Operating Conditions Continue To Improve For Non-profit Life Plan Communities

Not-for-profit life plan communities (LPCs) are continuing to rebound from challenges in recent years as conditions continue to improve.

That’s according to a new report from ratings agency Fitch Ratings. For the Sept. 10 report, Fitch analysts examined the public ratings of 162 LPCs as of Aug. 28, 2024, and came away with the conclusion that “continued improvement in occupancy and abating expense pressure allowed for operational stabilization and recovery in fiscal 2024,” according to Margaret Johnson, senior director of U.S. public finance and sector lead of senior living for Fitch Ratings.

“The COVID-era concerns that the pandemic would spell ruin for the senior living industry were unfounded. In fact, quite the opposite,” Johnson told Senior Housing News. “We have seen over the last few years a sustained trend of improved occupancy, the stabilization of capital projects and an abatement of inflationary expense pressures, which has in turn led to improved core operating, liquidity and coverage metrics.”

The current median rating for the life plan communities Fitch tracks is “BBB,” with more than half of the report’s borrowers achieving the rating, compared to the 32 in the “A” category. The number of properties considered below investment-grade have risen over the past decade, but the report’s authors noted that is due to newcomers to the portfolio of communities and organizations it tracks. 

Independent living occupancy rates range from 92% seen in the below investment-grade medians up to 94% seen in “A” medians. Assisted living follows similar trends at 89.9% in below investment-grade medians, though peaks at 91.2% in the “BBB” medians. Skilled nursing remains the lowest, though it ranges from 85.7% seen in below investment-grade medians and 87.2% in both “A” and “BBB” medians. 

The report notes the potential repeal of staffing ratios from the Centers for Medicare and Medicaid Services could provide relief for the skilled nursing operations found in LPCs and lower the pressure the sector faces. Johnson notes the minimum staffing ratios would likely not have an impact on the remainder of senior living.

Further performance for the remainder of 2025 is anticipated to remain “relatively stable” at the increased levels observed in the report, Johnson said, following the trends seen when the organization revised its sector outlook opinion to “stable” from “deteriorating” earlier this year.

Given the incoming demographic tailwind of the baby boomers entering into senior living, Fitch Ratings expects current conditions to continue to support performance at this improved level, and LPCs are working to plan ahead.

“Many of our LPCs are using this time to evaluate master facility plans to ensure their services and amenities are meeting the demands of the next generation of seniors and that their unit mixes are rationalized allowing for them to fully capitalize on strong demographics by building expansion units to monetize growing waiting lists,” Johnson said.

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