Senior Living Prepares for Next Big Wave of Consolidation

Serving the nation’s growing aging population could lead to widespread consolidation among senior living operators striving to provide services under healthcare reform, according to experts attending Senior Housing News’ 2013 Summit in Chicago on Thursday.

An important factor has been development relating to RIDEA, which has been a “tremendous game-changer” for operators, according to Dan Decker, principal of Coastwood Senior Housing Partners, LLC, which along with Beecken Petty and KKR own 80% of the Sunrise Senior Living management business.

“There’s going to be a lot of changes,” said Decker. “Consolidation is expected, absolutely, as it will be hard to have an entrepreneurial business to compete against high quality assets like REITs.”


While meeting thresholds to become an attractive asset for REITs will raise the bar higher for certain operators, healthcare reforms that stress evidence-based outcomes will add to the worth of smaller “mom-and-pop” providers.

“People are going to be moving through the post-acute care system,” said Dale Zaletel, former CEO of Lexington Health Network. “Mom-and-pops have a role in that if they can provide quality services and establish parameters to stay in that network, patients are going to flow in and out of that network.”

Those operators that do experience consolidation will be those small, regional-based operators that don’t have the critical mass to support resources for the long-term, noted Rick Exline, executive vice president and director of operations management with Des Moines, Iowa-based LCS.


“Sort of like microbreweries, there’s still going to be a flavor of local operators that will continue to exist,” said Exline.

As the 10 largest assisted living providers represent only 25% of market share, according to data from the Assisted Living Federation of America (ALFA), a substantial opportunity for the industry moving forward will also be to drive increases in penetration rate, says Decker.

However, communicating a positive message for the senior living industry may be an even bigger challenge, according to panelists, especially with the upcoming PBS FRONTLINE exposé set to air July 30, 2013.

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Decker said the segment may function as a catalyst for the industry to organize an effective way of telling its story in a way that resonates in the market, a sentiment echoed by others.

“Penetration rate fits into the growth of senior housing,” said Exline. “We are focused on the positive attention of this industry that not only works with people, but has people serving people.”

Written by Jason Oliva

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