Continuing care retirement communities (CCRCs) and Alzheimer's/dementia wings are commonplace among assisted living providers, but today, many providers are trying new areas of diversification—not only to reach out to potential residents who want to stay home as long as possible, but also to provide another revenue source for the bottom line.
About a year ago, Silverado Senior Living rolled out Silverado Senior Services to areas served by its senior living communities. The program offers assistance to seniors who need some help with the activities of daily living but don't want to move to a group residence. Late this spring, the company plans to roll out a hospice service for people with Alzheimer's disease in the final stages of life and their families. Silverado views it as the “final piece of what has always been a promise to age in place.” Silverado also offers home care to other assisted living communities that may not have a memory care unit and lets residents stay in those settings much longer than they otherwise would.
Such diversification is a trend that has grown over time. In the 1990s, new assisted living communities were being developed, and providers were concerned with expanding their market share through development and acquisition. When much of that financing dried up, providers starting working on honing operations and seeking new areas for growth. In some markets that meant taking unoccupied assisted living units and converting them into dementia wings.
As with any business, whenever you decide to offer new services, the first question to ask is whether you will still be able to provide your core competency—assisted living—well. You will likely be competing with other companies already providing the service to the market. Also, does the expansion make sense in your overall business strategy? Do you have the scale to make it successful?
The assisted living industry's largest player, McLean, Virginia-based Sunrise Senior Living, Inc., first introduced a home care practice in 1985 but dissolved it in 1988 to focus all of its energies on assisted living. “The biggest problem when you're small is that we just didn't have enough management time to chew gum and walk at the same time,” said Sunrise Chairman/CEO Paul J. Klaassen.
The company now has 4,000 communities in 25 metropolitan areas and, thus, the economies of scale to support expansion into new market niches. Today, Sunrise runs CCRCs with independent living, assisted living, and skilled nursing, as well as providing assisted living in a variety of formats.
Klaassen likens the process of developing new products to car manufacturing. “You need to think what the next minivan is going to be, what's the next trend, how to make our existing products just 5% better every year,” he said.
Sunrise doesn't provide hospice services, but rather partners with other organizations because good hospice providers are available in all of its markets. More than three years ago, Sunrise relaunched At Home Assisted Living. Services provided include help with daily activities, such as bathing and personal grooming; medication management; care coordination with healthcare providers; light housekeeping; home-cooked meals; life enrichment/companionship; and errands and shopping services.
Klaassen stresses that gradual expansion and care in choosing employees and training have been critical to Sunrise's success in diversification. That's a factor that also concerned Silverado, which set up a new business division to manage its home care practice to guarantee that the effort got the focus needed to be successful, rather than simply being one of a laundry list of items under the company umbrella. Home care staff are employed in that different division, but Silverado also uses its economies of scale to its advantage by training home staff in-house in its communities.
Marketing is another critical component of assisted living diversification efforts. For instance, if you have marketers internally who extol the virtues of the assisted living environment as opposed to the home environment, you may have to modify that approach for external marketing. You can extol an assisted living community, but not in opposition to the home environment.
Certain outside constraints can also make it difficult for assisted living providers to enter a new market niche—e.g., state regulations, zoning, and availability of funding. For instance, a CCRC provider in Ohio would have difficultly adding a skilled nursing component because such communities operate under a “residential care license.” Most states, including Ohio, require issuance of a certificate of need (CON) to qualify for nursing home licensure and receive Medicaid waivers and, in Ohio, a moratorium on issuing CONs has been in place for approximately ten years.
Adding Medicaid to the equation also can make providers, used to the freedom of private pay, subject to more rules and even leave them significantly more vulnerable to lawmakers' decisions and the ups and downs of state budgets. Another factor that may make it difficult to add a nursing home component is the tougher zoning fight this can provoke in residential neighborhoods. People are much less likely to mind having independent or assisted senior living in their area.
Other issues may include additional liability issues and coverage (already a complex issue), as well as extra challenges in raising financing. Most lenders in the senior housing industry provide only real estate loans.