Hospitality, Health Care Divide Widens in Assisted Living

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This coverage of the 2016 National Investment Center for Seniors Housing & Care Spring Investment Forum is brought to you by Mainstreet. As the nation’s largest developer of transitional care properties, Mainstreet specializes in real estate development, value investments and health care. With Mainstreet’s support, SHN brings this on-the-spot reporting from the NIC conference, which draws developers, providers and operators within the post-acute and preventative health care services space.

The debate over whether senior living is primarily a hospitality or health care industry has been intensifying in recent years. Now, it appears that rather than coming to a consensus one way or the other, leading providers in either camp are holding firm and building strategies around distinct philosophies.

It’s a phenomenon that could in fact be causing a “bifurcation” of the private-pay senior living sector, one expert proposed at the recent National Investment Center for Senior Housing & Care (NIC) Spring Investment Forum in Dallas.

“I think you’re going to see a group of companies that are very much interested in integrating health care services and offering a very different product for consumers, and I think you’re going to see other companies maintain the housing and hospitality focus,” said David Grabowski, Ph.D., a professor of health care policy at Harvard Medical School, with a particular interest in long-term care.

Each approach presents challenges to providers. In the case of more health care-oriented companies, the issue is how to maintain assisted living’s valuable person-centered focus and high quality of life in non-institutional settings.

“No one wants a ‘nursing home light,’” Grabowski said.

For companies that keep the focus on hospitality, the issue becomes how to enable residents to age in place even as they become frailer.

Although it will become a requirement that providers do both well, the market may be able to sustain both more hospitality-focused and more health care-centric operators, Grabowski said. While it remains to be seen whether this comes to pass, partisans on either side of the hospitality-health care debate presented focused cases at the NIC Forum.

Brookdale Seizes an ‘Advantage’

It may be too sweeping to say that the nation’s largest senior living provider is going big on a health care model, but certain initiatives are taking Brookdale Senior Living (NYSE: BKD) in that direction.

Assisted living has the potential to be key provider within the increasingly integrated U.S. health care system, Brookdale’s Chief Medical Officer Kevin O’Neil, M.D., said at NIC. In the six years since the Affordable Care Act passed, health reform efforts have aimed to control costs by incentivizing different types of providers to work more closely on managing the health of their patient populations. Those efforts have been focused on hospitals, skilled nursing facilities and other provider types that directly receive a large share of Medicare and Medicaid reimbursements—but now more attention is being paid to assisted living and other senior living settings, O’Neil said.

That’s in part because there’s a growing appreciation that assisted living is in many cases a less expensive option than nursing homes and it provides valuable social supports lacking in home care, he said.

Given this new focus, assisted living providers would be wise to beef up their health care services to be attractive partners to hospitals, SNFs, and other players. Preventing hospitalizations and rehospitalizations is one way that assisted living companies can be among the increasingly narrow networks of preferred providers in a given community, O’Neil noted. By piloting a checklist-based program to improve transitions between different care settings and flag at-risk residents, Brookdale has succeeded in slashing its hospitalization rate from assisted living by 17%.

Another facet of the evolving health care system is the rise of Medicare Advantage, in which private insurers contract with the government to manage certain Medicare populations. Medicare Advantage has tripled in patient volume over the last decade, and now more than 17 million beneficiaries are in MA plans, O’Neil said.

Brookdale has taken steps to become a player in MA, notably through a demonstration project launched in Oregon last year. Brookdale Health Options is a collaboration with United Healthcare, in which Brookdale residents voluntarily enroll in a United Assisted Living Medicare-Health Management Organization (HMO). The goal is to reduce Medicare costs while improving residents’ health status. The program rolled out in five communities in Oregon in April 2015 and is expanding to 14 within the next year.





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The enrollment rate so far has been solid, reaching 66% penetration at one community, and it is rapidly increasing, according to O’Neil. One of the main early goals is preventing avoidable hospitalizations for these residents, which should not only improve their health and well-being, but benefit Brookdale’s bottom line as well. That’s because 18% to 20% of residents who are hospitalized also have an additional 30-day SNF stay, and then 50% of these people do not return to the assisted living setting, O’Neil said.

In addition, hospitalization can account for up to 41% of the total Medicare spend for enrollees, so reducing hospitalizations should significantly help the health plan reduce costs—and Brookdale is being compensated by United Healthcare for meeting quality metrics.

O’Neil is a vocal advocate for these types of programs, believing that assisted living should carve out its niche now to be successful in the health system of tomorrow.

“This is going to come at you like a freight train,” he said.

Brandywine: No scrubs

New Jersey-based Brandywine Senior Living is known for offering a premium level of services and amenities at its communities in the Tri-State area, Delaware, and Pennsylvania. Hospitality will continue to be its primary focus, President and CEO Brenda Bacon said in no uncertain terms.

“I don’t want nurses in scrubs walking through our buildings,” she said during a NIC general session. “I’m more concerned with the hospitality services and making sure that that the tap room is fully stocked.”

This is not to say that Bacon and her colleagues have their heads in the sand about the shifting health care system. Brandywine has forged partnerships with four major hospital systems in New Jersey and Pennsylvania, she said. However, Bacon strikes a more conservative tone than O’Neil when discussing how private-pay senior living can become enmeshed with other providers and payors.

“I’m not sure I want to be in a liability risk chain for hospitals and nursing homes, because we can’t really control [the care provided] to our resident,” she said. Putting Brandywine too much at the mercy of government reimbursement rates also is something to avoid, she added.

Rather than putting too much emphasis on what’s going on outside the senior living community walls, improving quality internally is where Bacon believes the greatest payoff will come. Benchmarking quality both against other providers as well as a company’s own past performance will go a long way toward lowering risk and boosting profits, according to Bacon.

“I think that quality has a direct correlation to your margins and success as a company,” she said.

Part of Bacon’s outlook is informed by Brandywine’s early years, when skilled nursing, home health, and other more health-focused service lines were all part of the company. This model was changed largely because key differences in the business models of these services made it difficult to have them all under the same umbrella, she said. Now, while Brandywine can be laser-focused on its core competency of providing a hospitality-rich resident experience, the company partners with outside providers to meet residents’ health care needs.

It’s this approach that Bacon believes can address the challenge of allowing assisted living residents to age in place in environments like Brandywine, which also will help achieve the cost savings that is the goal of large-scale health care reform.

“People are living in their home or in [an assisted living] community that is their home, and utilizing medical services as they need them,” she said. “If we can bring services to help keep them independent, their life experience is going to be much better, and the taxpayers of this country are going to save a lot of money.”

Written by Tim Mullaney

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