Volatility demands real time attention in senior living

Across skilled nursing, assisted living and CCRCs, operators are navigating an increasingly complex dynamic operating environment. In skilled nursing, shifts in payer mix, rising competition and policy-driven changes in coverage and eligibility continue to reshape performance expectations. At the same time, assisted living and CCRC providers are feeling greater sensitivity to housing markets and affordability, alongside persistent workforce challenges that cut across all settings. In this environment, success depends on maintaining a strong connection between operational reality and financial visibility.

Recent industry data highlights the importance of this connection. In skilled nursing, more than 60% of residents rely on Medicaid, where reimbursement levels vary by state and policy cycle. At the same time, funding continues to shift toward home- and community-based services, which now represent nearly two-thirds of Medicaid long-term care spending, introducing new variability into facility-based demand. Broader policy analysis from the Kaiser Family Foundation reinforces this dynamic, noting the sector’s continued dependence on Medicaid and exposure to reimbursement and eligibility changes.

In assisted living and CCRCs, the dynamics are different—but no less impactful. A significant portion of revenue is tied to private pay, with approximately half of industry revenue coming from out-of-pocket sources [1]. This makes occupancy and move-in timing increasingly sensitive to economic conditions, including housing markets and personal liquidity. Industry data from NIC MAP® also shows that occupancy patterns fluctuate across markets and care settings, reinforcing the need for more dynamic operational and financial visibility [2].

Census has always mattered in senior living.  When census changes are not reflected in real time, the financial impact on operators can be significant. As a result, providers need systems that can produce accurate, timely and actionable information.

Why is Net Operating Income (NOI) becoming more dynamic in senior living operations?

As the census, payer mix and cost structures become more dynamic, the financial impact of day-to-day operational decisions is showing up faster. This shift is changing the role of Net Operating Income (NOI). While NOI is not a standardized GAAP metric and can be calculated differently across organizations, it remains a widely used measure of operating performance—relied on by boards, lenders, investors and management alike. 

Historically, NOI has been viewed as a lagging indicator — a retrospective measure of performance after the period is closed and reported.

But today, operating conditions are less static. When:

• Census changes daily
• Payer mix shifts continuously
• Labor and benefit costs — often more than 40% of revenue — remain relatively fixed.

A static, month-end view of NOI is no longer sufficient. Even organizations that have made meaningful progress in accelerating the close or improving reporting processes may still find themselves reacting to performance rather than managing it proactively.

Why traditional financial processes struggle with census volatility

Over the past several years, many organizations have made important investments to modernize finance operations, including:

• Faster close cycles
• Automated accounts payable
• Improved multi-entity reporting

These advances have delivered efficiency gains and better visibility into historical performance. But they are still built on a model that assumes operational activity occurs first, and financial insight follows once the period is closed. In today’s environment, that assumption is increasingly challenged. The issue is not a lack of data. It is the timing and integration of that data.

Operational drivers of performance—census, admissions, staffing—often reside outside the financial system. Without a consistent way to connect those inputs to financial outcomes, organizations are left reconciling performance after the fact rather than managing it in real time.

How senior living operators are rethinking financial visibility

Leading organizations are beginning to rethink how they approach financial visibility. Rather than relying solely on historical reporting cycles, they are exploring ways to:

• Connect operational data—such as census, staffing and payer mix—more directly to financial performance
• Monitor key drivers of margin on a more continuous basis
• Align financial and operational teams around a shared view of performance

This shift is being enabled, in part, by modern cloud financial platforms and integrated data ecosystems that can bring together clinical, operational and financial information into a unified model.

The goal is not to replace traditional financial reporting, but to complement it with more timely, decision-oriented insight.

How real-time NOI visibility improves operational decision-making making

This shift has meaningful implications beyond finance.

• Operators can make more informed decisions about staffing and resource allocation
• Finance teams can better anticipate performance trends rather than explain them
• Boards and lenders can gain greater confidence in forward-looking projections

Perhaps most importantly, organizations can move from asking “What happened last month?” to “What is happening now—and what does it mean for the rest of the quarter?”

What volatility means for the future of NOI management

Volatility is not a new concept in senior living. But its speed, complexity and financial impact have changed. As a result, the way organizations measure and manage performance must evolve as well.

Baker Tilly and Sage Intacct support this shift by equipping finance operators in senior living with cloud-based financial management solutions that bridge the gap between operations and finance, improve real-time visibility into NOI drivers and respond more effectively to volatility.

Organizations that succeed in this environment will not simply report on NOI more quickly. They will develop the ability to understand and effectively act upon the drivers of NOI as they change. Learn how Baker Tilly and Sage Intacct can help.

Sources
[1] IBIS World
[2] NIC Map