Fitch Ratings has recently announced its updated rating criteria for non-profit life plan communities (LPCs) and the changes in how it will monitor them going forward.
One of the key changes includes a more defined methodology for rating LPCs, with a focus on factors such as revenue defensibility, community size and scale, market demand, rates, and affordability. These changes aim to provide a more accurate reflection of a community’s financial profile, operating risks, and revenue generation capabilities.
It was noted that approximately 12% of LPC ratings are currently under observation due to the new criteria.
The criteria update comes after a period of public comment and stakeholder feedback, with the goal of better assessing the risks associated with operating life plan communities, especially in light of the challenges posed by the Covid-19 pandemic.
The revised criteria also introduce more nuanced methods for evaluating the financial health of LPCs, considering factors such as the mix of skilled nursing and independent living units in a community. Additionally, Fitch has adjusted its ratings scale to include an expanded range of ratings, from “A” to “BBB,” “BB,” and “B.”
In a recent report, Fitch highlighted the financial challenges faced by non-profit LPCs, such as rising staffing costs and slowing real estate prices, leading to a higher percentage of LPCs with negative ratings.
