We’ve attended several recent senior living conferences and have ongoing conversations with our healthcare partners, specifically related to senior living. Here are some of the key learnings we have gleaned from both, along with the macro trends shaping the industry, and the shift towards alternative housing in lieu of traditional senior living facilities.
Brief historical perspective
The rise in nursing home care began in the 1960s, as the government began to realize that people were staying in hospitals beyond the medical necessity requirement for that level of acute care.
During the 1970s and 1980s, the quality of care in nursing homes increased, along with the advent of Medicare and Medicaid, helping residents receive long-term care.
Today’s senior living has changed dramatically from the care many of our grandparents received, and the landscape is evolving because people are living longer. Assisted living facilities look more like residences, with home-like decor, common eating and meeting areas, and structured in- and out-of-facility activities that address the lifestyle changes many seniors are looking for in care today. But other forces at work are changing what upcoming generations may be looking for when it comes to senior living.
Macro trends and factors impacting senior living facilities
Several trends today are having a major effect on senior living facilities:
- Generational shifts — Baby boomers are working longer than their parents did — many well past the age of 70 — and the majority have yet to hit the stage where they require long-term care. As they age, a substantial number of them no longer want the same type of senior living arrangement as their parents had. They don’t necessarily need constant care, and many want to stay in their homes. They are looking for different lifestyle choices in senior care. This will dramatically change again in 40 years when millennials and member of Generation Z begin to look at their senior living and care choices.
- Labor expenses are surging —Higher labor costs due to a tight labor market, competitive recruiting, overtime and high turnover rates are increasing the cost of labor in senior living facilities.
- Tight labor market — The unemployment rate is at a historic low point, making it difficult to find workers. In addition, competition is fierce, and hourly workers will leave to work elsewhere for as little as a 50-cent increase in the hourly rate.
- Construction costs —Building costs are on the rise due to an industry labor shortage and the increasing costs of building materials.
Alternatives to traditional senior living facilities
In addition to these trends, it may be a challenge to keep senior health services affordable for baby boomers, who typically are post-pension-era workers with fewer monetary resources to pay for such services.
As a result, several unique alternatives to traditional senior care facilities exist. They are gaining in popularity among seniors and those who make decisions for them, and they are providing some competition to traditional senior living facilities.
- Home care services, which are becoming increasingly popular as they are answering the needs of those who want to stay in their homes, with services delivered directly to them. As of this year, the Centers for Medicare & Medicaid Services announced that non-skilled in-home care services will be allowed as a supplemental benefit for Medicare Advantage plans. This is the first time that CMS has allowed daily maintenance as a supplemental benefit included in Medicare Advantage.
- Real estate investment trusts, owned by investors who function as landlords for senior living facility operators who lease from them. A major concern for owners is that operators continue to maintain revenue growth that outpaces anticipated rent inflation.
- Care communities, in which a single home-care worker answers the needs of multiple seniors who require a lower level of care. Many of these places consist of homes that are within close proximity to one another or individual residences that are located within the same building.
- Cruise ships, for those seniors who want all the amenities of a senior care facility (room, meals, nursing care, doctors, etc.) in a non-traditional senior living environment that allows them to travel as well.
- Granny pods, small cottages that can be situated on a caregiver’s property and that keep seniors in close proximity to the caregiver so they can be closely monitored, while allowing them to maintain a level of independence.
In addition to saving money, given the fact that people in the United States are living longer, many of these options appeal to the adult children of seniors or others making decisions for them who are looking for alternatives to the traditional senior living environment.
Innovative benefits to recruit and retain workers
Also discussed have been ways to recruit, retain and engage workers, given the tight labor market and trying to maintain operating margins despite ever-increasing costs. Some of the more creative suggestions we’ve heard:
- A daily pay benefit appeals to hourly workers because it gives them access to their earned but unpaid wages before their next payday. It helps them to avoid overdraft fees, predatory payday loan fees and interest, and it assists with paying bills on time and meeting an unbudgeted expense.
- Career development opportunities lead to increased employee engagement and retention.
- Tuition reimbursement encourages workers to continue their education and provides an opportunity for advancement.
- Non-traditional benefits such as a contribution toward an employee’s wedding or toward college tuition for a dependent of an employee.
This list demonstrates a shift in what upcoming generations are looking for in senior living as they age and the fact that choices now exist. The more traditional senior living facilities will need to continue to adapt to compete for residents and workers.