New Rules of the Game: Pandemic Creates Clarity, Creativity Around Middle-Market Senior Living

Covid-19’s disruption puts further pressure on the senior living and care industry to address the need for middle-market communities.

But the pandemic has also wiped the slate clean, providing an opportunity to start anew and not think in currently defined terms, Torey Riso, former president and CEO of Blueprint Healthcare Real Estate Advisors, said Thursday at the 2020 National Investment Center for Seniors Housing & Care (NIC) fall conference.

Senior living owners, operators and other stakeholders must be willing to consider partnerships they would not have previously, particularly with health care systems and capital partners.


Riso compared the situation to a chess game that was interrupted by some unforeseen event: The industry can either pick up the pieces and restart the game as it existed before the interruption, or it can lay out a new game.

“We don’t need to go back to black and white squares,” he said. “We can actually change the rules of the game.”

Willing consumers

The foundation of this reinvention lies with the middle-market consumer. NIC was involved in agroundbreaking study released last year by NORC at the University of Chicago, Harvard Medical School and the University of Maryland School of Medicine, which found that there will be 14.4 million middle-income seniors in the U.S. by 2029 — 54% of those will lack the financial resources to pay for senior housing at today’s market rates.


As the oldest segment of baby boomers turn 76 next year, many of them lack the resources for market-rate, private-pay senior living, and have not recovered the wealth they lost during the Great Recession.

This will result in a savvier shopper as middle-market seniors move into the space because they lack the resources of their more affluent, market-rate peers, R.D. Merrill Company President Bill Pettit said.

“Middle income seniors are far more open to participating in their own needs and facilitating that in different ways,” he said.

The parent company of Merrill Gardens, R.D. Merrill is working on a scalable middle-market model with properties it acquired from Blue Harbor last November. That model involves providing affordability on a private-pay basis to a seniors of median wealth and income; providing quality care; and yielding an acceptable return on investment to a for-profit owner and/or operator.

The new brand, which he said will be announced later this year, is comparable to an extended-stay hotel where residents can opt in for services such as dining and wellness activities on an as-needed basis. For example, residents can participate in dining programs, but they also have the option to cook their own meals. In market-rate senior housing, affluent residents expect, if not demand, dining service.

A la carte services will allow middle-market seniors to remain active and age in place longer, while conserving their nest eggs for health emergencies and progressing to higher care segments.

“Seniors in the middle income are far more cognizant of their resources and willing to make decisions based on their resources,” he said.

New capital partners

Fully integrated companies have a clear line on providing solutions to the middle-market conundrum, HumanGood President and CEO John Cochrane said. The Pleasanton, California-based nonprofit owns and manages 21 life plan communities and 95 low-income senior housing properties on the West Coast and East Coast.

HumanGood is a vertically integrated organization, and Cochrane believes that the company’s experience developing and operating at both ends of the market spectrum can be leveraged to meet the middle-market demand. The problem, he said, is that the industry views middle-market as a monolithic question, when it should be looking at segmenting the greater cohort.

“I think [Covid-19] is creating greater clarity around the needs of the middle market,” he said.

Moving forward, the industry – especially the nonprofit sector – must consider more complex transactions from a capital positioning standpoint. Bond financings may not be enough to widen the customer base.

Cochrane sees a post-pandemic landscape where nonprofit providers turn to financing vehicles they would not have previously, and gain an appetite for risk.

One possible avenue involves mixed-use, intergenerational development. HumanGood wants to leverage its expertise at low-income development and property management as a launchpad to tap into middle-market senior housing.

“This market is huge. The needs are varied. You’re going to need multiple models,” Cochrane said.

Health care solutions

The pandemic solidified senior living’s place in the health care continuum. And the future of senior living will involve better integration of health care services into communities. Middle-market senior housing will be no different, CareMore Health Senior Vice President Jim Lydiard said.

CareMore provides health care services to 180,000 members across the country. Of those, around 7,000 live in long-term care settings – approximately 1,200 communities. Lydiard estimates that half of those communities qualify as middle-market senior housing.

“These are residents that are paying anywhere from $1,000 to $3,000 a month for room and board,” he said. “Often, they’re scratching to make those dollars up from places elsewhere out of their savings.”

Seniors who enroll in CareMore’s Touch program are given baseline health assessments called “healthy starts.” They are then placed in individualized care plans that are continuously monitored by community staff and CareMore employees for any changes in condition, at which time CareMore can deploy health care workers and services to ensure residents feel safe and comfortable in their home environment, as opposed to being admitted to a hospital.

Currently, the CareMore program is integrated into Medicare Advantage plans, but other payment mechanisms are in the works. Platforms such as CareMore are set to benefit from an approved expansion of the next-generation accountable care organization (ACO) model by the Centers for Medicare & Medicaid Services (CMS). When the expansion goes into effect next spring, seniors can enroll in the program without needing to change their health care plans. They can stay on traditional fee-for-service Medicare and change nothing in the way of their benefit structure or their network, in terms of preferred primary care physicians, specialists and hospitals.

Lydiard believes the expansion will be a boon to operators looking at every possible angle to elevate care for their residents, reduce expenses and widen margins. And CareMore, which is working with real estate investment trust Welltower (NYSE: WELL) and includes operators such as SRG Senior Living and Belmont Village as partners, is positioned to thrive under the expansion.

“We believe that government funded dollars should be part of the equation,” he said. “It should no longer just be privatized dollars, and on the backs of operators that are having to undertake herculean efforts and accounting with all of their residents.”

R.D. Merrill’s upcoming middle-market brand will take a similar approach. The company is in talks with several home health providers to determine a principal partnerthat can serve residents in multiple communities, provide better health care services and outcomes, and reduce billings.

Having a trusted partner in place will give the families of seniors moving into communities the confidence that Merrill has their loved ones’ best interest in mind, as well.

“A key partner for many seniors living alone is family,” Petit said. “Through some combination that’s economically comfortable for them, between home health care and family, they’re having their needs met.”

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