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.

“Do not go gentle into that good night”

– Dylan Thomas

 

In the 1920’s, T.S. Eliot ended “The Hollow Men” with:

This is the way the world ends
  Not with a bang but a whimper.”

This became a philosophy of aging for 20th Century generations.  The senior living / care industry offered protective living environments to meet the expectations of these generations as they aged with increasing physical and/or mental frailties.

BUT the 21st Century is a different world and the bobby-soxers (born 1935 – 1945) and baby-boomers won’t be satisfied to simply fade into the sunsetas their parents and grandparents did.  They won’t “go gentle into that good night” and the senior living industry must evolve to meet the increased demands of these future generations.

Today’s senior living communities were designed to provide care and services for “The Greatest Generation[1]and/or their parents.  These individuals lived through the Great Depression and were molded by the experiences of World War II.  They worked hard and made a better life for their children who often became the first in their family to attend college.  Frequently, they worked for the same companies their entire career and were rewarded with generous retirement packages, including lifetime health benefits.  Others built their own businesses, anticipating that their children would join and then succeed them in operating the company.  In either scenario, the parents were expected to retire with their productivity and significant contributions to society at an end.

The general message from the adult children and even the government has been:

You’ve done enough.  Just sit back and let us take care of you.

Medicare and related programs in the mid-1960’s created the funding for the development of modern health services to “insure” adequate care for these elderly.  Nursing homes and home health evolved from cottage businesses into professionally managed multi-million dollar industries.   Assisted living, independent living and investor owned CCRC’s developed to supplement non-profit (primarily church-related) life care communities and traditional “old folks” homes.

Operators built self-contained communities and assured residents that all their needs could be handled within these enclaves.  Food and shelter, security and transportation for essentials such as doctor appointments[2] were provided.  Activity programs were scheduled to entertain and fill the residents’ days.

Today, prospective residents are told that their worries will be over if they agree to move-in and pay an all-inclusive fee.  Concerns about meals, cleaning and maintaining the house and yard, or paying insurance and utilities, etc. are eliminated.  Depending on the type of facility, care needs may be provided directly by facility staff or arranged with private caregivers / home health companies.

This comprehensive approach led one resident in a recent Tennessean article[3]tostate: “They really take good care of me here. . .  They do everything for you.  They would even make my bed if I wanted them to, but I said ‘No, I want to do something.’”

Progressive Dependency

This chart demonstrates the loss of independence and increasing dependence on caregivers as the senior progresses through varying levels of care.

For individuals who experienced the shortages and deprivations of the Depression and World War II, the value equation was fairly simple.     They understood that the move to a senior living community was a compromise as their health and support needs increased.  They were used to adapting so giving up some independence to receive service was an acceptable alternative and they were willing to live with restrictions such as standard meals at set times.

However, these generations are dwindling – e.g. World War II veterans are dying at the rate of 1000 per day. [4] The replacement generations do not appear as willing to accept this one-size-fits-all-mentality.

The industry has seen quarterly declines in average occupancy for more than 2 years with blame placed largely on the economy and specifically the real estate market.  It’s time for a wake-up call if the industry wants to rebound from this census slump.  Another hidden (or ignored) factor is the “changing of the guard” with new demand models and demographics for today’s aging population.

There currently seems to be an over-riding preference for “Aging in Place”.  The Tennessean[5] states: “Despite more alternatives than ever, the overwhelming majority of elder Americans choose to age in place — in their own home, within the communities where they have lived for decades or have family ties.”

At some stage in the aging process, however, staying at home may NOT be the best option. Health and care needs, financial considerations, safety concerns, marital situation, housing condition, proximity of family members and the availability of caregivers and other components of a strong support system are factors that will impact this evaluation.

Yet, many senior specialists[6] note that the elderly will often stay in their own home until a “crisis” arises.  As a result, the senior is often “placed” in a higher level-of-care than required, with an unneeded loss of independence.

This is obviously not the best for the resident.  Could a senior living community do something differently to encourage the individual to move in earlier?

First, recognize that today’s aging population demands more than three meals a day and the “3-B’s activity program” – i.e. bingo, bible and birthdays.  They are not willing to retire their egos when they stop working.  They desire many more active and productive years with the ability to control their own destiny.

Focus on lifestyle vs real estate.  A HOUSE is an “object that can be bought and sold” while a HOME has “meaning and attachment to … personal living space” that can’t be “bought or sold”.[7] It takes more than living in a Taj Mahal to generate enough value to prompt a move-in.

Apply a scientific approach to the structure and organization of daily activities for the residents.  Utilize Maslow’s theory and healthy aging concepts to challenge the residents to continue to age gracefully, achieve new successes and “CREATE PRECIOUS MEMORIES”.  Treat the residents with dignity and respect by developing imaginative programs that stimulate and challenge their mind, body and spirit, going beyond the kindergarten style Summer Camp for Seniors[8] or cruise ship mentality.

Become familiar with the research about the negative impact isolation has on aging and couple this with Maslow’s need for socialization to develop a powerful marketing tool – offering a SOLUTION for potential residents and, especially, their adult children.

Revise marketing strategies to include education about your scientific approach and other 21st Century initiatives.  Use these to differentiate your community from the competition, AND eliminate prior perceptions.

Train staff to PROMOTE INDEPENDENCE by “helping” residents with their activities of daily living, but not “doing it for them!”  A former resident related an incident where she was made to feel “helpless and incapable” because, at an outing, “everyone tried to get food for me as if I couldn’t do things for myself.”[9]

Finally, accept that the new generation is guided by the words of Dylan Thomas:

Do not go gentle into that good night,
Old age should burn and rave at close of day;
Rage, rage against the dying of the light.


[1]Tom Brokaw, 1998.

[2] Maslow refers to these as “basic” needs in his Hierarchy of Needs.  Select “Maslow” in the CATEGORIES drop-down box to access additional articles dealing with differing levels of needs.

[3] “Facilities offer convenience and care” by Jessica Bliss, 12/27/2009.

[4] Associated Press, May 24, 2008

[5] “Elderly forgo assisted living – opt to stay at home” by Jessica Bliss, 12/27/2009

[6] Click on this link to review comments posted in the Senior Care Services Companies group on LinkedIN.

[7] Courtesy of Jason Popko.

[8] By Ellen Brandt, Ph.D., August 1, 2009 on the Ellen Interactive blog.

[9] Essay by Betty Warren, Hickory, NC, 2006

PROPERTY UPKEEP – in a challenging Environment

“How long can an organization postpone renovation/rehab and not risk losing move-ins?” asks the ALFA[1] Case Study: “When Looks Really Matter”. In response, there is no universal right answer, as each company and its situation are different.  Factors that may influence management’s reaction to occupancy challenges include the type of business (i.e. acute hospital, SNF, ALF, IL, etc.), type of clientele, level of competition, census level / amount of decline, and the organization’s overall financial condition.

As a former CFO, I understand that the company must live within its means and that there are often financing considerations behind decisions and timetables for rehabbing a building.  But, unlike a hospital or nursing home where admissions are driven by need and paid by third parties, independent and assisted living communities have a greater requirement in maintaining their properties to remain competitive and continue to attract private pay clientele.

SHOULD MANAGEMENT CUT OR SPEND?

Traditionally, organizations tend to do nothing extraordinary for a 1–2 % change in census, but cut costs and eliminate expenditures as occupancy drops 5–10 points.  Then when the occupancy decline hits 10 points, management panics and starts spending more money, bringing in outside sales/marketers and doing more advertising, special events, etc.  At 12 – 15 points, they call out the National Guard!

So, why wait for it to become a crisis before responding?  No matter the state of the economy, if the census drops, management should do something POSITIVE for the community instead of cutting costs.  Create value-added services[2] to increase the satisfaction of existing residents and marketability for potential residents.  In the private pay world, you must overcome inertia to obtain a move-in and CUTTING COSTS IS NEVER THE ANSWER!

[In fact it can become a “self-fulfilling prophecy” as the company continues to cut costs, reducing the perceived “value” of the services, thus leading to still lower occupancy.]

RENOVATION CYCLES

Many organizations schedule total renovations for their properties on an 8-12 year cycle.  This process generally includes an updated color scheme with new upholstery/furniture and furnishings in the building core and other common areas.  A conventional approach in difficult times is to delay these major expenditures until a) the census improves or b) the economy turns around.

The problem with this strategy is that the appearance of the building may be a CONTRIBUTING FACTOR to its census challenges, so management must look at each situation individually.  For instance, a well-maintained building with consistent local management might require a rehab for only cosmetic purposes and could likely postpone its renovation without adverse consequences.

On the other hand, a property that clearly shows wear and tear – regardless of age – needs attention NOW!  Executive management must convey support for the marketing efforts of the local management team.  In addition, efforts to instill “pride of ownership” in the local staff will be negatively impacted if it appears that management doesn’t care how the place looks.  This will only make the wear and tear cycle worse in the future.

Yet, in this economy, financial limitations are a reality.  No one expects everything to be fixed at once, but the key is to DO SOMETHING! Additionally, PLANNING, PRIORITIZATION and COMMUNICATION are essential for successfully managing renovations.

So, suspend the traditional cyclical renovation program and focus on extending the life of the existing color schemes with repairs and partial replacements.  At the same time, communicate to all properties and the residents in each of those communities that there is a plan and assure them that their concerns will be addressed in due course.  The key is to do a little something for everyone so that the management and residents of the “good” buildings are recognized and shown appreciation for their efforts in maintaining the property.

You don’t have to spend a lot of money to do this.  We promoted a lot of goodwill in a turnaround situation by throwing away a couple of rickety park benches and spending about $500 to replace them with rockers for the front porch.  In another situation, we simply re-arranged the lobby furniture to create several conversation groupings in a less formal setting.

DOES REAL ESTATE SELL?

Roger Bernier, the President and COO of Chelsea Senior Living states in the ALFA Case Study:  “Our buildings are our single most important marketing tools …” and he makes a compelling argument for maintaining a community in good repair, even in hard economic times.  However, a superior building may not be enough to stimulate new move-ins.

Psychologist Abraham Maslow teaches that physical and security are the basic needs for all individuals and most senior living communities focus on meeting these needs.  But, the real potential is in helping the retired adult achieve social, ego and self-actualization goals, which Maslow identifies as higher level needs.

If management shifts its focus to providing a fulfilling lifestyle for their existing residents and then highlighting these activities and services in their marketing efforts, they will find their clientele to be much more accepting of a little normal wear and tear.

GROUP PURCHASING

Lastly, having worked for both large and small enterprises, I understand the substantial price breaks from group purchasing that Todd Kaestner (Brookdale Senior Living) discusses in the case study.  But, to think outside of the box, the operator may get a better return on their investment by purchasing locally! Yes, I know it will likely cost more, BUT . . . you are only doing partial renovations and any exposure within the local community is good and provides inexpensive advertising.  A local owner-operator to whom you bring business (and even the local trades-people that do the work) can be turned into exceptional referral sources to “spread the word” as they visit your property and observe the level and quality of service you provide.  The fact that the company is putting money back into the community – especially in “tough times” – will produce positive public relations on MAIN STREET……one of  your targeted markets.

Again, these suggestions won’t work for everyone, but hopefully they’ll make you consider new options and maybe come up with even better ways to respond to the economy.


[1] Assisted Living Federation of America

[2] Please contact me via email at art@progressiveretirement.com or phone at 615-414-5217 to learn more about the types of value-added services that can be provided and how Progressive Retirement Lifestyles could help you with today’s challenges.

Do Senior Living Communities Need a Wake-up Call?

Although the housing slump may have “bottomed-out”,  occupancy declines, especially for independent living, are more widespread [1]. for-rent-sign-02.jpgWill the industry re-bound with a business-as-usual mentality?  Will new generations of customers be satisfied with today’s level of service?

There is no question that the real estate crisis and decline in portfolio values have impacted occupancy in senior living communities.  AND, it’s easy to buy into the concept of “We just need to hold on, the demographics are still there, and we’ll be OK as soon as the housing market recovers”.  The reality may be very different.

While the country has been in the economic doldrums over the past couple of years, several dynamics have been changing, largely un-noticed by the industry.  First, the demographics are changing – the target market is gradually moving away from the “greatest generation”[2] [World War II vets are dying at the rate of 1000 per day] – and the industry must prepare for the “bobby-sox” generation (as a prelude to the “baby boomers”).

This generation, born between 1935 and 1945, is affluent and benefitted from the medical advances and healthy lifestyle initiatives of the 20th century.  As a result, they will have longer life expectancies with more males in the target population.  They demand value and will be less willing to compromise than their parents and older siblings who were tempered by the depression and WW II.

In the 1990s, assisted living (“AL”) developed as an alternative to nursing homes, and independent living (“IL”) has in large part developed as an alternative to assisted living facilities.  The newest option is “aging-in-place” with various surveys documenting the desires for aging adults to stay in their own home.  In the past, this wasn’t practical for many people, but we are seeing the development of a number of new companies that use various enabling technologies to provide cost-effective alternatives to senior housing. For example:

image002A study several years ago indicated that up to 80% of AL admissions were driven by the need for assistance with medication management.  Yet, there are now numerous automated medication reminder systems for use in the home.

Numerous organizations have developed cognitive fitness systems to provide brain exercises and delay the effects of Alzheimer’s and other senile dementia.

Rosemary Bakker, a gerontologist with Weill Cornell Medical College has established the website This Caring Home to help caregivers and family members design a “smart home”, allowing individuals with early stage dementia to remain in their own home.

In addition to the psychological appeal of these options, the current economic malaise is forcing prospective residents – and their families – to become more value-conscious consumers.  These products and services will take market share from IL and AL communities by offering greater independence at lower costs.

As a result, the standard AL resident in the future may become a medically complex individual with multiple health/psychological conditions.

The impact on the traditional IL model may be even more dramatic.

Is Everything Doom & Gloom?

The answer is that it doesn’t have to be – IF operators heed the wake-up call and are willing to consider new options:

1.   Embrace new technology, instead of resisting it.  Future generations won’t appreciate things such as internet access, a social networking site for the community, etc. as an added value – they will expect it as a minimum level of service.

Technology should be utilized to promote independence (no matter what level the resident demonstrates at move-in).  View this as an investment in extending the higher functioning of the resident for extended periods of time, which should decrease the turnover rate, extend the average length of stay, and increase the occupancy percentage.

Offer the same technology services that are marketed for “at-home” care in a bundled package, so that the senior living community becomes the value-added solution.  Sell the advantage of having someone on-site who can and will MANAGE the technology for the senior, at the same time they are receiving other traditional services such as meals and transportation.

2.  Meet more than the basic needs for the residents. Abraham Maslow developed a Hierarchy of 5 levels of needs, as depicted in this diagram.image001

The senior living industry has traditionally done a good job of meeting the basic physical and security needs of the residents.   However, there is tremendous opportunity to offer and market services that address their higher-level social, ego and self-actualization needs.

In fact, programs meeting those needs could be the differentiators that trigger the move-in decision.  Interestingly, these needs are the most difficult for the senior to achieve while living alone in their home.

Too often society has assumed that seniors forgo these higher-level needs when they “retire”.  Yet Lasell Village, a CCRC located on the campus of Lasell College in Massachusetts was created around the principle that retirees would move into an independent living setting where they would be committed to an annual continuing education curriculum.  This program is clearly helping the “villagers” achieve their “Peak needs”[3]!

Senior living communities must adjust with the times and add these value-added initiatives if they wish to overcome the inertia caused by the economy and plan for the future generations.

What initiatives are you taking to use technology and/or meet your current or prospective residents’ higher level needs?  Please add your comment by clicking on “Leave a comment” below:

Additional Links for New Technology Options:

Good Design Age Well

Center for Technology and Aging

CareData Trak

CogniFit

Dakim, Inc

GrandCare Systems

MyFitBrain

TheCaringStore.com

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[1] NIC MAP®, 9/1/2009

[2] “The Greatest Generation” by Tom Brokaw (1998)

[3] “Peak – How Great Companies Get Their Mojo from Maslow” by Chip Conley (2007)