An embargo stops admissions, not departures, so occupancy keeps falling for as long as it lasts and the cost runs on for months after it is lifted.
Count the resident-months lost from the first day of the embargo until the home is full again, and multiply by the contribution each resident brings after the costs that actually vary. On an illustrative 70-bed home at 90 per cent occupancy, a six-month embargo takes occupancy to 68.5 per cent, the home is full again only in month 16, and the cost is 480,320, more than half of it incurred after admissions reopen. Over the first twelve months it takes rent cover from 1.69x to 1.00x.
Worked in full in Senior Living and Healthcare Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
An embargo on admissions, imposed by the regulator or by the council that commissions the beds, stops new residents arriving. It does nothing to stop residents leaving, through death, hospital or moves. A care home has no leases, so occupancy cannot be read off a schedule: it is the balance between admissions and departures, and an embargo removes one side of it. The fall therefore keeps going for as long as the embargo lasts, and the refill afterwards is limited by how many referrals the home can convert each month, which is usually not many more than in normal times.
| Input | Value |
|---|---|
| Beds; occupancy before the embargo | 70; 90%, 63 residents |
| Average length of stay | 22.5 months |
| Residents leaving each month (1 / 22.5) | 4.44% |
| Admissions a month in steady state (63 × 4.44%) | 2.8 |
| Embargo | 6 months |
| Admissions a month once reopened, until full | 4.0 |
| Average weekly fee | 1,150 |
| Costs that vary with residents, per week | 190 |
| Contribution per resident-week | 960 |
| EBITDARM before the embargo; rent | 1,100,000; 650,000 |
The variable cost covers food, continence products, laundry and the hours a manager can genuinely take off the rota as residents leave. Everything else, most of the care staff, the nurses, the manager and the building, is treated as fixed over the period, which is how a home actually behaves in the first months of an embargo. All figures are illustrative.
1. Each month: residents = last month's residents × (1 − 4.44%) + admissions.
2. During the embargo admissions are zero, so residents fall from 63 to 60.2, 57.5, 55.0, 52.5, 50.2 and 48.0.
3. From month 7 admissions run at 4.0 a month. Departures are now fewer because there are fewer residents, so the home gains 1.9 residents in the first month of recovery and less each month after.
4. Lost resident-months = Σ (63 − residents) until the home is back at 63: 54.6 during the embargo plus 60.5 during the refill = 115.1.
5. Cost = 115.1 × 4.345 weeks a month × 960 = 480,320, or 6,862 a bed.
Excel, one row per month: =B2*(1-1/22.5)+IF(A3<=6,0,MIN(4,63-B2*(1-1/22.5))), then =SUMPRODUCT(63-B3:B18)*365/7/12*960
| Month | Residents | Occupancy |
|---|---|---|
| 3 | 55.0 | 78.5% |
| 6, embargo lifted | 48.0 | 68.5% |
| 9 | 53.3 | 76.2% |
| 12 | 58.0 | 82.9% |
| 14 | 60.8 | 86.8% |
| 16, full again | 63.0 | 90.0% |
The lowest point is the day the embargo is lifted, and the home is still 5.0 residents short a year after it began. In the first twelve months the embargo costs 452,258, which takes EBITDARM from 1,100,000 to 647,742 and rent cover to 1.00x. A home that was comfortably covering its rent is, for that year, covering it exactly.
| Embargo | Lowest occupancy | 3.5 a month | 4.0 a month | 5.0 a month |
|---|---|---|---|---|
| 3 months | 78.5% | 192,947 | 143,717 | 106,421 |
| 6 months | 68.5% | 608,313 | 480,320 | 372,400 |
| 9 months | 59.8% | 1,134,941 | 932,317 | 749,704 |
| 12 months | 52.2% | 1,728,234 | 1,459,997 | 1,207,956 |
The cost grows much faster than the length of the embargo. Nine months costs 1.94 times what six months costs, because the deficit is deeper when admissions reopen and the refill takes longer. The refill speed matters almost as much as the length: at 3.5 admissions a month a six-month embargo costs 608,313 and the home is not full until month 21. That is why the first thing a buyer or landlord should ask about an embargo is not when it ends but how many referrals the home was converting before it.
The resident engine that builds occupancy from admissions and departures, with the book's own embargo case, is in the free workbook for this case. The same flow logic applied to a new home filling from empty is in how long a new care home takes to fill, and the occupancy a home needs to pay its rent in care home break-even occupancy.
At the rate residents leave, since nobody replaces them. With an illustrative average stay of 22.5 months, 4.44 per cent of residents leave each month, so a 70-bed home at 63 residents falls to 48.0 after six months, 68.5 per cent occupancy. A nine-month embargo takes it to 59.8 per cent and a twelve-month one to 52.2.
Because the home has to refill at the pace referrals allow. Admitting 4.0 residents a month against 2.8 in steady state, the illustrative home only reaches 63 residents again in month 16. The ten months of refill lose 60.5 resident-months, more than the 54.6 lost during the embargo itself, and 53 per cent of the total cost of 480,320.
No. Staff costs barely move when a few beds empty, but food, consumables and some variable hours do. Costing each lost resident-week at the 1,150 fee rather than the 960 contribution overstates the loss by 20 per cent. The bigger error runs the other way: stopping the count when admissions reopen misses more than half the cost.
This article is one calculation from Senior Living and Healthcare Real Estate. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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