Top Senior Housing Trends for 2023

Each passing year brings closer the huge demand wave for senior living. And as 2023 begins, providers are more focused than ever on the next generation of consumers — but also are struggling to find ways to evolve the product as needed.

The struggle is due to economic turmoil and uncertainty, with tight labor markets, rising interest rates and historically high inflation. Getting new development projects financed is difficult, hiring and retention remain major challenges, and investing in operational innovation is tough.

Tough, but necessary. And senior living providers are finding ways to keep pushing forward. 

Organizations are redefining the active adult product, finding new ways to scale up, reimagining how senior living communities operate and reimagining the value proposition they present to consumers. Strong owners and operators will find 2023 a prime time to differentiate themselves from the competition and begin winning over more diverse and demanding residents.

Active adult 2.0 launches

Three trends from past years — the rise of rental active adult communities, the creation of new care paradigms rooted in population health, and the vast need to serve the middle market — will combine to create a super-trend in 2022, shaping the future of low-acuity senior living.

The phenomenon of rental active adult communities has been gaining strength for several years already, but the market is now reaching a new and notable level of maturity, with some early trial-and-error now giving way to models supported by lessons learned on the ground as well as industry-level data.

For instance, major player Greystar has pivoted toward the middle-market Album brand after years of going big on a more upscale offering. And the National Investment Center for Seniors Housing & Care has recently defined the active adult sector for data tracking purposes, and issued an initial report shedding light on key metrics such as margin and length of stay. 

All this means that a more standardized active adult product is taking shape. And expect that one major component of active adult “2.0” will be the co-location of amenity-rich housing with health care services.

The idea is that older adults will first flock to active adult communities, then want the services and support that would allow them to live there as long as they possibly can.

This model raises some eyebrows, as the appeal of active adult lies in the vibrancy of these communities, and residents aging-in-place for long periods of time is seen as a risk.

But this approach to active adult will take hold due to several factors. One is the need for middle-market senior housing. As the baby boomers age, many will seek out communities that meet their lifestyle preferences while also not breaking the bank. Active adult, with rents much closer to multifamily than IL, checks both boxes.

Then there’s the continued rise of integrated care models supported by Medicare Advantage and other managed care plans; increasingly, payers see the value of working with senior living providers that can help better manage the health of large older adult populations. Owners such as Welltower (NYSE: WELL) have already seized on opportunities to connect active adult residents with MA-supported care services, working with partners such as Clover. And 2023 is set to be a watershed year, as Welltower now has the green light to start self-managing more it’s low-acuity senior housing properties — expect the integration of care to be a key component of its operating model.

Indeed, one of the industry’s biggest proponents of the model is Clover CEO Michael Joseph, who has worked over the years with Geisinger to integrate the health system’s care programs in certain locations in Pennsylvania, for instance.

“We’ve looked at combining with or doing some kind of joint ventures with some of the health and hospital chains,” Joseph told SHN in 2022. “The rationale there makes more sense. The healthier we can keep our tenants, the longer we can keep our tenants.”

Other companies forging ahead with this concept of active adult integrated with care services include senior living developer Avenue Development, which as part of its Viva Bene brand is seeking to combine active adult senior housing with preventive care from primary health partners.

Pairing active adult and health care flies in the face of an industry notion that says active adult communities risk becoming glorified independent living if their residents age in place for too long. But Joseph, who has honed the Clover model over a nearly 30-year span, said he doesn’t think that’s a big risk as long as operators position communities the right way.

“I know that the people are very concerned about acuity where people just age and become somehow an expense to the property owner and what will that do,” Joseph said. “We haven’t seen that.”

Instead, he has seen residents move out when their care needs become too great, usually in their early 80s. And that is with access to care.

Perhaps an even bigger sign of the rise of active adult/age in place hybrids is the fact that capital providers beyond Welltower are stressing this model over others. For example, at least one large capital provider told Senior Housing News that they see health care as the product type’s most opportunistic future.

2023 will be ‘year of the consumer’

Senior living is a customer service industry, with hospitality prioritized alongside — and sometimes more than — health care.

Yet, senior living has not done a consistently good job of serving the consumer. Penetration rates have been stubbornly stuck around 10%, and they are at risk of dropping even lower if boomers do not like the options available to them, or they are frustrated by the senior living sales process.

This was a topic under intense discussion during a roundtable at the Aging Media Network CONTINUUM conference in late 2022. Senior living executives and other leaders from across the care continuum noted how difficult the senior living sales process is for consumers, from determining the options in their markets, to being confused and overwhelmed by third-party referral sources, while being unable to find basic pricing information about monthly rates on community websites.

If they show up to see a community, new consumers are bringing higher expectations in terms of the lifestyle on offer, including programs and facilities to maintain or enhance their wellness.

Senior living providers are certainly aware of these dynamics, but in recent years, their focus has been on Covid-19 and on winning over and retaining staff. Now, the time has come for providers to intensely focus on consumers, to gain a deeper and more sophisticated understanding of them, and adapt accordingly — from adjusting operations to elevating building design, all to create a more personalized and appealing product.

LCS and Vi Living are two companies pursuing these goals.

“As an industry, we also need to get serious about aggregating today-and-tomorrow consumer data and adapt the product accordingly. It’s time to leave the lens we have used to define senior living behind – we can learn a lot by looking at data to answer the question, ‘What’s the product or model of care that defines the next generation of aging consumers?’” LCS CEO Joel Nelson told SHN.

And Vi Living is looking to “the boomers and beyond,” as CEO Gary Smith put it.

“We are currently conducting a comprehensive research study with older baby boomers to understand their needs and wants in their later years,” he told SHN. “We want to make sure that we are developing programs and amenities that will be attractive to this increasingly important segment.”

Providers such as Juniper are also leveraging technology to gain a clearer picture of who residents are and what they desire from a senior living experience. And Mather is leading an effort to redefine the wellness paradigm in senior living to make it more person-centric.

Senior living providers are still facing enormous financial pressures, clinical challenges related to Covid-19 and other infections, an acute labor crunch, difficulties related to the broader economy, while having to execute on (or create) value-based care strategies. But a focus on the consumer can and should inform decision-making in all these areas and others.

As one senior living CEO put it at CONTINUUM:

“Rather than start with how we change our workflows … maybe we should think about it from the consumers’ perspective, and bring the consumer in … it could be really interesting.”

A Place for Mom challengers step up

It’s no secret that senior living providers have a troubled relationship with third-party referral services — notably industry giant A Place for Mom. They depend on APFM while vocally criticizing the referral giant and bemoaning high costs and other issues.

In 2023, new competitors to APFM will pose stiffer competition and plant their flags, as the industry begins to take a more holistic view of the way that older adults and their families navigate long-term services and supports.

One such challenger is Referah, a senior living referral service with significant industry backing and a dating profile approach. Whereas other lead aggregators might give operators a wide and shallow pool of referrals, Referah does the opposite by giving them a much smaller pool of more targeted leads to work with.

From the perspective of a prospective resident and their family, Referah works like an executive matchmaker service, pairing them with just three of the best-suited communities for them. Operators working with Referah also will only hear from the top three most suitable matches.

Another similar effort is underway from Insurance giant Genworth (NYSE: GNW) and entrepreneur Timothy Peck. The two are collaborating on a startup to help connect older adults and their loved ones with senior care and other services, with a formal rollout planned in 2023. Given Genworth’s huge built-in market of long-term care insurance beneficiaries — and the data about this group at the insurer’s fingertips — this effort has the potential to achieve a meaningful scale. 

Still, A Place for Mom is the undisputed market giant, and is not going anywhere. APFM has put considerable resources into improving processes for prospects and operators. But despite the huge business success that APFM has had, the company has thrived within a dysfunctional system that is not working for consumers, and so remains ripe for disruption.

That point was made in a recent report from Nexus Insights — the senior housing and care think tank founded by NIC Founder Bob Kramer. Describing the current situation as a “crisis” for older adults, who are floundering to find the support and housing they need, the report called for a “one-stop shop” for people to access care services and navigate options. The Nexus report may come to be seen as an opening manifesto in a drive toward finally addressing this crisis. And the long-term success of APFM and its competitors may lie in how they can innovate to help finally address this consumer pain.

A senior living provider goes private

The coming year will bring changes to the public markets. It’s almost a certainty that a senior living REIT will go public in the coming year. But 2023 will also be the year a currently public senior living company goes private, if current trends are any indication.

Earlier this year, rumors swirled that Brookdale Senior Living (NYSE: BKD) was considering a sale of the company, with analysts speculating private equity among the potential suitors. This is not the first time Brookdale has reportedly explored a sale, and so far, the nation’s largest senior living operator has stayed mum on the possibility.

But Brookdale going private is a plausible scenario for 2023. Although Brookdale has made good headway on its Covid recovery in 2021 and 2022, going private would surely take some of the pressure off of management to deliver quickly, and give them more time to focus on leading rather than reporting results.

The appeal of having the luxury of less scrutiny and longer time horizons was demonstrated recently, when Brookdale announced the pricing of a $144 million tangible equity offering. This caught investors off guard, given that management had not indicated such a raise during the company’s most recent earnings call. Brookdale’s share price fell 37% over two trading sessions amid concerns about “liquidity, dilution and business outlook,” according to a note from Stifel analysts.

Brookdale management said the capital raise was spurred by their concerns over the deteriorating economic outlook and tough capital markets conditions, and the Stifel analysts described the raise as a “rainy day fund” that ensures no new capital has to be secured in the next year.

The whole situation highlights that it is difficult for a publicly traded senior living company to be nimble while maintaining clear communications with shareholders, and that the delta between near-term headwinds and longer-term upside remains a difficult one to manage on a quarterly reporting schedule.

These same challenges and dilemmas are faced by the other publicly traded operators, AlerisLife (Nasdaq: ALR) and Sonida Senior Living (NYSE: SNDA). As of Dec. 29, 2022, AlerisLife was trading at $0.67 a share, down from $3.05 a share in early 2022. Sonida shares also have been falling, down 55.62% year-to-date as of Dec. 29, 2022. This despite both companies taking multiple steps to shore up finances and operations in the last several years, and with new CEOs at the helm of each.

Clearly, public market investors seem not be compelled by the long-term upside of senior housing, or by any foreshadowing of what Brookdale CEO Cindy Baier called a “super-cycle.” It may be that investors just do not think these companies are the best positioned to take advantage of such a super-cycle — but if that is true, it’s in part because the organizations have been hamstrung in innovation efforts by the need to hit quarterly benchmarks.

It would be interesting to observe the IPO of an operator that has grown in private hands and is pursuing a more innovative strategy, and it’s just possible that such an offering could occur in 2023.

But more likely — unless the super-cycle comes on strong and quickly — 2023 will be the year that all the arguments against being a publicly traded operator win out, with a company taken private.

‘Amazon effect’ becomes less intense — for now

For years, the senior living industry has braced for the tech and retail giants like Amazon to make their big arrival into the older adult health care space, making a move that would disrupt the traditional senior living model in some way.

Amazon has been one of the companies at the forefront of these discussions. In 2022, Amazon acquired tech-enabled primary care platform One Medical in a $3.9 billion deal. With the acquisition, the company gained about 767,000 members, a presence in 188 medical offices and a new platform that could be used to disrupt health care delivery for older adults.

The company has made its presence in senior living known in other ways, such as through Amazon Alexa devices in communities. It’s clear that Amazon recognizes the huge potential of the older adult market. But like other tech giants, Amazon is beset by a bevy of challenges and pivots, including in health care strategy, as 2023 begins.

Already, Amazon wound down Amazon Care, its telehealth and in-home care platform. The company filled that gap with the launch of Amazon Clinic in November, a “message-based virtual care service” through which users can source clinical care from third-party providers. Though in theory customers could include senior living residents, those are not the intended primary users.

Amazon is also grappling with an expected $10 billion loss in 2022 related to Amazon Alexa. While the company in November announced the expansion of its enterprise Alexa Smart Properties for Senior Living service to operators in the U.K. and parts of Europe, the online retail giant is only starting with a handful of companies in the U.K., with others planned in France, Italy and Germany.

Putting the pieces together, it does not seem like Amazon has written off senior living communities and residents as a business line, by a long shot. But 2023 could bring a retrenchment in certain areas, including senior living, as Amazon resets from the Covid boom times.

And Amazon is not alone among the tech giants. About 152,000 employees were laid off from tech jobs in 2022; most of these job cuts came toward the end of the year, with 53,000 in November, according to research cited by Forbes.

“The economic conditions have also prompted the industry to take an existential look at itself and focus more on core strengths, after years of trying to diversify revenue,” Forbes’ Richard Nieva wrote. “ … Companies may try to reset and invest more in the core products that made them juggernauts to begin with, said Bledi Taska, chief economist at Lightcast, a labor market analytics company.”

So, among the tech behemoths, bold experiments in health care delivery to older adults may be on the backburner in 2023. Still, the senior living industry should not mistake this for disinterest; as they consider their go-forward strategies, tech companies will be well aware of how the consumer market is aging, and they may well refocus their energies on disrupting senior housing and health care.

Furthermore, the massive layoffs across the tech sector mean that a huge number of people now are considering their next moves — no doubt there are entrepreneurs who will seize this moment to form new ventures, drawing on all they learned while employed at Amazon, Google and similar companies. The next big disruption in senior living just might be conceived in 2023, in one of these startups.

ESG becomes more than a box to check

For years, the role of environmental, social and governance (ESG) efforts in senior living projects have been gaining prominence. Recent and important issues have prompted the rise of ESG in development, including climate change and social justice. In senior living, the rise of ESG in construction projects has as much to do with capital providers and developers as it does with those trends.

But for some organizations, ESG has been mainly a symbolic exercise, involving generating new reports, forming new committees, or otherwise paying lip service to ESG goals without baking them into a business strategy.

In 2023, such an approach will no longer fly. From the REITs to the largest private investor groups involved in senior housing, investor expectations have risen, and real resources are being dedicated to ESG. On the operator side, compressed margins are making ESG-related cost savings more important than ever, while they also are being forced to confront increasingly serious climate-related challenges.

PGIM Real Estate aims to be carbon net zero by 2050, and is prioritizing environmentally friendly design features in new projects. The company earlier this year beta tested an ESG strategy with The Aspenwood Company to install Google Nest thermostats in an effort to make operations greener.

Another company, Harrison Street, has dedicated itself to “creating an ESG roadmap when one doesn’t exist,” namely in senior housing projects. In addition to doing well for the environment, ESG can also help trim energy and resource costs, according to Harrison Street Chief Impact and Sustainability Officer Jill Brosig.

“We’ve done case studies where we’ve gone into communities and done something as simple as putting in low-flow water fixtures that may cost $360,000 to do across a section of our portfolio,” Brosig told SHN earlier this year. “But we’re saving $450,000 from the first year.”

The nation’s largest operator, Brookdale Senior Living, also plans for ESG as part of its long-term growth strategy, as do the industry’s large real estate investment trusts (REITs). Other proponents have included Juniper Communities CEO Lynne Katzmann and Enlivant, a senior living operator owned by TPG Capital and Sabra Health Care REIT (Nasdaq: SBRA) that Katzmann advises as a board member. Sabra is putting together a fund so that operators can fund ESG initiatives, paying back the REIT from savings accrued over time.

With so many industry players focused on ESG, it’s certain those initiatives will gain steam in 2023, with each successful effort paving the way for more to come.

Lots of ‘stupid M&A’ — and some transformative deals

As the senior living industry leaves its Covid-19 downturn in the rearview mirror, more companies will be pursuing mergers and acquisitions — sometimes at their own risk.

As 2023 begins, lenders and equity groups have largely ended “extend and pretend,” the practice through which they gave operators leeway and time to work out performance issues with the expectation of future success. This will motivate changes in operators, as well as sales, with prices coming down and narrowing a bid-ask spread that has existed.

Opportunities to add scale will seem attractive, but those forces will push more companies to chase ill-advised transactions that leave the sum weaker than its parts — amounting to, in the words of Aegis Living CEO Dwayne Clark, “stupid M&A.” His thinking is that companies will see M&A as a magic bullet and overlook the hard work it takes to execute.

“Scale is not an applicable metric in our industry like it is in restaurants or hotels,” Clark told SHN in November. “The amount of brain damage it does to assume another company, it’s catastrophic.”

Companies that adopt a breakneck pace of expansion also risk growing at such a high rate that they collapse under their own weight. In recent weeks, Clark said, Aegis and its new development services company have fielded new requests to provide third-party oversight to growing portfolios managed by other operators, suggesting uncertainty of results among some ownership groups.

All of this is leading to a scenario in 2023 where more companies seek to scale, but existing tensions between owners and operators will be exacerbated as some companies get way too far ahead of their skis.

At the same time, not every 2023 transaction will be “stupid.” Scale obviously can bring real advantages. Cost efficiency, a streamlined back office, the ability to access capital at reasonable costs, and the capacity to offer robust employee benefits are of particular importance given current economic dynamics, and as organizations consider the path forward after a rocky last two years.

So, expect 2023 to include some notable consolidation, as providers add large portfolios or sizable operators merge. The key will be learning from the industry’s many cautionary tales in order to realize the upside of greater scale without a “catastrophic” loss of culture or quality.

Business intelligence gets real in senior housing

Senior living providers see the tremendous promise of data analytics to improve operations, but many have struggled to actually turn data into actionable business intelligence. As The Springs Living CEO Fee Stubblefied put it:

“Many platforms promise to make our life easier, save us money, and give us the holy grail of data analytics. Yet, I fear that most are like that boat I once purchased. You know the saying about the two best days of owning a boat? The day you buy it and the day you sell it.”

But there are signs that 2023 could be a turning point in the quest for BI-powered senior living.

Tech company consolidation is one trend that should help in this goal. As disparate platforms come under common ownership, they should become more interoperable and streamlined, with fewer redundancies for users and a clearer path toward actionable business intelligence. In one example of consolidation, Glennis, Enquire and Sherpa in 2022 came together under the umbrella of private equity firm Rubicon Technology Partners, with a goal to create a “comprehensive, scalable end-to-end software solution.”

REITs will also contribute to making 2023 a turning point year for BI in senior living.

Welltower has been putting together a tech-driven operating model, with COO John Burkart leading the effort. He had some provocative words for operators in 2022, saying that the industry is decades behind the multifamily apartment sector in its management sophistication, and teasing “truly huge, shocking improvements” that should be made.

In 2023, Welltower is poised to start self-managing a significant portion of its independent living and active adult portfolio, which will enable a large-scale test of the Burkart approach.

And then there are providers that appear to be ahead of the curve with business intelligence. Discovery Senior Living CEO Richard Hutchinson credits the company’s internal BI team with enabling the provider’s “experiential living” model, which elevates resident choice through more a la carte pricing. Since first assembling the BI team several years ago, Discovery has grown to become one of the 10 largest U.S. operators, and its BI-driven approach could become even more widespread if the company makes acquisitions powered by its recent recapitalization.

The ongoing transition to more value-based care models, and the integration of senior living within the broader care continuum, also are propelling the trend of more data-driven operations. Companies on the leading edge of positioning senior living within Medicare Advantage and other managed care frameworks, such as Lifespark and Juniper Communities, are in pursuit of technology that integrates medical record data with data on residents’ lifestyles and goals, to power a more personalized experience.

‘Decisive moment’ will come for hospitals, senior living

In 2022, senior housing and care innovator Dr. Bill Thomas predicted that the hospital-centric health care system would soon enter its “twilight era.” That is, hospitals will become places where people go when needed, but they will be replaced by people’s homes — including senior living communities — as the most important site of care.

“In art photography, there’s something called the decisive moment, and this decade is the decisive decade in health care,” he said, as part of Aging Media Network’s Vision Series. “I expect an accelerating pace of change throughout the ’20s, especially coming out of Covid. It’s going to be very upsetting to some people, and very rewarding for others.”

Signs are pointing to 2023 as a decisive year in this shift. That’s because the hospital-centric model of health care is broken as the new year dawns, in no small part because of hospitals’ inability to provide longer-term care to older adults.

As Axios reported in Nov. 2022:

“Providence Health in Spokane, Wash., for example, is on track to spend nearly $18 million this year on nursing care for patients who no longer need to be hospitalized at its two facilities. A handful of patients have been on the premises for more than 100 days, Susan Stacey, Providence chief executive for inland northwest Washington state told Axios.”

This situation is being repeated across the United States. Never before has hospitals’ reliance on post-acute facilities been more obvious, as well as the need for a health care system that places more resources in these settings, from home health to skilled nursing and, of course, senior living communities.

Even before the current crisis, managed care organizations were pursuing exactly this shift, trying to create payment models that incentivize more care and services in home- and community-based settings. The expansion of Medicare Advantage benefits to cover common senior living services was just one part of this effort.

In 2023, expect even more momentum for value-based care, and a reckoning with how to strengthen the senior housing and care system.

For senior living, this will mean focusing on how to staff up and elevate care, to take some of the referral volume that previously would have gone to skilled nursing facilities — which are beset by an even greater scope of challenges than private-pay senior living, including thinner margins dictated by government reimbursements, a strict and tightening regulatory framework, and deep consumer distrust.

And to play this expanded role in the health care system, senior living communities will have to become adept at participating in payment models that support integrated care across settings, such as Medicare Advantage plans or other value-based reimbursement frameworks.

In other words — as Dr. Thomas put it — senior living providers no longer can think about “outsourcing” so much care to hospitals.

“An approach that’s based almost exclusively on rate, occupancy and amenities is only enough to keep you in business,” he said. “To play in this new world, your organization needs to become more sophisticated in how it handles data, information, systems, partnerships and collaboration with providers of more sophisticated services.”

To put it simply, hospitals have huge problems, and senior living providers that can present themselves as part of the solution have a tremendous amount to gain.

And those providers that can’t present themselves as part of the solution ultimately will struggle — and eventually, an approach based on rate, occupancy and amenities will not be enough to keep a provider in business.

Written with contributions from Tim Mullaney