Top executives from several different senior living companies weighed in on a variety of topics ranging from adjusting strategies to accommodate rising acuity levels to thoughts on development versus acquisitions at the National Investment Center for the Seniors Housing & Care Industry’s (NIC) annual national conference, held last week in Chicago, Ill.
Here’s a collection of quotes from those leading Capital Senior Living Corp., Merrill Gardens, Brookdale Senior Living, and Genesis HealthCare:
On creating a value proposition for residents:
All of Merrill Gardens’ apartments are licensed for assisted living, even though its resident census is approximately 65% independent living and 35% assisted living, said president and chief operating officer William D. Pettit, Jr. “We want to make the transition to senior housing as easy as possible,” he said. “Once they move in, they don’t have to move. They’re not segregated.”
Capital Senior Living Corp.’s strategy focuses on geographic locations with lower costs of overhead, allowing the company to leverage its existing platforms and implementing cost-saving initiatives, said CEO Larry Cohen. “We have an industry serving an older senior with more chronic needs; we’ve focused on an increasing level of care to residents to provide more of a continuum.”
Brookdale Senior Living also seeks to offer value to its residents by providing a continuum of care. “It’s something we’ve embraced for a long time,” said CEO Bill Sheriff.
For Genesis HealthCare LLC’s short-term skilled nursing and rehabilitation business, the focus is to discharge patients back to the home in the shortest amount of time possible with the ability to function independently and without a return to the hospital, said CEO George V. Hager, Jr.
On acuity levels:
In 2001, the average age to enter an assisted living community was 79. In 2012, that number rose to 84, says Pettit. What’s happening, he says, is that seniors are becoming better able to manage their diseases.
That’s resulting in a “much shorter window of independence,” he says. Prior to the recession, a Merrill Gardens community would retain a resident for about three to five years. “Today, they come in and might have a year or six months, because they made the decision to wait to make the transition,” he says.
“There’s no question that the person being served in the skilled nursing setting has changed dramatically in the past five years,” said Hager. “The presence of full-time, on-site doctors and nurses is a requirement. The need for higher levels of clinical skill are without a doubt the most important element of how we provide quality care to our residents, and provide a quality outcome.
“The long-term care patient, too—many of those are coming to the facility later in life, later in the progression of disease,” Hager continued. “Even those long-term care patients require a much higher level of care.”
Although the change in acuity acquires operational adaptation, it’s far more of a positive than a negative, says Brookdale’s Sheriff. “The profile of our residents has changed and will continue to change; the acuity level will continue to go up, and we will adapt to that. It requires change in your skill set and capabilities. But we get paid for those services. We need to be skilled at the aspect of properly measuring that and doing it with integrity.”
On the role of developments vs. acquisitions for creating value:
Brookdale: “Acquisitions are still a significant part of our growth plan,” said Sheriff. “We have considerable opportunity of getting very attractive, double-digit returns. Expansion, repositioning, redevelopments—we have a good amount of activity going on in that area.”
Genesis HealthCare: “We have a reimbursement system where our patient population is principally funded and financed by government payment sources,” said Hager. “There are no mechanisms in that to consider the cost of development and new assets. But it’s an increasingly obsolete infrastructure in the skilled nursing space that needs to be replaced and modernized. It used to cost $30,000 to $40,000 to replace skilled nursing beds. Today, it’s more like $200,000 a bed.”
Capital Senior Living: “We’re focusing exclusively on acquisitions,” said Cohen. “There’s opportunity in the fragmented industry to acquire properties [that fit well into our portfolio]. We don’t anticipate [doing] development in the next few years.”
Merrill Gardens: “There are times when you want to develop, and times when you want to buy,” said Pettit. “We believe today that the opportunity to develop high-quality assets is a very attractive value proposition. Four to five years from now when capital starts tracking experience and performance, and starts trying to push too much capital [into new development], the value proposition is going to shift back to buying.
“Right now, if an acquisition comes up that’s attractive, we’ll buy it through our RIDEA partnership with Health Care REIT. In the meantime, we’re going to take the bulk of our capital and focus on development.”
Written by Alyssa Gerace