“We won’t go back to the way we were. The new normal will not be the old normal.”
These words were spoken last week by Beth Mace, chief economist at the National Investment Center for Seniors Housing & Care (NIC). But, it was a sentiment that many people have been expressing over the past month, as the industry has engaged in a conference season that has gone virtual.
While there are more virtual conferences to come, certain themes and messages have already started to crystallize during the recent events held by NIC, industry association Argentum and specialty investment bank Ziegler.
Specifically, senior living leaders have started to identify and explain some of the large-scale and lasting changes that the pandemic likely will cause, including the four below.
Health care delivery will never be the same
As the pandemic has unfolded, some senior living CEOs have argued that Covid-19 is settling a long-standing industry debate over health care versus hospitality models, by showing that senior living communities must be considered health care settings.
This is because the pandemic has highlighted the vulnerable health status of the older adult age group, and also because senior housing communities have had a vital role to play in the larger care continuum, whether that’s taking on Covid-19 patients or taking steps to minimize acute care and primary care visits to avoid further straining the system. These points were made repeatedly during the conferences that have taken place so far this fall.
Hospitality must still be a strong component of senior living communities, but new and innovative health care delivery approaches must also be implemented if the industry wants to maintain its appeal to the future consumers, SRG Senior Living CEO Michael Grust said at NIC.
SRG is pursuing new ways of delivering on-site health services through a partnership with Anthem affiliate CareMore. Through enrollment in a Medicare Advantage insurance plan, residents can tap into an array of CareMore services, which are personalized to each individual’s health status and goals. Proactive care management and early interventions are helping to maintain resident wellness while reducing hospital admissions and other episodes of care, according to Jim Lydiard, general manager of CareMore’s Touch program.
Lydiard spoke on a second NIC panel, making the case that programs such as Touch also will play a vital role in supporting middle-market models, by enabling residents to receive a broader array of care services without driving up costs for senior living providers. And, he pointed out that coming changes will make it easier for more residents to access the CareMore program even if they are not enrolled in Medicare Advantage.
But the CareMore initiative is just one example of the type of health care delivery that Covid-19 appears to be making standard in senior living.
The pandemic has strengthened ties between senior living providers and the health systems in their markets, which is laying the groundwork for closer integration even after Covid-19 wanes. One example is in Pennsylvania, where health systems tapped grant money to assist operator Country Meadows in its infection control efforts. This involvement has given the health systems a first-hand look at the way that Country Meadows operates and a new appreciation of its ability to provide sophisticated care, including for Covid-19 cohorts, COO Meredith Mills said during an Argentum panel.
On the nonprofit side of the industry, senior living providers were pursuing strategies of scaling up and diversifying into new services such as home care or hospice even before Covid-19; these organizations have an eye toward playing a larger role in the health care ecosystems of their local markets, where many of them have been established for multiple generations.
Nonprofits have been affiliating with each other and with health systems in pursuit of this goal, and the pandemic further supports these objectives of being able to provide a broader array of care across various settings, including in people’s single-family homes.
Covid-19 has only heightened consumer interest in how a senior housing provider works with home care providers, hospitals and physician groups, Greystone CEO John Spooner said at the Ziegler Finance + Strategy conference.
While no nonprofit has yet to fully realize this vision of a large, integrated care provider close health system alignment, some are getting close, said Ziegler CEO Dan Hermann.
Federal oversight and regulation
For several reasons, the pandemic could be a tipping point toward greater oversight and regulation of the industry from Washington, D.C.
One factor to consider is the persistent and ultimately successful case that the industry has made, largely through the coordinated efforts of its trade associations, to gain access to federal relief funds.
In making the case for federal dollars, the industry has showcased the ways in which communities — particularly on the higher-acuity end of the continuum — are in fact health care settings. While provider CEOs and other industry leaders make the fair point that other private-sector industries such as airlines and hotels have received much larger relief packages, putting the genie back in the bottle might be impossible once lawmakers and regulators come to understand assisted living as part of the health care continuum, especially if more Medicare Advantage or Medicaid dollars begin flowing this way in the coming years.
These points were raised most plainly at NIC by two people with plenty of insight into the way that Washington, D.C. operates: former Avalere CEO Dan Mendelson and ATI Advisory founder and CEO Anne Tumlinson.
“You can’t ask for federal dollars in a public health emergency and then say you’re not health care,” Tumlinson said.
But, she and Mendelson are hardly the only voices to address the potential for more regulations as a result of Covid-19.
You can’t ask for federal dollars in a public health emergency and then say you’re not health care.
Eric Mendelsohn, CEO of National Health Investors (NYSE: NHI), raised the issue at Argentum. He pointed to the effort already being led by Massachusetts Sens. Elizabeth Warren and Ed Markey, who requested copious information from some of the largest senior living providers in the nation, and put out a report attempting to quantify the number of Covid-19 deaths in assisted living.
This request for information read like “an inquisition,” Mendelsohn said, warning of potential negative repercussions for the industry if Warren takes on a leadership role in a possible Biden administration.
Also at Argentum, Commonwealth Senior Living President and COO Earl Parker flagged that the influx of government money could ultimately lead to more government oversight.
Federal regulation likely would focus on defining assisted living while leaving states with autonomy on more granular aspects of regulation, Tumlinson believes. And she and Mendelson both strenuously urged industry groups to take a proactive approach now, to play a part in shaping any coming framework.
Exactly which industry group might take the lead on any such effort is an open question, as is the possibility of consolidation among the provider associations. In the last several months, these organizations have worked together more closely than ever before, and their leaders appeared together on a NIC panel last week. But there have been efforts in the past to more formally consolidate, and at least a few voices have questioned whether now is a good time to renew those efforts, in order to speak with a more unified voice on Capitol Hill.
Providers will become more transparent
Providers surely would have to publicly report more data about their operations and resident health outcomes under any future federal regulatory framework, but there are also business imperatives that will almost certainly create a more transparent industry in the future.
Even though providers have not been required to report Covid-19 data to federal authorities, they have had to adhere to a patchwork of state reporting requirements. This has created confusion and concern among consumers because states have presented data differently and sometimes inaccurately, Bickford Senior Living Executive Vice President of Operations Alan Fairbanks said at Argentum.
At the same time, media reports have often lumped private-pay senior living providers together with skilled nursing facilities in dire reports about infection rates and death.
So, Fairbanks and the Bickford team believe that their company must provide clear, robust information about how Covid-19 is affecting each community within their portfolio, as part of an effort to maintain consumer trust and confidence. While many providers have emphasized the need for quick and candid communication with residents, family members and staff about Covid-19 infections rates, Bickford has been posting this information for all to see on the company’s website.
Trilogy Health Services also created a public-facing website with information of that providers rarely disclose — not only flagging the number of presumed or confirmed Covid-19 cases, but the number of total active employees and total in-house residents in each community on a given day, cumulative number of Covid-19 recoveries among team members and employees, and employee and resident deaths.
“It was a little bit risky to go that route, but it actually gained us a lot of trust from our communities and families,” Trilogy CEO Leigh Ann Barney said at NIC. “And, surprisingly, we had some praise from our local media outlets for being transparent.”
Sharing your identity, values, interests is even more important now.
Trilogy and other providers such as Atria Senior Living have already invested in technology to enable these efforts at communication, and this tech will remain in place and support more transparency even after the pandemic wanes. For example, Fairbanks and Commonwealth’s Parker agree that rental and care rates will be posted to provider websites more often as a result of the pandemic.
This type of transparency will be needed to rebuild occupancy, as providers will have to work even harder than in the past to win over consumers.
“Sharing your identity, values, interests is even more important now, to capture the mind share of seniors that are coming into the market, or they’re in the market,” Greystone’s Spooner said at the Ziegler event.
A more consolidated, sophisticated industry
Leaders with PGIM Real Estate — one of the largest private equity investors in senior housing — made a prediction in June. They said that the pandemic would widen the spread between winners and losers among senior living operating businesses. Those operators with a strong culture and the sophistication to handle the increasingly complex demands of senior living have a brighter long-term outlook, while weaker operators will struggle and many will not survive.
During the recent industry conferences, this idea was backed up by numbers that are starting to quantify the division between the strong and weak players.
NIC’s Mace described an occupancy “barbell.” One side of the barbell is created by the roughly 22% of inventory that has maintained occupancy rates of 95% or higher. The other side of the barbell is created by the roughly 28% of communities with occupancy rates that have fallen to 80% or lower.
Operators with portfolios on the low-occupancy side of the barbell will have a hard time weathering the pandemic, Mace suggested. New data from HealthTrust paints a picture of why this is so, as rising expenses and declining revenue have converged to drive senior living margins down to an average of about 21%, which is around the level seen in skilled nursing facilities.
This margin compression likely is putting low-occupancy operators with thin coverage in danger of missing their debt service obligations, HealthTrust Partner and COO Colleen Blumenthal said during Argentum.
As time goes on, expect bankruptcies and acquisitions of distressed assets or entire operating platforms. In other words, a long-anticipated “evolution” of the senior living industry is being accelerated as the pandemic creates a survival-of-the-fittest environment.
This is not necessarily a bad outcome for the industry as a whole, if the result is a more consolidated sector with fewer but stronger operators. And the recent conferences began to paint a picture of how the strong will survive this period and thrive in the future through better operations.
“We have been tested as an industry,” SRG’s Grust said at NIC. “We have, I think, risen up.”
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