In an effort to win over the next generation of senior living residents, providers are beginning to rethink traditional models such as the entrance-fee continuing care retirement community (CCRC). One new alternative — the “micro-CCRC” concept being developed by Wilsonville, Oregon-based Avamere Companies — has encountered some construction delays but is on track to hit the market next year.
Avamere first announced the micro-CCRC concept in February 2018, and unveiled the “Ovation” branding for these projects last fall. The first two projects are coming out of the ground in Omaha, Nebraska, and St. George, Utah. While winter weather slowed construction, the Omaha project is on track to open in September 2020, according to Ryan Haller, chief development officer for Point Development, the development arm of Avamere.
Haller is slated to discuss the micro-CCRC concept at the upcoming Senior Housing News BUILD conference, to be held in Chicago on May 8. In advance of that event, he sat down with SHN to provide an update on the projects and explain why Avamere believes a new version of the CCRC is needed.
The following has been edited for length and clarity.
The micro-CCRC consists of independent living, assisted living and memory care, but no on-site skilled nursing facility. Skilled care will be provided by Avamere’s home health company, Signature, and at nearby rehab centers. Why remove the SNF component?
The skilled nursing business, I think, is an evolving marketplace right now. We think part of the micro-CCRC concept is redefining, does skilled nursing go in the typical CCRC? And we think not. But in those same markets, we’re looking to acquire short-term skilled nursing. We just don’t think it belongs in that continuum of care on a single campus.
You said skilled nursing is evolving right now. Are you thinking of the new Medicare patient-driven payment model (PDPM) that is slated to take effect in October?
Well, I think it’s all the industry headwinds that we’re seeing with skilled nursing. I think for starters, Medicare and CMS [Centers for Medicare & Medicaid Services] have made it pretty clear that they don’t want to be in that market. The cutbacks they’ve been doing have been pretty incongruent with the augmentation of minimum wages. As a consumer price index rises in any town, there is not a congruent adjustment to reimbursement rates. And as you look at PDPM, I think there’s even more losers that come out of that as well.
So I think that as the economic headwinds continue to prove that skilled nursing is not a viable option —- especially in these Medicaid markets, because that’s what skilled nursing has become —- I just don’t think it’s going to be a profitable line of business to have in something you’re trying to promote as vibrant and you’re trying to promote as youthful. That’s everything that baby boomers want.
If you need transitional care in our Ovation markets, we will own transitional care in the same town. It happens to be two miles down the road. But we don’t want that general look and feel in our campuses because we want to send the messages that it’s very urban, chic, and very hip. Skilled nursing, even if it’s short term, never sends that message.
You mentioned that skilled nursing is primarily Medicaid driven, as this is the payer for long-term care in that setting. It sounds like you envision long-term care in the future to look like assisted living or memory care supplemented with home health or short-term therapy stints?
I very much believe that.
I think … we’re just lucky enough or strategic enough that we have a pretty sizable home health and hospice business … So we said, “Why have more skilled nursing in our Ovation campuses, when those folks can supply the same services that you see in skilled nursing? For a fraction of the cost, they can run those businesses and hopefully allow people to age in place as long as possible without going to the long-term skilled nursing facility.”
So, unless you’re company like Avamere, which owns assisted living and skilled nursing and home health, among other businesses, the micro-CCRC model is a tough play.
I totally agree. I mean, if you’re selling the micro-CCRC concept, you better have a home health company, you better have a rehab company that’s attached to your business. Either through a joint venture or through owning them. So for us, it was just maximizing or parlaying brand equity and the brand capabilities and the operational capabilities of all of our companies into one concept.
There are a few people that approached me [and said], “We’re doing the same exact thing.” And I start explaining they don’t have home health in it, they don’t have wellness … they’re just doing independent living, assisted, memory care over three or four buildings.
I mean you look at a traditional CCRC. Some of them are towers which are very expensive, $250 million to $350 million to build. Some of them are 60 acres of land. We’re very specific. We do not go over 8 acres. We’re very compact. And we go vertical, usually four stories. And then for all those other amenities that typical CCRCs have, we say, “You know what? We paid for that in land price.” We may have paid a little bit more in land price but it’s because we’re in the dead center of an entertainment zone where you can get all those other amenities by walking within two or three blocks.
Can you elaborate a bit on the types of urban infill sites that you’re targeting for this model? I imagine these mixed-use sites are somewhat hard to come by?
They’re harder in major urban metropolitan areas. There are other parts of this country … We’re a big believer in the tertiary-plus market.
Developers, as retail starts to fail more and more, they’re looking replacements for retail. So they’re looking for restaurants, they’re looking for more apartments, and the retail that does go into urban lifestyle centers is usually like the Bonobos model … But the old brick and mortar of the Crate and Barrel store and the Best Buy, that’s not growing. So they’re looking for senior housing opportunities that come with a lot of these.
We’ve actually signed up several developers in the country that don’t specialize in senior housing to find land opportunities. We’ve signed up for urban lifestyle center type brokerage firms. And they typically have opportunities of five to eight acres in most of these developments. And that’s where we’re looking to build.
But you can’t go and build an $85 million to $100 million dollar campus in every single market. There have got to be certain boxes that you check economically. I would tell you what we’ll be announcing, probably over the next six to 12 months, probably three more Ovation properties. And we don’t have a hard Mason-Dixon line but it’s kind of Minnesota, Iowa, Nebraska, Kansas, westward.
Interested in learning more about Ovation, and other ideas for how CCRCs are being redefined for the next generation of senior living residents? Attend the Senior Housing News BUILD conference in Chicago on May 8.