Fitch Reports Better 2004 for U.S. CCRCs; Nursing Homes Still Tough

Better credit profiles for continuing care retirement communities (CCRC) in the United States can be attributed to improvements in investment returns, solid demand for CCRC facilities as baby boom generation retires, and better management practices, according to a new report by Fitch Ratings. However, the industry remains challenged by labor issues and insurance.

Furthermore, freestanding nonprofit nursing homes remain significantly challenged, already pressured by weak financial performance and reimbursement pressure from Medicare/Medicaid.

According to Fitch, CCRCs will benefit from improvements in the markets, which should result in improved investment returns and unit sales. The new report views labor-related issues for CCRCs as the main credit concern for the industry.

“Labor will continue to be a main credit weakness in 2004, however, the labor markets are beginning to show favorable traits that could result in reduced concerns in this area over the medium term,” said Jim Mitchell, senior director, at Fitch Ratings. “Another major industry pressure to continue into 2004 includes rising insurance expenses, primarily professional liability and workers’ compensation.”

Fitch’s outlook for the freestanding non-profit nursing homes remains negative. Significant challenges, such as inadequate Medicaid reimbursement, rising insurance, labor and benefits expense and increased capital needs will continue to pressure already weak financial performance.

The report “2004 Outlook for Continuing Care Retirement Communities and Nursing Homes” can be found on the Fitch Web site at www.fitchratings.com by linking to the “Public Finance” sector and clicking on “Special Reports.”