How the Senior Living Industry Can Help Solve Its ‘Three-Body Problem’ 

The senior living industry has a “three-body problem” – but new research shows it also potentially holds the solution to that problem.

Recent data analysis by researchers NORC at the University of Chicago in partnership with the National Investment Center for Seniors Housing and Care (NIC) found that the senior housing industry shows promise for reducing the overall health care spending patterns of older adults.

The preliminary findings studied health care costs of 58,000 independent living (IL) residents and 28,000 assisted living (AL) residents and found that over a quarter of IL and AL communities had lower health care spending compared to non-congregate living settings by 17% in independent living and 20% in assisted living. 

But exactly how senior living communities are generating these cost savings still needs to be studied, according to Dianne Munevar, Vice President of Health Care Strategy at NORC, who noted that a majority of savings come from lower hospital and skilled nursing stays by senior living residents compared to older adults living at-home. 

Tori Soper Photography

The “mid-stream” analysis of the ongoing data project also found that senior living communities reported fewer hospitalizations of residents compared to their at-home counterparts, and lowered hospital stays ranging between $10,000 and $20,000 in savings per resident annually, Munevar said.

“One prevailing theory is that better chronic care management and primary and preventative care has a greater likelihood of generating more of those reductions in that high-cost utilization,” Munevar said during a panel at the NIC Fall Conference in Washington DC. 

These early findings come amid the Centers for Medicare and Medicaid Services (CMS) having a goal of having all Medicare fee-for-service beneficiaries in accountable care relationships by 2030, which in tow could increase Medicare Advantage (MA) participation rates in the coming years, NIC Head of Research and Analytics Lisa McCracken said during the panel.  

This means that senior living operators must consider a future deeply rooted in value-based care structures, interacting with ACOs and increasing MA participation, according to Munevar.

“Senior housing needs to get there as soon as possible and this is the moment because you’re actually not at risk … so rather than getting burdened with regulation and financial incentives that don’t meet your needs, get there as soon as possible, demonstrate that you have the value and help articulate what could a contract look like before you get to 2030,” she said during the panel discussion.

Senior living operators face ‘three body problem’

From lacking scale or financial resources to pivot independently to value-based care structures, operators are faced with few options as to how to proceed in this evolving future.

But it’s not the senior living industry alone grappling with how to embrace the future of health care, and Munevar sees a world in which the larger health care industry faces a “three-body problem.”

One prong of the three-body problem is that 60 million older adults 65 and older will need housing and care as affordability – and that still remains a key challenge.

The second problem is that 20% of older adults age 65 and older have self-care limitations, according to the Harvard Joint Center for Housing Studies.

It’s no secret that acuity is a key issue for many senior living providers, with operators reporting shorter lengths of stay and seeing residents enter communities more frail with a host of chronic care conditions.

The third problem centers around workforce shortages to meet the massive caregiver and service provider need—which has forced senior living operators in recent years to revamp recruitment and retention.

“All of this is coming at a moment where there’s been historical lack of financial incentives to manage health care in senior housing. But it also presents this incredible opportunity,” Munevar said. “This three-body problem could be solved with a senior housing and care solution.”

Recent NORC-NIC research found that senior living residents were living longer compared to their at-home counterparts.

In the future, Munevar said senior living operators could capitalize on the ability to reduce hospitalizations and access to primary care delivery, especially in a world in which operators receive financial compensation in value-based care.

Going forward, she added that operators should “use the data to tell your story” in preparing for a value-based future with greater CMS involvement, along with forming ties with physician practice groups and emphasize risk management.

“How do you understand what they need to advocate for? How do you understand what their value based arrangements are, and then describing your unique value to meet their needs? That’s the partnership that needs to happen between now and 2030,” Munevar said.