When the novel coronavirus first swept the United States in late March and April, the pandemic raised fears about vulnerabilities for independent living, but this part of the senior housing continuum has so far proven resilient.
In the early days of Covid-19, the better health, mobility and independent nature of residents made social distancing and self-isolation a bigger ask, and the leaner staffing to operate these communities gave residents less support in the form of caregiving and other services. But independent living communities have largely been able to keep the virus at bay; the penetration rate for independent living averaged 0.4% as of June 30, according to an executive survey insights survey released July 26 from the National Investment Center for Seniors Housing & Care (NIC). The penetration rate for the virus was 2.9% for assisted living communities, and 3.9% for memory care.
Occupancy rates among independent living have declined at a slower pace than assisted living and memory care, as well. And providers are reporting an accelerated pace of move-ins, and interest in the product type — a positive sign, given concerns that consumers might avoid this less needs-based type of senior housing due to fears of communal living.
Sales and marketing teams, meanwhile, have adapted to the new environment and tailored their marketing campaigns, striking a balance between the lifestyle independent living offers with the daily reality of the Covid-19 landscape, Integral Senior Living President and CEO Collette Gray told Senior Housing News.
“We’re not shying away from the fact that this is our reality right now,” she said.
And Integral is not the only large senior living company bullish on the prospects for independent living. Providers Discovery Senior Living and Leisure Care, as well as real estate investment trust New Senior (NYSE: SNR), are also reporting positive momentum.
Positive occupancy trends
As the pandemic first swept the country, providers scrambled to secure communities to only essential personnel and stockpile as much safety gear, disinfectant, cleaning supplies and personal protective equipment (PPE) as possible. Independent living providers were no exception.
But the early shutdowns proved pivotal for the segment. Providers were able to step back and reassess their restrictions as more was learned about the virus, and kept residents and their families abreast of new guidance from the Centers for Disease Control and Prevention (CDC), as well as state and local public health departments. It also gave time for providers to lock in their testing protocols for residents and staff, and implement social distancing guidelines for residents in independent living.
As states that were quick to institute their own restrictions began phased reopenings, independent living providers were able to gradually open up communities for move-ins, with safety guidelines in place.
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As providers become better equipped to respond to operating communities while in a pandemic, and with move-ins gaining in velocity, there are signs that independent living is handling the outbreak stronger than its more needs-driven care segments — in some cases even outperforming executives’ initial expectations.
An early glimpse into independent living’s resilience was New Senior’s earnings in the second quarter of 2020. The New York City-based REIT — which has a portfolio of about 100 communities, dominated by independent living — trimmed expenses by 4.5% despite losing 250 basis points in occupancy in the quarter.
New Senior CEO Susan Givens attributed the cost cutting to flexible staffing schedules and managing supply costs.
“We believe that this is a unique attribute of independent living, and while others in senior housing have experienced large spikes in health care-related labor costs, including hazard pay and overtime, we have not incurred those expenses,” she said during the REIT’s earnings call earlier this month.
In fact, the REIT’s financial performance has been “much better than we had originally anticipated at the start of the pandemic,” Givens said.
Carlsbad, California-based Integral instituted a phased reopening approach to its independent living portfolio of 34 communities in 21 states, and has the ability to secure communities quickly if someone tests positive for the virus, Gray told SHN. Residents that test positive for the virus are restricted to their apartments, meals and activities are delivered directly to them, and staff and home health care workers are required to wear full PPE when interacting with them.
Residents have mostly been amenable to the protocols, although some are eager to return to a pre-coronavirus lifestyle.
“We’re starting to see some of that pressure. Once you have visitors in communities and they can see their family members, it’s helped alleviate a lot of the pressures that we’ve seen throughout our portfolio,” Gray said.
Like the industry at large, independent living experienced a significant drop in occupancy during the pandemic’s early weeks. The occupancy rate for majority independent living communities in the 31 primary markets tracked by the National Investment Center for Seniors Housing & Care (NIC) decreased 80 basis points last month, to 88.1% — near a record low.
The pace of occupancy declines, however, has slowed as the pandemic has progressed. Providers are accepting move-ins with tight safety and testing protocols, which is helping margins compressed by increased spending and labor costs, Discovery Senior Living CEO Richard Hutchinson told SHN. The Bonita Springs, Florida-based provider’s portfolio includes 32 communities where independent living is a major component, and Discovery relies heavily on data to dive deep into its operations, identifying pain points and strengths.
Discovery’s independent living residency declined 380 basis points throughout the outbreak, which Hutchinson considers a success, compared to the declines other operators have endured.
Starting in June, move-ins accelerated after the nadir of March and April. Discovery’s move-in pace was 75% of pre-coronavirus levels, increasing to between 85% and 90% in August, which Hutchinson believes positions the operator to return to pre-pandemic move-in levels in September and beyond.
“Our goal was to make the hole as shallow as possible. No one was naive enough to think that we weren’t going to have to dig out of one,” he said. “We just want to do everything in our power to put us in the best position possible.”
Leisure Care’s independent living occupancy rate fell 4% during the coronavirus pandemic, but after an April low point, occupancy has ticked upward, Leisure Care COO Ryan Rasar told SHN. Move-ins doubled in May and again in June. Based in Seattle, Leisure Care’s portfolio includes independent living in 33 communities in 12 states.
Moreover, the pace of move-outs among independent living residents has slowed over the months, and Leisure Care is fielding a higher number of inquiries about independent living than assisted living.
Integral saw a similar trend as the months progressed, with July being its best month for move-ins this year.
“It was a nice net growth,” Gray said.
In addition to a strong focus on rebuilding occupancy, independent living providers are also alleviating pressures on margins through a variety of factors.
Discovery’s data-driven model allowed it to develop metrics that serve the dual purpose of reining in expenses and maintaining the safety of its residents. The provider instituted flex staffing after analyzing overtime costs from the pandemic’s early weeks.
“It was a nightmare,” Hutchinson said.
The cost of coronavirus testing has dropped significantly as the outbreak has persisted. During the early weeks, testing could cost as much as $300 per person. Discovery switched to rapid testing that costs between $15 and $20 per person. While there have been some concerns about false positives with this method, Hutchinson prefers to err on the side of caution.
“It is far better for us to have false positives than false negatives, and those rapid tests are really solid on the negatives,” he said.
Integral incurred huge expenses with PPE acquisition as well as hero pay in many of its communities. The company is taking a line-by-line approach to curbing expenses and halting spending on items such as non-essential capital improvements and entertainment, which can’t happen while communities are still in a phased reopening, Gray said.
“We’re looking at [costs] from a strategic level and seeing what is a must-have versus what is a nice to have,” she said.
Leisure Care is adjusting its staffing at the community level to infection rates in the greater market, which helps to rein in labor costs. Capital expenditures are evaluated on a case-by-case basis, with some projects pushed out a few months in hopes that outbreaks subside. And Rasar believes the company is well-stocked with PPE in anticipation of a second wave in the fall.
“As we go through [expenses] month-to-month, those have been held well in check,” he said.
‘Telling our story’
Marketing is another area where independent living operators were able to trim spending in the early months of the pandemic. For New Senior, marketing spend was down about 30% on a year-over-year basis in the second quarter of 2020. But, the REIT expects marketing costs to begin increasing as communities cautiously begin accepting more move-ins in the months ahead.
Indeed, providers are finding new and creative ways to market, viewing this as essential in reassuring consumers about the safety and desirability of independent living despite the challenges and risks posed by Covid-19.
Part of the Integral’s success with July move-ins can be traced to a shift in its marketing spend. With communities secured only to essential personnel, the provider cut back its overall marketing budget while it focused on setting up virtual tours and nurturing existing leads.
In June, Integral ramped up its marketing spend and weighted it heavily toward digital advertising, which laid the groundwork for July’s success. It also amended the tone of marketing campaigns to strike a balance between selling the lifestyle an Integral community affords residents, and the protocols in place to keep them safe. Advertising campaigns now feature residents and staff wearing masks while engaged in activities.
DIscovery reduced its overall marketing budget only slightly, and focused resources on digital and social media, as communities ramped up virtual tours. Sales and marketing teams launched a new series of image ads, showing the safety measures communities implemented to keep residents safe. As leads decreased, sales teams shifted to what Hutchinson calls “lead education” — educating prospects well into the sales process on Discovery’s response to Covid-19.
The changes proved educational for Discovery’s sales teams, as they have learned that digital and social media platforms can be used to engage directly with customers and keep prospect pipelines moving forward.
“Our ability during this time to hone our selling skills [resulted in] our conversion rates and sales actually increasing during this time,” Hutchinson said. “It’s because people realize the leads that you do get need to be worked very fastidiously to ensure that you’re as efficient as you possibly can be with a lower number of leads.”
Leisure Care gradually increased its marketing budgets as the months progressed, while also striking a balance between lifestyle and safety. Marketing materials emphasize the measures the provider has implemented to keep residents and staff safe, create healthier environments for activities and engagement, and maintain partnerships to respond to the virus.
Leisure Care recognized that the best way to get ahead of the bad publicity faced by the industry in the pandemic’s early weeks was to control the message.
“It’s about telling our story,” Rasar said.