If you have ever thought that technology was a young person’s game then you would be sadly mistaken. In fact, it is becoming an integral part of senior living and shaping the way senior living facilities function.</p><p>There are several alert systems on the market that monitor the patterns of those living in the community. It is a more reliable alert system and provides and the additional level of connectivity in case of an emergency.</p><p>Connectivity is important not only for emergencies but for staying in touch with family and physicians. Modern technology allows seniors to stay in contact with their family and keep track of their medical appointments. Both are vital to maintaining great mental and physical health.</p><p>For more information about senior living centers, look to Shep Roylance of The JCH Senior Housing Group.</p>
New investors are entering the senior housing space prompted by the favorable investment return, which is well above the return on other investment opportunities. Motivation for investors is also prompted by favorable demographics. The aging of the population continues to play a key role in driving demand for senior housing services. With 55 million older Americans searching for homes by the year 2020, the market for this type of housing is huge and growing exponentially every year. Low interest rates are a significant force contributing to the ease for which new entrants can enter the space as senior living providers.
Furthermore, senior housing portfolio diversification is a draw for new entrants as senior living providers. The four types of facilities – independent living, assisted living communities, skilled nursing communities, and continuing care retirement communities – offer attractive investment choices to the new investor. Let’s take a closer look at each of them:
- Independent living facilities operate much like any other multi-unit complex, except that they are marketed explicitly to people in their golden years, and usually offer communal dining, housekeeping, and transportation. Independent living represents about 10 % of the senior living market.
- Assisted living facilities make up about 50% of the market. Non-medical services often include memory care, which is one of the reasons these facilities are so attractive to investors.
- Skilled nursing communities provide long-term, round the clock care for seniors who need intensive medical attention. This type of community currently has about one-third of the market. Although the nursing home market may be ripe for growth, experts warn that unless a new investor has a background in healthcare, they would be wise not to take their first foray into senior living investing in this type of complete care environment.
- Community care retirement communities offer blended levels of service including independent, assisted living and nursing home care all on one campus.
So, for all your ‘new kids’ on the senior housing block, watch, listen and learn. Make sure you are doing your homework before diving into this industry. Since you will be responsible for the health, well-being and, in large part, the happiness of people’s parents and grandparents, purchasing property geared toward seniors is not only a real estate investment, but also a hospitality and healthcare business. Experts say that successful investors in senior living should have a broad expertise in real estate, and should know what it takes to operate the facility. Even if you plan to be a silent partner, only owning the property, you will need the knowledge to ensure that competent people are operating your facility, since you could be ultimately liable for the inherent risk that comes with the medical and assisted care industries.
While the senior housing market is a huge undertaking not to be entered into lightly, with some smart planning and good business sense, senior housing will make a wise addition to any investor’s portfolio.
Shep Roylance, Senior Vice President and shareholder of JCH Senior Housing Group, is available to answer your questions. If it is your desire to get started in this exploding and rewarding investment Shep will help you get started. Shep Roylance S V P | JCH Senior Housing Group Direct: 805.633.4649 Text: 818.515.0530 eFax: 805.392.5171 Email: email@example.comWeb: www.thejchgroup.com BRE: 1378282
Back in April of 2015, the Centers for Medicare & Medicaid Services (CMS) issued a statement outlining the proposed 2016 Medicare payment rates for skilled nursing facilities. The stipulations surrounding this statement included proposed policies that were in line with the shift of Medicare payments from volume – as in “fee for service” – to the value model. n an effort to change from volume to value, the administration has set measurable goals and a timeline to move the Medicare program, and the healthcare system at large, toward paying providers based on the quality, rather than the quantity of care they give patients.
The proposed rule includes policies that advance that vision and support building a healthcare system that delivers better care and spends health care dollars more wisely, resulting in a healthier population overall. Based on proposed changes contained within this rule, CMS projects that aggregate payments to skilled nursing facilities (SNFs) in 2016 will increase by $500 million, or 1.4 percent, from payments in 2015. The estimated increase is attributable to a 2.6 percent market basket increase, reduced by a 0.6 percentage point forecast adjustment and further reduced by 0.6 percentage point, in accordance with the multi-factor productivity adjustment required by law.
What Does All This Mean?
The improving Medicare Post-Acute Care Transformation Act of 2014 requires the implementation of a quality reporting program for SNF’s. By 2018, SNF’s that fail to submit required quality data to CMS will have their annual updates reduced by 2 percent. CMS proposes the adoption of three measures addressing three quality domains identified in the impact act: Skin integrity and changes therein; incidence of major falls; functional status, cognitive function and changes in both therein. These measures require standardized data reporting across four post-acute care settings, including home health agencies, inpatient rehabilitation facilities, skilled nursing facilities, and long term-care hospitals.
By changing from a fee for service to a value model for reimbursement the industry as a whole becomes more efficient. The senior care provider has an incentive to improve the quality of care to their residents and is rewarded for their effort. Treating the “wellness” of an individual by addressing all physical, emotional, and spiritual aspects produces a healthier, happy resident. In a nutshell, the proposal supports building a healthcare system that benefits all, healthcare dollars are spent more wisely, and the senior population is healthier and happier.
High demand, cheap capital, retiring baby boomers and clarity in reimbursements have all contributed to a favorable environment that allows for small skilled nursing providers to expand. Acquisitions by skilled nursing providers with large portfolios are actively increasing their presence in the market. New investors are entering the space as senior housing has become an accepted asset class.
Although public and privately-held real estate investment trusts (REITS) remain the most active buyers of senior housing properties in terms of total investment, there is increased activity from small and large skilled nursing providers. Operators that own one or two facilities are drastically and aggressively growing their portfolios. Mergers and acquisitions are the growth strategy for skilled nursing providers. Consolidation activity in 2014 contributed to a 38% increase in transaction velocity compared with the prior year. We also saw a 40% increase in the average price per bed to $95,100, according to a recent research report.
More and more opportunities are presented to small operators as institutions owning larger portfolios ranging from 50-25 beds sell off the non-core assets. We are seeing a shift in the market with smaller regional operators becoming more aggressive, producing better outcomes than a 300-400 provider operator, for example. The flexible ability that small providers have in the structure of an acquisition contributes to the ease of completing a transaction from a larger provider to a small provider. Furthermore, small operators are open to many options. A transaction can be structured as a business only purchase, as a lease purchase, or a lease back transaction as well as a sale of the business and the real estate.
What Does All This Mean?
2015 followed a year that brought blockbuster acquisitions and record-breaking deal volume by large senior housing provider, and we expect this to continue through 2016. The ranking of the largest senior living providers reflects the growth and consolidation of the top players in the market. For example, the merging of Brookdale Senior Living and Emeritus Senior Living brings the combined equity’s total resident capacity to 113,022 with 1,140 properties, according to the Assisted Living Federation of America. With less than half the resident capacity of Brookdale and less than one-third of the number of properties, Holiday Retirement ranks second in the ranking of the top largest senior living providers. Ranking third is Life Care Services LLC with a resident capacity of 25,989, followed by five-Ssar Quality Care (25,133 and Sunrise Senior Living (25,085).
The healthcare industry is growing stronger and wiser as the entire landscape is changing. Heightened demand creates incentives and opportunities for small and large providers to grow bigger and better, resulting in a favorable bottom line for investors and better care for the senior population.