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Senior Housing > Blog > 2016 > October

Why Investors Are Getting More Serious About Senior Housing

The last few weeks we have been discussing the various changes and regulations impacting the senior housing market. From the rule changes affecting new senior housing construction to CMS ruling no more arbitration, it can be hard to keep up with all the SNF news these days. One bright spot we came across is the fact that more and more investors are turning their interests – and bank accounts – to senior housing. For the second year in a row, senior housing was named the most attractive asset list when looked at in comparison to other commercial real estate sectors. This survey was conducted by the National Investment Center for Seniors Housing & Care (NIC) and National Real Estate Investor (NREI).

There are numerous reasons why senior housing is such an attractive investment, some of which you may be able to guess. As Baby Boomers continue to reach the age of needing the assistance and support of nursing homes, we are seeing facilities make adjustments accordingly. These days, technology is a huge factor in SNFs, as are open floor plans that accommodate CMS’ new rulings. With this in mind, senior housing investors are changing their strategies and focusing on acquiring properties that have either been run by long-time operators or are in need of a tune-up. One industry expert named independent living as the “most attractive”, but this should not rule out other facilities.

Let’s now take a look at a few of the top reasons why investors are more serious about senior housing than ever before:

  • The opportunity for growth is significant. Right now the senior housing market is valued at $372 billion and we expect to see this number grow. One of the reasons the sector is still growing is because of the involvement of real estate investment trusts (REITs), which have had a huge role in attracting capital providers.
  • Attractive demographic trends. As briefly mentioned above, Baby Boomers are moving into nursing homes, and there’s a lot of them. In fact, Baby Boomers are the largest demographic of Americans right now, and they will continue to be in need of care and housing supply.
    • Great ROI. When looked at in comparison to other types of real estate property, senior housing has had strong returns on investment (ROI). Thanks in large part to the need-based part of providing care, senior housing is incredibly resilient and will continue to be so.
    • New opportunities. Last but not least, there are many great opportunities for new properties in senior housing today. As the properties age, there is an opportunity for investors to swoop in and refurbish or replace existing facilities in order to meet the changing demographics, and new regulations.

    To learn more about changes in senior housing and why this is a great time for investors, please contact Shep Roylance of The JCH Group today.

    How Rule Changes Will Impact Senior Housing New Construction

    We recently learned that new regulations have been put in place that will impact skilled nursing facilities that are either under new construction or renovations. Effective November 28th, 2016, all facilities are are constructed, reconstructed, or newly certified must have no more than two residents per room. This is significant because, in the past, facilities were allowed by law to have four residents per room. The only exception to this new rule is in the event a facility is certified to participate in Medicare or Medicaid or had their construction plans approved prior to this date. In addition to the new occupancy regulations, facilities must also include specific bathroom fixtures and room sizes must be a certain size. For more information on these changes, you can visit the Federal Code of Regulations 483.90.

    Some of the regulations in place per this document that all SNFs must adhere to include:

    • The facility must provide sufficient space and equipment in dining, health services, recreation, and living areas
    • The facility must be adequately equipped to allow residents to call for staff assistance
    • The operating organization for each facility must review its compliance and ethics program annually

    Prior to these rule changes, facilities were required to make sure each resident room was “equipped with or located near toilet and bathing facilities.” All facilities constructed or renovated after November 28th must ensure each resident room has its own bathroom equipped with at least a commode and sink.

    These are significant changes and will impact the number of residents SNFs can safely and lawfully admit. While senior living floor plans have undergone numerous changes in recent years, the fact that only two instead of four residents can be in a room, and that each room must have its own bathroom, will likely impact senior housing construction in a major way. We will keep a close eye on this subject and notify you of any additional changes. If you have any questions or anything to add on the topic, please do not hesitate to contact Shep Royalnce of JCH Senior Housing Group.

    CMS Rules No More Arbitration: Does it Matter?

    As you may have heard, at the end of September the Department of Health and Human Services issued a new rule prohibiting nursing homes that receive federal funding from requiring its residents to solve any legal issues in arbitration, instead of court. The rule will become effective November 28, 2016, signifying the first major overhaul of nursing home regulations in 25 years. There are a few other notable rules in addition to the pre-dispute arbitration ban:

    • SNFs must provide “nourishing and palatable” dietary options that are inline with residents’ needs and preferences
    • SNFs must create an infection prevention and control program
    • SNFs must create a comprehensive, person-centered plan for every individual resident within 48 hours of admission
      • Either a nurse aide or dietician must contribute to the plan before it is finalized

    This new ruling has raised a lot of questions and concerns among those in the SNF community. On the one hand, many are opposed to it because the previous system has helped nursing homes reduce legal costs. However, this has prevented the families of nursing home residents from getting justice and receiving fair compensation in a wide range of cases, including murder.

    A handful of states (16 + the District of Columbia) have encouraged the government to cut off funding to SNFs that use the clauses, namely because they believe arbitration promotes patterns of wrongdoing and keeps families of residents from receiving a fair ruling.

    The Good and the Bad

    For some, this new ruling is not being welcomes with open arms, as it will undoubtedly increase costs for many SNFs. However, the fact of the matter is that numerous residents and their families have been cheated out of receiving compensation and justice for injuries – and even death – because of old school arbitration rules. Nursing homes operating below standards have not been held accountable for their actions – or inactions – which is simply not right.

    The new ruling will roll out slowly, giving SNFs time to adjust and warm up to the changes. Keep in mind that the changes do not mean arbitration is never an option, but that the contracts are no longer written in a way that will automatically push both parties into arbitration. The policies are designed to reduce unnecessary hospital readmissions, improve quality of care, enhance safety measures for residents, reduce infections, and protect residents and their family members. This doesn’t sound so bad, does it?

    We would love to hear your opinion on the CMS ruling. Are you a fan or in opposition to it? Why?

    Shep Roylance and the JCH Senior Housing Group team are committed to staying on top of the latest news and rulings as they pertain to the SNF community. If you have any questions about today’s blog topic or a different industry-related news story, please do not hesitate to contact us.

    To Photograph SNF Injuries or Not, That is the Question

    Recently questions have been raised as to whether or not it is appropriate for long-term care providers to take photos of resident injuries. During a recent American Association of Directors of Nursing Services meeting, it was brought to the attention of attendees that many long-term care providers discourage employees from taking pictures of injuries sustained by residents. This got us thinking – why would SNFs want to avoid having photographic evidence of resident injuries on hand? It seems as though photographs could be instrumental in uncovering what took place and what type of injuries a resident incurred. As the overall goal of any SNF should be to provide excellent care and attention to all residents, we should encourage caretakers to document any injuries and abuse.

    There are many considerations when discussing whether or not photographs should be allowed in SNF settings, but those who are advocating for this practice in nursing homes often point to the fact that it can help protect the facility from claims of malfeasance. In the event a resident slips and falls, resulting in areas of bruising, it may be a good idea for a caretaker to take pictures of the injuries and document the incident. In some cases, bruises can appear worse after several days, leading to questions and concerns on the part of the resident’s family. If a nursing home has taken a proactive approach to any type of resident accident or injury, they will be able to show the family members their record of the incident, including pictures.

    According to the Centers for Medicare & Medicaid, falls happen quite often in nursing homes and it is important facilities take proper actions to protect themselves. Photos can make it clear what happened, protecting a facility and its workers from a potential lawsuit or any questions as to the quality of care they are providing. It is generally recommended that SNFs have a designated camera or cell phone on hand to be used for documenting injuries and accidents. If possible, make sure your staff does not use their own personal cell phone to take pictures of resident injuries.

    While many SNFs have a procedure in place for documenting resident injuries and accidents, they often do not include visual evidence. In some instances, a written report may not be sufficient. We encourage you to discuss the idea of photographing resident injuries, accidents, or abuse with your staff and come up with ways to improve documentation and include photographs.

    We would love to hear your opinion on the topic – should SNFs be required to photograph resident injuries, or should it be up to each facility’s discretion?