Last year, more than 90 not-for-profit senior living communities changed sponsors/owners, with some transferring to other not-for-profit sponsors and others being acquired by for-profit owners and operators, according to Ziegler Investment Banking. Affiliations such as these align one company with another to strengthen both.

This year looks to be an equally big year for affiliations in the not-for-profit senior living sector. Several key influences are driving this consolidation activity:

  • Complexities of healthcare
  • Leadership turnover
  • Technology demands
  • Financial pressure
  • Competition
  • Ability to attract talent/workforce
  • Access to capital

Although the above national and statewide trends are helpful to frame the level of affiliation activity in recent years, local market influences also matter. Some consolidation-drivers are much more pronounced in some markets compared with others, so it is important to consider strategic questions paired with each driver below when evaluating whether to affiliate with another senior living provider.

Complexities of healthcare

Nearly everyone would agree that the U.S. healthcare system has been in a dynamic period of change in recent years. This includes an increased regulatory environment, changing payment arrangements such as bundled payments and other risk-based models, as well as an increased reliance on measures such as five-star ratings and a general trend toward the least-costly environment, which may not include skilled care. The consolidated healthcare system also is putting increased pressures on local post-acute providers. When evaluating whether to affiliate with another senior living provider, consider these questions:

  • Am I in a geographic area where the post-acute marketplace is increasingly competitive and where smaller providers are getting squeezed out?
  • What is the climate of the local healthcare system(s) in terms of payment reform (for example, accountable care organizations, bundled payments), and am I prepared to participate in at-risk models in my local market?

Leadership turnover

Baby boomers hold many of the C-Suite positions in today’s senior living organizations. Many long-time CEOs are looking to retire, and although the board may move forward with an executive search, several organizations use this milestone event to discuss affiliation as a strategic move.

For some smaller organizations that are in highly competitive markets, it may be difficult to recruit a high-level executive to replace the retiring CEO without going through an affiliation. Experienced leaders often are looking for ongoing growth opportunities that smaller organizations may struggle to offer. Additionally, many of these smaller organizations may have no internal successor to effectively fill the CEO role.

When evaluating whether to affiliate with another senior living provider, consider these questions:   

  • Do we have a leader that is nearing retirement and no clear succession plan in place?
  • Will our organization be able to effectively recruit and retain experienced leadership to guide us through the dynamic senior living environment of today and tomorrow?

Technology demands

The evolution of technology continues to cause monumental shifts in how business is done, and senior living is no exception. Providers are having to invest increasing amounts of financial and human capital in technology solutions. Some providers simply cannot keep up with the pace of investment needed to remain competitive. Additionally, organizations need to ensure there is strategic oversight in the form of a chief technology or information officer.

Keeping up with changing technology trends and best practices is an additional trigger for some organizations to assess partnership and affiliation opportunities. When evaluating whether to affiliate with another senior living provider, consider these questions:

  • Are we able to keep up, or ideally be ahead of the curve, when it comes to technologies for our senior living community(ies)?
  • Can we devote the financial resources that are needed to invest in and maintain our current technology infrastructure?

Financial pressure

This is an obvious one that should be on any list of consolidation pressures. The important thing to note is that each year away from the recession fewer transitions have been driven solely by financial distress. More organizations today are exploring affiliation for strategic reasons rather than out of financial necessity.

When evaluating whether to affiliate with another senior living provider, consider these questions:

  • Do discussions around financial issues and long-term viability tend to overshadow a focus on growth and strategic direction?
  • Have we projected a near-term period of time where financial shortfalls suggest a negative long-term outlook?


This truly is a local-level issue and will vary dramatically by market. A senior’s home always is a significant area of competition, but it is important to look at the local area and identify the number of new seniors housing options that have been developed across the past five years.

Is this competition creating occupancy pressures and market saturation? Occupancy is the lifeblood of the senior living organization, and when competition effectively pulls away potential residents, it creates additional financial pressures that may lead to affiliation decisions.

When evaluating whether to affiliate with another senior living provider, consider these questions: 

  • Can we say with confidence that we are the top or one of the top two providers in our local market?
  • Has the competition moved at a greater pace with growth and campus reinvestment and now we are playing catch-up?

Ability to attract talent/workforce

It is important to acknowledge that there are workforce shortages across all levels of many health organizations, and senior living is no exception. Recruitment and retention are among the top areas of focus for many providers and trade associations as they look to draw people into the field.

In some states and cities, increased minimum wage requirements have had a significant effect on the ability to recruit and retain talent and have resulted in increased costs being passed on to residents. Those in high minimum wage areas are feeling some of the greatest pressures in this regard.

When evaluating whether to affiliate with another senior living provider, consider these questions:

  • Are we able to keep up with the increasing pressures on wages and benefits to maintain an effective workforce?
  • Do we have career advancement opportunities for individuals who want to grow and evolve within our organization?

Access to capital

It is well-known that healthier organizations and organizations with greater scale are better able to access needed capital to operate and fund growth initiatives. Some organizations may have healthy financials and an acceptable community environment but have very limited ability to tap into additional capital.

Capital is needed to reinvest and remain viable long-term. In markets with less competition and consumers who will tolerate slightly older physical buildings, some of these pressures may be less than other markets where reinvestment is needed every six to eight years to remain competitive.

 When evaluating whether to affiliate with another senior living provider, consider these questions:

  • When looking at our strategic plan, do we have the funds necessary to accomplish our goals?
  • Are we needing to reinvest in our physical plant, but are limited because of an inability to access additional capital?

The list above is not meant to be exclusive by any means, but rather a reflection of the key drivers behind many of the senior living sponsorship transitions in recent years. Providers are encouraged to review the points above and the key questions that are posed. The answers clearly will be affected by local market forces and will result in a unique set of responses from each provider to help determine whether affiliations, acquisitions or dispositions may be a strategic alternative.

Lisa McCracken is the director of senior living research at Ziegler, an investment bank, capital markets, wealth management and proprietary investments firm specializing in the healthcare, senior living, education and religion sectors. McCracken is responsible for conducting market research, trend analyses and facilitating the Ziegler CFO Hotline, an electronic interchange of information among senior living provider chief financial officers. Ziegler was ranked the No. 1 healthcare/senior living underwriter by financings and the No. 4 healthcare/senior living underwriter by par amount, according to 2016 league tables compiled by Thomson Reuters.

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