OREANDA-NEWS. Improving occupancy levels and solid expense control will remain benefits for U.S. nonprofit continuing care retirement communities (CCRCs) next year, while a cycle of increased capital spending is expected to continue, according to Fitch Ratings in its 2016 outlook report.

Changes to post-acute care services and changing reimbursement models related to health care reform could present some challenges over time for CCRCs. That said, it does not figure to impact core financial performance, with investment-grade median ratios expected to remain mostly unchanged and operating profitability likely to remain stable.

Another factor likely to keep CCRC performance stable is the broader housing market. 'Housing market growth appears set to level off, which should keep occupancy levels and net entrance fee receipts for CCRCs stable or slightly improved in the coming year,' said Senior Director Jim LeBuhn.

Capital spending among Fitch-rated CCRC's increased sharply this year with more of the same likely in 2016. 'More CCRCs are likely to pursue major renovation or expansion projects next year with favorable access to capital to remain in place,' said LeBuhn. Negative rating actions in the sector will be concentrated among CCRCs that take out significant amounts of debt to finance renovation or expansion plans.

While Fitch expects CCRC operations to remain stable, external factors such as a significant downturn in the equity or fixed-income markets or a material change to or reduction in reimbursement by Medicare for post-acute rehabilitation services could pressure margins.