There will be modest improvement in the continuing care retirement community industry in 2004, but the outlook is not so optimistic for freestanding nonprofit nursing homes, according to a study released Wednesday by investment analyst Fitch Ratings.

CCRCs’ financial performance should improve from 2003 results and possibly yield the first upgrade in four years, Fitch analysts wrote. Long-term demand, high occupancy rates and improved management practices are current industry strengths, they explained. Since many CCRCs are reliant on investment income, 2003 financial statements should show improved financial results, though labor, insurance and reimbursement will continue to pressure performances downward, analysts said.

Nonprofit nursing homes will continue to feel downward pressures due to inadequate Medicaid reimbursement, rising insurance and benefits expenses; and increased capital needs, Fitch wrote.

“Fitch believes that long-term stability in the nursing home sector will not occur without significant reform to the current reimbursement environment,” study authors wrote, commenting about Medicaid in particular.

They also said that relief from liability insurance premiums may occur only when state’s pass legislation to limit lawsuits and establish “meaningful” caps on settlements. Labor expenses will continue to outstrip the inflationary rate due to nursing shortages, they added.