Consumer-focused approach fuels assisted living growth

When a tsunami of skyrocketing energy costs and slumping residential housing hits the U.S. economy, there is much devastation and everyone gets wet. But the assisted living industry finds itself on higher ground and weathering the economic disruption with relatively minimal effects.

The economy affects the senior living field just like any other economic sector. The operators of independent living communities are particularly sensitive to the downturn. As retirement stock portfolios and family homes decline in value, some seniors are postponing decisions to sell the family home and move into a retirement community. Many seniors ready to trade the three-bedroom family home with a big yard for a smaller condo in independent living seem to be taking a “wait and see” attitude in hopes the residential housing market will improve. And there are even a few instances of seniors moving from retirement homes into their grown children’s homes after the family experiences a major financial reversal from wage cuts or job loss.

However, the decision to move into assisted living, as opposed to independent living, tends to be needs driven. Most seniors prefer to remain in their own homes as they age as long as they are physically able. For those driven by need, economic concerns are more likely to take second place to the priority of getting the kind of care needed to support help with the activities of daily living. This is not to say the assisted living sector is completely impervious to the economic downturn. The National Investment Center for the Seniors Housing & Care Industry (NIC) report on the first quarter performance of 2008 reflects this reality and show that overall assisted living census is flat with some providers reporting slight declines. That said, these same reports indicate that the operating fundamentals of assisted living are sound with little sign of the stress evident in other economic sectors. NIC pegged the average assisted living occupancy rate at a robust 90.3% in the first quarter with demand and revenue increasing. The largest assisted living companies are still moving ahead with expansion plans.

This remarkable resilience suggests that the assisted living “brand,” now in its third decade, has established itself as a desirable and quality option for many older Americans. This, despite the fact that many lawmakers, the media, and members of the public routinely confuse other long-term care options with assisted living by, for example, mistakenly assuming that there is little difference between skilled nursing care and assisted living. But there is no confusion among those consumers who actually avail themselves of professionally managed assisted living services. Seniors currently living in an assisted living community and their families recognize that assisted living is a great option.

Seniors who need some assistance with activities of daily living but don’t want or don’t need the care offered in institutional settings, who want to remain as independent as possible, and who want to maintain optimal control over their own daily lives find a near perfect fit in assisted living.

Assisted living also helps allay some of the fears and realities of aging: social isolation, loss of autonomy and control, and the consequences of becoming increasingly frail. Residents may initially resist the idea of moving but once they do, become champions of assisted living. Freed of the need to do housework, prepare meals, or drive themselves to the doctor, they can relax, make new friends, and get precisely the amount of support and care they need. A common refrain: “I wish I had moved here sooner!”

For those who work in this profession, the reason for the popularity of assisted living is obvious. Assisted living providers are entrepreneurial and intensely consumer focused. This is a market-driven business. A sharply focused attention to the residents’ wants and needs encourages constant innovation. And, of course, competition also drives excellence in operations, in resident care, and greater efforts to meet the customer’s expectations. Operators know that consumers have a choice and will vote with their feet if they are unhappy with their community.

The latest trends in assisted living show that an intense focus on the consumer is also driving an expansion in the array of services and other incentives offered by providers. Some of the increasingly popular enticements include varied apartment size and layout, help with moving costs, flexible payment plans, high-speed Internet access, and even flat-screen televisions. A growing number of assisted living providers offer specialized memory care communities for those with Alzheimer’s disease and other forms of dementia. And hospice, the service that keeps the terminally ill comfortable and free from pain, has already become a routine offering for those who want to stay out of a healthcare institution, in their own assisted living home and close to friends in their final days.

A common fear of many seniors is the risk of outliving assets. Yet a disheartening number of consumers mistakenly believe that Medicaid and Medicare cover assisted living services. These invaluable government safety net programs cover many healthcare expenses for seniors but they do not cover assisted living. Medicaid only pays for a limited number of assisted living slots for seniors who are impoverished and qualify for the benefit. While assisted living costs less than half as much as a skilled nursing home, the median annual cost for a private room in assisted living is $30,000, the average stay is just over two years and the average age of a new assisted living resident is just over 83.

Assisted living is constantly looking at its prospective market. The U.S. Census Bureau says the fastest growing demographic in the United States is the group of seniors over age 85. These seniors draw upon the dual benefits of Social Security and defined benefit pensions to pay for long-term care and many reap a financial windfall from selling family homes purchased and paid off decades ago. The next generation may not be so fortunate. The employers of baby boomers are unlikely to offer a defined benefit pension. Consumer debt is at record levels and personal savings remains exceptionally low in the United States.

The Assisted Living Federation of America (ALFA) is trying to raise awareness of the need for retirement planning for boomers in collaboration with the American Association for Long-Term Care Insurance. To pay for their future long-term care, consumers have depressingly few options: using personal assets, relying upon friends and relatives, or spending down assets to qualify for Medicaid. For consumers at midlife, long-term care insurance is another option which transfers some of the financial risk to an insurance company. Long-term care insurance pays for all or some of the cost of personal care and services in long-term care. And it is never too soon to plan. As many as one third of long-term care insurance applicants between the ages of 60 and 69 are rejected for coverage for medical reasons.

Many baby boomers are discovering the facts about long-term care as they confront the needs of their own aging parents. They can take some comfort in knowing that history now shows that the assisted living industry will continue to expand and improve on long-term care options to meet the needs of an expanding market.

Richard P. Grimes is President/CEO of the Assisted Living Federation of America (ALFA), the largest national association serving companies operating professionally managed assisted living communities for seniors. ALFA is the voice for senior living and advocates for informed choice, quality care and accessibility for all Americans needing assistance with long-term care.

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Long-Term Living 2008 October;57(10):78-79

Topics: Articles , Facility management