In the 1970s and 80s, when they first emerged in large numbers, the Continuing Care Retirement Community (CCRC) product was the most progressive vehicle for caring for older adults as they aged. Residents entered CCRCs able-bodied and independent knowing they could move through the CCRC’s various levels of care—assisted living, memory care, and skilled nursing—as they aged and their needs changed. CCRC staff would work with residents and their families to help residents handle the psychological and physical challenges that each level of care move brought. When care management was progressive, many residents actually moved back into independent living units after long stays in the skilled nursing and assisted living wings as flair-up of chronic conditions stabilized and improved.
Also helping to propel CCRC sales was the fact that CCRC’s skilled nursing facilities (SNF) were the most luxurious and best staffed facilities in their service areas. Assured priority access to the CCRC SNF, versus the anxiety of being placed in a community SNF, drove many CCRC unit sales over the last 30 to 40 years. While free-standing, assisted living (ALF) emerged in the 1990s as a more residential and user friendly alternative to the “depressing and dreaded” free-standing SNF; and the fact that assisted living only offered a one- or two-level care continuum still left mom vulnerable to the potential of entering a community SNF should her care needs exceed that of assisted living’s residential setting.
In response, assisted living providers and free-standing congregate housing providers always competed against CCRCs with a sales argument that the risk of prolonged SNF care was minimal and that paying for residential and assisted living care on a monthly rental basis was a better deal than the entrance fee payments required of traditional CCRC providers. When housing values were forever trending upward, the cost of entrance fee admission, while formidable, was tolerable for many seniors because they simply traded their appreciated home value for the price of CCRC entrance fee admission.
As home values have dropped over the last 4 to 5 years, the sales pitch for many CCRCs has returned from a life-style and campus amenities pitch back to the 70s’ and 80s’ era promise of a priority admission to an attractive SNF bed. Evidence of how housing market economics has pushed CCRC admission patterns back to their historic needs-driven SNF is gleaned by the increasing age of CCRC admissions over the last 5 years – which has risen from 78 to 80 years old for many CCRCs to 83 to 85.
Understanding the marketing draw of a full continuum of care and understanding the marketing challenges a depressed housing market has cast on the entire senior living industry, Kindred, Brookdale, Sunrise and other senior housing and assisted living providers are using the advent of Medicare reform to create competing, and often more comprehensive continuums of care than many CCRCs can offer.
Medicare reform seeks to better link hospitals and doctors to the supervision of their patients’ post-acute care. In response, Kindred and Sunrise are developing care continuums that are linked to these physician and hospital payers and referral sources through IT connections and on-site medical clinics, drawing patients from both ends of the continuum.
By adding more medically oriented assisted living and skilled nursing beds and on-site clinics to their housing campuses, these large proprietary firms are providing residents a rental aging in-place alternative to the CCRC. The marketing pitch being that you can forego a CCRC entrance fee payment but still gain access to a full shelter care continuum with priority access to a SNF bed, all under the close supervision of your medical care provider and all without paying an entrance fee. The only drawback being you might need to move from a congregate housing campus to a nearby centralized ALF/SNF and medical clinic facility, which is connected via hourly van shuttle.
By courting newly emerging ACOs and hospital discharge planners to refer acute care discharges to their new SNFs, ALFs, and linked home health agencies, these rental housing providers can now offer medical and insurance referral sources a full post-acute care continuum for their patients that is coordinated and has ongoing communication with these payer/provider entities.
Brookdale’s marketing pitch to the medical and insurance communities is that they are willing to invest in the IT infrastructure necessary to track hospital discharges through not only their first Medicare reimbursed post-acute service but also their second and third post-acute care destinations.
Linking these post-acute destinations is important to hospitals, because they need to worry about Medicare readmission penalties and contemplate a future where they will be at-risk for senior care through the split of a single acute DRG payment that is scheduled to be combined with Medicare covered post-acute services such as SNF, home health, and out-patient skilled therapies. These emerging IT systems allow physicians and discharge planners to communicate with post-acute providers in real time so as to ensure they are receiving the appropriate level of post-acute transitional follow-up and not returning to the hospital due to provider neglect.
Brookdale has started construction on over a dozen “Sweet Life” campuses in just the last 12 months. Each Sweet Life Campus includes a short-stay oriented SNF of 60 to 80 beds and a medically supported assisted living facility of 80 to 100 units, with assisted living residents having easy access to skilled home health and outpatient skilled therapy services. All Sweet Life facilities are co-located near Brookdale housing campuses and close to regional hospitals.
Brookdale’s combining of congregated housing with skilled service levels creates tremendous economies of service delivery that Medical providers are eager to achieve under fixed Medicare bundled payments The physicians are happy, the hospital discharge planners are happy, and the patients and their families are happy, because care is coordinated, access to a new SNF room is assured, and all of it is paid for through monthly residential rental fees combined with Medicare reimbursement, all of which is a much easier psychological investment for many seniors than having to supplement declining home sale proceeds with their savings to afford an entrance fee payment.
The challenge for entrance fee CCRCs is to get into the post-acute care game. Most CCRCs have the best reputations in their communities for hands-on, personal care services. What many lack is a meaningful link to the skilled post-acute marketplace. As ACOs form and Medicare post-acute reforms take place, hospital providers are going to reduce the number of SNFs to which they refer to only those that accept a significant volume of their acute referrals and that have invested in the IT infrastructure needed for all parties to communicate regarding patient conditions and treatment plans.
If a CCRC SNF doesn’t maintain an active short-stay Medicare practice of at least 25 to 30 ongoing short-stay beds, it runs the risk of becoming irrelevant to the health care system, with even existing CCRC residents potentially having to go off-campus in order to make use of their Medicare Part A post-acute SNF benefits. So, your CCRC will not only not have a place in the post-acute marketplace and the enhanced profits it can provide but it will no longer be able to sell new residents on the promise of that private nursing home bed.
One final note, CCRCs struggling to regain strong profitability after 4-5 years of stagnant entrance fee appreciation would be wise to understand the bottom line benefits of adding 25 to 30 Medicare patients to their SNF revenue mix. Most CCRCs treat their SNF as a cost center, a necessary component to attract independent living admissions, but the reality is that adding a Medicare component can turbo-charge a CCRC’s bottom line.
Most CCRCs realize the up-side opportunities but don’t have the treatment oriented expertise to make the transition from convalescent to skilled care provision. We strongly urge CCRCs to either bring such expertise in-house or partner-up with other regional CCRC competitors to seek third-party SNF management contracts to help acquire the technology to make that conversion.
This article was written by Bill Pomeranz and originally appeared in Cain Brothers’ Industry Insights newsletter #767, 4/23/12. It was reprinted with permission from Cain Brothers.