Senior Living News Wire

While entering the home health industry makes sense for senior living providers, a considerable amount of due diligence is required before plunging into the marketplace, said panel members on Thursday during Senior Housing News’s webinar, Time for Senior Housing Operators to Get Into Home Health Care?

A massive aging population offers an incentive for senior living providers to expand their services, according to Chris Guay, senior vice president of Operations & Ancillary Services at Emeritus.

In November 2012, Emeritus announced the purchase of home health provider Nurse on Call for $102.5 million. Given the demographics of America’s aging population—with 8,640 seniors turning age 65 per day—the entry into the home health market “made sense,” says Guay.

Acquiring Nurse on Call enabled Emeritus to expand its offerings, while at the same time helping to build a bridge from home to the senior living community.

The partnership with Nurse on Call also helped Emeritus create efficiencies, says Guay, as having patients under one roof helped reduce travel time for home health aides, and enabling senior living providers with measurable clinical data.

But while the benefits of a partnership between senior living providers and home health agencies are numerous, providers need to conduct a comprehensive market study before pursuing any agreements, according to Sarah Lentz Spellman, a healthcare director at accounting and consulting firm CliftonLarsonAllen.

Part of this market study includes analyzing the demographics, competition and surrounding geographic area, says Spellman, who says taking the acquisition route is a viable way to command a given marketplace.

“[Acquisition] is a great option in a more competitive marketplace, because it takes a competitor out of the system, putting you in its place,” says Spellman.

The downside to this, according to Spellman, can happen when companies enter an agreement, “date” for a while and then “break-up.” The development process usually takes a long time, and in these cases it ultimately delays entry into the marketplace.

“You have to do very thorough due diligence on who you are looking to acquire—and not just financially,” says Spellman, advising providers to also look at the clinical aspects of the business in question.

Understanding how a company clinically manages their patients, while also analyzing past surveys on performance reviews, can help more accurately assess potential risks when making a purchase, she says.

Providers must also consider financial, Medicare and regulatory due diligence once they sign a letter of intent to acquire a home health company, according to Guay, who says it has to be all or nothing.

“If you have one without the other, it is not going to work,” he says. “You have to make sure that you have a full and clear picture of what the company’s practices have been prior to the purchase.”

As thousands of older Americans age everyday, panelists agree that the need for home-based care services will continue to be at the forefront of the healthcare system.

“Home health is not going away,” said Guay. “In a world moving toward coordinated care, home health has to play a role.”

Written by Jason Oliva

Senior housing executives are losing sleep over the universal health insurance coverage provision of the Affordable Care Act (ACA) as they try to predict the eventual costs to their companies.

“The ACA is one of those things that’s keeping me up at night,” said Pat Mulloy, CEO of Kentucky-based Elmcroft Senior Living, during a general session at the National Investment Center (NIC) for the Seniors Housing & Care Industry’s 2013 Regional Conference in San Diego.

Company leaders are trying to get educated on what the law actually means, Mulloy said, and while it’s becoming clearer each month as CMS issues new rules and guidance for implementing the massive healthcare reform bill, it’s hard to predict human behavior.

Employers with 50 or more full-time employees are required to offer affordable, adequate coverage to those full-time employees. By 2015, that coverage must extend to dependents as well. The largest employers, with more than 200 employees, are required under the Affordable Care Act to automatically enroll new, eligible employees for the company-sponsored healthcare plan on an opt-out basis.

Starting in 2014, those who fail to provide this coverage may be subject to a penalty of up to $2,000 per full-time employee, beyond the company’s first 30 workers.

While insurance costs have actually flattened a bit in the past year, according to Mulloy, the big cost driver for many companies will be increased participation.

“My big worry is the cost-factor. I stay up at night fretting about that,” Mulloy said. “If [people] abide by the law, where they’re uninsured today and decide to go get coverage, behaviorally, it will drive up participation.”

Elmcroft has about 5,000 employees, and its current company-sponsored health insurance plan has a 70-30 co-pay. Of the company’s full-time employees, about 65-70% are already enrolled in company coverage. Starting in 2014, though, most people will be required to have health insurance—or pay a penalty if they don’t comply.

Were participation to rise above 70%, and the company continues to contribute about 70% of coverage, Mulloy said, that could substantially drive up health insurance expenses.

“The ‘aha’ moment is, intuitively you’d think people will just go to exchanges—maybe they won’t go to our plan,” he said. “But if they do that, they [would pay] 100% of the cost [of the insurance policy]. However that gets priced out, you’d think behaviorally they’d go to our plan. It’s a huge cost driver in our business.”

Stephanie Handelson, president and COO of Benchmark Senior Living, says she is “absolutely” concerned about how the healthcare reform law’s insurance requirements will impact her company’s bottom line.

“For us, it’s really going to be about the participation and how many more people come onto our plan,” she says. “I believe volume alone is going to be a big issue.”

Benchmark currently has about 2,350 associates who are considered “full-time” under the ACA definition of working 30 or more hours a week. Of those, 60% are enrolled in medical insurance, with an average monthly medical deduction—based on plan enrollment, coverage level, length of service, and Wellness Program participation—of $240, or 7.1% of average monthly pay, meeting the law’s affordability requirements.

While Benchmark currently has two active plans—a PPO and a consumer-driven plan—the company has room to make changes in restructuring contributions and offering lower employer contribution for certain plans, says Handelson, and is exploring a change to a self-insured plan. If they do so, she says Benchmark could avoid the Health Insurance Industry Fee under the ACA that would add 2-4% to the cost of insurance renewal negotiations for 2014.

If Benchmark were to receive a 2014 insurance renewal consistent with industry trends, Handelson says, costs would increase approximately 6-8%. The company is expecting an additional 4% increase as participation levels rise due to the ACA’s individual mandate. The resulting net impact to Benchmark would be about $1.2 million, she says, and would require an additional $3.6 million in revenue to cover the cost.

Four in 10 healthcare services employers expect costs to increase 3% or more due to ACA requirements that start in 2014, according to Mercer’s National Survey of Employer-Sponsored Health Plans.

While most remain committed to offering health coverage, especially among large employers, some are weighing their options and figuring out the cost effectiveness of paying a penalty for not providing coverage.

“Every one of them is concerned [about health care insurance coverage for employees],” says Gregg Hathorne, partner at public accounting and consulting firm CliftonLarsonAllen LLP. “Every one of them is going through an insurance evaluation criteria and thinking through the decision process.”

Written by Alyssa Gerace

Senior housing executives are losing sleep over the universal health insurance coverage provision of the Affordable Care Act (ACA) as they try to predict the eventual costs to their companies.

“The ACA is one of those things that’s keeping me up at night,” said Pat Mulloy, CEO of Kentucky-based Elmcroft Senior Living, during a general session at the National Investment Center (NIC) for the Seniors Housing & Care Industry’s 2013 Regional Conference in San Diego.

Company leaders are trying to get educated on what the law actually means, Mulloy said, and while it’s becoming clearer each month as CMS issues new rules and guidance for implementing the massive healthcare reform bill, it’s hard to predict human behavior.

Employers with 50 or more full-time employees are required to offer affordable, adequate coverage to those full-time employees. By 2015, that coverage must extend to dependents as well. The largest employers, with more than 200 employees, are required under the Affordable Care Act to automatically enroll new, eligible employees for the company-sponsored healthcare plan on an opt-out basis.

Starting in 2014, those who fail to provide this coverage may be subject to a penalty of up to $2,000 per full-time employee, beyond the company’s first 30 workers.

While insurance costs have actually flattened a bit in the past year, according to Mulloy, the big cost driver for many companies will be increased participation.

“My big worry is the cost-factor. I stay up at night fretting about that,” Mulloy said. “If [people] abide by the law, where they’re uninsured today and decide to go get coverage, behaviorally, it will drive up participation.”

Elmcroft has about 5,000 employees, and its current company-sponsored health insurance plan has a 70-30 co-pay. Of the company’s full-time employees, about 65-70% are already enrolled in company coverage. Starting in 2014, though, most people will be required to have health insurance—or pay a penalty if they don’t comply.

Were participation to rise above 70%, and the company continues to contribute about 70% of coverage, Mulloy said, that could substantially drive up health insurance expenses.

“The ‘aha’ moment is, intuitively you’d think people will just go to exchanges—maybe they won’t go to our plan,” he said. “But if they do that, they [would pay] 100% of the cost [of the insurance policy]. However that gets priced out, you’d think behaviorally they’d go to our plan. It’s a huge cost driver in our business.”

Stephanie Handelson, president and COO of Benchmark Senior Living, says she is “absolutely” concerned about how the healthcare reform law’s insurance requirements will impact her company’s bottom line.

“For us, it’s really going to be about the participation and how many more people come onto our plan,” she says. “I believe volume alone is going to be a big issue.”

Benchmark currently has about 2,350 associates who are considered “full-time” under the ACA definition of working 30 or more hours a week. Of those, 60% are enrolled in medical insurance, with an average monthly medical deduction—based on plan enrollment, coverage level, length of service, and Wellness Program participation—of $240, or 7.1% of average monthly pay, meeting the law’s affordability requirements.

While Benchmark currently has two active plans—a PPO and a consumer-driven plan—the company has room to make changes in restructuring contributions and offering lower employer contribution for certain plans, says Handelson, and is exploring a change to a self-insured plan. If they do so, she says Benchmark could avoid the Health Insurance Industry Fee under the ACA that would add 2-4% to the cost of insurance renewal negotiations for 2014.

If Benchmark were to receive a 2014 insurance renewal consistent with industry trends, Handelson says, costs would increase approximately 6-8%. The company is expecting an additional 4% increase as participation levels rise due to the ACA’s individual mandate. The resulting net impact to Benchmark would be about $1.2 million, she says, and would require an additional $3.6 million in revenue to cover the cost.

Four in 10 healthcare services employers expect costs to increase 3% or more due to ACA requirements that start in 2014, according to Mercer’s National Survey of Employer-Sponsored Health Plans.

While most remain committed to offering health coverage, especially among large employers, some are weighing their options and figuring out the cost effectiveness of paying a penalty for not providing coverage.

“Every one of them is concerned [about health care insurance coverage for employees],” says Gregg Hathorne, partner at public accounting and consulting firm CliftonLarsonAllen LLP. “Every one of them is going through an insurance evaluation criteria and thinking through the decision process.”

Written by Alyssa Gerace

Changes issued earlier this year by the Financial Accounting Standards Board (FASB) regarding refundable entrance fees for continuing care retirement communities (CCRCs) aren’t expected to impact community ratings, according to a new Fitch Ratings report, but consumer reassurance may be required as a result.

The change has to do with whether income from refundable entrance fee contracts can be accounted for as amortized revenue. The new standard requires the residency agreement contract to have a very explicit condition in order to amortize revenue from refundable entrance fees: they have to specify that an entrance fee refund will be limited to the proceeds of the sale of a particular unit.

“What we’ve seen throughout the CCRC spectrum is that very few communities actually had the language in their residency agreements, and therefore, they would not meet the standard,” says Cline Comer, a partner at CliftonLarsonAllen, LLP.

Anecdotally speaking, it’s not surprising that Fitch doesn’t expect the new accounting change to effect CCRC ratings, he says. “It’s a non-cash accounting change. The financials will look somewhat different than before, but it doesn’t change the economics of the residency agreement.”

All communities with refundable entrance fee contracts that don’t specifically include the requisite language requiring refunds to be contingent on what the provider receives from the sale of a unit will be affected by the FASB change.

A start-up community only offering 90% refund plans that is amortizing the entrance fees it receives over the life of the building has a big portion of income that’s non-cash and currently presented as amortization revenue on an income statement, says Mario McKenzie, partner at CliftonLarsonAllen, and that would have to change. “For some communities, a substantial amount of revenue may go away from a cosmetic perspective,” he says. “All of a sudden, you don’t have that revenue.”

Many of the industry’s approximately 1,800 CCRCs offering refundable entrance fees have been amortizing revenue from those fees, says Comer, and stabilized communities may be doubly affected. “If a facility has been around for 20-30 years, with predominantly refundable contracts they’ve been amortizing, they’ll lose that amortization going forward, but they’ll also have an adjustment in net assets and equity to restore the amortization that has already occurred,” he says.

The accounting adjustment isn’t likely to directly result in widespread financial distress among the industry.

“Regardless of your income statement, as long as you’re priced correctly and can demonstrate that inflows will outpace outflows, then the economics don’t change,” says McKenzie.

Neither were surprised at Fitch’s announcement.

“Overall, Fitch views the FASB guidelines positively for the improved clarity and better consistency on the sector’s treatment of refundable entrance fees,” said Jim LeBuhn, Senior Director, in reference to the report. “Certain ratios such as operating and excess margins and debt to capitalization will be negatively impacted by the accounting change. However, the changes are non-cash, and many of the key financial metrics used in Fitch’s analysis will remain unaffected. Thus, the change in accounting treatment is not expected to have an impact on Fitch’s CCRC credit ratings.”

From a consumer perspective, though, communities may have to do a lot more explaining to do from a cash flow perspective.

“For someone who doesn’t understand the CCRC business model, they could look at a financial statement and conclude a community is underwater or about to go insolvent, but that’s not the case,” says Comer. “Most facilities who are operating with a pretty full occupancy and have their fees aligned won’t really see a change, but it will look a lot different [on the income statement] for non-educated consumers or residents.”

Investors will be looking for cash flow with a long-term perspective, McKenzie says, and may check to see that a community has an adequate disclosure and communication plan to educate consumers about the CCRC business model.

Only a few of CliftonLarsonAllen’s clients have indicated plans to restructure their contracts as a result of the accounting change, says Comer, but the majority are not inclined to do so.

Access the Fitch report.

Written by Alyssa Gerace

Providing a continuum of care services outside of the traditional bricks-and-mortar setting can be way to increase utilization and occupancy at senior living communities, but it’s paramount for providers interested in starting these types of programs to do their homework, said Sarah Spellman, a director at top-ten accounting firm CliftonLarsonAllen LLP during an interview with not-for-profit senior living provider organization LeadingAge. 

Here’s what Spellman had to say on how a continuing care at home program could improve a CCRC’s financial position:

Continuing Care at Home programs have relatively low startup costs. There are virtually no capital costs, especially if you are locating the program’s infrastructure in existing buildings on your campus. Of course, you have to remember that this is lifecare, so you’ll have to continue to maintain reserves, as with any lifecare contract.

Cost savings come from the ability to spread the organization’s current administrative costs over an additional program. Let’s say the Continuing Care at Home program has an office on your campus. You can charge rent for that office. You can also charge the program for other administrative services, including the work your staff does to bill program members.

A Continuing Care at Home program can also help you increase utilization and occupancy of your assisted living or nursing home. Granted, you won’t increase your occupancy by very much because these programs are focused on keeping people at home. But if Continuing Care at Home members ever need assisted living, nursing home care or even short-term rehab, they are going to use your campus facilities. And you can charge the Continuing Care at Home program for those services.

Finally, there may be a small number of Continuing Care at Home members who decide, after a while, that they want to move to your campus. This usually happens when someone experiences a life change, like the loss of a spouse.

Read the full interview at LeadingAge.

Written by Alyssa Gerace

It’s not an easy question, or an easy answer. What health care reform will mean for senior living providers and their employees is something all businesses will have to consider if they are not already doing so. And what it will cost may be, for some, a million dollar question. At least.

There are still some unknowns when it comes to health care reform, but the change is already under way.

Currently, the Supreme Court is considering the constitutionality of the Affordable Care Act, passed into law by the Obama Administration in March 2010. Some of its components, namely a health care mandate for all citizens, have been questioned as out of bounds in terms of what the U.S. government can and cannot do.

While companies await the final Court decision on the constitutionality of the law, expected this summer, there are still some certainties about the future of health care. For starters, it is going to cost senior living employers a lot.

“The complexity of regulations is going to increase the cost of care for virtually every employer in America,” says Michael Barton, Chairman of the Willis Human Capital Practice. “Insurers are going to have to be intentionally conservative.”

In a recent survey of mid-market clients, global insurance broker Willis found largely that companies did not understand health care reform. When asked if they thought it would help cover the uninsured, the answer was: maybe. But on the question of whether it will bring costs down, the outcome was not what reformers had intended.

“Uniformly [companies] said, ‘No. Conversely, we think it will increase costs,’” Barton says. “I don’t see anything in the reform that is going to bring the cost of coverage down. It looks like the burden will be transferred pretty squarely to employers.”

What It Means for Senior Living

The effects could be stronger for the many senior living providers who do not currently have full enrollment of their eligible employees. Many opt out of health plans due to the cost.

A $2,000 per-employee tax for companies with more than 50 employees that do not offer employer-sponsored insurance is also scheduled to take effect in 2014, introducing another cost for employers.

“Relative to the senior living space, it is defined by higher than average plan costs,” Barton says. “Depending on whose surveys you want to believe, the difference could be 12.5% higher on average [for senior living providers]. Because the cost to cover employees and their families is higher, many will be above the ‘Cadillac’ tax threshold and will face a penalty. That’s a big number. A very big number.”

By Willis’s rough estimates based on a company with 800 employees, the tax could amount to upwards of $3 million in 2018. Companies are currently weighing the potential penalty against the cost of insuring employees.

“The big issue emerging is whether providers are going to continue to elect to offer employer-sponsored insurance,” says Andy Edeburn, Consultant Manager for Health Care at CliftonLarsonAllen LLP. “It may ultimately make financial sense for some organizations to drop their plans and just pay the penalty.”

But weighing the costs is not black and white. The new law requires state health care “exchanges” that offer federally-subsidized plans on an individual basis.

“Every organization, no matter how big or small, if they are offering employer-sponsored insurance, needs to look carefully and wisely at their situation and see if it makes sense to continue to offer health insurance, or for employees to go to the exchanges,” Edeburn says. “A lot of people are cautious or slow to do that given where reform is right now in the Supreme Court.”

Current Attitude: Wait and See

Continuing care retirement community (CCRC) Gold Medallion, based in Tulsa, Okla., says it is looking at the options, but is in “wait-and-see” mode until a decision has been made.

“It may possibly become necessary to have our employees enroll on the federal [exchange] plan,” says Diane Hambric, who operates the CCRC. But, she says, the flexibility of having 220 employees does make things easier.

In contrast, Seattle-based Emeritus Senior Living, with 28,000 employees nationwide, currently has roughly 19,000 who are benefits-eligible. Of those, 10,000—or roughly 60%—are enrolled in one of the three health plan options the self-insured company offers.

But the outcome of the employee mandate decision could mean insuring all 19,000 and offering plans accordingly, says Pam Engle, vice president of benefits and compensation.

“If a mandatory plan happens, we’ll have a material increase in enrollment,” Engle says. “The costs would go up exponentially.”

Emeritus has contingency plans depending upon the Supreme Court decision. In the meantime, it has an optional wellness plan in place in an attempt to drive—and reward—smart health decisions by employees.

“It’s a good thing to do in general, but we were certainly spurred by the need to control medical inflation,” Engle says, of the plan, which has about 30% enrollment currently and offers incentives for joining.

Other providers, too, are going the route of wellness. Senior Lifestyle Corp., based in Chicago, has a total of 4,700 employees and is preparing for change. Also self-insured, Senior Lifestyle offers an incentive for enrolling.

“A lot of our employees participate because of the immediate economic benefit,” says Adam Kaplan, vice president of operations. This year, the company modified the program to include a contract stating that employees would not smoke. While it is difficult to calculate the return on investment, Kaplan says the response has been encouraging.

“As a self-insured company, we benefit directly from any reductions in our expenses,” he says.

Smaller providers may take the wait and see approach, pending the upcoming decisions.

“We haven’t done anything in terms of changing or modifying our plans,” says Natalie Zeleznikar, CEO of Minnesota-based Diamond Willow Senior Living. “We’re waiting to see how this goes with the Supreme Court.”

Diamond Willow offers health benefits to its 400 full time eligible employees, and also offers access to a wellness program through its insurance provider. Education is the important factor right now, Zeleznikar says.

“As health care costs continue to go up, we are continuing to educate employees so they are not using emergency rooms unnecessarily,” she says. “When you have people working, especially on shifts, they tend to deal with [health issues] when they’re not working.”

For that reason, care might not happen within the 9-to-5 window when it’s most readily available, forcing them to get care through emergency rooms and drive up the costs, she says.

At the end of the day, senior living providers are anticipating big changes in the delivery of health care to their employees.

“Health care costs are going to rise. The more you can prepare for that and put into place strategic measures like wellness programs, the better you will be in the future so you don’t one day have to make drastic changes,” Kaplan says.

Providers looking at the bottom line know the impact will be significant.

Written by Elizabeth Ecker

This article is sponsored by the Assisted Living Federation of America (ALFA) as part of its efforts to advance excellence and explore topics impacting the future of senior living. For more information about ALFA, visit www.alfa.org.

The Financial Accounting Standards Board decided during its May 30 meeting to finalize some amendments changing the way continuing care retirement communities (CCRCs) account for refundable entrance fees.

The amendments will be included in a separate Accounting Standards Update in July 2012, and they could affect certain communities depending on their entrance fee refund policies. 

“CCRCs that do not have language in their contract that specifically limits refunds to the reoccupancy proceeds of the specific unit, will have a cumulative effect adjustment—which is a change in accounting principle,” says Cline Comer, a health care partner with accounting firm CliftonLarsonAllen. “This will restore the liability to the full refundable amount under the contract, with a corresponding reduction of net assets.”

Affected communities will need to figure out how much they’ll be impacted by this accounting change, says CliftonLarsonAllen, and they might need to devise a plan to communicate with their residents and consumers as some may no longer recognize an “amortization income.” This could result in operating losses in financials, says the firm. 

Read more at CliftonLarsonAllen.

Written by Alyssa Gerace

Boomers across the nation are facing a harsh reality of declining home value, rising debt, and depleted savings as they approach retirement age with little time remaining to recoup their losses, and the senior housing industry might not want to consider this generation to be their big break, according to a healthcare consultant during Life Services Network’s annual meeting, held last week in Chicago, Ill.

“Don’t count on boomers as the next big customers,” said Andy Edeburn, a healthcare consultant at Minneapolis, Minn.-based CliftonLarsonAllen LLP, during his presentation. 

Boomer finances

He pointed toward the 32% of fifty-plus homeowners who say their home value has declined substantially in the past three years, according to an AARP survey, and the 25% who have exhausted their savings. Credit card debt is a factor for nearly a fifth of this age demographic, too.

Nearly four out of ten of high net-worth Americans approaching retirement admitted in a February 2012 survey released by Nationwide Financial that they haven’t discussed their retirement with a financial advisor at all, despite nearly half of the survey participants saying they are “terrified” of what healthcare costs may do to their retirement plans. 

While this can serve to indicate boomers may not be the next target customer, as they might not financially recover in time, this won’t necessarily be the case.

“The best prospects for a senior living community tend to be planners, those that have always hedged their bet by making good fiscal choices,” says Ken Curnes, Senior Vice President, Planning and Strategy, at advertising and marketing firm GlynnDevins. “The decision to move to a senior living community as a plan to enhance their quality of life and have a defined plan for future healthcare needs is often just the latest of many considered choices they have made in life. That same mindset would most likely have given these individuals a buffer against the recession as their portfolios would most likely have been balanced and/or more conservative by nature.”

When will the “silver tsunami” hit?

Something else to consider is the fact that the first wave of boomer consumers likely won’t hit for about 10 more years, Edeburn pointed out during his presentation. 

This number could in fact be much larger, according to Ryan Frederick, founder of consulting firm Point Forward Solutions, LLC. Right now, the median age of consumers moving into retirement communities is about 83 or 84 (although some communities say their incoming resident age has stayed at about 78 for the past few years, even though the average age of independent living residents has risen to early- to mid-80s).  

The oldest boomers are aged 66 or 67, and if the average age of incoming residents doesn’t change at all, says Frederick, that means there’s still a good 15 years before boomers start moving into retirement communities. 

Further, he points out, if the average incoming age continues to rise, the industry could be waiting nearly 20 years for the first boomers to start arriving. 

Evolving senior living model

This raises another issue. “Separate from their ability to pay for things, how do we know what people are going to want, 20 years from now, given what we know of the boomer generation?” Frederick says. “I don’t think we know what people 20 years from now are going to want… What we do know is probably what they’re not going to want.” 

It might be similar to how cellphones evolve, he continues. Think of what a cellphone looked like 10 years ago compared to what they’re like today. “It’s a lot different now,” he says—and it’s hard to comprehend what new technological developments might look like five years from now, let alone 20.

With dual issues of affordability and an extended consumer timeline, Frederick emphasizes present-day preparation.

“You need to have a viable enough product right now, in order to still be around when the boomers hit. You need to be thriving and existing now,” he says. 

And that’s what many are doing. “From our work with many senior living organizations, we not only see a recognition of [the evolving model], but many examples of how it is already being executed in community design, delivery of services, and evolution of organizational cultures,” said Curnes. “We see those most responsible for acting on this—from owners to developers to architects to lenders—clearly have an understanding of how the product needs to evolve. Some are more visionary than others, but… the field of senior living is clued into this.”

Written by Alyssa Gerace

Similar to the saying, “If the mountain will not come to Mahomet, Mahomet must go to the mountain,” the senior housing industry is increasingly finding that if older adults don’t want to go to senior living communities, it’s going to need to find ways to bring its services to the senior.

Consumers as a movement drive the senior housing business, and their wants and needs are changing considerably. This is forcing the industry to evolve as well, said a healthcare consultant at a session during Life Services Network’s annual meeting and exhibition, held in Chicago, Ill.

Most people, when asked, don’t think they’ll move into a retirement community because they don’t want to leave their current home, said Andy Edeburn, Health Care Consultant at Minneapolis, Minn.-based consulting firm CliftonLarsonAllen LLP. Though boomers are beginning to retire, they’re not exactly picking up and moving: just 16% of respondents to a 2012 MetLife survey on how boomers are transitioning into retirement said they planned to move from their current residence, while 83% had no plans to do so.

“The market for us is people who want to stay in their own home,” Edeburn said. “The reality is, the aspect of the argument [that it's socially stimulating to live in senior living communities] is changing; the boomers are not like the customers we serve right now.” 

Business model is shifting toward home & community

Boomers are more vocal, and adapting the industry to the customer is key, Edeburn said. Current care models have largely evolved out of nursing homes, but that’s not what consumers want; the industry needs to re-envision the way it delivers housing and care.

Keeping up with popular consumer sentiment, there’s a political trend toward home- and community-based services (HCBS).

“Right now, political winds have changed, and it’s politically savvy to re-appropriate funding for home and community care settings,” said Edeburn. While there’s a stigma that it costs more to care for someone at home, technology is going to make it easier to proactively—and cost-effectively— manage patients in home settings, he added.

For senior living providers with traditional communities, it could be a good idea to develop some sort of HCBS system, whether as a stand-alone business, or as a feeder product, the consultant advised.

Providers who are getting into HCBS options are recognizing it as a service opportunity, especially considering the two ways to grow market share: Go out and steal it, or buy it up through acquiring another company.

But if current senior living providers do this, they’re going to have to adjust their mindset.

“Operating a home health agency through a nursing home lens does not work. It’s a totally different mindset to operate a HCBS product than an institutional practice,” Edeburn said before advising providers to look for professionals trained in home- and community-based services rather than going with a former nursing home administrator who’s relying on past experience.

Look for greater segmentation

Right now, senior housing and care is roughly divided between three segments: independent living, assisted living, and skilled nursing (many of which also offer memory care). But look for a broadening of the continuum, Edeburn said, as greater segmentation emerges to follow people’s desire to age in place.

Instead of a three-tiered model, Edeburn thinks the continuum will end up looking more along the lines of co-operative housing–>independent living apartments–>housing with services–>catered living–>assisted living apartments–>skilled nursing, with even more nuanced variations of senior living and care along the continuum, including short-term rehab or long-term acute care.

“It’s not going to be the same product that we’re serving the current generation,” he said.

The boomers are coming! …but not for 10 years. (Or more.)

Despite all the hype about the impending silver tsunami, the leading wave of the boomers won’t hit for 10 more years, Edeburn pointed out, and besides, considering declining home values, lack of savings, and less time to recover financially, boomers might not be the industry’s next big customer.

“Senior consumers, as buyers, are challenged,” the consultant said. And exacerbating the problem is that many seniors are subsidizing adult children who have been impacted even more by the Great Recession.

Ultimately, rather than eagerly awaiting the boomer generation, he said, the industry might want root for an economic recovery.

Written by Alyssa Gerace

Do you have comments or differing views? I’m interested in writing some follow-up articles based on the concepts and ideas Edeburn presented, but I need more perspectives and outlooks. Email me!