Serving middle-income older adults could be an answer to the occupancy and oversupply challenges facing senior living operators and developers, Eclipse Senior Living CEO Kai Hsiao told those attending a Health Affairs event Wednesday.

Hsiao participated in a panel discussion during the journal-hosted event held in conjunction with the release of a study funded by the National Investment Center for Seniors Housing & Care that projected that at least 54% of the 14.4 million middle-income older adults in 2029 in the United States will lack the financial resources to pay for senior housing and care.

| Read more about “The Forgotten Middle” study. |

“For those in senior living right now, one of our big challenges is occupancy due to oversupply,” Hsiao said. “If you take a look at what’s being built out there today, the fact of the matter is, it’s all the same. It’s all the 80-unit [assisted living], 20-unit memory care — 100-unit-ish, $4,800 [revenue per occupied room] targets. Everyone is building the same thing for that upper-income market. I think a lot of our occupancy woes and oversupply woes could be lessened or dampened if we actually targeted that middle-income demographic.”

Although the study paints a “scary” picture, Hsiao said, “there’s also a lot of opportunity there as well.”

One of the reasons that the senior living industry penetration rate is only 10%, he said, may be that operators haven’t targeted the middle-income group. “Imagine what the penetration rate would be if we actually started to do that,” he said.

‘It’s going to take a village’

But the industry can’t address the middle-market challenges alone, the CEO said. “It’s going to take a village to get at this,” he told attendees.

“On the real estate side, on the development site, how do we actually build a product that comes in less so that we can actually hit the price point that we want?” he asked. “How do we source the land? The land may be more rural versus suburban. How do we construct it so it’s less? It’ll probably be more prefab than not.”

Also, Hsiao pondered, “From an operator standpoint, how is our business model different so we can get to a lower cost? Our staffing models will probably have to be adjusted. The services we provide may be adjusted. Our food delivery could be adjusted.”

Labor, he noted, is one of the biggest challenges facing the industry.

“How can we get help from other organizations or other sources on the labor side?” he asked. “I remember years ago, the United States was losing the Cold War to Russia, and we funded a lot of education for people to become scientists and what not. We need help with caregivers. Can we get more people into that role and provide them with an education and resources to become caregivers out there?

“There’s a full array of different functions that have to come together to address this issue here. It’s not just on one side,” Hsiao said.

Noting that labor can account for more than 60% of the operating costs of a community, NIC founder and strategic adviser Bob Kramer, another panelist, said: “The caregiver issue is huge, and I think it’s one of the areas where we have to think much more creatively and out of the box for solutions. I think we can look to the experience of other countries — the involvement of the family caregivers and other unpaid caregivers, volunteers, which now, from a regulatory and legal point of view, is virtually impossible.”

In a separate interview with McKnight’s Senior Living, Kramer shared that in Japan, less-frail older adults care for more-frail older adults, and in other countries, “family members are expected, and in some instances even required, to provide so many hours of assistance on-site in the community where their parent lives, or loved one lives, in return for a lower rate.”

Panelist Debra Whitman, executive vice president and chief public policy officer of the AARP, said that in Singapore, “you either get a larger apartment or cheaper rent if your parents live in the same building, because then you have that ability to drop in and provide that care.”

And in The Netherlands, she added, “They are moving students into long-term care facilities into empty rooms to bring life into the place where the students don’t have to pay for their rent.”

Whitman agreed with Hsiao and Kramer that creativity will be needed to address caregiver-related challenges.

“As we have tight labor markets, we’re also looking at a really hard time filling these roles,” she said. “They’re tough roles. They’re physically demanding. They’re emotionally demanding, and we don’t pay very well. That whole spectrum of caregiving is going to be really, really crucial.”

Challenges will ‘grow and accelerate’

Middle-market needs aren’t going away anytime soon, the study’s lead author, Caroline Pearson, senior vice president at NORC at the University of Chicago, told those attending the event.

“In 2029, the oldest baby boomer is going to be 83 years old,” she said. The youngest baby boomers will be 64. “As we think about the 10- to 20-year window, all of the patterns we’ve laid out here are only going to grow and accelerate.”

An interactive tool for operators, investors, policymakers, programmers and others will be available on the NORC website in May, said study author David Grabowski, Ph.D., professor of healthcare policy in the Department of Health Care Policy at Harvard Medical School. Users will be able to vary assumptions made by the researchers related to housing, medical costs, age range, housing equity and other factors to arrive at their own estimates.

“If folks don’t think we’ve got the right numbers here, they can create their own numbers,” Grabowski told McKnight’s Senior Living in a separate interview. “But the story is still a significant one, even if you make pretty big changes to our assumptions.”

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