The health care industry’s shift in focus from acute care in a centralized setting to treating people in their homes is creating ripple effects across the senior living market.
Senior housing owners and operators need to prepare for the shift or risk being left behind, National Investment Center for Seniors Housing & Care (NIC) founder Bob Kramer said during a Tuesday webinar.
Preparing for the shift will not be simple, though. It will require operators to rethink partnerships and collaboration in care delivery, and respond to new payment dynamics.
The ‘drive to home’
The shift — which Kramer calls the “drive to home” — is in its early stages. It is being caused primarily by consumer desire for being treated in their homes, from post-acute through hospice and palliative care, and will have a long-range impact on a senior housing industry already dealing with historic low occupancy rates.
“Any care that can be done at home, will be,” he said.
This is in large part because of a growing recognition that emergency departments, hospital inpatient wings, and even doctor offices are dangerous places for older adults, often degrading their health and wellness.
As the shift toward home continues, this can have a lasting transformation on how frail seniors and people with cognitive disabilities or mobility impairments will be treated.
Technology is another driver in this change. Home health devices and telehealth services allow better, real-time communications between doctor and patient, without the need for face-to-face meetings.
The third factor behind this shift is that payers are now willing to reimburse operators for these services, because they realize the preventive treatment model will lead to more savings for consumers and payers long term.
Changes in Medicare compensation forcing invention
The pace of change is being facilitated by the transformation of the fee-for-service Medicare payment system, Anne Tumlinson Innovations founder and CEO Anne Tumlinson said. With changes to and the expansion of Medicare Advantage and other replacement programs, payment now depends on patient outcome, or a bundling of services.
The good news is that as payment systems shift, senior living settings are being recognized as “home” for many older adults. This is opening up potential new revenue sources, including Medicare Advantage, for providers. Starting this year, some MA plans are covering non-skilled, in-home care — exactly the types of services often offered in senior living.
“The definition of ‘home’ is changing,” Tumlinson said. “A quarter of seniors live somewhere other than a single family dwelling. Every real estate organization should form partnerships across the care continuum, as they create value and provide needed integration.”
But to keep up with and benefit from shifting payment models, senior living providers will need to forge the right cross-continuum partnerships to offer wrap-around care. Entering the right partnerships with care providers will save money over the course of a senior customer’s life, Tumlinson said.
“When serving Medicare beneficiaries, the best way to get at high costs and improve value is when care is integrated,” Tumlinson said. “It will require non-medical capabilities and working together.”
On the non-medical side, senior housing capital providers are beginning to apprehend the importance of care coordination and strategies to tap potential new payment streams, said NIC Chief Economist Beth Mace.
“They’re starting to understand the change happening and posing questions to operators,” she said.
Rising interest rates, upward pressures from wage growth and a tight labor market, flat rent growth and growing expenses all pose challenges to operators, she added, and forging new health care partnerships to create additional service lines — and maybe draw from new reimbursement models — could help, she added.
“Operators need to think about offsets that can grow net operating income,” she said. Operators can increase revenue by enhancing services, increasing length of stay and making facilities a one-stop shop for care.
Taking on risk
Operators also need to consider absorbing some financial risk, if they wish to be in the mix for referrals in the longer term, Tumlinson said.
Doing so runs counterintuitive to protecting oneself from exploding health care costs, which could make some organizations understandably skittish. And it’s not necessarily easy to get the timing right.
With so much change and disruption happening, it is easy for an operator to overestimate the level of innovation happening immediately. More operators, however, are prone to underestimating how changes will affect them in the future. Any partnership strategy should begin with assessing payers and referral patterns in a given market, Kramer said.
“The danger is an operator can become irrelevant and lose customers, if it is not part of a referral network,” he said.