There are many factors affecting our industry that we are not prepared for.
By Charles Turner
I recently attended a wonderful conference focused on innovations in seniors housing, which culminated with a keynote panel discussing what the speakers believed would “disrupt” our industry by the year 2030. Examples of disruption included how Amazon has disrupted Sears, Uber disrupted taxis and children have disrupted my sleep.
However, I couldn’t shake the feeling that the focus was, perhaps, too myopic. Are we waiting for some app or robot to appear out of Silicon Valley, transforming how we care for our elderly? In reality, the disruption is already here.
So, based on a very nonscientific survey of industry insiders, here are four factors already disrupting our industry.
The rise of the ACO
While, as an industry, we have traditionally proclaimed we are not a medical service, building communities that more closely resemble high-end resorts, we must accept that we will increasingly be asked to “partner” with medical providers responsible for coordinating care for their patients.
According to ASHA, hospitalizations account for roughly $406 billion of national health expenditures, with the greatest preventable cause attributed to 30-day readmission. With Medicare/Medicaid expected to double by the year 2026, we are already seeing greater scrutiny placed on quality outcomes.
Since the passage of the Affordable Care Act, we have continued to see a rapid increase in the creation of Accountable Care Organizations (ACOs). Under this plan, if a patient were somehow readmitted to a hospital within 30 days while under the care of an ACO, the ACO reimbursement could be reduced.
What these ACOs are starting to realize is that seniors housing is often less expensive than either lengthy nursing home stays or home health services. While we might see this as a boon for seniors housing, this is not coming without a great deal of scrutiny. In fact, over the past year, ACOs are starting to rank local assisted living communities based on the frequency of readmission to their hospitals.
The medical community will increasingly play a larger role in affecting our census based on the metrics that they dictate. What other standards will be foisted upon us to be a preferred partner of an ACO?
So, while seniors housing may not expect much in the way of direct regulations, the regulations placed on our medical brethren could have a tremendous impact on us.
Medicare Advantage a game changer… for someone else
On April 2, 2018, CMS announced that, starting in 2019, Medicare Advantage plans would cover certain types of non-skilled, in-home care, with the presumption that seniors housing qualifies as the “home.”
While this could be a positive disruptor for us in that it has the potential to finally make inroads into the ever-elusive middle market, it could be a negative disruptor by allowing seniors to age in place longer in their own homes.
But, for the moment, let’s assume that seniors housing will be a net beneficiary for these Medicare Advantage dollars. Are we prepared for the scrutiny that this “gift” will surely bring?
Insurance companies and CMS will expect us to be able to show outcomes. Outcomes mean standards. Standards mean data. Data mean technology. Technology means change. Change = disruption.
For an industry with no standards body, a reluctance to implement technology, with little to no integration and interoperability, and which fights change management, are we ready for this?
With only 26 percent of assisted living communities (according to the CDC) currently on some sort of electronic health records platform, the future looks murky.
Investment in the isolation economy
During a panel at a recent Silicon Valley event, it was revealed that U.S. venture capital investment in “stay at home” technologies may exceed investment in “stay in seniors housing” technologies by a factor of 10. Silicon Valley is betting on the home.
AARP likes to refer to it as the $7.1 trillion longevity economy, but much of that economy is focused on keeping seniors in their homes, further fomenting isolation and exacerbating the negative aspects of aging. Now, we know that the outcomes in seniors housing exceed those of home-based seniors, but so far, we struggle with our messaging (though perhaps ASHA’s “Where You Live Matters” campaign could help turn the tide).
Take, for instance, Amazon Alexa and Google Home. Even now, there are applications for the stay-at-home senior.
Recently, a 91-year-old family member refused to move into a nearby independent living community. To “solve the problem,” my family installed an app that tells Alexa, with a simple voice prompt, to send emergency text messages and phone calls to her contacts.
We can argue how effective this technology will be in a real emergency, but nonetheless, it affected the census of her local independent living community by one person. What happens when we multiply this story to the 50 million Americans who are over the age of 65?
So, if Alexa makes sure seniors are OK, Grub Hub delivers meals, Instacart delivers groceries, and Netflix keeps them entertained, will we be building a generation of 85-year-old shut-ins who eschew seniors housing? Probably not categorically. But what if it affects seniors housing occupancy by only 5 percent? What will that do to our REIT stocks?
Labor is paramount
We still must take some solace that none of the Amazon Alexas, Grub Hubs and ACOs have figured out how to physically assist someone from their bed to their dining room. Seniors housing will continue to be relevant, so long as we have sufficient labor.
Unfortunately, we are entering a perfect storm of labor issues.
According to MIT, by 2030 there will be a national shortage of 151,000 paid care workers and 3.8 million unpaid family caregivers. By 2040 it gets far worse: shortfalls of 355,000 paid and 11 million unpaid.
This trend, unfortunately, assumes no significant change in immigration policies. At the risk of speaking politically, we are not currently in an environment that fosters immigration.
But wait, there’s more! We have not yet factored in potential changes to minimum wage.
While no labor economist, I ran an assumed $15 minimum wage through the data supplied by the ASHA’s annual publication The State of Seniors Housing and the results are startling. Focusing only on care labor (not dining, housekeeping and other hourly workers), the impact of a $15 minimum wage reduces average assisted living operating margins from the mid 30 percent range to mid 20 percent range.
While one could easily poke holes in these assumptions, the overall point remains: there would be stress on operating margins. And unlike McDonald’s, we can’t replace our labor with self-service kiosks.
Charles Turner is the CEO of Invidia for Seniors, a company investing in improving seniors housing through community development and improving operations through the use of technology. Currently he is helping build a platform, Veritage Solutions, which integrates data from multiple sources in order to drive operational and care efficiency, as well as helping build on-demand staffing solutions for senior care facilities.