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