3 Business Benefits of Closer Senior Living, Hospice Alignment

For nearly a decade, American seniors have steadily grown more comfortable with hospice. Nowhere has that growth manifested itself more than in assisted living.

Yet for a variety of reasons — including the lingering taboo around hospice and the administrative burdens that come with Medicare — hospice remains largely an assisted living outsider, according to our recently released deep-dive report on the topic.

There are certainly a lot of factors that a senior living operator must weigh when considering bringing hospice into the building, and there are multiple approaches an operator can take to maximize the rewards and minimize the risks.

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No matter the form, the operators who bring hospice into their buildings see several key care and operational benefits. The new Senior Housing News report explores the pressing need for senior living providers to formulate hospice strategies. Here are the three big benefits providers create by facilitating hospice in their communities — and that other operators are missing if they continue to overlook hospice.

1. Length of stay & occupancy

Among the major trends driving senior living operators to enter the hospice business is its positive impact on length of stay (LOS) and occupancy.

When an AL resident receives a terminal diagnosis and wants to enter hospice, that hospice care will either happen at the community or outside of it, often in a nursing facility. If the hospice is taking place in the AL, that keeps the resident in the community.

And as seen in one eye-popping statistic, hospice in AL isn’t just about keeping a resident in the community during the standard duration of hospice.

That insight comes from a July 2017 report from the Journal of the American Geriatrics Society (JAGS), which revealed that the average hospice patient in AL receives 42 more days of care than the national average — 112 days compared to just 70.

Due to a combination of the health care setting, the demystification of hospice that can come when a person lives in a health care setting, and the most common chronic conditions for AL residents, hospice can have a greater impact in AL than in any other setting.

That is one lesson Brookdale Senior Living (NYSE: BKD) knows well. A major part of the company’s turnaround is focused on hospice, because owning hospices keeps residents in the community. As CEO Cindy Baier said at the RBC Capital Markets Global Healthcare Conference in New York City in May 2019, every five points of occupancy growth equals approximately a $100 million opportunity for adjusted EBITDA and adjusted free cash flow.

Brookdale has found that owning hospices is its preferred approach to bringing the service to its residents. But there is also a LOS play that comes from simply opening one’s doors to an outside hospice provider without the ownership burdens.

“Even if we did not have hospice as part of our program, those residents would still live with us and they would have those (hospice) services provided by an outside agency,” says Gary Anderson, president of Lutheran Senior Services (LSS), which has an average daily hospice census of 79, 90% of whom are in one of the 11 LSS communities.

“We are not exclusive. … We may also on occasion have outside programs servicing the resident, but that resident is still living with us.”

2. Revenue

While quality of life improvements is an important driver for senior housing operators to bring hospice into their communities, there is a business play at work here too. And from major for-profit operators to non-profits, the business side is positive.

These business opportunities can take several forms. Brookdale has gone the ownership route, and continues to tout its hospice business. In Q1 2019, the company’s ancillary services line brought in about $111.5 million in total revenue, a more than 4% increase from Q1 2018. The company credited its growing hospice business as fueling the gains.

Another option comes from Watermark Retirement Communities. The Tucson, Arizona-based operator has contracts with hospice providers for individual skilled beds as they become available, but its most profitable and dynamic arrangements come through leasing space to hospices.

The first one they launched was at their CCRC The Fountains at La Cholla in Tucson, where they lease one of their small houses to hospice provider Casa de la Luz Hospice. This partnership began when Watermark realized that it was not optimizing its space at The Fountains, specifically in its two small houses for memory care, neither of which were ever at capacity.

Their solution was to consolidate the residents of the two houses into one house, and then lease the other house to Casa de la Luz for hospice services for their residents.

Casa de la Luz pays Watermark a fixed, monthly rental fee, which means that the residents moving into hospice no longer count toward Watermark’s occupancy, but the lease makes up for that lost revenue.

“We basically get the benefit of having a noted hospice provider onsite, bringing revenue in but not having to learn the hospice world,” says Richard Howell, managing director of operations at Watermark. “In essence, for that space, it took away our risk of any downside occupancy trend,” Howell says. “If there’s a recession, we know we can count on that revenue through the lease process.”

Another sign of hospice’s dependability as a revenue generator is its margin growth since 2014, coinciding with a staggering increase in for-profit hospices. The March 2019 MedPAC report to Congress revealed that 100% of new hospices established in 2017 were for-profit operations. Two years earlier, the MedPAC report noted that the Medicare margin on hospice in 2014 was 8.2%, with a projected 2017 margin of 7.7%.

Instead, by 2016, the overall margin on hospice was 10.6%, with for-profit hospices at 16.8%.

“For hospice providers, Medicare payments exceeded marginal costs by roughly 14 percent in 2016, suggesting that providers have an incentive to treat Medicare patients,” the report’s authors wrote. “This rate of marginal profit is a positive indicator of patient access.”

3. Referrals

The revenue play in hospice is not just about revenue coming in — it’s about potential revenue of the future. Leaders at memory care provider Silverado, which has an average daily hospice census of 980 across its 20 communities, have seen that a successful experience in hospice is ultimately what family members remember.

“Families that have had a hospice experience (in our community) have a much more positive vision to that whole stay,” says Kim Butrum, Silverado’s senior VP of clinical services. “You always remember how someone died, and to have a good death with the support of the hospice team really helps any senior housing situation.”

Adds founder and president Loren Shook: “(Families) get happier with the senior living community (when hospice is there). They don’t look at the hospice. They look at the senior living community as good or bad relative to how the hospice does.”

This article draws from the new report, “Why Senior Housing Should Embrace Hospice.” Click here to access the complete report, which digs deep into these five trends, reveals the three benefits senior housing operators miss out on if they don’t facilitate their residents’ hospice and fully explores the evolving world that is increasingly bringing hospice into senior housing.

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