Senior living providers have been slow to partner with health systems and payers, but Capital Senior Living (NYSE: CSU) hopes to play a “leading role” in this going forward, according to CEO Larry Cohen.
“It’s the Holy Grail,” Cohen said these types of partnerships. His comments came Tuesday on a fourth-quarter 2016 earnings call.
The Affordable Care Act created a variety of new payment models that incentivize care coordination across acute and post-acute settings and better management of patient populations to limit care in high-cost settings like hospitals. This has led to various formal and informal partnerships among different provider types. However, in the seven years since the ACA was passed, private-pay senior living providers largely have been on the outside of these arrangements.
Now, the time might be ripe for greater involvement.
“It will take some time to evolve, [but] there are some hospital systems very focused on senior living right now,” Cohen said.
Part of the appeal for these hospitals systems and other provider groups is that senior living operators might be able to keep patient populations within their walls healthy and out of high-cost emergency departments and other acute care settings.
However, a major impediment for senior living providers has been a lack of data to prove their value to potential partners, Cohen said.
Other types of providers, which are more health care-focused, collect and report data to the Centers for Medicare & Medicaid Services (CMS), he pointed out. But the goal is not for senior living to become more health care-focused; Capital Senior Living is “not a health care company,” CFO Carey Hendrickson said on Tuesday’s call.
Rather, there are other ways for senior housing to become more data-driven, including by working with post-acute partners that may already be offering services within independent living and assisted living settings.
For instance, Capital Senior Living works with Genesis HealthCare (NYSE: GEN) as a therapy provider. Genesis assesses patient independence utilizing a tool called the modified Barthel Index.
Capital Senior Living residents have the best measurements on this index out of Genesis therapy rehab patients throughout country, Cohen shared.
Another point in favor of senior living playing a larger role in the post-acute continuum is that—at least in more affordable communities—not only might outcomes be better but costs could be favorable compared with other settings.
“The cost of living in one of our [CSU] buildings, at an average rent of $3,535, is 50% less than the cost of home care,” Cohen said. “If you compare it to the cost of skilled nursing at $432 a day, hospitals at $1,800 a day, it’s significant.”
If participation in health care partnerships increases the flow of residents to senior living even slightly, the impact could be enormous, Cohen stated.
“All we have to do is increase the penetration rate of this industry by one percentage point, and if we do that, there will not be a vacant apartment in the entire United States,” he said.
No ‘Unusual’ Activity
In terms of its fourth quarter earnings results, revenue was up 7.7% from the third quarter to $115.8 million. Occupancy, which had been dinged by unexpected move-outs in the third quarter, bounced back 10 basis points to 88.5%. This still was down 70 basis points compared with the fourth quarter of 2015.
However, the weakness in occupancy was not due to new supply coming into CSU’s markets, Cohen said. Occupancy in fact bounced back more than the company expected after the third quarter, and Capital Senior Living does not have a large presence in markets that are highly exposed to new supply, he emphasized. Its competitors, such as Brookdale Senior Living (NYSE: BKD) have cited new competition as a major headwind in recent quarters.
Brookdale also has been rumored to be in negotiations to sell the company in whole or in part to a private equity entity or other potential buyer. When asked whether Capital Senior Living has been approached by any potential strategic buyers, Cohen indicated that there is nothing out of the ordinary to flag.
“There’s always private equity in real estate, but nothing unusual we’re seeing out there,” he said.
Written by Tim Mullaney