As headwinds continue to batter the senior housing industry, some not-for-profit providers are looking to partnerships or mergers as a way to grow scale in order to thrive — or in some cases, simply survive.
“In the last three years, a number of organizations are saying, we could go on independently … but where do we need to be to really thrive in the decades ahead?” Ziegler Director of Senior Living Research and Development Lisa McCracken told the audience Monday during a panel at the LeadingAge Leadership Summit in Washington, D.C.
Since 2010, 568 not-for-profit senior housing communities have changed owners or sponsors — with the for-profit sector gobbling up around half of that total, according to recent data from Ziegler Investment Banking.
New competition, a changing health care environment and other market pressures are further squeezing the not-for-profit sector and creating incentive for some providers to join forces. Two recent and notable examples of this trend include last year’s merger between the Evangelical Lutheran Good Samaritan Society and non-profit health system Sanford and the affiliation between Acts Retirement-Life Communities and Integrace.
Smaller providers seem to be collaborating with industry stakeholders more, too. A little more than a third of the 2018 LeadingAge Ziegler 200 (LZ 200) have engaged in some form of joint venture, either with another provider, a home health or home care agency or a health system.
Strength in numbers
The reality for many not-for-profit senior living providers is that scale and size are critical to thriving and surviving in today’s marketplace.
This can happen in a number of ways, such as the 2018 “merger of equals” between Augustana Care and Elim which created Minneapolis, Minnesota-based provider Cassia. The merger created an organization that is better able to leverage its efficiencies of scale, according to Cassia CEO Bob Dahl.
“We’re opening six locations, all-new and managed sites,” Dahl said during Monday’s panel. “That’s capacity that, on our own, we could not have done.”
But senior living providers don’t need to be sizable regional players to find useful partnerships. For example, Chicago Methodist Senior Services, a senior housing and care provider based on the city’s north side, was able to launch a number of joint ventures aimed at helping the organization scale and stay relevant, according to Bill Lowe, the organization’s president and CEO.
For an organization like Chicago Methodist — a “virtual CCRC” spread across six senior housing and care properties in the major metro market — the traditional way of growing through steady new openings or acquisitions is simply off the table. And at the same time, competition in Chicago, particularly on the for-profit memory care side, is fierce, Lowe added.
“On the one hand, we could certainly be satisfied by what we’ve assembled on the north side of Chicago,” Lowe told Senior Housing News. “On the other hand, in order to survive, these joint ventures become more important.”
Through strategic alliances, partnerships and JVs, the organization is able to continue its mission and care for residents the way it has for over a century, even in the face of stiff competition. In some cases those joint ventures are vertical integration initiatives such Parasol Alliance, a company co-founded by Chicago Methodist which handles IT strategy and operations for the organization and four other non-profit partners in the area. Another is Symbria, a therapy, rehab and pharmacy services company founded by Chicago Methodist and 11 other non-profit senior living providers in the late ’90s.
The arrangements have saved Chicago Methodist plenty of money, and all for services the organization needed in any case. And those are just two of the ways the nonprofit links up with other industry players.
In the end, it’s all about positioning the organization through its 200th birthday in 2098.
“We’ve created a boutique housing and health care operation that we hope is sustainable,” Lowe said. “We’re great neighbors, we’re married to the community, and we can hopefully do that for centuries to come.”