Bold new models of adult day services are beginning to enter the market, and senior living providers would be wise to take note. Their standard adult day offerings may lose luster in the face of these new options, but providers also may be ideally positioned to take advantage of a growing market opportunity.
While many senior care providers already offer adult day services in one form or another, the scope and quality of such services can widely vary from company to company. Typically, adult day services provide supervised daytime care, activities, some transportation and meals or snacks, all of which is funded by a mix of Medicaid, private-pay, long-term care insurance and other payment sources.
In addition to adult day offered within senior living communities, standalone centers are an option. But the old model is rapidly evolving, with providers such as Innovation Senior Management (ISM) exploring new adult day services that could break the mold. And ventures from longtime home care stakeholders — Senior Helpers CEO Peter Ross and Mark Heaney, former CEO of Addus HomeCare Corporation (Nasdaq: ADUS) — may also represent a new way forward for the product type.
Senior living providers who don’t take heed of these emerging trends could miss out on opportunities that are ripe for the picking, said ISM’s Founder and CEO Pilar Carvajal.
“I think it’s going to be a missed opportunity for those that decide not to do this,” Carvajal told Senior Housing News.
Adult day by the numbers
Robust data on adult day is lacking, but available numbers show that it is a relatively small but growing segment of senior care.
The total number of U.S. adult day centers grew by more than 35% from 2002 to 2010, according to an industry study from MetLife Mature Market Institute, the Ohio State University College of Social Work and The National Adult Day Services Association (NADSA). As of 2014, there were about 5,685 adult day programs in the U.S.
Adult day centers usually are a lower-cost option compared with traditional senior living services. The national median cost for one day of adult day health care is about $72, according to the most recent Cost of Care Survey from Genworth Financial (NYSE: GNW). By comparison, the median daily rate for an assisted living community is about $132.
That lower cost is a tool for industry providers looking to reach the sizable middle market, according to Dana Wollschlager, partner with Plante Moran Living Forward.
“[Adult day] is going to be an important part of the senior living continuum in the future, specifically as it relates to affordability,” Wollschlager told SHN. “It is an affordable option for private-pay seniors who wish to make their resources last and can’t afford $4,500 a month for assisted living.”
Amid the rise of adult day, some companies are taking advantage of the trend by updating the model to suit the needs of a new generation of older adults.
One such endeavor is Town Square, an adult day model from in-home care services franchiser Senior Helpers.
The model converts large buildings into dementia-friendly indoor streetscapes with amenities and designs from the 1950s. The plan is for each center to have different “vignettes,” or unique stations modeled to look like diners, movie theaters and hair salons from a bygone era. There, residents would take part in programming aimed at preserving cognitive function and keeping them from feeling isolated.
“It’s like they’re going back in time,” Ross told SHN. “I call it the Disneyland for adult day programming.”
Town Square is also designed to shake up the traditional adult day model, which is often stigmatized by older adults and their families.
“We’re really trying to give [older adults] a purposeful experience that is much different than a current adult day center in this country, where most of them are one big room, and you’re either playing bingo or watching a movie,” Ross said.
The model comes with another draw in addition to its programming: It’s cheaper than traditional senior living, at just $95 a day for residents. This affordability will help bridge the gap for older adults who need more care and want to stay at home but are unwilling or unable to move into senior housing.
“The real issue for this country is the middle income group, which is probably 50% to 60% of the market, if not more,” Ross explained. “Town Square fills a huge void for that group of people, because for $95 a day … it’s a godsend.”
Like a traditional Senior Helpers home care business, the Town Square model will be franchised. A typical investment from a prospective franchisee lies between $1.2 million and $1.7 million, with 75% to 80% of that eligible for small business administration (SBA) financing, Ross said.
The Baltimore-based home-based services company opened its first Town Square location near San Diego last year in a partnership with the George G. Glenner Alzheimer’s Family Center, which originally spearheaded the model. Another is scheduled to open later this fall in Baltimore.
And that’s perhaps just the beginning for the Town Square model.
“We have 11 franchises sold already … and we have a huge pipeline as well.” Ross said. “So, we feel good and we’re off to a great start.”
Ross isn’t the only longtime home-based services leader that sees growing opportunities in the adult day space. Former Addus CEO Mark Heaney now serves as an advisor for Post Capital Partners, a private equity partnership interested in adult day center opportunities.
“Our objective is to provide a full range, comprehensive set of community-based, home-based care in dense urban population centers,” Heaney told SHN. “We think adult day care will be an important part of our service delivery offering, but so will home health, so will personal care, so will meals, and transportation and other necessary services.”
In particular, Heaney sees adult day settings as potentially more cost-effective than a one-on-one personal care approach. This will appeal not only to consumers, but to insurance payers, which will gravitate to the economic benefits of adult day centers, he explained.
“You can get three or four hours of personal care, or you can get eight hours of adult day with transportation and two meals at a lower rate, in many cases,” he said. “So, it’s an attractive alternative.”
New way forward
There are some senior living providers that already see the upside in offering adult day services, such as ISM. The Miami Beach, Florida-based company currently manages six senior living properties, and owns and operates one, in the Sunshine State.
ISM is working on adding adult day components to all of its assisted living communities. It’s also considering opening standalone adult day centers, where older adults would take part in a variety of activities including tai chi and yoga.
Part of that effort is aimed at attracting baby boomers, many of whom turn up their noses at the thought of adult day services as they exist today. Too often — at least in the Miami market familiar to Carvajal — adult day centers are essentially large rooms with basic services, she said.
That necessitates a shift in the overall model.
“We always talk about the baby boomers and what they’re going to want … but the adult daycares are not vibrant right now,” Carvajal said. “So we want to create a vibrant center where people can make friends and get an education and learn how to live as well as they can.”
There are two main benefits for senior living providers who want to get into that line of business: new referral sources and another revenue stream.
“Just like you see assisted living with a feeder into memory care, I really see an adult day feeder into assisted living,” Carvajal said. “It’s a way to gain trust from people that want to try us on for size before committing to a lease.”
Like Ross, Heaney and Wollschlager, Carvajal emphasized that adult day’s affordable nature also makes it a powerful value proposition for middle-market older adults. And while there is still a stigma surrounding the product type, that stigma can be surmounted through a shift in branding.
“There’s a perception issue right now with the ‘adult daycare’ nomenclature,” Carvajal said. “What’s out there today, it’s not attractive, so we have to create something attractive.”
Because most senior living providers already have many of the components of an adult day program — such as a kitchen, activities or wellness initiatives — such an operational component likely wouldn’t be a heavy lift.
“[Adult day is] icing on the cake as far as I’m concerned,” Carvajal said. “It makes a whole lot of sense.”