The long-term outlook remains positive for the senior living industry, which is adapting to change brought on by the COVID-19 pandemic, according to a new report.
“Beyond the Global Health Crisis,” from Marcus & Millichap Research Services, reports that as the nation emerges from the COVID-19 health crisis and states begin reopening, the senior housing sector is dealing with its share of challenges and adapting to a new normal.
The financial impact of the pandemic came quickly in the form of increased labor and supply costs, but providers are finding those costs — compounded by additional costs associated with testing — may be a permanent part of the landscape.
Although the long-term effects of COVID-19 are unknown, providers already are adopting a new normal — prioritizing frontline healthcare workers’ needs, enhancing infection control protocols, increasing supply inventories and altering social isolation practices.
What is clear, the authors state, is the broader outlook for the industry remains positive with a “demographic wave on the horizon that ensures strong demand for the needs-based asset class.”
COVID-19 infection rates have been low in assisted living, with less than 1% of the more than 800,000 residents in communities in the country contracting the virus, according to the report authors. But challenges come in the form of expenses to battle the virus.
The report states that once the virus enters a building, the expense to each facility is about $1 million. Some providers forecast a $500 to $700 cost per unit for increased labor, supplies and cleaning.
“The financial impact of the coronavirus could total roughly $60 billion industrywide as providers are faced with increased costs for labor and supplies,” the report states, echoing an estimate from Argentum and the American Seniors Housing Association. “Moving forward, occupancy is anticipated to fall as move-ins slow and seniors turn to home health and telemedicine alternatives over the near term, affecting revenue and the recovery of many facilities.”
Although the authors predict that occupancy will erode in the near term, occupancy levels will bounce back in the long term as the increased levels of care many aging seniors require makes “families realize they are unable to appropriately care for loved ones during a crisis.”
Because independent living residents generally are younger and have fewer health issues, the impact of the virus was minimal on this population. The authors predict that move-ins and lease-up will continue to slow, however, as aging seniors delay moving into a community until the health crisis is over.
What independent living operators will need to contend with is public perception, even though the outbreak was more concentrated in skilled nursing and nursing homes. Marketing efforts should focus more on health and safety along with the amenities promoted over the past few years, the authors said.
“While the long-term ramifications to the sector remain cloudy, it is clear that operators will need to increase infection control protocols even after the outbreak is contained,” the report said. “Independent living providers will adopt a new normal, which includes enhanced social distancing and isolation measures, along with broad use of disinfectant and other PPE.”
Staffing has been an issue in independent living as well. According to the report, labor costs rose 8% for communities with no outbreak, whereas those with outbreaks saw a nearly 20% increase in labor costs. Costs associated with personal protective equipment and technology purchases also pushed operating expenses to the limits for some smaller providers already struggling due to decreased move-ins.
How the industry recovers depends on several factors, including the economy, the report authors said. The shorter the economic downturn, the stronger the recovery, whereas the longer the downturn, the weaker the recovery.
Retirees looking to make the move to senior living communities may struggle with selling their homes or may put off moves until a vaccine is established. Staffing requirements likely will change, leading to higher costs associated with labor and technology adoption. New construction will hit the pause button.
Lower occupancy rates and heavy debt loads may result in industry consolidation through a flurry of acquisitions of lower performing properties.
“Historically the sector has demonstrated resiliency through prior shocks and continues to illustrate safety for the elderly during a major crisis,” the report stated.
In other coronavirus-related news:
- The National Investment Center for Seniors Housing & Care announced Tuesday that its Fall Conference now will be a virtual event. Originally scheduled for Oct. 7 to 9 in Washington, DC, the event now will be held Oct. 6 to 8 and Oct. 13 to 15. For more information, see NIC’s website.
- The Centers for Disease Control and Prevention has released a fact sheet, “Supporting Loved Ones in a Long-Term Care Facility” for families. It includes ideas on how to keep in touch and ways providers are supporting communication between residents and families.
- The coronavirus pandemic could cost the U.S. economy $16 trillion over the next 10 years, according to a Congressional Budget Office projection.
- A study published by Health Affairs suggests that over the course of the COVID-19 pandemic, the virus could result in direct medical costs ranging from $163.4 billion (if 20% of the population is infected) to $654 billion (80% infection rate), making COVID-19 costs substantially higher than other common infectious diseases. The study has been available online since April but was published in the June print issue.
- Senate Majority Leader Mitch McConnell said the next coronavirus aid bill will be the fourth and final one, and there could be funding for small businesses and healthcare.
- Older men may be at greater risk of contracting COVID-19 because they worry less about catching or dying from it than women their age or than younger people of both sexes, according to a new study from Georgia State University.
- The COVID-19 health crisis is hard on mental health, and there is a scientific basis for the anxiety felt by so many, including those in assisted living communities.
- Ten weeks after asking senior long-term care facilities to lock down due to the COVID-19 pandemic, Massachusetts is easing guidelines to allow visitors — with some restrictions.
- It recently was move-in day for the first residents of The Spires at Berry College, a new continuing care retirement community on the property of Berry College, a liberal arts school in Georgia. The general public is not being allowed on the grounds due to the COVID-19 pandemic, however.
- A state lawmaker, public records activists and others are pushing back on the Minnesota Department of Health’s refusal to reveal the number of COVID-19 cases at each long-term care facility in the state. The state says it could violate privacy laws or mislead the public by doing so.
- Senior living leaders in New Jersey are calling on the state government to help assisted living and other long-term care providers financially prepare for the next crisis.
- Medically assisted deaths in America increasingly are taking place online thanks to COVID-19’s promotion of telemedicine. But the digitally assisted deaths are making the process harder on family members, who now must take a more active role in their loved one’s final act.
- Gulf Coast Pharmaceuticals Plus, an Ocean Springs, MS-based medical supplies distributor, has donated more than $30,000 worth of personal protective equipment to assisted living communities, state medical centers, health organizations throughout Mississippi. The company donated 4,000 masks to a variety of assisted living communities and retirement centers throughout the state.