Most Affordable States for Assisted Living Shed Light on Reaching Middle Market

Developing enough middle-market senior housing to meet anticipated demand over the next decade is shaping up to be a daunting challenge, for myriad reasons.

Senior living providers are taking on the challenge with operational innovations, but external forces such as market conditions and regulations also play a significant part in helping or hindering these efforts.

For instance, higher minimum wages and other workforce expenses — along with Covid-19 — contributed to a 6.15% increase in assisted living costs last year, according to the 2020 Cost of Care Survey from insurer Genworth Financial. The national median cost for a one-bedroom unit in a private-pay assisted living community is now $4,300 per month, or $51,600 per year.


But the Genworth data also reveal that in some states — including large markets such as Florida — the average assisted living rate is significantly lower, suggesting that policies and market forces in these locations could shed light on how to achieve more affordable senior living.

Determining middle-market rates

The biggest challenge in determining what constitutes middle-market assisted living is determining the range of rates that middle-market seniors — those who lack the resources to afford market-rate senior housing yet have too much in earnings to qualify for federal and state assistance — can afford.

The sweet spot for middle-market assisted living ranges between $3,000 per month and $3,500 per month, according to focus groups held by Merrill Gardens, the company’s president Tana Gall told SHN last month. Not coincidentally, this is the price point being targeted by the Seattle-based operator’s new middle-market brand, Truewood by Merrill, which launched in April after over a year of internal planning.


A groundbreaking 2019 report from NORC and NIC revealed that there will be 14.4 million middle-income seniors in the U.S. by 2029 — 54% of this cohort will not be able to afford senior housing.

A deeper dive into the numbers paints a more detailed image. Based on 2014 dollars, the average annual cost of assisted living rent and medical out-of-pocket costs is around $60,000, or $5,000 per month. But only 19% of middle market seniors 75 and older — 2.7 million — will have annual financial resources of $60,000 or more in 2029.

NORC surmised that if providers can find ways to trim the average annual rates by $10,000 to $15,000 per resident — up to $1,250 per month — millions more older Americans can afford private-pay senior living.

A deeper look into the 2020 Cost of Care Survey reveals five states with average AL rates between $3,000 and $3,500 per month: Missouri ($3,000), Alabama ($3,150), Utah ($3,450), Arkansas and Georgia ($3,500).

Another 14 states have assisted living rates ranging from $3,595 (Nevada) to $4,000 (West Virginia). Notably, rates for assisted living in Florida average $3,700 per month.

The landscape for providing assisted living services at affordable rates is wide open, but there needs to be a commitment to doing so, Arrow Senior Living President and Principal Stephanie Harris told Senior Housing News.

The St. Louis-based company owns or operates 29 communities, the bulk of which are located in Missouri. Arrow targets the upper end of the middle-market scale identified by Gall; assisted living rates range from $3,500 per month to $4,500 per month, depending on the market.

Arrow found that, because its communities are newer, it a wide gulf between higher-end and subsidized assisted living offerings in a market, and it has been doing so long before industry groups began to prioritize the demand for middle-market senior housing.

“We’ve enjoyed an open lane for the last 10 years in how we target the markets we choose to operate in, and the services that we offer,” she said.

Eclipse Senior Living targets middle-market assisted living via its Elmcroft platform, Eclipse CEO Kai Hsiao told SHN. The Lake Oswego, Oregon-based operator’s Elmcroft portfolio includes three communities each in Alabama and Arkansas, two in Georgia, and seven in Florida. Rates range from $2,100 per month to $3,335 per month, according to information from third-party sales platform Seniorly.

Level playing fields

The Truewood portfolio is geographically diverse, with communities in states as varied as Arizona, Idaho, Florida and Pennsylvania. So, Merrill Gardens obviously believes in the potential for a middle-market product that can succeed in various markets.

But, the Genworth data suggests that middle-market rates are currently more easily achievable in some states than others. Intuitively, lower rates make sense in a largely rural state such as Arkansas or Utah. Yet, there are some states with low average rates that include urban centers, such as St. Louis and Kansas City in Missouri. Even more dramatic is Florida, one of the most populous states in the country, with expensive real estate markets such as Miami.

Florida and Missouri highlight the impact that favorable regulatory environments and high barriers to entry can make on affordability, as well as the power of supply and demand and the role of residential models of care.

Florida has 3,153 assisted living facilities, according to data provided to SHN from the Florida Senior Living Association (FSLA). Of those, 49.8% — 1,571 communities — are six beds or fewer, FSLA President and CEO Gail Matillo said.

In total, 87.5% of assisted living facilities in the Sunshine state are communities with 100 or fewer beds. Only 32 facilities are large scale assisted living communities consisting of 200 or more beds.

“It’s a wide variety,” she said.

Other factors are at play in Florida as well. The state is home to several world-class health systems and colleges, which appeal to seniors interested in continuing education and receiving quality health care. There is no state income tax, which helps with affordability.

Most importantly, Florida has one of the largest 65-plus populations in the country. A 2019 population estimate report from the U.S. Census Bureau found that one in every five Floridians — 20.9% — is 65 and older. The state’s population increased 14.6% from 2010 to 2020.

Still, maintaining affordability and a healthy competitive marketplace requires vigilance. FSLA and other industry groups are working with the Florida legislature and Governor Ron DeSantis on balancing the interests of seniors with big business, Vice President of Public Policy and Legal Affairs Jason Hand told SHN.

The majority of FSLA’s members are private pay, and are cognizant that attracting and retaining quality talent will be essential to meeting the growing demand for middle-market assisted living. More providers are offering tuition reimbursement and continuing education opportunities, as well as higher wages and enhanced benefits, in order to compete with other industries for workers.

“There are a lot of benefits to [working in] senior living,” Matillo said. “Most of our board members never intended on getting into senior living. They got there by happenstance, by taking a chance to say, ‘Let me check this out and see how it looks for me.’”

In the case of Missouri, a probable driver of assisted living affordability is its status as a certificate of need state, which is required for establishing or expanding health care services in a market. Missouri is one of three states, along with Arkansas and Connecticut, requiring a certificate of need for assisted living facilities.

Arrow’s Harris theorizes that certificate of need requirements deter larger operators from entering Missouri, allowing smaller and more localized companies to operate without the threat of competition.

Many of these operators are family owned, with either single sites or smaller portfolios. The owners also work in the communities, helping to keep payroll expenses in check.

There have been frequent attempts over the years to loosen Missouri’s certificate of need requirements to spur competition. Those attempts have been thwarted by concerns that increased competition will bring higher rates. Harris does not see that changing anytime soon, in the current political environment.

“[Certificates of need will] continue to be a part of ensuring stability and resources, and ensuring having control over what types of healthcare services are built, specifically assisted living,” she said.

Streamlined services

Of course, location alone does not mean that a senior living community will be able to charge middle-market rates — the operating model must also be highly efficient. Arrow, Merrill Gardens and Eclipse are all striving toward this goal.

A linchpin in Arrow’s success involves its market selection and development strategy. Many of its assisted living facilities are located in campus settings, side-by-side with independent living. This has allowed the company to attract what Harris calls “assisted living-light” tenants: seniors considering moving to assisted living, but who could live in independent living if personal care services were available.

This creates an organic tenant pipeline from independent living to assisted living as a resident’s acuity needs increase. Since Arrow’s campuses offer both, a resident does not have to move, which Harris estimates saves $1,000 per month.

“This is a key part of our method in maintaining affordability is to ensure that we have slightly earlier move-ins movements, than what we may find in a traditional sales and marketing approach,” she said.

Merrill Gardens’ Truewood model will rely on leaner staffing models and a la carte services based on need — something Bill Pettit, president of Merrill Gardens’ parent company, R.D. Merrill Company, consistently stressed as it explored creating its middle-market brand.

“The biggest obstacle we have as an industry to serving the middle-income senior is our own vision of what they will accept,” Pettit said during a May 2020 webinar on middle-market senior housing hosted by industry trade association Argentum.

With Truewood, Merrill Gardens is tweaking some of its standard service offerings, such as dining and transportation services. The operator also created its own universal worker concept, a resident experience partner (REP), capable of assuming multiple responsibilities within a community. A REP may handle dining services during the day, then switch to coordinating activities in the afternoon.

Hsiao believes the Elmcroft brand is successful at catering to middle-market assisted living residents because the programming and amenities offered in the buildings are not on the scale of what is coming online from luxury developers and operators, which in turn, moderates staffing costs.

“We provide similar services, at a value-driven standpoint,” he said.

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