With vaccination rates high and occupancy starting to tick up, now is the time for senior living providers to reevaluate their plans for the future in light of Covid-19.
“If you haven’t focused on strategic planning because you’ve been in the middle of Covid, we totally understand that — but now is the time to really dust that off and think through how you’re going to leverage what you learned during this to reshape our industry in the future,” Dana Wollschlager, partner and practice leader at Plante Moran Living Forward, said Tuesday during a webinar on the future of the senior housing industry.
In particular, many organizations could benefit from focusing on improving their use of technology, organizational expansion and growth, and changes in their mix of service offerings and building designs.
Tech still lagging
From the earliest days of the Covid-19 pandemic, many senior living organizations expanded their use of technology.
“There will be more advancement in telehealth between mid-March and mid-April than there has been in the last three years and it was already advancing dramatically,” Ziegler Managing Director, Healthcare Investment Banking Grant Chamberlain said in March 2020.
Providers also began leveraging other types of technology, including platforms to digitally connect residents with loved ones.
But, providers also faced impediments to utilizing technology, including infrastructure limitations.
“Of all the assets that are in the top 140 MSAs [metropolitan statistical areas], more than half of those assets are over 20 years old,” Wollschlager observed Tuesday. “A lot are built really, really solid, so the ability to go in and retrofit the baseline tech to give residents connectivity has been the biggest challenge.”
This could help explain the results of a survey that Plante Moran conducted with Retirement Dynamics last summer, which collected data from 3,582 independent living residents, 717 prospects and 703 staff members. All the operators involved were nonprofits, although some were managing buildings for for-profit entities.
Fewer than half the surveyed residents — 47% — believed that their community was using technology effectively to enable greater engagement and connectivity with family and friends. Furthermore, 72% of staff wanted an enhanced platform to streamline communications with families, and 54% of staff believed that technology “absolutely needed to be improved.”
Improving infrastructure is the top priority for technology spending in the next 12 months, according to recent CFO Hotline data from Ziegler. Out of 150 organizations that took part in the survey, 48% of respondents identified “ICT infrastructure” as the top area for tech investment.
While upgrading infrastructure in a 100-year-old building is no easy task, there are simpler steps that providers can take to improve their technology efforts.
“A lot of the comments that we received from residents and staff and prospects was the fact that they needed somebody to just show them how to do it — how to use FaceTime, how to get onto a Zoom meeting,” Wollschlager said. “Understanding that and providing that as a resource in the communities has been a big help to bridge the gap.”
Indeed, more providers are staffing buildings with a “tech concierge” or similar position to serve this function. One example is Louisville, Kentucky-based Atria Senior Living, at its “community of the future” in Newport Beach, California.
As they ramp up technology use, Wollschlager cautioned that the sector also has to increase its cybersecurity measures. She noted that Plante Moran has experienced a 650% surge in attempted cyberattacks.
“We’re a very large tax and audit firm and real estate development firm; now imagine how easy it would be to go after a single-site organization that doesn’t have all the firewalls and all of those [protective] pieces,” she said.
Prior to the Covid-19 pandemic, many nonprofit senior living providers were pursuing growth initiatives, and these efforts are even more crucial now.
“When we talk about scale and resources, we certainly know that the smaller, less-resourced organizations look back on the past year and say, it would have been a heck of a lot easier with some additional clinical expertise and in-house resources,” Ziegler Director of Research Lisa McCracken said on Tuesday’s webinar.
The good news is that the pandemic has not seriously derailed the expansion plans that many senior living providers were pursuing.
“While there was some drop in anticipated growth plans over the next two years — primarily some expansion projects that were put on hold — there are still many organizations that are very aggressively looking at their growth,” McCracken observed.
And while there are some providers that are financially beleaguered due to Covid-19 and seeking to combine with larger organizations as a result, there are also strategic transactions being pursued by operators that are in a position of financial strength.
One example is the recent affiliation of Covia and Front Porch.
“That’s an example of a very strategic merger in a very competitive region, the state of California,” said Tom Meyers, senior managing director and co-practice leader of Ziegler’s Senior Living Finance Practice.
Scale matters in both the nonprofit and for-profit sectors, as Eclipse Senior Living CEO Kai Hsiao said in a recent appearance on SHN+ TALKS. But there is urgency among nonprofits, because for-profit growth is proceeding at roughly a 5% to 7% annual rate versus about 1% among nonprofit organizations, McCracken said.
Organizations that are prioritizing strategic growth may want to consider hiring a chief strategy officer or chief business development officer.
“Those organizations are definitely growing at a faster pace than the organizations where it’s another job for the CEO or the CFO,” McCracken said.
Repositioning buildings, service lines
CCRCs, also known as life plan communities, have generally maintained stronger occupancy than other types of senior living properties. Their resilience is due in part to their diversified service offerings, Meyers said.
But, the skilled nursing sector was hit hard, given that referrals dried up from health care partners across the continuum, and the frail resident base was particularly susceptible to serious effects of Covid-19.
Coming out of the pandemic, some companies — including Five Star Senior Living (Nasdaq: FVE) — are shutting down and repurposing their CCRC skilled nursing units.
“There are regional differences to this without a doubt, but we know that most of the not-for-profit senior living providers remain committed to skilled nursing,” McCracken said.
However, nonprofits are considering changes to their skilled nursing offerings, including downsizing their bed count and shifting more to private rooms.
Another trend is in redesigning skilled nursing centers — and other levels of care — into “small house” models, said Alexis Denton, associate principal with architecture firm Perkins Eastman.
Small house models are organized around more intimate resident cohorts that live in a residential manner, sometimes with universal worker staffing models. Small house designs were easier to secure from an infection control perspective during Covid-19, and offer an attractive lifestyle with an emphasis on a sense of community, Denton said.
A shift toward the small house model could be a positive result stemming from the Covid-19 pandemic, in her view, and she believes that skilled nursing is in for a comprehensive reinvention.
“Skilled nursing is primed for a very drastic change — one that is desperately needed, given how the institutional model fared during the pandemic,” she said.
As they shift away from skilled nursing, senior living providers might consider expanding their home- and community-based services (HCBS). Demand for HCBS increased while older adults were confined to their homes during the pandemic, and public policy appears to be shifting toward greater investment in this part of the aging services continuum.
“HCBS growth and the skilled nursing conversation are not an either/or proposition, it’s a both/and conversation where there’s continued need for both,” McCracken emphasized — but, she said that providers need to consider the “new normal” in terms of consumer preferences, as well as the skilled nursing pressures.
Whatever strategic planning decisions senior living providers make about their service mix and where they intend to invest for the future, the panelists agreed on one point: every aspect of the senior living business model should be under review, and now is a moment when big changes can be made to position organizations, and the sector, for future success.
As Perkins Eastman Principal David Hogland put it: “If there was ever a time when we should all be taking a moment to rethink what we’ve been doing and what we need to do for the future, I think this is it.”
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