Health Dimensions Group recently published its “Top Trends in Aging Services: Preparing for Historic Changes” list for 2020. Like never before, senior living and care organizations are facing a time of great uncertainty. The speed and diversity of change seems unparalleled. The following trends, along with expected implications, will have significant bearing within the senior living space.
Occupancy and growth challenges
Despite projected growth in the senior population over the next several years, occupancy pressures will continue for senior living, because construction is based on population levels that are five or more years out. This negatively effects current absorption rates, particularly in saturated markets. 2019 saw occupancy fluctuate with a dip in the second quarter to 87.8% (the lowest level since the second quarter of 2011) and then a slight rebound in the third quarter to 88%.
We anticipate that occupancy will continue to be a pressure point in 2020 as even the oldest baby boomers, or members of the “silver wave,” still are below the average age of residents in senior living communities. Developers and operators increasingly must focus on qualitative and quantitative market feasibility and demand studies, detailed demographic research and robust financial analysis to ensure the appropriate balance of current and future supply and demand.
Increasing needs for low- and middle-income seniors
Although we anticipate ongoing stagnation of occupancy in the higher-end senior living communities in 2020, the need for senior living options for low-income to middle-income seniors will continue to increase. The growth of the low-income senior population in need of comprehensive care will continue to stress state and federal budgets. This growth also will create challenges for organizations in their missions to improve the quality of life for seniors in their communities.
Care models such as the Program of All-Inclusive Care for the Elderly, or PACE, have proven to enhance the quality of life of the dually eligible population by providing comprehensive, coordinated care that allows the elderly participants to safely live in the community and avoid or defer a move to institutional long-term care. These models of care also result in lower costs for the state and federal governments than the traditional fee-for-service model.
Of the myriad challenges facing senior living and care operators, one of the most significant and perplexing centers on meeting the needs of middle-income seniors. Many middle-income seniors will not have sufficient resources to cover costs related to housing and healthcare. Historically, senior housing operators and investors focused on the upper end of the income distribution. For lower-income seniors, state and local programs such as Medicaid provide for some housing and care-related services. The industry largely has not focused on the middle-market cohort, however.
With the aging baby boomers, the United States will experience a significant increase in the number of middle-income seniors aged 75 or more years over the next decade. A variety of creative and alternative solutions will be needed to serve the millions of seniors who will lack the financial resources for private-pay senior care and housing.
Such solutions include:
- Implementing less costly models of care.
- Realigning expectations around owner / investor levels of return for products aimed at the middle-income market.
- Exploring more cost-effective construction options.
- Repurposing existing real estate.
- Partnering in new and creative ways.
- Continuing introduction and use of technology to drive efficiencies.
Momentous workforce challenges
Workforce shortages remain an issue in today’s senior living landscape. Unemployment rates are at a 50-year low of 3% nationally and just more than 2% in healthcare. Thus, the challenge to rethink the employee experience and use that as a driver for competitive advantage is critical.
Nearly 21 million new jobs have been created since 2010, leading to one of the tightest labor markets in decades. More stringent immigration controls and the retirement of millions of baby boomers each year create an even more constricted labor supply. The workforce shortage has become a crisis in healthcare that is only getting worse.
On top of job vacancies, we have five generations of workforce cultures to navigate, ranging from the silent generation to Generation Z. To adapt, progressive senior living and care organizations face continuous need for these key elements:
- Advancement in workspace and technology to broaden reach to recruit and retain the brightest talent;
- Prevalence and use of social media avenues to gain awareness; and,
- Dramatically increasing wages for hourly positions to professional exempt positions.
Exceptional customer experience
Occupancy pressures and saturated markets are causing senior living providers to take a serious look at how they differentiate themselves in the marketplace. This trend is occurring now and will continue in 2020. Through our work across the country, we have seen an increase in investment for a wide range of services and offerings geared to differentiate the senior living community.
- Smart watch technology that can be programmed to be the smart key for residents as well as to monitor health, movement, and well-being.
- More public spaces, such as roof-top restaurants, to alleviate depression and increase socialization.
- Specialized service line development in home health, or partnerships with home health agencies, so therapy under Medicare Part B can be managed while residents remain in their apartment homes.
These are but a few examples of what operators are doing, and will need to do in the future, to make their senior living communities stand out and become the providers of choice.
To learn more about these trends, as well as others affecting senior living and care organizations, read the complete list of Health Dimensions Group 2020 trends on our website.