Senior Living News Wire

New construction is a risky proposition these days. Initial design and the costs of construction are some of the most critical factors when developing a new home even though the long-term use of the house is unquestioned. Is it right to rip up the foundation of a new home because of questions about how to pay for it? If so, that’s what the Republican-controlled House of Representatives did when it voted to repeal the CLASS Act.

The CLASS Act (Community Living Assistance Services and Supports), a voluntary long-term care insurance program, was designed to meet the needs of seniors, caregivers and families to provide long-term care insurance and supportive services.  The CLASS Act was created as part of the Obama Administration’s healthcare reforms under the Affordable Care Act.

The need for long-term care insurance continues to grow as the American population ages regardless of socio-economic background. The CLASS Act was implemented as part of a wide-ranging solution to combat the rising costs associated with Medicare and Medicaid—a fundamental problem facing the country’s fiscal future. While the program was not designed to be the silver bullet to the problems facing Medicare and Medicaid, it was designed as a risk mitigant to the rising costs of care that would ultimately be borne by the taxpayer.

Government Intervention Needed for Greater Accessibility

While there are private sector alternatives for long-term care insurance, can these products reach the thousands of Americans who need it?  Can private-sector participants keep costs under control, all while being accessible to the average American?  
The need for long-term care insurance in the coming years will mimic the need for the government to provide a means for affordable homeownership for individuals and families. Homeownership has been a cornerstone of the American dream, and affordable long-term care may supplement that as part of the dream.

Before criticizing the government’s role in the current housing crisis, look back over the last 78 years that the government has played in managing risk (insurance) for home purchases. The Department of Housing and Urban Development’s (HUD) Federal Housing Authority (established in 1934) provides mortgage insurance to many lenders throughout the country as a means to provide protection against loan defaults. Over the years, the FHA loan programs have provided many homeowners with the an opportunity to own their homes with a low down payment and interest rate while providing lenders protection to encourage taking risks to lend these funds out.

For the first time in its history, the FHA may exhaust its reserves in the coming fiscal year according to the budget figures released by the Obama Administration. In an effort to combat the funding and solvency concerns of the insurance fund, FHA has raised premiums and fees associated with the origination of their loan products.These changes in funding mechanisms allow the program to continue ahead and serve the underlying mission of HUD and FHA despite the possible need for infusion from the Treasury department. The birth of FHA was during the Great Depression that provided a basis from which to promote homeownership.

Has the FHA had a spotless past? Absolutely not, but it has stood the test of time and provided a meaningful product that has enabled thousands (if not millions) to enjoy part of the American dream.  Even as the housing market has showed that there are substantial risks to keeping the FHA insurance fund solvent, are there cries to abolish the laws that established the program?  There has been no vocal cry to repeal the National Housing Act of 1934.  Are all aspects of the National Housing Act of 1934 relevant today?  No, but the legislation has evolved to provide the basis for the success of the program over the years and mechanisms are in place provide for the safekeeping of the insurance fund’s solvency over time.

Should CLASS be Back in Session?

Although there are defects within the CLASS Act, repealing the program represents a premature retreat from a crucial fight. Proceeding to implement—with an eye on modifications and amendments—is the most prudent course to provide an opportunity for affordable, attainable long-term care insurance.

No program is perfect, especially ones devised by the federal government.  Dismantling the foundation and building blocks of the CLASS Act will do more harm than good, which will require starting from scratch.  Many providers and advocacy groups have provided recommendations that will modify the program and address the concerns over the affordability of premiums, funding mechanisms for long-term security and ways to protect tax payers from costs spiraling out of control.  There is no doubt there are flaws in the fiscal sustainability of the Act as it stands today but to simply “give up” is almost un-American.

Could the fundamentals of CLASS be re-worked to make it a program that starts small and grows with time in a fiscally responsible manner?  Even if the program is re-worked but less accessible to the broad populus, it would still be better than nothing.  Could it morph into an insurance type “wrapper” tied to long-term care insurance products like FHA insurance with private lenders?

Even though the House voted to put the CLASS Act down, we should consider the alternative of no program for long-term care that is affordable and accessible to all Americans. If FHA was a byproduct of the Great Depression, maybe the Great Recession will highlight the need for the government to play a role in maintaining affordable long-term care insurance.

Let’s hope that the CLASS Act can withstand the partisan politics to initially survive and then become the program that was hoped for at the outset. While the expectations may initially shrink from the grand vision of new construction, a smaller, more efficient house that can work within the original foundation can sometimes be the right solution.

Written by George Yedinak

Health Care REIT, Inc.’s recent RIDEA-structure partnership with a Canadian REIT for a 42-property portfolio makes sense, says the U.S. company, considering extremely favorable market demographics of a large senior population and a growing demand for senior housing.

“We have spent some time over the last year or so looking at different marketplaces and Canada we thought was unique in the sense that their growth of the elderly population as a percent even exceeds the U.S,” said chief acquisitions officer Stephanie Anderson during Health Care REIT’s earnings call. “They’ve had less of a hit to their economy by the housing there. So even though there was some overbuilding, specifically in the seniors housing market, it did not impact their economy and so the stability of that economy was an advantage.”

Bridging the Acuity Gap

In general, while the Canadian marketplace is very similar to the one in the U.S., it has a significantly lower acuity, Anderson said.

“The difference in Canada is that they have specialized health care once you reach a certain age and acuity level,” she said. “That causes there to be less acuity in this portfolio.”

Some recent “changes on the regulatory side” in terms of licensing requirements means the government has moved the acuity levels up to be able to qualify for socialized housing.

However, there’s a gap between a resident who qualifies for a government-supported long-term care home (which Brinker said is roughly equivalent to the U.S.’s assisted living), and the resident that’s able to remain at home.

“The gap in acuity is expanding, and we do believe there’s a lot of opportunity there to provide those services,” said Brinker.

“That creates additional private pay opportunities, which, over the next five to ten years, we think will be an advantage,” Anderson said.

The properties, which are all independent living, private pay facilities, have the ability to provide services, according to the REIT.

“This is all private pay, but certainly activities of daily living is something that can be provided,” said Brinker. “Chartwell, over time, may decide that the best approach in this specific building is to add more healthcare services; they have that kind of ability and capability.” But for now, he added, it’s a very low acuity portfolio.

Portfolio Potential

The properties are currently 88% occupied, and Health Care REIT has stated its intentions to capitalize on possible upside.

“We have not only occupancy upside, but we have some staffing costs and other ways that we can improve everybody’s return,” Anderson said. “We think Chartwell is really a fine operator. They operate very much like our top operators do in the United States.”

The average occupancy rate in the U.S. across seniors housing is 88.2%, according to the National Investment Center for the Seniors Housing & Care Industry (NIC), so the new acquisition is on-par with the U.S. market. However, there are some buildings in particular that Health Care REIT has targeted for significant improvement.

“There are three or four fill-up buildings that are less than two or three years old that still have census in the 70% to 80% range that we think over the next three years will improve to the 90-plus percent range,” said Scott Brinker, executive vice president and chief financial officer, during the call. He also added that some Canadian markets, similar to some the U.S., had a period of overbuilding in the last five years that is now “starting to burn its way through.”

“Industry wide, in Canada, the census is down 300 or 400 basis points from three of four years ago, and we’re finally starting to see that move back in the correct direction,” Brinker continued. “So at least long-term, we think low 90s, 91%, 92% is highly achievable; that’s what Chartwell had done historically. And this portfolio, the 88%, we think there really is some 400 basis points of growth over the next three or four years.”

Health Care REIT is looking at the venture with Chartwell as a long-term partnership.

“We would like to grow in Canada alongside with Chartwell,” she said.

Written by Alyssa Gerace

It used to be that residents requiring different levels of care could still dine together in continuing care retirement community (CCRC) Harbor’s Edge’s River Terrace dining room.

Whether residents occupied the community’s independent living units, assisted living apartments, or skilled nursing units, they could all join each other at the dinner table—until last spring, when the community’s managers began separating the healthy from the frail, writes the New York Times’ “The New Old Age” blog.

“[L]ast spring, managers declared the River Terrace and two other dining facilities at the community off limits to anyone but independent living residents. Assisted living residents were told to use their own small dining room; nursing residents were restricted to theirs.

Family members were instructed to join them there. But longtime friends—and several married couples—who lived in separate parts of the facility could no longer share meals in the main dining room. Those in assisted living or nursing care also were also barred from community events like the Fourth of July celebration.

[T]he new policy initially stemmed from overcrowding, said Neil Volder, a former real estate developer who built the complex and is its executive director.

Moreover, managers believed that the policy of letting residents of various degrees of disability dine together violated Virginia state regulations, Mr. Volder said, and left Harbor’s Edge vulnerable to lawsuits or revoked licenses.”

It wasn’t long before residents began fighting what they considered discrimination and trying to reverse the new rules, says the Times, although some residents agreed with the policy.

The community ultimately offered up a compromise, saying that those who originally entered independent living but had since transitioned to assisted living could undergo an assessment to determine whether or not they would be allowed to continue using the dining room.

Read the full “Tables Reserved for the Healthiest” article here.

Written by Alyssa Gerace

CNL Healthcare Trust, Inc., said on Feb. 20 that it made its first acquisition (originally announced in December), a five-property portfolio of senior housing communities purchased for approximately $84 million.

CNL is a real estate investment offering that recently changed its name from CNL Properties Trust to reflect its focus on healthcare assets. The portfolio was acquired from affiliates of Primrose Retirement Communities.

“We are thrilled to complete our first acquisition with Primrose, which has a successful track record of developing and operating high quality senior housing communities,” said Stephen H. Mauldin, president and chief operating officer of CNL Healthcare Trust, in a statement. “We believe senior housing and other healthcare assets provide an excellent opportunity for our investors as the aging population and rising healthcare costs are expected to continue to drive demand for well-positioned and well-managed real estate assets.”

The purchased communities include Casper Senior Living, in Casper, Wyo.; Grand Island Senior Living in Grand Island, Neb.; Sweetwater Senior Living in Billings, Mont.; Marion Senior Living in Marion, Ohio; and Mansfield Senior Living in Mansfield, Ohio.

The communities, which were 95% occupied as of Feb. 12, will still be operated by Primrose under a long-term triple net lease.

Written by Alyssa Gerace

Real estate brokerage Grubb & Ellis Co. recently filed for bankruptcy, reports the LA Times, and will sell its assets to the parent company of its rival, Newmark Knight Frank, as part of a prepackaged bankruptcy, according to the firms.

BGC Partners Inc., a New York financial services firm that acquired Newmark Knight Frank in October, agreed to buy essentially all the assets of Grubb & Ellis for an undisclosed price.

Grubb & Ellis will conduct its asset sale under Section 363 of the U.S. Bankruptcy Code and has commenced Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of New York.

The firms did not reveal whether the Grubb & Ellis name would survive the takeover. The company’s yellow-and-black signs are a common sight on offices, warehouses and other commercial buildings available for sale or lease.

Grubb & Ellis was formed in Oakland in 1958 by Bill Grubb and Hal Ellis and grew into what was once the largest independently owned, publicly traded real estate firm in the United States. It borrowed heavily to expand, however, and had trouble turning a profit after the real estate industry crashed in the early 1990s.

The brokerage was dropped as a sponsor for Grubb & Ellis Healthcare REIT II, Inc. last November, which is now sponsored by American Healthcare Investors, LLC and Griffin Capital Corporation, and known as Griffin-American Healthcare REIT II.

Following this, Grubb & Ellis’ share prices fell below $1, and it was delisted by the New York Stock Exchange in January.

Read the LA Times article here.

Written by Alyssa Gerace

This article is part of a series following “Will the Nation Go Broke Paying for Senior Housing & Long-Term Care?“

The whole aging-in-place movement can be scary for senior housing providers who worry about how their occupancy levels might be affected with seniors increasingly wishing to remain in their own homes, but they can take advantage of the concept for the seniors who are already living in their facilities with the help of home health care services.

The average age and acuity of current residents in both independent and assisted living facilities is going up, and those who are moving in are often older, says Ryan Frederick, principal of Point Forward Solutions, a consulting and financial advisory firm serving the seniors housing and care industry.

Some younger seniors aren’t choosing to enter assisted living because of the higher age and acuity demographics, while those who enter independent living are staying longer before transitioning to a higher level of care.

But despite a longer independent living stay, residents’ overall length of stay is shorter, and many places are experiencing a higher turnover than what they’ve historically had, says Frederick.

“If you’re a CCRC provider, you’re having a harder time bringing younger people in because of aging in place, and you’re gonna be facing a higher turnover,” he says.

It’s a big issue for providers to figure out how to handle this, as high turnovers can be quite costly, and many are beginning to expand their services in order to accommodate changing demographics.

Home Health Care Increasingly a Factor to—and in—Senior Living Communities

As consumers and state governments alike increasingly turn to home health agencies as a more affordable source of senior care, some senior living providers are making sure they’re not left out of the movement by buying agencies or incorporating home care into their communities.

Many signs point toward the declining viability of the next couple generations of seniors being able to afford their long-term care in nursing homes. A generous number of nursing home residents already depend on Medicaid to fund their stays, but as Medicaid eligibility expands and census grows, state governments are looking for ways to deliver care less expensively, and home-based care is one such way to do so.

If senior living providers don’t want to be shut out of the business opportunities presented by the thousands of Baby Boomers, many of whom will be needing some sort of long-term care in the next 15-20 years, they might want to consider integrating home health services.

Providers Adding Health Care Services to Communities

Brookdale Senior Living’s strategy, for example, is adding healthcare services to their communities to help people age in place.

They’re using Care3 Wellness programs through Brookdale’s Innovative Senior Care program, which includes a Medicare-certified home health care service. Care3 Wellness is described as a “comprehensive nursing, therapy, and wellness system” that can help residents retain or improve their independence.

The program’s benefits include the potential for residents to have “better health at any age in any senior living environment,” with residents assessed by senior care professionals on a voluntary basis to determine which segment of the Care3 Wellness Program they would best fit into, according to Brookdale, based on their personal level of health, fitness, or mobility.

Acquiring or Partnering With Home Health Agencies

Some senior care companies, such as The Ensign Group, Inc., (NASDAQ:ENSG) are going a slightly different direction and expanding services by acquiring home health care businesses.

In December, Ensign acquired Homecare Solutions, a Denver, Colo.-based home health agency. This “lateral diversification broaden[ed] Ensign’s reach into that business,” said Christopher Christensen, the company’s president and CEO.

Ensign most recently made headlines for its purchase of Connected Home Health, a Portland home health agency, with Christensen again speaking to the company’s move to grow and develop its home health business.

These two agencies join Ensign’s existing similar operations: Horizon Home Health and Hospice in Idaho; Custom Care Hospice in Texas; Careage Home Care, in Iowa; and Symbil Home Health and Hospice, in Utah. The businesses are operated through affiliates of Cornerstone Healthcare, Inc., Ensign’s home health and hospice-based portfolio subsidiary.

Home Health as a Conduit to Assisted Living Care?

Emeritus Senior Living, based in Seattle, Wash., is considering tapping into the home health care market.

The company currently offers “complimentary home visits” where an Emeritus nurse will do an assessment of a senior in the community and in many cases identify needs that aren’t being met. Then, the senior living provider attempts to connect the individual and their family with resources to help meet those needs, which in some cases could be home health care.

For now, Emeritus is referring these seniors to home health care agencies, but in the future, says the company’s president and CEO Granger Cobb, it’s possible they’ll offer their own home health care services.

“It makes a lot of sense to kind of marry the two,” says Cobb, referring to partnering with home health care. “If we have a licensed home health agency that can fit in nicely with our home visit program, it probably offers even more options in terms of how we can benefit seniors at home.”

However, he also points out that while a home health agency would complement the company’s service offerings, it could also provide a referral conduit into Emeritus communities in the event that it became more cost efficient for someone receiving home health care to enter a facility.

“Generally it’s more affordable to a senior—to a point, when they have someone come in for a few hours a day,” he says. “But when it reaches a point where it’s eight or 10 hours a day, usually assisted living is a more affordable option.”

Rather than seeing the aging in place movement as a foe, senior living providers have the option of incorporating home health care into its existing assisted living and independent communities, whether it’s through a subsidiary operation or a third-party agency. And it’s possible to go still further and expand service offerings to include home care for seniors who haven’t yet joined senior living communities, especially as this could eventually serve as a referral base for potential future residents.

Written by Alyssa Gerace

Ventas, Inc. (NYSE:VTR) saw its normalized funds from operations (FFO) skyrocket 114% to $259.3 million for the fourth quarter ended Dec. 31, 2011, thanks to acquisitions made in the period.

“Ventas delivered excellent results in 2011, as our portfolio performed well while we successfully integrated over $11 billion of accretive acquisitions,” Ventas Chairman and CEO Debra A. Cafaro said in a statement. “We have a highly diversified portfolio approaching 1,400 properties, with nearly 80% of our annualized revenues derived from private pay sources, an outstanding balance sheet and an attractive cost of capital.”

Normalized FFO—Fourth Quarter & Years End

Both the quarterly and yearly FFO benefited from the REIT’s acquisition of Nationwide Health Properties, Inc., its 117 Atria-managed communities, increased net operating income from senior housing communities managed by Sunrise Senior Living, and rental increases from Ventas’ triple-net lease portfolio. FFO was partially offset by increases in general and administrative expenses, higher interest expense, and a greater number of weighted average diluted shares.

The normalized FFO per diluted common share was $0.89 in the fourth quarter, up 15.6% from the comparable 2010 period, and does not include the net benefit from litigation proceeds ($99.7 million from HCP, Inc.) and income tax benefit.

For the full year, normalized FFO increased approximately 71.1% to $777 million, up from the previous year’s $454 million, with normalized per diluted common share of $3.37.

Net Income—Fourth Quarter & Years End

Net income attributable to common stockholders for the quarter ended Dec. 31 was $192.9 million, or $.66 per diluted common share, compared with $77.6 million, or $0.49 per diluted common share, during the same period in 2010.

For the year, net income attributable to common stockholders totaled $364.5 million, or $1.58 per diluted common share, compared with the previous year’s $246.2 million, or $1.56 per common diluted share.

Net Operating Income—Fourth Quarter & Years End

In the fourth quarter, total net operating income for Ventas’ portfolio grew 2.4% versus the third quarter to $89.5 million, and stabilized unit occupancy increased 100 basis points.

While 70% of Ventas’ net operating income (and 84% of revenues) came from its private pay census, CEO Debra Cafaro said the REIT still believes in diversification, and that having a balanced portfolio is the best way to manage the company’s growth.

“We have deliberately focused over the past 2 years on driving our private pay revenue and NOI statistics higher and we think it was the right time in the cycle to do that,” said Cafaro during the earnings call. “But obviously, nursing homes are an important part of the post-acute delivery of care to seniors in the United States. And at the right time and at the right price and the right structure, those are appropriate assets to own as a health care REIT, I believe, in a diversified portfolio.”

However, she added that net operating income from private pay residents could rise to 80%.

Looking forward, the REIT expects its 2012 normalized FFO per diluted share to range between $3.63 and $3.69.

Written by Alyssa Gerace

The past couple weeks in senior care technology news have been a mix of product development and partnerships. One company’s pilot program reflects a shift away from time-consuming paperwork to efficient, speedier electronic information transmitting. Two technology companies have entered into partnerships to improve care service and quality, while a software provider has combined the best features of three management programs into an integrated senior living platform. Read on:

1. RealPage: Integrative Senior Living Platform

RealPage, Inc. (NASDAQ:RP), a provider of on-demand software and software-enabled services to the rental housing industry, announced on Feb. 9 its product offering RealPage Senior Living, an “enterprise-wide, senior living solution that integrates Care Management, Community Management and Marketing Management.”

Care Management is designed to help senior living owners and managers improve quality of care and increase direct care revenue through an assessment tool that lets clinical staff measure changing acuity of senior residents, and also helps to plan staffing so as to accurately price the delivery of care and achieve maximum revenue. Community Management includes a system for accounting, census and billing, electronic payments, purchasing, and facilities for multiple senior living communities. The Marketing Management component is meant to provide cost-effective marketing solutions, such as lead tracking and contact center services.

2. Molina Healthcare and Sandata Technologies: Exclusive Implementation of Managed Senior Care Program

Molina Healthcare, Inc., a provider of Medicaid Managed Services, and Sandata Technologies, LLC, a provider of technology solutions to the home health care industry, have agreed to have Sandata exclusively provide Electronic Visit Verification services for Molina’s Home and Community based programs. The agreement is meant to increase Molina’s compliance to care plans, improve quality of service to members, and increase overall program efficiency within its network of home care providers. Sandata’s Electronic Visit Verification technologies, including its payor management solution, will be implemented, along with a speaker verification system and a telephonic visit verification.

3. WellAWARE: Senior Care Technology Developer Partners with Installation Services Provider

WellAWARE Systems, a developer of senior care technology, has partnered with Zigmo, a technology services provider that will now provide installation, on-site support, and installation training services for WellAWARE customers across the U.S. WellAWARE has a “smart sensor” solution that gathers data about resident wellness and overall health. Senior care providers can use this data to spot trends, which in turn can help reduce rehospitalizations and preventable emergency room visits.

4. Omnicare: E-Prescribing Application for Skilled Nursing & Assisted Living Providers

Omnicare, Inc. has launched an e-prescribing application pilot for its OmniviewDr platform, which allows prescribers to electronically transmit orders for controlled substance prescriptions as well as other medications in real-time directly to Omnicare pharmacies. This technology shortens the wait for elderly patients to receive their medication and also streamlines the manual, paper-based process. OmniviewDr was developed to address the growing needs of physicians and residents in skilled nursing facilities and assisted and independent living communities, and is expected to be released to the full market by the end of the year.

The average price-per-bed for assisted living rose more than 45% in 2011 to $156,900 per unit, compared to the previous year, reports Irving Levin Associates, Inc.

Prices came “extremely close” to 2007′s peak, and showed the value of the seniors housing market despite economic uncertainty.

“The seniors housing market was so resilient during the Great Recession that investors were willing to pay higher prices for the higher quality assisted living communities that came on the market in the past year,” says Irving Levin.

While assisted living saw the greatest increase in per-unit pricing, independent living came in with the “most valuable beds,” increasing 17% to an average price of $171,000 per unit, also close to the record set in 2007, says Irving Levin.

“Even though the housing market has not improved much to help seniors sell their homes at reasonable prices, high quality seniors communities were in demand in the market, especially those with an assisted living or memory care component,” said Stephen Monroe, editor of the Irving Levin M&A report.

Skilled nursing didn’t fare so well in 2011, with the average price per bed dropping about 18% to $51,100, according to Irving Levin’s The Senior Care Acquisition Report.

“While this decline looks significant, it is very much in line with the average prices paid in the four years from 2006 through 2009,” said Monroe. “Last year was an unusual year for the skilled nursing industry because it had to deal with a short-term period of higher Medicare rates that were then drastically cut effective October 1, 2011. No one likes uncertainty, but skilled nursing providers are adapting well to the changes and there is no shortage of buyers or M&A activity.”

Written by Alyssa Gerace

The Ensign Group, Inc. (NASDAQ:ENSG) announced on Feb. 13 that an Ensign subsidiary had acquired Connected Home Health, a small home health agency based in Portland, Oregon, effective as of Feb. 10, 2012.

“We are pleased with the growth and development of our home health businesses thus far, and this lateral diversification broadens Ensign’s reach into that business,” said Christopher Christensen, Ensign’s president and CEO. “More importantly, this acquisition is an important first step in our desire to offer a wide range of healthcare services to the vibrant Oregon healthcare community.”

A subsidiary of Cornerstone Healthcare, Inc., Ensign’s home health and hospice-based portfolio subsidiary, will operate Connected Home Health.

The new acquisition joints Horizon Home Health and Hospice, the company’s existing home health and hospice operation in Idaho; Custom Care Hospice, Ensign’s hospice operation in the Dallas, Tex. market; Symbil Home Health and Hospice, Ensign’s home health and hospice operation in the Salt Lake City, Utah, market; Homecare Solutions, Ensign’s home health agency in Denver, Colo. an Careage Home Care, Ensign’s home health agency in Cherokee, Iowa.

Ensign purchased Connected Home Health, formerly known as Portland Home Health, with cash and expects the transaction to be midly accretive to earnings in 2012.

Written by Alyssa Gerace

This is a follow-up to Part 2 of a multi-part series exploring the question, “Will the Nation Go Broke Paying for Senior Housing & Long-Term Care?” Check out parts one and three.

While some states are making use of Medicaid waivers to create “affordable” assisted living models, there’s industry consensus that the concept of affordability probably isn’t viable in assisted living facilities.

“It’s a very difficult thing to accomplish, to make a meaningful difference in the cost of assisted living without compromising the service,” says Tom Grape, chairman and CEO of New England-based Benchmark Senior Living.

The only real way to provide truly affordable assisted living is with a reimbursement or grant of some form from the government, he says.

“There’s no way to offer it without some payment from an outside source, and I don’t think that’s going to happen in the near term,” Grape told SHN.

He broke down the economics of an assisted living community: Roughly 70 cents of every dollar goes toward operating costs, another 20 cents goes to mortgage or debt services, and the remaining 10 cents is left for cashflow.

“Someone could give you the building for free, and it would reduce costs by 20%. But once you start chipping away at 70% of operating expenses… you can chip away at the margin, but you still have to provide three meals a day, and all the other basic services,” he said.

And until there’s some sort of government waiver program set in place, residents often end up relying on their families to “chip in,” Grape said.

“The long-term solution that is best for the country is an expanded long-term care insurance product, whether publicly or privately sponsored, but I don’t think a new large-scale reimbursement program from the government’s likely, so I think the situation will likely remain as is for most of [the next 10 years].

Andrew Carle, a former senior living administrator and the founder and executive in residence of George Mason University’s seniors housing administration program, agrees wholeheartedly with Grape. He’s done extensive research on the topic of technology and its role in senior care, including how it can help senior living facilities reduce costs and become more efficient.

Despite the possibility of using technology to cut costs, it’s not enough to constitute affordability.

“There are fixed costs that you can’t do anything about,” he says. “There’s an opportunity to make things more affordable, but not actually affordable with technology.”

He says that some of those currently using various technological developments in their senior housing communities are actually the county-run, low-income senior housing organizations.

This is because they don’t have a business interest in ancillary revenue, says Carle.

In general, while it’s possible to make facilities “more” affordable and efficient, he says, there will probably never be a truly affordable model because at a certain point, it’s just not possible to trim costs any further.

Written by Alyssa Gerace

Lawmakers recently voted to extend the payroll tax cut through 2012, which includes a measure to prevent a 27.1% cut in Medicare payments to doctors for the rest of this year through a ‘doc fix’ that would be funded by reducing federal healthcare spending. But while doctors’ reimbursements might be saved, it could come at the expense of skilled nursing facilities.

The ‘doc fix’ will be funded by reducing spending by about $21.1 billion, which includes a $6.9 billion reduction in federal payments to skilled nursing facilities and hospitals that collect “bad debt”—the amount facilities can get reimbursed by Medicare to cover expenses (debt) incurred by those dually eligible for Medicaid and Medicare that’s uncollectable by federal law.

Currently, skilled nursing providers can collect 70% of beneficiary cost-sharing, or “bad debt,” expenses from Medicare, and 100% of bad debt stemming from the treatment of “dual eligibles”—patients eligible for both Medicaid and Medicare.

Unfortunately for providers, the ‘doc fix’ includes cutting reimbursements for bad debt to 65% beginning in 2013 for those who are currently getting a 70% reimbursement, and phasing those getting complete reimbursements down to 65% in the next three years. President Obama recommends that bad debt reimbursements be reduced to just 25%.

With this turn of events, the already-slim margins in skilled nursing could get dangerously smaller, according to the American Health Care Association.

“It’s unclear how much of that $6.9 billion is ours [as opposed to affecting hospitals],” says Greg Crist, vice president of public affairs at AHCA.  “The [three-year] phase-in helps, but we have a lot of facilities who have Medicaid patients and therefore have a lot of bad debt, and this is going to be another financial strain.”

He says the cut will impact 20 to 25 states disproportionately to other states, naming Florida, Pennsylvania, and Illinois among those that will be particularly hard-hit.

AHCA had previously offered an alternative to the bad debt proposal, for facilities to absorb all private-pay bad debt with no federal responsibility, and has also introduced other “substantive policy alternatives and solutions” such as penalizing nursing homes with higher-than-average hospital readmissions.

Previous analyses have shown that nursing homes’ profits will flatline or even turn negative with further cuts beyond the average 11.1% Medicare reimbursement reductions to nursing homes that went into effect last October.

“Many may not want to mention margins when it relates to healthcare providers, but the fact of the matter is without a margin, it’s just not possible to keep operating,” AHCA President and CEO Mark Parkinson has previously stated.

The doc fix was included in the payroll tax extension deal, which passed in the Senate on Friday with a 60-36 vote shortly after clearing the House, 293-132.

Click here for a summary of the health-related provisions contained in the deal.

Written by Alyssa Gerace

It’s possible that the Centers for Medicare & Medicaid Services (CMS) will soon be implementing a common pay system for post-acute care providers, including skilled nursing facilities, home health agencies, long-term care hospitals and inpatient rehabilitation facilities.

Because similar patients can be treated in more than one provider setting, having a common evaluation and payment model and being able to “consistently measure patient acuity, resource use, and outcomes across settings will help to guide appropriate policies for these patient populations,” says the CMS report to Congress on the Post Acute Care Payment Reform Demonstration.

Currently, there are three mandated assessments for skilled nursing facilities, inpatient rehabilitation facilities, and home health agencies, but although they measure similar concepts, they use different clinical terms and assessment timeframes, and disparate measurement scales to assess health, physical function, and cognitive status, according to the report.

“The current Medicare payment methods for PAC providers are designed largely as independent systems that measure within-setting variation but they do not recognize the potential overlap in case mix or complementary service options available in other settings,” says CMS.

In trying to reform the current system, CMS developed a uniform assessment instrument called the Continuity Assessment Record and Evaluation (CARE) tool. The dataset for CARE includes Administrative Items; Pre-Morbidity Patient Information; Current Medical Information; Interview Items: Cognitive Status, Mood and Pain; Impairments; Functional Status; and Discharge Information.

Implementing this assessment within CMS’ demonstration was successful, the Center said, as all five settings were able to use CARE items “to collect information in a consistent and comprehensive manner for their Medicare populations.”

“Overall, the inter-rater reliability results showed very good agreement on most items,” the report says. “These results suggest that most of the standardized versions of the assessment items have strong reliability within and across settings.”

The report to Congress includes CMS’ demonstration results across the different post-acute care settings and lists recommendations for going forward with the payment system reform.

“Given the promise of the CARE tool and the importance of standardizing the collection of information between settings about patient acuity and outcomes, CMS believes that it should pursue its development efforts towards integrating CARE into the reporting requirements for acute care hospitals, SNFs, HHAs, IRFs, and LTCHs,” the report concludes.

View the full report here.

Written by Alyssa Gerace

The state of Tennessee’s Medicaid managed care program, TennCare, is looking to save millions of dollars by restricting what qualifies people for long-term nursing care, reports WCYB.

At least $15 million could be saved in the state institutes “tougher new standards” for who’s eligible to enter a nursing home. Currently, an individual with one activity of daily living deficiency (ADL) can be admitted into a facility through the TennCare program.

The new proposal, however, changes that requirement to four ADLs by next year.

Most patients admitted into Tennessee facilities have at least three deficiencies, according to WCYB. “That means those on the threshold may not be allowed into a nursing home,” the article says.

This could leave some seniors at a disadvantage, but those who don’t “quite meet the long-term criteria might receive TennCare coverage for in-home and community based services,” WCYB reports. “If passed, local home care businesses said they would expect an influx of clients.”

Read more at WCYB.com.

Written by Alyssa Gerace

On Feb. 3, Health Care REIT, Inc., (NYSE:HCN) closed its acquisition of Belmont Village Sabre Springs LP, an assisted living facility located in Scottsdale, Ariz., for a purchase prices of approximately $67.5 million.

The 176,379-square-foot building is located at 13075 Evening Creek Drive S., and follows the Ohio-based Health Care REIT’s November acquisition of a California assisted living facility, Belmont Village Senior Living.

The REIT’s real estate portfolio is valued at more than $13 billion and includes senior living communities, medical office buildings, inpatient and outpatient medical centers, and life sciences facilities.

Written by Alyssa Gerace