For CCRCs, the Future is ‘Grow or Die’

CCRCs are looking to grow now more than ever — but they aren’t looking anything like their decades-old counterparts.

Some are still breaking ground or building additional units onto their existing campuses, but many more are looking to new, alternative ways to grow more efficiently and cost-effectively.

Satellite communities and partnerships are two of the ways CCRCs are expanding their services and market reach, industry experts said during a recent webinar hosted by Irving Levin Associates, Inc.

“What are these old CCRCs going to be doing when this next generation comes up? That’s the real kicker — if it looks, smells or tastes like an old CCRC, they’re not [going to live there],” Dan Cinelli, principal and director at Perkins Eastman, tells SHN. “That [traditional CCRC] market is going to continue to shrink. What you’re going to see is more and more people looking for alternatives.”

One emerging alternative to traditional CCRCs, which offer a continuum of care at one location, are communities that relocate one level of care to off-site satellite facilities.

The Embassy of Asbury Heights, located in the heart of Mt. Lebanon, Penn., is an example of a satellite independent living facility. The six-story building has 27 units and is just 1 mile away from its CCRC “mothership,” Asbury Heights.

“The idea was that there are a lot of younger older adults who are still very active in the community and who didn’t like the lifestyle of an actual retirement community,” Audrey Burgoon, chief of staff at Asbury Heights, tells SHN. “They like the security of knowing they have the umbrella of being under Asbury Heights so the health care is available when they need it, but they don’t have to be here [on campus] to be reminded of it every day.”

While Asbury Heights does offer independent living on its main CCRC campus, The Embassy gives residents an option for a more active downtown lifestyle, Burgoon says. 

The Embassy provides 24-hour security and concierge services in addition to a fitness center with an exercise instructor and a continental breakfast offered six days a week.

Aside from the continental breakfast, there is no dining option available at The Embassy. In many cases, only the satellite facility’s brick and mortar CCRC campus offers dining in addition to health services and skilled care. So proximity to the CCRC campus is key for these satellite facilities.

Because locations of the satellite facilities vary based on factors such as traffic, proximity should be measured in time, not miles, as it may take longer in some areas to travel to and from the CCRC campus, Cinelli says.

To maintain a connection between the campus and the satellite, The Embassy offers van transportation services to Asbury Heights, as well as to outside activities and, for example, the grocery store.

This satellite model is going to become much more common in the coming years as CCRCs run out of room or land at their current locations and as they need to add more independent living units, he says.

“The satellite allows them to build some additional products but not have to build a full-blown CCRC,” he says. “Many CCRCs have a lot of product on the other side of the continuum, but don’t have enough independent living apartments — so they can put an apartment a mile away.”

Other communities are looking at affiliations to expand their reach.

In the next few years, CCRC growth through affiliations, mergers and acquisitions will outpace new campus growth, according to data presented at the Irving Levin webinar by Lisa McCracken, senior vice president of senior living finance research and development at investment bank Ziegler.

“There’s a universal agreement that it’s grow or die — a need to evolve,” McCracken said during the webinar. “There are some that are strategically saying we might want to grow through affiliation or consolidation. That can be driven by a position of strength or weakness; consolidation drivers will depend on providers.”

Ziegler used the term “sponsorship transitions” as an umbrella term that encompasses such affiliation activities as consolidation, joint ventures and partnerships.

With a slowly recovering housing market and more demands being placed on the senior housing industry, organizations are beginning to realize the benefits of scale, McCracken tells SHN. 

“This is not unique to senior living, but similar to what is being seen in the health care sector as well,” she says. “With the increasing demands around health care reform, the need to keep up with technology, etc., having size can matter. Larger organizations are better able to manage an under-performing community because of the other assets they have.”

She adds, “When you are a single-site CCRC and if you are struggling, there is no parent there to assist during difficult times.”

So while consolidation is often viewed as a negative form of business growth, it doesn’t have to be.

“Growth can be through new campuses or expansions, but it can also be changing your portfolio: adding or deleting communities,” said Thomas Meyers, Ziegler managing director, during the webinar. 

Joint ventures are another affiliation strategy CCRCs are using to gain expertise and resources to best position their businesses. For example, with a growing number of senior living communities looking to offer home health care services, some are looking to form joint ventures with agencies that can offer their expertise on the topic, Meyers says.

“Joint ventures can be a great way to join or align an organization, … expand its market and get access to some product or services or some other element they don’t have,” Meyers said.

Service partnerships, a looser form of joint ventures, also offer CCRCs the ability to strategically share services and extend their reach. Communities come together, for example, on an IT platform that’s sponsored by the organizations, but neither of them assume each other’s liabilities or company affiliation.

Whether it be through affiliations, consolidations or satellite facilities, CCRCs will need to change their current model in order to attract the coming generation. This kind of growth is a necessary factor in the CCRC senior living equation.

“If the shark stops moving, it dies, but the constant growth and change and movement in this industry is necessary to keep everything fresh,” said Susan Brecht, president of market research firm Brecht Associates, Inc., during the webinar. “Older CCRCs need to be renewing what they offer and how they offer it.”

Written by Emily Study