The Business of Aging

Sizing Up The Market For Assisted Living: New Report from Harvard Medical School.

Thanks to Kathy Mills from Factix Research, LLC whose blog post alerted me to this excellent new report.

The report's abstract is: (Get full report here)

"Assisted living has emerged as an important housing and long-term care option for older Americans. To date, development of this sector has occurred largely without government financing or regulation. In this study we used primary data that we collected on county-level assisted living supply to gain a fuller understanding of this sector nationally. Reflecting their reliance on private resources, assisted living facilities are located disproportionately in areas with higher educational attainment, income, and housing wealth. As this sector evolves, policymakers will have to contend with issues related to access to services, public financing, quality of care, and regulatory oversight."

Kathy sums is up perfectly:

"If you're in the assisted living industry, you may want to check out this new study: Sizing Up the Market for Assisted Living. It contains data on the national level, which is difficult to find elsewhere. The researchers provides some helpful statistics and interesting maps, including a map detailing the correlation between assisted living penetration and an area's sociodemographic traits. The data was based on the market as of 2007. "

"Searchable" Senior Care Directories. A Rapidly Growing Product Category.

Leena Rao at TechCrunch posted an excellent blog titled "OurParents Launches Free Customized Service To Find Senior Care Providers".  Techcrunch writing about the senior care space is a big deal given their enormous popularity and PR clout. So kudos to the marketing and PR team at OurParents for getting the visibility.   And based on a quick look around OurParents I was very impressed. They will be a fun company to watch.

This space (searchable provider directories of senior care companies) is exploding so I thought I'd share with readers of this blog my thoughts on the space.

Again, these are my opinions so if I mischaracterize anything PLEASE let me know. 

First of all, let me define what is meant by "searchable provider directories of senior care companies".  In a nutshell, these are online directories that allow people to search for various types of elder/senior care companies from residential care to medical products to handyman. However, most seem to focus on in-home care, assisted living and nursing homes (the most lucrative and widely requested type of senior care providers).

There appear to be THREE broad models although I realize there are many variations and hybrids of each.

MODEL ONE: LEAD REFERRAL
These are what I call pay-to-play models whereby the only companies who get listed or referred are those who pay to be in the search results. With some variations of this model, you don't actually get to view the search results. Instead, you are contacted by a sales rep or "care consultant" who helps connect you to a provider (and of course they get paid a commission if you choose that provider). While these models can be quite useful their downside is you may not be referred to the best provider if they have not paid to be in the directory. An example of this model is A Place for Mom, who I believe is the largest company of its kind oin this space.

MODEL TWO: USER-POPULATED
These directories include companies who have taken the time to create a listing - usually at no charge although they can get premier placement for a fee. The main downside to this model is again, you may not get a complete listing of providers in your area or the information may be out of date. The quality varies considerably amongst the various directories. An example of this model is The Senior List but there are hundreds of these sites. 

MODEL THREE: MAINTAINED DATABASES
I could not think of a better name for these directories so I use the word "maintained" because typically the company running these sites gets their information from their own internal researchers, state licensing or other agencies and/or databases. This insures (a) all providers in a particular zip code are listed and (b) the information is up-to-date. Needless to say, there are a lot fewer of these sites because they are very expensive to run - labor intensive.  As a result, many companies in this space are focusing on a specific category such as Assisted Living with hopes of expanding into other categories in the future. I believe SNAP for Seniors and OurParents (the site Techcrunch reviewed), are good examples of this model although their business models are quite different.

 Some of the best companies with maintained databases are not B2C but B2B companies like Employee Assistance (EAP) or work-life vendors who provide these services as an employee benefit by charging employers who in turn offer the online directories (and access to caregiving consultants) to employees as a benefit. Examples of these include LifeCare.com, Ceridian and CIGNA. 

PUBLIC SECTOR DIRECTORIES
Although these most closely resembles MODEL THREE, I broke it out because unlike other models, these directories have no "business model" and don't need to make money :-). Instead, our tax dollars support them. These are government sites that provide listings of various types of providers. As a result, they are bare-bones, often difficult or cumbersome to navigate and provide no enhanced listings or bells and whistles.

MAKING MONEY
Ahh, details, details, details. There is no question the demand for these types of sites is going to balloon. But what types, how many and who will survive remains a mystery because there is no clear winners in terms of business models. True, model 1 seems to make money today but there are a lot of unanswered questions about the growth potential of these types of services. 

With regard to model 2, the B2B EAP and work-life companies I mentioned will continue to do very well as they have for decades because they have a proven business model. But the B2C companies adopting model 2 currently don't have a sustainable revenue stream (no, advertising in my opinion is not sustainable in this sector - yet) and whether or not they can make money by up-selling other services like insurance and health related products is unknown. This may explain why the B2B companies like Lifecare.com and Ceridian have yet to penetrate this market. Why should they? Although you can bet they'll do it when they figure out how to go B2C without cannibalizing their profitable B2B business.

In the meantime, consumers have a lot more choices today than they did a year ago in terms of finding senior care resources. And that's a good thing.

Dealing with Assisted Living Vacancy Rates

Jim Moore, president of Moore Diversified Services (a senior housing consulting firm) wrote a good article in the December Assisted Living magazine (why McKnights doesn't publish their magazine articles online is beyond me) where he discussed his recommended New Year's Resolutions for senior housing businesses.

One in particular that jumped out for me was what to do about decreased occupancy rates.

Due to typical resident turnover, most assisted living facilities on average need to refill about 50% of units during the course of a year (much higher for facilities with poor customer satisfaction).  If you figure the average assisted living facility charges a base rate of about $3,300 per month, Jim says:

"the incremental additional operating expense cost of occupying just one additional unit at a relatively high occupancy is approximately 30% of that $3,200, or $960. That means for each vacant unit, about $2,240 per month would go right to your bottom line as additional profit and cash flow. That is a cash flow impact of about $26,900 per year".

BTW, depending on the amount of additional care you need these "base rates" can rise well above $6,000 and for end stage Alzheimer's residents it is not uncommon to see monthly rates in excess of $8,000. 

To reduce these vacancy rates, Jim suggests (and we 100% agree) that you need to "redouble your occupancy enhancement efforts", even if that means spending more money. The rationale for investing more in marketing is to fill the pipleline to avoid the high opportunity costs of vacant units.

In this slow economy when margins are already lower for assisted living facilities the gut instinct is to slash the marketing budget but it's a huge mistake.  Marketing should not be stopped and started. The reason is because there is a lag time between campaigns and sales. Suspending marketing creates serious gaps in your prospect pipeline - something you can't just kick-start when good times return. It's not a faucet whereby you turn it on and realize immediate leads/sales.

Another reason why assisted living facilities must invest in continuous marketing campaigns is that unlike most businesses, you must capture people at the time they need your product - unlike say a car, people who need assisted living don't have the luxury of delaying their purchase until their personal financial situation improves - they need it now and if you are not on their short list or if they are not aware of you, you lose the sale opportunity.              

And lastly, don't limit your marketing to just local advertising. Big mistake.

Often times the "buyer" of assisted living is a son or daughter who is making the purchase on behalf of their aging parent(s) and they may live out of state or outside your local market. For these reasons, having a search-optimized web site and a strong online presence is critical so as to be found by people out of state who are searching the Internet for resources. 

And lastly, your marketing strategy should also focus on "referal targets" who also play a role in the buying decision for assisted living - e.g., discharge planners, case managers, rehabilitation centers, physician offices, geriatric case managers, etc.

Will The Changing Economy Bring Families Closer Together? What it Could Mean for Elder Care.

John Sumser is an expert when it comes to employment and recruiting topic. At our recent annual company meeting, John gave a superb keynote presentation where he touched upon how changing demographics and other societal trends are impacting everything from politics to marketing to recruiting - and the opportunities this is presenting. Fascinating stuff and I highly recommend John for any event you are planning. His presentation can be tailored to any company/industry. It's important stuff. 

Anyway, John's presentation got me thinking about elder care.

People say it takes a village to raise a child. This is debatable but when it comes to caring for elders, there is no question about it - it takes a village or at least a team of experienced and caring professionals. Especially when the elder has Alzheimer's.  But most of all, it takes a family. Unfortunately, within the last one hundred years of our society, increasing numbers of people have moved away from home. The number of long-distance caregivers in the U.S. who are caring for an older relative is about 7 million. Long-distance caregivers are generally defined as living more than one hour from the older adult needing assistance.

But a recent USA Today article titled For family, There's no Place Like Your Hometown  shows this trend is starting to reverse - and the economy is a major reasons why. In fact, geographic mobility is at the lowest levels since the government began keeping statistics in 1948 according to a recent study by Pew Research Center.

"People move for economic opportunity, and they stay put for family ties," says Paul Taylor, project director of Pew's Social & Demographic Trends Report. "But if you add it all up, you find ultimately family trumps money when people make decisions about where to live." 

Those who study migration trends say a combination of factors has led to the decrease in mobility, including an aging population (the prime ages for moving are 18-29); a rise in two-career couples, which complicates job moves; a murky employment outlook; fewer moves to traditionally high-growth areas; and the economic slump, whose roots began years before the word "recession" came into play.

My opinion is that this trend of decreased mobility will dramatically increase in the next 10 - 20 years - meaning I believe families will be brought closer together by either (1) children moving back to their parent's hometown or (2) parents moving to their child's hometown.  And the primary reason I believe this will happen is economics.

And the impacts this will have on companies providing products and services relating to the aging population is enormous.

According to Met Life,  the average cost of a private room at a nursing home in the USA is about $77,000. The average monthly "base" rate for an individual residing in an assisted living community is about $35,628 annually. If you have dementia and require additional support, this number can exceed $100,000 per year. And unless you have a long term insurance policy, this is all  private pay. What about in-home care? The average hourly rate for in-home care is about $20. If your needs increase to requiring a full-time live-in you can end up spending $200 per day or over $70,000 per year.

Now, how many families can afford these rates? 

Not many.

And even fewer with the recent real estate and stock market downturns.

As a result, children of aging parents requiring some level of care may be forced to live if not together, closer to their parents.

And this will impact how we market senior services.

The Bias Against In-Home Care: Things Heating up in Florida.

Fact:  If you qualify for Medicaid (the state-federal partnership that provides health coverage and nursing home care to the poor) and get sick or disabled enough to require substantial care, you have little problem gaining admission to a nursing home. But obtaining Medicaid-supported services at home, such as visits from an aide, is substantially harder and often involves a long waiting list, even though it may cost the government less.  In fact, even if you do NOT qualify for medicaid there is a bias toward residential care versus in-home care. For example, long term care insurance policies often have a higher daily benefit for "confined care" (e.g., assisted living or nursing home) versus "non-confined care" (in-home care) meaning families pay more out of pocket for in-home care - again, even though this option often saves the Government (and family) money.

So it was with interest I read a news story about Florida Medicaid recipients want out of nursing homes.

The debate?

A group of residents on Medicaid in Florida are claiming the state is illegally forcing them to live in nursing homes when they should be able to live where they choose. They claim that nursing homes, afraid of losing money, have successfully pressured politicians to make qualifying for community care more difficult. They have filed a federal lawsuit seeking class-action status on behalf of nearly 8,500 institutionalized Floridians.

What one Medicaid resident said:

"I can't choose what meal I want, I can't have a visitor after 8 o'clock - it's just like a prison without bars," he said. "People are making decisions for and about me that don't even know me or even care about me. All they care about is the money they're getting for me."

And some very influential people are supporting them:

"There are very, very, very few people who cannot be cared for outside in the community," said Stephen Gold, a Philadelphia disability lawyer who, along with AARP attorneys and others, is representing the group. "Why should the state give a damn whether you put the money in the left pocket of the nursing home or the right pocket of the community?"

"There's a lot of concern that the nursing home industry is very powerful in many states and has made sure that a lot of Medicaid dollars go to institutional care as opposed to home and community-based care," said Toby Edelman, an attorney at the Center for Medicare Advocacy.

What does the State of Florida say?

The Florida Agency for Health Care Administration, the Florida Department of Elder Affairs and Gov. Charlie Crist's office - the three defendants - all declined to comment on the litigation. So did the attorney general's office, which is representing the defendants.  But In court filings, the defendants have claimed the plaintiffs lack standing because they haven't proven that treatment professionals deemed community-based care appropriate for each patient.

"Plaintiffs are not alleging that Florida's Medicaid program has failed to cover their medically necessary services," the defendants wrote. "Instead, plaintiffs want this court to second-guess the manner by which Florida's elected officials and policymakers have chosen to make those services available in light of the state's available resources."

Sadly, many nursing homes (and assisted living facilities) are excellent facilities and very well managed but a lot are not and they tend to be the ones getting media attention.

The message to the nursing homes and assisted living facilities? Do a much better job with your public and community relations, admit the shortcomings of the industry, pressure the poor performing institutions to get their act together and work with residents, their families, the government and other "patient" advocacy groups to improve the laws to better support the needs of families and the elderly/disabled.

Yes, a tall order but if the industry does not voluntarily change then it will be forced to change by legislation.

How do I know this?

Because the aging Baby Boomers will soon insist these changes take place and they have the numbers to make it happen.

Assisted Living for Individuals with Alzheimers. Do Your Homework. Manage Expectations.

My mom has advanced Alzheimer's disease (AD). In the early stages of her dementia we kept her in her home. Something I highly recommend for any senior who wants to remain at home, be safe and can still communicate this preference. Eventually, as my mom's needs increased, we hired a 'companion' from a local home care company. The one I used was Comforcare - excellent agency but it's a franchise business model so quality may vary by location.

Initially the companion visited my mom for a few hours each day (about $20 per hour and covered by most Long Term Care insurance policies) but as my mom's needs increased we increased the hours. Eventually, we hired a full-time live in from the agency for about $200 per day. Sounds like a lot and it is but quality residential care (e.g., assisted living) can be more than this in some locations.

Eventually, my mother's needs became more than what a single caregiver in the home could effectively manage. At this point we moved her to an assisted living facility. But wait, how can you place someone with AD into "assisted living" if they can't care for themselves?

As it turns out, most assisted living facilities have a dedicated floor for residents with AD. If a family can afford it, it's a better option than a nursing home (way better). If you do choose this option, in addition to the obvious questions to ask a facility , make sure the AD section is on a ground floor, residents can walk outside on their own (fenced in area of course), the staff is trained in AD, rooms have sensors to detect at-night wandering, there is plenty of stimulation, residents can get out once in a while (via a bus with a lift) and daily schedules are flexible.  One such facility that I am familiar with that meets all of these requirements is Aegis Senior Living - in particular, the Aptos, CA location. This is a very impressive facility. They "get it" when it comes to assisted living for AD.     

Now, here is where it gets interesting and why you need to do your homework when considering assisted living for people with AD.

Assisted living facilities do not typically provide one-on-one care. So if you need assistance getting dressed, going to the bathroom, getting to-and-from meals, etc. your going to have to pay extra for these services or hire an outside agency (like Comforcare) to provide "supplemental" care. And as your needs increase an assisted living facility may ask you to provide 24/7 supplemental care. So it is not uncommon to be paying close to or in excess of $100,000 a year for care in some areas.  In my experience the good assisted living facilities will be very clear about this but the not-so-good ones will be vague about it. Remember, when you take a tour of an assisted living facility the tour guide is a sales person. They get paid to place residents.

So what can a family do that can't afford this option? They typically end up spending all of the elder's money on care and then qualify for Medicaid. True, you can "spend down" or "gift" assets to other family members to qualify for medicaid faster but the laws make it very difficult to do this - and part of me understands and accepts the reasons why. 

Crazy isnt it? Yes it is. The sad truth is that families of AD patients get a double whammy because they need to spend so much more on supplemental care. And to make matters worse, the tax code and LTC insurance companies do not distinguish between elders with AD and those without so you are subject to the same daily maximums and restrictions.

I don't blame anyone for our imperfect system but as one Geriatric Care Manager recently told me "when congressional leaders have to begin caring for loved ones with AD I think the rules will be changed".

I hope you are right Nancy and I have a feeling changing this imperfect system is the final legacy the Baby Boomers will leave us with. They have the numbers and the influence to do so.

At least I hope so.

How to Manage, Operate and Market a Senior Housing Facility

Benjamin Pearce from Potomac Homes emailed me about his new book,  Senior Living Communities. It is a guide book on Operations Management for Assisted Living, Congregate, and Continuing Care retirement communities. It was just released in its second edition by Johns Hopkins University Press. 

Contemporary Gerontology describes the book as an " in-the-trenches approach to the administration and marketing of assisted living, congregate and continuing care facilities".

As the demand for senior residential communities continues to rise with the aging U.S. population, this is a great idea for a book and one that will prove useful to the many administrators and staff members who often are forced to learn by trial and error the complicated task of delivering high-quality and consistent services to elderly persons. It's also a must-read for the many facilities who have been plagued by a variety of administrative and financial difficulties.

Mr. Pearce offers a wealth of sound advice and practical solutions, discussing resident relations, operating methods, staffing ratios, department management, cost containment, sales and marketing strategies, techniques of financial analysis, budgeting, and human resources. New chapters address issues particular to dementia care and architecture, and the appendix contains a department-by-department audit of senior living operations.

Fewer Seniors Live in Nursing Homes: What it Means.

An article in USA Today titled Fewer seniors live in nursing homes discusses how despite the graying of the nation, the percentage of elderly living in nursing homes has declined.

The article says this trend is the result of two factors: (1) the improved health of seniors and (2) more choices of care for the elderly. However, this has much more to do with the fact that family's have more choices than it has to do with the improved health of seniors. There are a LOT more elderly people in the USA than ever before so even though the elderly population may be healthier, that alone does not explain the decrease in nursing home popularity.

For example, the article mentions that about 7.4% of Americans aged 75 and older lived in nursing homes in 2006, compared with 10.2% in 1990.

According to US Census data,  in 1990, there were approximately 13,135,000 people over the age of 75 and in 2006 this number was estimated to be 18,263,307. This means, according to the USA Today article, that in 1990 there were 1,339,770  people age 75+ in nursing homes (10.2% of 75+ population) and in 2006 there were 1,351,485 (7.4%) people - about the same number as 1990.  Yet, the 75+ population grew by over 5 million people. I don't think that many seniors are that much healthier.

So where are these people going?

The answer is most are choosing other housing options (e.g., Assisted Living) or simply staying at home - and the economical impact of this is huge, especially when you consider that by 2030, there will be over 33 million people over the age of 75. This means that even if the percentage of people age 75+ in nursing homes drops to 5% by 2030, there will still be 24% more people in nursing than today. And this still leaves a big percentage of 31 million additional people over age 75 choosing other options.

And this means strong demand for "other" housing options like Assisted Living (wonder why private equity likes this space?). And it also means strong demand for in-home care services and all the related products and services.

What related products and services? The average cost of nursing home care is more than $67,000 a year and tops $100,000 in some urban areas - and a good percentage of this cost is for related products and services the elderly person will need as a part of their care .  So if an elderly person chooses to stay at home by using a home health care company or a non-medical home care company like ComforCare,  the family or the in-home agency will need to purchase many of these products and services including such things as home safety, pharmaceuticals, medical equipment, personal healthcare, mobility, etc.

And this will be a boom for the suppliers of these products and services. And this is why services like SeniorCareMarketer will be so valuable to the suppliers to help them generate publicity, website traffic and sales leads.

Keep Just 30% of Aging Americans in Their Homes and Save $30 Billion

In Andy Grove's Open Letter to the Candidates he outlines some out-of-the-box ideas on how to fix the U.S. health care system.   The former Intel CEO has some great ideas.  One idea is to "keep [our parents] at home".  As Mr. Grove states:

"The cost of caring for the elderly is huge and will only grow as our population ages. Of the $440,000 the average American spends on health care in his lifetime, $280,000 will be spent after age 65. Probably 50% of that post-65 outlay goes to assisted-living facilities and nursing homes. So it stands to reason that if there were a way to keep elderly patients in their own homes longer - without degrading quality of care - we'd have a cheaper and better system."

In fact, according to Mr. Grove's calculations, the savings achieved by keeping just 10% of the aging population in their homes can amount to $30 billion a year.

Sounds good to me. And, our parents are happier in their homes.  Sounds like a win-win.  For an objective comparison to the various care options for aging adults, check out  Care Options for Your Aging Loved One: How to Make the Right Decisions. If you and your aging loved ones determine that staying at home makes sense, you will find this article of interest: Creating a Safe Environment for Your Aging Loved On.

Two Issues with Assisted Living

The Assisted Living industry provides a valuable service to many families. The industry also employs caring individuals who do great work for many families across America. And these individuals are often underpaid, making what they do an honorable profession. 

But I do have two criticisms of Assisted Living. (1) the industry often presents itself as the "only" and "best solution" for families and (2) the industry is too sensitive to criticism.

I've visited many Assisted Living facilities, taken formal tours, spoken with "sales associates" and personally know some residents and their families. I also have some of my own family in Assisted Living. So while I am not an expert on Assisted Living, I do feel I'm able to speak objectively and credibly about this subject.

The Only and Best Solution
Most experts agree that it's time to consider Assisted Living placement for a loved one when their "safety is in question and their ability to perform Activities of Daily Living". The key word here is "consider". What Assisted Living too often tells families is it's the best decision and that keeping the aging loved one at home is a bad idea. But this is not always true. Many elderly people can live safely at home from the time of needing minor assistance with daily tasks all the way to end of life. This is possible with the help of inhome caregivers (that at some point live with the elderly individual), visiting nurses and hospice. There are many reputable companies who provide these services and in fact, keeping your loved one at home can sometimes be less expensive than Assisted Living or Nursing Homes. What about socialization? Assisted Living will often use this as a reason to place the elderly person into the more "social" Assisted Living community. Maybe, but older people who choose to live alone in their home can get plenty of socialization by taking advantage of local senior centers (many of which offer free transportation) and companion services who come to the person's home.  Again, very affordable options. 

Here is a good (and objective) article on the various care options available for seniors, titled Care Options for Your Aging Loved One: How to Make the Right Decisions   

Too Sensitive to Criticism
Every time there is a negative story on Assisted Living, the industry's reaction is to gang up on the reporter saying what an injustice has been done, rather than an honest and objective acknowledgment to the fact that yes, there are problems and we are doing all we can to address them.  In a very bizarre (and negative) story about patient neglect at an Assisted Living facility in California, the spokesperson for the facility denied the allegations (nothing wrong with that if she truly believes they are false) but went on to say "we take care of our residents, and find this negative publicity to be a disheartening affront to our professional caregivers and most especially to our residents and their loved ones." Something happened. Acknowledge there may be a problem and pledge to fix it.

Anyway, as I said, I support Assisted Living. With the aging of America, the country needs Assisted Living. But don't give families such a hard sell and be a little more open to criticism. It will do your industry good and the public will consider you more credible.