What Does the Future Hold for the Senior Living Industry?

Dust off the crystal ball, get out the Ouija board and tarot cards, and check with your swami! There are signs that we are coming out of the recession, so will the senior living industry quickly rebound and get back on track?

After all, the “graying of America” is no secret. The Administration on Aging[i] reports that the number of “older Americans” (i.e. over 65) grew by 4.5 million to 38.9M in the 10 years ending in 2008 and are expected to increase to 55 million by 2020.  The 85+ population will increase by 43% to 6.6M from 2000 to 2020 and will just begin to include the “bobby-sox generation (born from 1935 – 1945) with NO baby-boomers in that statistic.  So, won’t that create a “rising tide that floats all boats”?

OR, are there other forces at work that will have a profound and long-lasting impact on the industry? Have these forces been gathering strength behind the scenes while the industry accepted blanket excuses for census declines because of the real estate problems and loss of portfolio values?

Perhaps, now is the time to learn some lessons from the Long Term Care Industry. The 1980’s were “heady” days for that segment of the senior care spectrum. Each year, more facilities and beds were added and the financial markets were happy to fund the growth and consolidation of the industry. They read the statistics at the time and KNEW that the demand would continue unabated “for our lifetime”.  Beverly Enterprises was the clear growth leader after securing the first public equity funding in 10 years in 1980. This and other financings fueled their growth from 100 facilities in 1980 to almost 1200 by the end of the decade.  Hillhaven and others soon followed suit.

So, what happened?  Why did Beverly shrink to less than 300 buildings?  Why has the total number of SNF beds and facilities been decreasing each year (to only 16,000 facilities today)? Why didn’t the demographics continue to drive the growth of the nursing homes?

Obviously, there is no one universal answer to these questions.  Changes in the hospital payment system clearly had an impact on the type of patients being discharged into the SNFs. Meanwhile, the intermediate care (“walking wounded”) residents, and especially the private pay, disappeared from the nursing homes.  WHY?  Because of the rapid development of alternative services for these individuals:  ASSISTED LIVING, INDEPENDENT LIVING and HOME HEALTH.

Americans continue to live longer and the number of older Americans has continued to increase.  The difference is that they no longer have to look only at nursing homes as their source for elder care and support. The introduction of these other alternatives caused a major and permanent shift in the elder care paradigm.

TODAY’S SENIOR LIVING COMMUNITIES FACE THE SAME TYPE OF CHALLENGE AS THE NURSING HOME OPERATORS IN THE 1990’s.

Various studies[ii] have shown that between 85 – 90% of older Americans wish to age-in-place and there are a multitude of new technologies being developed to assist them in achieving that goal. Meanwhile, both independent and assisted living communities are increasingly hearing: “I’m not ready yet!” when communicating with their leads. The question may soon change from WHEN they’re ready to “Will they ever be ready to move-in?”

With the poor economy, it has been very easy to bury our head in the sand and assume that “I’m not ready yet!” is a subtle excuse for the prospect’s inability to afford the services at this time. Although this may be true, it’s also likely that newer generations of prospective residents are less willing to compromise with lifestyle choices than their older siblings and/or parents.

Currently, many assisted living facilities have minimized their census drop by focusing on potential residents with heavy care (and/or memory care) needs. This has been a decent short-term solution to the economic downturn, but parallels the nursing home industry’s gravitation towards heavier, skilled and even sub-acute care.  While they focused on moving those types of patients in the front door, the lighter care residents were going out the back door and into the new assisted living communities 10 years ago.

WE MUST OPEN OUR EYES AND RECOGNIZE THE THREAT OF THE AGING-IN-PLACE PHENOMENA! Otherwise, assisted living will simply become “junior” nursing homes and independent living will struggle to find suitable residents.

As ALFs become more like nursing homes, with heavier and heavier care residents, the probability of increased government oversight and regulatory requirements increases. When that happens, the flexibility to run the buildings with a consumer driven approach will decrease as the cost of care goes up.  Not a pleasant forecast!

Will the government step in and dictate changes to the industry as they’ve repeatedly done for nursing home residents? For instance, while many senior living communities still require all residents to dress for breakfast and be in the dining room at 8am sharp, the new MDS 3.0 being implemented October 1, 2010 for nursing homes requires that residents be allowed preferences for time to awaken, etc.

In a private-pay, “resident-first” environment, these would appear to be “non-issues”.  Yet, one female resident complained: “I worked all my life and had to get up in the morning.  Now, I’m retired and don’t think I should be made to get up and get dressed by 8 o’clock in order to have breakfast!”

We need to learn from the nursing homes’ history where the population that was financially able to pay privately for their services “voted with their feet” as new alternatives evolved. This group told nursing home operators that their physical plants, care options and lifestyles did not meet their demands. Are prospective residents telling senior living communities the same thing today?

To counteract the aging-in-place THREAT, operators need to re-evaluate every aspect of their services to determine ways to add greater value to their prospective residents.  Future residents are likely to want more options and choices, with fewer rules and restrictions. Socialization and lifestyle enhancements (probably more than upgrading the appearance of the building) need to be strong marketing points.  Incorporating some of the “stay-at-home” technology into the senior community may be advisable.

Let Progressive Retirement Lifestyles help you with this evaluation process and turn the aging-in-place challenge into an opportunity. Call Art at 615-414-5217 to discuss the creation of unique outreach programs that provide services to and generate revenues from your prospects who aren’t “ready yet”.

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[i] “A Profile of Older Americans: 2009” published by the Department of Health & Human Services’ Administration on Aging.  CLICK HERE for link.

[ii] For example, see Tessa ten Tuscher’s Investor Presentation for Living Well Assisted Living at Home on SlideShare on LinkedIN.

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23 CommentsLeave a comment

  1. Art,

    I couldn’t agree more. There are so many that have been in the industry that still stick with “this is how we do it, and have done it” mentality. Yet, in just about ever other business if you are not constantly evaluating your product and your service you will be defeated by your competition or something else replaces you entirely. I had an interview a couple of weeks ago and the general feedback to the recruiter was that no one had any new marketing ideas.

    Everyone is looking for a magic bullet instead of looking in the mirror, or listening to your residents, to do things that would make them happy to be there. Isn’t that why we exist in the first place?

    Great stuff as always.

    Don

    Like

  2. Hi Art:

    I think that you are right – but my perspective is a little different – given that I promote the Assisted Living at Home model of care…. My sense is that the niche for facilities – no matter how resident centered they are will always be small and that their day is coming to a close. The personality of the younger old is so much more independent and determined to do things their own way, that moving into a community is not a popular choice….. Also technology is moving in leaps and bounds to help homes be safe and supportive and to be able to remotely monitor and respond to medical and social needs….

    I think that you are also right that ALF’s and CCRC’s are becoming increasingly focused on the frailer resident, thereby making them more difficult to market to the healthier ones. This gives them a higher turnover rate as well as forces them to deal with safety, health and security issues in ways that they did not before….

    I guess I’d ask people reading Art’s article where you want to age and I’d be curious if those who know the industry fit the same 89-92% statistic of people who want to age in their own homes….. or find alternatives to facility life.

    Like

  3. Art,

    I think that your insights and comments are spot on. Successful senior living operators will understand the dynamics of aging in place and they will embrace solutions that allow seniors to age successfully in their communities and outside of their communities. Aging in place is not a threat, rather it is an opportunity.

    Steve

    Like

  4. You nailed it again Art !

    Today’s seniors demand choice and expect quality of life to go hand in hand with lifestyle improvements.
    Stay at home technology will continue to draw interest from our seniors clients as they evaluate alternatives.

    As operators we must sell the whole story including the fact that seniors who chose our communities’ lifestyle are happier and live longer

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  5. Art,

    The challenge is here and now. There is no question that the size of the market will be huge, but today, we have to create an experience that is desired. Some organizations are doing well at this by engaging with the customer and implementing value oriented, life-experience focused operations. We cannot be a replacement industry, we have to offer the unique experience almost impossibly to replicate by staying at home.

    The key to all of this is consumer feedback. This has to be on-going and continue well after the physical plant is created.

    This will help ensure that when the question of opportunity cost is measured, our industry comes out ahead.

    All the best,

    Rob

    Like

  6. Great article again! Love your introduction. Really well done and an enjoyable read too. Yes, I’ve forwarded it to many of my colleagues. I just had a conversation yesterday with a colleague who is an SRES agent. She told me the very same thing – that the AL’s and many Independent Living Communities are switching and phasing out regular clients and wanting more Alz and memory care and are remodeling for those purposes.There’s more money in it. The current independent seniors in many places are now concerned and scrambling to find alternative places to live. A unexpected stress and cost for them! The mixture of Alz and dementia is creating safety issues like being attacked by agitated Alz patients (That’s my seat!) and also just plain depressing for those healthier clients who are now feeling outnumbered. Yes, I also have concerns for the “aging in place” trend as I’m not sure that is always in the best interests of the senior -sometimes it means being left to die in front of the TV.

    Like

  7. I’d like to offer an idea. Just because statistics show that most seniors want to stay at home, doesn’t mean that it is in their best interests to do so. Some homes are just not safe, would be too costly to make safe or the senior is too isolated, even with a personal caregiver. As a colleague once said, “Elder abuse is sometimes self inflicted.” We must balance what the senior wants with their ultimate safety and well being and sometimes there is mild dementia involved and they really aren’t able to make decisions for themselves. It’s a very emotional and complicated issue and there is no perfect solution.

    Like

    • Marilyn,
      Thank you for your comments. You make some good points.

      In the ideal world, both senior living operators and “friends and families” would join together to HELP the senior make the best decision for them AT THAT TIME! The RIGHT DECISION today, will not necessarily be the right decision tomorrow. One of the things we’ve learned is that situations can change very rapidly as the individual ages.

      So, instead of selling what we have, we need to take a more progressive approach and help the potential client find what’s right for them. In the long run, this marketing concept will pay huge dividends.

      Like

      • I think you make some very good points in your article. I do agree with Marilyn’s points, however. Safety is not the only reason seniors move to retirement living communities. Studies show that seniors who stay involved in activities and friends and have fun – live longer and remain healthier longer. Even more important than just living longer or being more healthy is quality of life. Living alone at home is often not the best choice for the senior. It leads to a life of loneliness, boredom, and inactivity.

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  8. Anthony Mullen wrote:

    “Art, you make some excellent points that some still don’t get…but the real issue is simply failure to professionally sell (genuine, caring professional approach to building a sincere relationship)…..there are plenty of good prospects and those who can sell are full….obviously, people will leave if you don’t deliver a resident centered experience. All the best, Tony”

    Like

  9. Good Afternoon Art,

    I wanted to touch base after reading your article on “What Does the Future Hold for the Senior Living Industry”. This was right on spot. I’ve been working with several senior living communities (i.e. ALF, CCRC’s) on alternative ways to finance entry into these communities. In my opinion seniors have been hit the hardest due to the real estate slump and portfolio losses, to boot many have stepped in to take care of their children and their children’s children, depleting more of their savings / investments.

    It seems as if there is a perfect storm in place for both SLC and seniors alike. More and more I see and hear that residency in these communities are significantly down due to cost of entry and to quote you, seniors are looking for “more options and choices” when it comes to these communities. I think the more choices and options residents have the more likely they will want to buy in and stay at the community (i.e. alternative financing means, styles of rooms / housing to meals and availability to eat when they want, within reason). The greater the community involvement, the more successful owners of these communities will be in attracting residents and increasing their occupancy rate.

    An idea that I typically bounce off to the management teams of these communities and their developers are to really get the current residents involved in building the next phases of the community, residents are able to share their thoughts on what the real estate developer is missing or what has been overlooked from a senior perspective on that specific community. Who knows better than the residents that live there, Right! I’ve even advised them on creating an “Advisory Board” of the most influential residents to further facilitate relationships with not only the senior management / owners but with the sales staff.

    As for financing options, one option that has greatly been overlooked and in many cases unheard of are life settlements. A life settlement is the sale of an unwanted life insurance policy by a senior to a third party investor. Many seniors cannot afford their premium payments on these policies and either lapse or surrender their policies. If they let the policy lapse, then they have no way to recoup all premiums they paid into the policy. If they surrender it, they only receive the cash surrender value (which in many cases amounts to less money than they originally paid into the policy). What a life settlement is able to do is potentially offer that senior an amount three times greater than the cash surrender value and in many cases we have been able to get seniors the money they need in order to pay the entrance fee into that specific community. Not only does this option work in favor for the senior, but the community they are moving into has just sold another unit and increased their residency. Win, win for both parties.

    We have also been successful in helping raise money for a community’s benevolent care fund (if one is in place) through a life settlement. The concept is simple, it’s based off the same premise that a senior can no longer afford their premium payments or they no longer have a need for the policy therefore they transact a life settlement and donate the proceeds to the community’s benevolent care fund.

    We’ve also had several of these communities senior leadership team and/or heads of the real estate development firms request information on how to invest in these funds to better position themselves i.e. hedge against market downturns utilizing an absolute return fund.

    I know that I have shared more than I anticipated, but I would love to get your thoughts.

    Like

  10. Insightful article, Mr. Carr. I just tweeted it: http://twitter.com/joefreudenthal/status/18086407088

    Great senior living communities that create a ‘restorative environment’ in which the residents gets stronger, healthier, and connected in meaningful ways will help seniors “age well” much better than aging-in-place at home in my opinion. Senior living needs to do a better job of telling positive resident stories to the community at large. Videos do a great job of this: youtube.com/vintageseniorliving. Thanks for the article, Art.

    Like

  11. Hi Art,

    Will post this article on my website and also tweet it — very good.

    I don’t think making the senior housing communities more amenable is the solution — the often-misplaced but hopeful aging-in-place mantra so many have will be far more apparent as the 65-year-old boomers become 75-year-olds in 2020. Rather than limit the future to the 90-and-up range, partner and form home-care offerings now, identify by-the-drink offerings that connect family members more tightly (no matter how far away they live. If senior housing executives began now to imagine 10 or 20 new service offerings to the community at large, by 2020, who knows, it might be a substantial revenue stream.
    See blog post on what it might mean if we knew we would live to be 100. Best, Laurie Orlov

    http://www.ageinplacetech.com/blog/after-genetic-test-living-100-had-better-be-better

    Like

  12. Maximizing any/all available opportunities to help others seems key to happy/healthy mindsets.

    Like

  13. This is an insightful and thought-provoking article, and should stimulate the creative, prescient senior care providers and developers. There is unlimited opportunity to adapt the existing traditional senior facilities into vibrant centers to cater and serve the expectations of present and future aging generations.

    Like

  14. Art,

    Congratulations on a well thought out article! I’ve lived your scenario with my own father-in-law. He voted (with his feet and pocket book) to not move into independent, assisted or skilled environments. Instead his vote was to stay at home, including his end-of-life care with hospice’s help. Sam WAS the private pay client everyone is trying to land as a client. As far as I’m concerned, your assessment is a ninth inning bases loaded home run.

    Roger

    Like

  15. Your concerns are valid and important. With the growing need for elders to receive ongoing care at home post discharge, but restrained by financial considerations from hiring licensed health care providers, who are often unnecessary anyway, there is a legitimate need for certified at home care providers. I do not believe that they necessarily have to be associated with formal agencies because I believe that people should be able to be free and independent workers, but professionally trained, nevertheless, for their work. Our fragile economy and many elders depend on contractor independence and direct care provision in many instances.

    Appropriate legislation is important and should serve to protect the needs of the elderly and chronically ill as well as the appropriately credentialed home care provider.

    With the population shifts occurring, elder care will be one of the fastest growing social needs and career paths. It might well become an employment salvation for many displaced workers. However, proper training and certification of these people is and will remain critical.

    Such legislation is being drafted by my office ( I am an elder care attorney) and there are programs available at reasonable costs and high quality for persons who need new in demand career training. Please feel free to refer institutions and individuals who you believe could benefit from proper at home elder care training and certification credentialing to http://www.certifiedcare.org .
    Please feel free to contact me, Cathleen Carr (no relation!) at directly at attorneycvcarr@yahoo.com.

    Like

  16. Art thought provoking piece you’ve penned here.

    May I suggest a point of departure in framing your major premise?

    “WE MUST OPEN OUR EYES AND RECOGNIZE THE THREAT OF THE AGING-IN-PLACE PHENOMENA! Otherwise, assisted living will simply become “junior” nursing homes and independent living will struggle to find suitable residents.”

    There is a saying;
    What you are against weakens you—and what you are for strengthens you.

    I too, have used this kind of terminology (THREAT) to provide a sense of urgency to my point of view when discussing aging in place.

    I respectfully suggest, being for making options to aging in place more palatable and even desirable to segments of the 89% of AARP members who favor “home.” You are more (minus the THREAT) on track with the following paragraph:

    To counteract the aging-in-place THREAT, operators need to re-evaluate every aspect of their services to determine ways to add greater value to their prospective residents. Future residents are likely to want more options and choices, with fewer rules and restrictions. Socialization and lifestyle enhancements (probably more than upgrading the appearance of the building) need to be strong marketing points. Incorporating some of the “stay-at-home” technology into the senior community may be advisable.

    GREATER VALUE = BETTER MOUSE TRAP; build it and they will come…If it is truly a better percieved quality of life choice.

    The “aging-in-place challenge” is for your industy a BIG problem—and if you want a BIG opportunity…find a BIG problem. You’re blessed, you’ve found yours…and reframing might stregthen your side.

    The “challenge” as I see it, has much to do with continunity theory
    (http://en.wikipedia.org/wiki/Continuity_Theory), a strong human need as we age. Herein, resides a key to your work…

    See:
    Aging in place vs. Jail: http://aginginplace.com/2788/aging-in-place-jail-vs-nursing-home/

    To your success,
    Patrick Roden

    Like

  17. Patrick,
    Thank you for your thoughts.

    PERHAPS, we should gear our industry(s) more around the type of services provided and LESS based upon WHERE THEY ARE PROVIDED.

    I suspect much of the evolution of the senior living INDUSTRY into sub-industries has been driven by the government and its various funding mechanisms. For instance, skilled nursing – up to and including 24 hr a day care — can be provided in a skilled nursing facility (i.e. nursing home) or in the individual’s own home through a licensed and Medicare certified home health agency. Yet, we have whole different sets of rules, regulations and payment mechanisms for those different “providers”.

    For less intense care needs, we can provide “secure housing”, meals, differing levels of oversight, housekeeping & laundry services, opportunities for socialization and physical and mental activities in assisted living, independent living, CCRCs, “adult” (55+) housing, senior apartments OR in the customer’s home. Yet, each of these is treated (at a minimum)as a separate business line or industry [after all – they each have different national associations].

    Is all of this categorization and attendant bureaucracy beneficial to the customer – the aging adult?

    Join me at 2 o’clock Eastern on August 26 for a further discussion on these ideas with a webinar entitled “The New Aging Continuum” at the following URL:
    https://my.dimdim.com/grandcare/

    Like

  18. [Editor’s NOTE: The case study that is referred to in this comment is located in the “Beyond DEATH and Dying – Part 4 BARGAINING” article: href=”http://wp.me/pCemc-9e”>
    Art,
    This is the all too typical situation. The family in this vignette is lucky. They have the funds, and a place to live that may give them some separation and this situation may end eloquently. The folks that most need to be dealing with are those who do not have the were-with-all to be able to live a productive or even desirable life after a physical failing. Our government, the law-makers, whose whole drive is to be re-elected don’t seem to be able to put anything together that will remain constant enough for someone to effectively plan and put together a long range program that will help. Their needs, as one of you bloggers pointed out, legislation to assist the masses who have not been fortunate enough to be able to provide more than a Social Security check for the declining years.
    This vignette is very typical, the senior has a sound body, but the failing eyesight has caused severe limitation on his ability to function. This is compounded by the loss of his spouse, the loneliness, her failure to keep her promise to him, and most of all the loss of control of his life and the real or perceived “fruits of his life’s labor”. In some ways it would be easier on him if he had his eyesight, but a failing body.
    The last thing that this family needs is to be together under these circumstances. The adult children are “sandwiched” in this situation. They have to earn an income, look after a cranky old man and their own children. This is the last thing that any of them need. Jim is looking for his autonomy. Dale is trying to “do what he thinks is right” for his father, but is exposing his family to the wrong side of his father. Dale’s family is trying to live their lives as though Jim was not present, and though not meaning to, causing further discord.
    Jim is still in various phases of anger over the loss of his spouse. Angry that he can no longer function as an autonomous individual, which, in his case, is especially difficult because of his history as an executive “in charge”. Jim is also angry because he is alone, and he has lost one of the most important “anchors” in his life. Jim is not dealing with the anger in an appropriate way, but lashing out at the only ones that he can.
    In my opinion the first thing that Jim needs to do is become involved in his church or other “anchor” that is available to him. Involvement in a grief counseling group would be especially helpful, but difficult to convince him that he needs it. This should probably come from someone that he respects and trusts. Next Jim needs to be in a place that will provide the services that he needs, in a caring and responsible way. If the move-in coordinators are trained in this sort of thinking and can facilitate what is needed to help Jim and the Jim’s of the city then they will keep a full house.

    Like

  19. […] Dust off the crystal ball, get out the Ouija board and tarot cards, and check with your swami! There are signs that we are coming out of the recession, so will the senior living industry quickly rebound and get back on track? After all, the “graying of America” is no secret. The Administration on Aging[i] reports that the number of “older Americans” (i.e. over 65) grew by 4.5 million to 38.9M in the 10 years ending in 2008 and are expected to inc … Read More […]

    Like

  20. […] The busiest day of the year was July 1st with 288 views. The most popular post that day was What Does the Future Hold for the Senior Living Industry?. […]

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  21. Very desсriptive article, I enjoyed that a lot. Will thеre be a
    part 2?

    Like


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