New Directions in the Senior Living Housing Market in 2019

Posted On
January 22, 2019

As 2019 kicks off, FIVE19 has taken a look at some of the trends that may affect and influence the senior living industry. Some new directions and trends in the senior housing market may bring challenges to operators and in some cases, big opportunities as well. Here is a look at what this year may bring.

Mega-mergers like that of CVS/Aetna and Kindred /Humana will have major impacts on the market. Health insurance providers are moving into new areas, offering affordable managed care plans that help the consumer stay healthier by providing more convenient access to doctors, pharmacists and nurse practitioners. This not only results in better health but it increases the length of time seniors can remain independently in their own homes. Chronic conditions that previously required multiple hospital and rehab admissions can now be managed through home visits by nurse practitioners and other health providers. It is expected that these new forms of health care will result in later in life admissions to Assisted Living and Memory Care.

As these big mergers continue to change the face of healthcare, possible opportunities will be created as senior living operators can extend their reach further into the community to provide some of these desired home health services. There will be a need for senior housing providers to focus more on home medical care and services within their Independent Living communities.

Another problem for this market is that, as new construction of senior housing facilities has continued unabated, occupancy rates have been falling. Health Dimensions Group, a business consulting firm based in Minneapolis, in quoting the National Investment Center for Senior Housing and Care organization says that “absorption rate of new units entering the market is a contributing factor, as new construction entering the market continues to outpace demand.” As a result, concerned real estate investors may want to more closely watch communities that are in danger of failure. They may want to monitor economic indicators and initiate correctional plans to prevent failures. There may be tighter requirements from both lenders and investors and more restrictions on how funding is used.

Within the senior housing industry, the trend towards moving the patient away from facility care to home based care is nowhere as pronounced as in skilled nursing facilities. There are about 200-300 skilled nursing facilities closing each year.[i] This is primarily due to changes in Medicare requirements for admittance. In this case, the cause is related to stricter Medicare guidelines for admittance to skilled nursing facilities. In addition, surgeries are moving from inpatient to outpatient surgical centers; and the growth of Medicare Advantage (MA) plans that provide medical services in the home and in Assisted Living communities has reduced the need for admittance to Skilled Nursing facilities.

On the upside, economic forecasts overall are strong and the above conditions may provide chances for communities to expand through acquisition of these distressed skilled nursing properties at reduced prices. Also, many existing Skilled Nursing facilities can be repurposed. These assets can be turned into senior housing alternatives such as low income or market based rental properties, specialized rehab units, mental health units, Assisted Living or Memory Care. All of these profitable areas are experiencing higher demand. [ii]

A continuing concern that is expected to increase in scope is that of personnel. Forecasters are predicting significant workforce related challenges this year. [iii] Team member shortages, wage and benefit costs, and employment law enforcement are anticipated to increase this year. An issue affecting this concern is that wages appear to be rising faster than increases in monthly fees. Suggestions to counter these issues include: incorporating focused talent acquisition programs, regular employee engagement surveys and conversations, labor management systems, and a culture of “continuous learning.” Operators should consider utilizing centralization of administrative personnel, to free them up to focus on their core missions. Real time employee management systems, that will allow staffing to be quickly adjusted on a per patient day basis, will be critical to help managers effectively handle labor costs and productivity. [iv]

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