Organizational readiness, and operational and reimbursement strategies, are themes emerging for the year for financial discussions among senior living and care operators.
That’s according to a panel of experts from Chicago-based public accounting firm Baker Tilly. During a Tuesday webinar, they highlighted trends and challenges facing their senior living and other long-term care clients in the wake of the COVID-19 pandemic.
Operational strategies to address industry challenges
Not surprisingly, occupancy and workforce issues are the top operational challenges for providers, with staffing driving census due to limitations on staffing levels, said Edward Klik, principal with Baker Tilly. Wage competition and increased agency costs, or even access to an agency, are challenging providers to new levels, he said.
Companies, Klik said, must return to a focus on operations, revenue-driving opportunities and expense monitoring with inflationary factors.
“Now is the time to continue to home in and strategically look at it and see where the next one to three to five years will take us,” he said.
Although occupancy recovery across the care continuum continued in 2022 and through April, Michael Edwin, director in the healthcare practice, said that occupancy levels for assisted living, independent living and memory care remains “well below” pandemic levels. But he said that the senior living sector historically has a higher tendency to bounce back than does skilled nursing.
Operators can target occupancy by understanding the local market, assessing pricing strategies and looking at design considerations, he said.
Edwin said it’s important to understand what might be causing disruptions in a local market, whether construction is impeding access to a community, socioeconomic trends affecting wages, unemployment trends or the overall economic health of the local community.
Assessing pricing strategies, he said, is important to understanding the unique pricing situation in any given region. He recommended being aware of what other providers are charging, fee schedules based on services and square footage, and service packages to assess whether a community is underpricing or overicing its offerings in a given marketplace.
“Don’t fall short of potential increases in revenue because you don’t understand your pricing potential,” Edwin said. “Many clients, we find, are undervaluing their services.”
Those who have achieved significant occupancy increases cannot rest on their laurels, he said.
“Now is the opportunity to enhance public spaces you don’t consider revenue-generating — entryway, front desk, breezeway — these areas are your first impressions,” Edwin said. “What do you want people to think and feel when they walk into your building, and what impression do you want to be giving?”
For older independent living and assisted living units with less square footage, consider combining efficiencies or small one-bedroom units to create larger one- and two-bedroom units, he recommended.
“Efficiencies are difficult to fill,” Edwin said. “As you create large one- or two-bedroom units, you see greater revenue per square foot and greater demand.”
Business strategy must focus on workforce
Workforce — and specifically workforce development — should be a priority in any strategic plan, according to panelists.
“Everything we do in building out a strategic plan and implementing initiatives should have a workforce lens,” Edwin said, adding that clients across the country are struggling to implement strategic plans due to workforce shortages. “We all know this is a challenging area and there is no silver bullet.”
Among the business strategies senior living organizations are focusing on, according to the panel, are partnerships, niche marketing and growth.
Ediwn said the industry has to stop looking at itself as an island and start focusing on generating more revenue by providing additional services that may be outside of the current mix. Partnerships, he said, can help operators think “outside the box” and position their communities as community resources rather than as providing senior living only.
Identifying niche markets — memory care units, traumatic brain injury units or behavioral health — is another opportunity to capitalize on existing resources to provide services to the greater community, they said.
Edwin cited independent living as one of the niche areas becoming more relevant as baby boomers age into the industry.
“Expanding the continuum of service in independent living will pay dividends over the next 10 years,” he said.
Beverly Asper, a director with Baker Tilly, said that most clients are continuing to plan and strategize around development despite the economic environment. But that planning, she said, is more strategic, and projects are being viewed through a more critical lens.
“One thing that has changed is a deeper and more keen focus on upfront analysis,” she said. “They are really looking at the market and understanding the dynamic of this market we are in, and how to compete in this market. They are really understanding financially what type of project is going to create a return for the organizations.”
