Tami Antebi, a first vice president for National Healthcare at BHI, echoes what many bankers have been saying about skilled nursing’s immediate financial future.
“As of now, we do not see new stimulus on the horizon and staffing remains a real challenge, both in finding employees to generate revenues, and the ability to pay higher wages,” she observed in January.
But as a testament to the confidence they’ve long held, banks are “open for skilled nursing business.” Antebi said she expects lenders to focus on expense management, working capital and operator experience.
“Lenders are providing financing for turnaround and value-add opportunities selectively for the right operator, and there has been an even greater emphasis on financing stabilized facilities,” she added.
It wasn’t that long ago when many feared the COVID epidemic would never end. Then came September 2021, when SNF occupancy declined precipitously after seven straight months of gains to 75.1%.
As COVID pressures have eased somewhat, conditions exposed an ever-thinning workforce. By November, half of every SNF chain in the country reported staffing shortages and nearly 80% of all nursing homes were relying on temporary agency help.
For likely the first time ever, no other metric — whether it be operating margin declines or suffocating inflation — seems a worse fate than workforce shortages.
“The pandemic accelerated the labor crisis trend,” said Bill Kauffman, senior principal at National Investment Center for Seniors Housing & Care (NIC). “You can strive to be the best operator and have the best culture and be able to retain the best employees, but the sector as a whole simply does not have enough labor right now.”
Part of the conundrum is the flood of stimulus money that served only as a temporary fix. Trying to afford labor and cope with other inflationary costs after that crutch was removed has been a struggle.
Now, a big question for many is what will happen with the federal funds rate, which determines the cost to borrow. The Fed is widely expected to increase it starting in March. “The question is how fast and how far the Fed will go,” Kauffman said.
