Don’t overlook a ripe growth area within the industry just because it’s difficult.
By Rob McAdams
We are on the cusp of numerous growth opportunities in seniors housing. While migrations to urban areas get much of the focus, opportunities will also be available in rural areas.
A 2018 study by the Joint Center for Housing Studies of Harvard University found an increase of more than six million older adults living in low-density metro tracts, an upsurge from 24 to 32 percent from 2000 to 2016. This number is expected to rise to almost 90 million people by 2050, according to estimates by the Population Reference Bureau.
Seniors housing hot spots
The seniors housing market, especially in rural areas, does bring several distinct challenges. Rural residents are geographically isolated, requiring them to travel long distances to see physicians. There are also fewer physicians, with 13.1 physicians for every 10,000 people according to the National Rural Health Association. The ratio is 31.2 to 10,000 in urban areas.
In rural areas, people have nearly 9 percent higher rates of diabetes and close to 39 percent higher rates of coronary heart disease than their urban counterparts, generating higher demand for assisted living facilities and skilled nursing facilities. Rural communities often have more uninsured residents and higher rates of unemployment.
As a result, rural senior care facilities rely heavily on federal programs like Medicaid and Medicare, which has led to shortfalls with a gap between the daily cost of providing needed care and the amount reimbursed by the government.
Policy changes have limits
There currently are new initiatives in place to address many of the financial limitations hindering development and growth in seniors housing. Will these pave the way for investors to fill the widening gap in rural communities?
The market basket rate did increase by 2.4 percent in 2019, and legislators are currently evaluating more than 10 significant proposals to expand Medicare and Medicaid. The Patient Driven Payment Model (PDPM), which begins on Oct. 1, 2019, may help to ease the financial pressure by eliminating uncompensated care.
All of these initiatives could give patients and care providers much-needed financial relief. At the same time, a healthy housing market could drive more seniors to take advantage of equity and sell their homes.
The rural route requires innovation
Even with those policies and tax breaks in place, investing in the rural seniors housing market will require a thorough understanding of the unique needs of the elderly in rural communities. Creative solutions that address longstanding problems of costs, labor and quality of care include:
• Widening the pool of residents with innovative healthcare services: One way for developers to attract and keep residents is to offer health services they need but are unable to find anywhere else. The spectrum of services could include offering home-health services, a walk-in clinic, short-term and post-acute care, assisted living, adult day care, behavioral health and meal services. Transforming nursing homes into a one-stop, a la carte health center could cast a wider net to serve a larger rural area.
Additionally, the lifestyle needs of seniors can separate one provider from another. Some developers are creating age-restricted housing that offers a multitude of amenities designed to meet a variety of senior lifestyles in urban communities. Similar solutions could yield results across the acuity spectrum. These changes could include fitness centers and entertainment options not available elsewhere. It is important to understand which of these will appeal to an intended market to maximize their benefit.
• Understanding financial options: The construction of nursing homes in rural areas creates much-needed jobs in areas of low employment, which does not go unrewarded by the government.
The U.S. Department of Agriculture (USDA) encourages construction in rural communities with direct loans and grants. These programs include the USDA’s Business and Industry program, which can be utilized by various property types in rural communities, and their Community Facilities program, which caters more specifically to nonprofit rural facilities seeking permanent debt funding.
The Strategic Economic and Community Development Program also provides incentives to projects that promote regional economic development through several programs. The Department of the Treasury offers significant tax advantages for new investments to potential investors to Qualified Opportunity Zones, a designation provided to selected distressed communities to spur economic growth in those areas. Working with a financial partner to assess these or other options is often crucial to creating long-term financial stability.
• Wise implementation of telehealth solutions: Out of all of the tools available for meeting the rural healthcare gap, telemedicine holds the most promise. Telemedicine can fill the gap in remote areas where 24-hour physician coverage is impossible. A Targeting Revolutionary Elder Care Solutions (TRECS) study at Cobble Hill Health Center in Brooklyn found telehealth solutions averted 91 instances of hospital admissions/readmissions, saving more than $1.3 million for Medicare.
Additionally, the data driven by telehealth monitoring and artificial intelligence (AI) will be a necessity to capitalize on PDPM and create actionable insights needed for personalized, unique treatment protocols for customized care. Access to this data will allow facilities to more accurately receive reimbursement dollars that reflect the complexity of the patient’s care.
• Finding and keeping quality staff: Recruiting and retaining staff will continue to be a problem in both rural and metro settings and will require creative recruitment. Part of the solution may require paying higher wages. Many nursing assistants have not seen a wage increase in over a decade.
If fast food franchises offer higher wages than the labor-intensive, demanding jobs in a nursing facility, staffing will be a problem. Medical schools are increasingly offering financial incentives to students to encourage the study of medicine and to return to rural areas. Some seniors housing facilities overcome lack of specialists by partnering with competitors to share specialized services.
A long-term commitment to patient-centered care
The national shortage of seniors housing and access to medical care within rural communities is a growing concern. Investors must be prepared to provide progressive solutions to a market with lower income levels and potentially more complicated health issues than those in urban areas. Federal and state policies may offer some relief, but providers will need to implement innovative solutions, including amenities, telehealth solutions and creative recruiting campaigns to develop models that provide quality care with good outcomes and high levels of patient satisfaction.
Rob McAdams is a vice president with Lancaster Pollard. He resides in the firm’s Denver office and is the primary point of contact for all clients in Colorado, Wyoming, Montana and Idaho.