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The following is part of the “You’ve got Questions,…We’ve Got Answers” series featured in McKnights Senior Living

By Jim Moore

What practical options are available to enhance the flexibility of my service offering to be more competitive and financially viable without significant modification to my community? 

Offer a unique and more flexible living arrangement for some of your independent living residents who obviously want to continue to maximize their independence, but many now need some moderate additional assistance in living.  They may not currently require more extensive and structured assisted living at this time.  But they could benefit from accessing additional a la carte priced assistance in living services that can be offered on a flexible, as-needed basis within their independent living unit.  I call it “Catered Living.”

You can optimize the individual independence of many of your residents by providing the necessary services on a highly customized basis.  What this means is that your residents can live as independently as their situation allows while having access to appropriate assistance.  That’s the essence of Catered Living.  Eventually, a particular resident might obviously require a more formalized high acuity assisted living setting, but short-run, many resident’s ideal lifestyle desires of experiencing optimum independence can be sustained.

As with every strategic opportunity in Senior living, there are challenges and cautions.  Here are three; 1) Make sure regulations and licensing allow you to deliver Catered Living services in your state or locale. 2) Have a clearly documented policy as to when a resident must move to a more structured, formal assisted living setting.  3) Develop a financial model for equitable a la carte charges that avoids cost creep and delivers appropriate profit margins.

Jim Moore is president of Moore Diversified Services, Inc., a national senior housing and healthcare consulting firm based in Fort Worth, TX that has been serving clients for 46 years. He has authored five books about senior living and healthcare including Assisted Living Strategies for Changing Markets and Independent Living and CCRCs.  Jim Moore can be reached at (817) 731-4266 or jimmoore@m-d-s.com.

 

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I’m concerned about being a Senior living owner-operator with just one community. 

Yes, you should be concerned.  A growing number of individually owned, self-managed communities must address three major concerns; 1) keeping up with the current state-of-the-art and growing complexities of the changing business model, 2) addressing change and challenges both short-run – in the next 18 to 24 months and longer range over the next 24 to 60 months and 3) the ability to afford and fund necessary change.

Examples of just some of the future typical needs include sophisticated systems and procedures, expanded strategic business practices, increased purchasing power and possibly funding a more market-responsive physical plant design.  One issue is very clear, increased financial viability resulting in available cash flow must be enhanced in order to fund strategic sophistication that is evolving within the industry.

Most self-managed single community owners desire to remain in complete control.  That’s understandable.  But it could be increasingly difficult to achieve.  Owner/operators might alternatively consider retaining a qualified third-party management company.

A key question is, “Should I consider exiting the business?”  Good question.  Exiting can result in a win-win outcomes.  Today, many single facility owners are selling to quality operators who have the objective to expand their existing portfolio of properties.

The complexity and sophistication of the senior living business has increased substantially over the past 10 years.  A frequently used business cliché is still very appropriate; “evaluate your past with 20/20 hindsight . . . but look to the future with an entrepreneurial vision.”

Contact MDS today to see what your next strategic move should be.  From necessary updates to expansion to an exit strategy, MDS can help you decide on your next step.

How would you like to bring a sharpened, market-responsive focus to your campus, as well as:

• Increase your resident’s average length of stay?
• Provide a “feeder market” for your independent and assisted living?
• Optimize your resident profile?
• Improve your operating profit margin?
• Make productive use of available land?
• Put additional cash in your coffers?

Better still, how would you like to accomplish all of this with limited capital and acceptable market and financial risk?

If this strikes your fancy, and you have some available land on your existing CCRC campus, consider adding active adult housing. While open space on the campus is certainly desirable, many sponsors and owner/operators now prefer to devote part of that land to active adult housing. Many continuing care retirement communities are located on a 20-acre or larger site.

An active adult community frequently consists of single family detached homes with living areas of approximately 1,500 to 1,800 square feet with garages.  The resulting unit density is typically four to six units/acre.  A higher density alternative would be single family attached duplexes, triplexes and quadraplexes with living areas ranging from 1,300 to 1,600 square feet with a density of six to eight units/acre.

Active adult housing can provide a very attractive alternative to your smaller CCRC apartments, which typically range from 600 to 1,200 square feet.

Active Adult Financial Synergy

Adding 25 active adult cottages/villas with a reasonable land cost allocation has a big payoff. Developing the land allows you to realize an increase of land value that you probably already own free and clear.  In addition, when successfully implemented, you will now be spreading much of your existing fixed costs (executive director, general administrative costs, etc.) across additional revenue-producing units.  You will also realize ongoing increases in cash flow after paying all operating expenses and mortgage payments.

You will also diversify your product mix and realize a more optimum resident profile. At the same time, you’ll also extend the average length of stay on your campus.  If you offer any form of life care, you will likely lower your future actuarial and financial risks.  Remember, entry fees (one active adult pricing option) are essentially interest free loans that you get to keep for an extended time – typically for as long as the resident lives on your campus.

Market Positioning for a Slightly Different Resident Profile

When adding active adult villas, you’ll have some unique market positioning issues to address.  Your current independent living or CCRC resident profile probably consists of 70 to 80 percent single/widowed females with a typical entry age of 80 years or more.  Most of these residents have specific needs and have probably already experienced a health related “wake-up call.”  This type of situation has motivated them to make the senior living decision in the first place.

On the other hand, active adult villa residents are typically couples in the 75- to 80-year-old age range, active, and in relatively good health.  Their average entry age will change slightly. Instead of residents moving in at 80 years or older, residents – primarily couples – will typically move in when they are 75 to 80 years old. They desire hassle-free living with the option of purchasing additional a la carte services such as meals, housekeeping, and possibly health care.

Market positioning must be concise and clearly segmented to avoid confusion and cannibalization between your cottages/villas and your independent living apartments.  Each must be positioned as separate products for seniors who have different short-term wants and needs, but common long-term concerns.

To many seniors, this represents the cure for the classical “I’m not ready for retirement living” sales objection.  They can access senior living without a comprehensive array of mandatory services.   To many CCRC owner/operators, it represents a whole new market.  In the past, this niche market of senior housing was usually perceived as a site-specific, large-scale project involving hundreds of units.  But today, a moderate-sized CCRC can boost its bottom line by developing its own brand of active adult housing at minimal cost.

Before moving on, take a very close look at your specific situation and consider whether active adult housing is appropriate for your campus in terms of the location and availability of land.  Also, consider “resident flow patterns” and how active adult housing expands your continuum of living options.  These are important issues you and your team should consider.  Don’t forget the potential financial impact. At MDS, we can help you examine your situation and together determine if this is a profitable situation for your organization.

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Moore Diversified Services, Inc. teams up with Senior Housing News to bring you the most up-to-date industry information you need to succeed.

Senior Housing Expansion Strategy: Keys to Intelligent Growth in 2017

The past few years have been busy for the senior housing industry as existing owners pursued growth opportunities and new players made investments in the sector.  Senior housing transaction volume in the first quarter of 2017 alone hit $4.4 billion, according to the National Investment Center for Seniors Hosing & Care (NIC).

Recent data show some markets are stabilizing while others are overbuilt, and yet in other markets, supply is still well below demand for senior housing.

This landscape means there are still many opportunities for new investors and existing owners and operators to target expansion, whether through organic growth, portfolio acquisition, or through other avenues if necessary.

But today, more than ever, it’s important to have a calculated approach to that expansion – both in understanding the markets and ensuring every deal makes sense from a financial perspective.

With the help of market studies and financial analysis expertise, today’s senior housing players do not have to navigate this market alone.  Instead, they can leverage industry experts to bridge knowledge gaps to make better investment decision.

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Looking to the future, a growing number of operators of individually owned, self-managed senior living communities have two major concerns; 1) they may not be fully aware of all of the issues that need to be addressed in order to keep up with the current state-of-the-art and the growing complexities of the senior living business model and 2) once they identify all of the issues, can they really afford to pay for them?

Multiple property portfolios and large third-party management companies have significant economies of scale and can spread the cost to develop and  implement the necessary strategies to keep up with changing trends.  The future challenges for individual self-managed operators involve two key time frames; 1) short-run, what must operators consider in the next 18 to 24 months? and 2) longer-range, how can they really address the future; at least over the next 24 to 60-months?

Examples of these current and future needs include: sophisticated systems and procedures, comprehensive and expanded business practices, growth and expansion of Information Technology (IT), enhanced business operations efficiency including financial benchmarking, enhanced sales and marketing, human resources, risk management, and increased purchasing power.  One issue is very clear; financial viability and available cash flow is a must in order to procure additional services, resources and professional advice and counsel.  The trends of increasing minimum wage will also impact entry level workers in senior living.

There are four basic property management decision options for senior living communities; 1) continued individual self-management, 2) purchase as-required, short-term third-party management company services and resources while sustaining full self-management autonomy, 3) procure selective management support on an ongoing basis from either local providers or through a negotiated contract with a full service, third-party management consulting firm and 4) full scope long-term outside third-party management support.

Most self-managed operators desire to remain in complete control.  That’s understandable.  But it will be increasingly difficult to achieve.  Some not-for-profits and for-profit operators may think they are somewhat immune to these future challenges.  That’s not true.

To remain successfully self-managed in the future, sponsors and owner/operators must essentially create the same service mix and resources that they might otherwise get from a qualified third-party management company. 

Here is but a sample of some existing and future self-management issues to address.  There are actually about 25 that will surface over the next few years:

1. Systems, Procedures and Policies – Having sophisticated, yet practical, and cost-effective systems, software, operating strategies, controls and performance enhancements.
2. Achieve Economies of Scale – Realizing the potential for creating significant ongoing operations and procurement economies of scale that deliver substantial (and necessary) financial benefits to an individual community.
3. Staying on the Leading Edge – Sustaining the ability to stay on the leading edge of the state-of-the-art in operations strategies and technology in an ever-changing complex industry.
4. Providing Innovative Operating Strategies – Executing cost-effective, consistent and focused market positioning, sales and marketing initiatives, along with cost-effective operations that result in high resident satisfaction and clinical excellence.
5. Implement Risk Management – Having leading edge risk management knowledge, experience and systems. Contractual and resident care litigation will continue to increase along with potential cost exposure.
6. Succession Planning – Operators must recognize that leadership can change by both planned and unpredictable events. Developing existing “bench strength” with existing staff  and forward looking succession planning will also be a mandatory initiative.
7. Growth In Community Based Services – Progressive communities are creating an expanded seamless continuum beyond their campus into their Primary Market Areas. This generates additional revenue and sharpens the image and market positioning of the original senior living campus.
8. Enhanced Organic Growth – That’s a fancy term for expanding service delivery and realizing efficient financial proceeds from an existing asset – the current community.
9. Increased and Sharpened Board Involvement – Board members should no longer be selected or retained as an honorary position. Boards should be carefully diversified based on their specific experience and the ability to directly benefit the community on a continuing basis.

The complexity of the senior living business has increased substantially in the past 10 years.  This trend is projected to dramatically increase over the next 10 years.  A frequently used cliché is still very appropriate; “evaluate the past with 20/20 hindsight . . . look to the future with an entrepreneurial vision.”

MDS can help you evaluate your current position and the ability to continue to self-manage. You must know where you are in order to know how to get to where you want to go. Call us today for an appointment. 

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“You’ve Got Questions . . . We’ve Got Answers”

What are some top priorities I should focus on to become more market-responsive, operationally focused and successful in 2017 and beyond?

I’ve identified five top strategic challenges and priorities for sponsors and owner/operators to successfully address in 2017 and future years.

1) Increasing Resident Age and Higher Acuity – Many independent living communities are turning into “naturally occurring assisted living communities.”  The need for assistance in living for residents is increasing.

2) Aging Physical Plants – Some of today’s older designs are not state-of-the-art or fully market-responsive.  Physical plant retrofit and cosmetic enhancement is a mandatory initiative for many campuses.

3) Increasing Capital Expenditure Requirements – These investments can include functional design modification, cosmetic enhancement and adding market-responsive features like additional dining venues.

4) The Senior Living and Health Care Continuum Is Expanding – Many operators are specifically addressing Alzheimer’s/dementia, memory care and Continuing Care At Home (CCAH).  They also recognize that the psychographics and “birthmarks” of today’s prospect and their adult children/decision influencers have changed considerably.

5) Market Positioning/Sales and Marketing – Key strategies include sharpened marketing positioning, improving the lead management programs, have very targeted and quantified performance objectives and sophisticated social media strategies.

The next steps for you should be to objectively address three critical questions.  1) What will be your strategic position in 2017?  2) What specific action are you implementing?  3) What are your expected outcomes in 2017 and beyond?

Keep in mind I’ve only identified five strategies.  There are at least 25 initiatives that could be considered.

Let MDS help you develop and define your strategic focus. From a quick situation review to a full strategic analysis we can tailor a service just for your needs.  MDS helps clients to accomplish their goals. Contact us today.

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