Welltower CEO: We Aim To Mimic High-End Senior Living at $1,000 Price Point

Real estate investment trust Welltower (NYSE: WELL) made headlines last week with the official introduction of its new middle-market brand, welltowerLIVING. On Monday, Welltower CEO Tom DeRosa provided additional insight into how the plans for welltowerLIVING fit into a larger strategy to create senior living options for the vast cohort of aging middle-income baby boomers.

“What I’m trying to do with the welltowerLIVING model is mimic what goes on in a $10,000-a-month senior living community for $1,000 a month,” DeRosa said at the Chief Executives for Corporate Purpose (CECP) investor forum in New York City.

Achieving this will be no easy task, but Welltower is pursuing a model that blends purpose-designed buildings with services paid for via Medicare Advantage insurance plans, with technology and other types of products and partners also playing key roles.

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The right design, the right partners

Welltower is no stranger to luxury senior living. The REIT’s operating portfolio is full of high-end communities, and the company also has luxe developments underway, including a Manhattan property where prices could reach about $20,000 a month.

While that shows how high assisted living rates can go, the national median cost still is not cheap — it was in the $4,000 range, according to 2019 data from insurance company Genworth Financial.

Only a small slice of the senior population can afford these types of communities, DeRosa acknowledged in his remarks at CECP.

“I know you were all offended by the amount of money I charge seniors per month to live in our premium assisted living residences,” he told the audience of investors. “So now I’m going to talk about how we’re answering that, because I was not happy with that … that’s not acceptable to me.”

Existing affordable housing stock in the United States, such as garden-style apartment blocks that are common throughout the country, are not an ideal solution. These buildings often feature stairs, narrow hallways, inaccessible bathrooms and other design features that undermine safe aging in place, DeRosa noted.

So, under the welltowerLIVING brand, the REIT is creating purpose-built housing to maintain affordability but address design issues and accommodate a “long arc of aging,” he said. The first three welltowerLIVING communities — located in Las Vegas — exemplify this approach, he said.

To keep monthly rents in the $900 to $1,200 range also means that labor costs — typically a major driver of senior living operating expenses — must be checked. Each welltowerLIVING community will have only two or three full-time employees, DeRosa explained. Rather than relying on in-house labor to provide care, the goal is to prolong residents’ wellness and meet their increasing health needs as they age by partnering with health systems, particularly those that offer Medicare Advantage plans.

Though welltowerLIVING just launched, Welltower already has been making moves into the middle-market space, such as through a joint venture forged last year with Clover Management. DeRosa pointed to how Clover communities in Pennsylvania are working with regional powerhouse health system Geisinger. Through this partnership, Clover residents enrolled in Geisinger’s MA plan have benefits that include access to the health system’s new 65 Forward clinics. There, seniors receive comprehensive care from a team that includes a primary care physician, nurses and other clinicians, as well as care managers that can connect the older adults with community resources to support social determinants of health.

By providing access to this wraparound health and wellness support, as well as the benefits of custom-designed communal housing, Welltower anticipates that residents of its middle-market communities will have extended length-of-stay not only because they remain healthy but because their out of pocket health expenses will remain manageable over time. Meanwhile, the health systems and payers benefit because these seniors should have lower utilization of expensive services such as emergency department visits.

An entrepreneurial experiment in dining

Dining is another cost center for senior living, and Welltower is exploring new alternatives on this front to support middle-market operations.

While taking part in a program at Harvard Business School over the summer,* DeRosa was approached by an entrepreneur who was developing 300-gram frozen meals low in salt and sugar and high in protein, that could be tailored for people with particular conditions such as diabetes. 

“I said, ‘So you’re a health care company.’ She said, ‘No, we’re a consumer packaged goods company.’ I said, ‘I think you’re a health care company,’” DeRosa said.

Today, Welltower is working with this company — called Luvo — to bring affordable meals to seniors, including patients being discharged from skilled nursing facilities owned by the REIT. These discharged individuals often are going home to refrigerators that are empty or full of spoiled food, and they may struggle to cook or shop for themselves. Sending them home with high-quality frozen meals addresses this issue and can prevent readmissions.

In the context of middle-market senior living, Luvo’s low retail price of about $3 a meal opens up possibilities, particularly considering that Medicare Advantage plans may be able to cover some of that cost.

“For $20 a week — you can afford that — we’re going to send you 10 to 15 meals,” DeRosa said. “So this is how you get a company that was thinking … about selling frozen meals at Whole Foods into helping this mission of health and wellness.”

Welltower, which doesn’t have a cafeteria, is also making these meals available to its employees, he noted.

Part of ‘increasingly relevant’ portfolio

The middle-market model that Welltower is driving toward is still in its early stages, but the REIT has been active in putting the pieces together for some time.

In addition to its partnerships with Geisinger and Clover, the company forged a watershed joint venture with health system ProMedica to co-own the large HCR ManorCare portfolio of senior living and skilled nursing communities. More recently, Welltower came together with another health system, Jefferson Health, on a collaboration that likely will include welltowerLIVING communities, DeRosa noted Monday. And the REIT also expanded its investment in senior apartments through deals with provider Priya Living and developer Terwilliger Pappas.

With all these partnerships, operating innovations and other experiments in the works, it’s all but certain that Welltower will have to learn on the fly to create a profitable and scalable middle-market product. But with the number of middle-income seniors expected to hit 14.4 million by 2029, DeRosa is striking a confident tone about the decision to focus on this segment as part of the REITs’ effort to restructure its diversified portfolio since he took the helm in 2014.

“Welltower has taken a very active approach … by acquiring, recycling and developing properties to maintain a high-quality, modern, sustainable and increasingly relevant asset portfolio,” he said on Monday.

*Editor’s Note: A previous version of this article stated that DeRosa was teaching at Harvard Business School. The story has been updated to reflect that he was taking part in the school’s Dialogue program. SHN regrets the error.

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