byproduct.
John O’Connor is editorial director for McKnight’s.
