Red Light, Green Light
Keys to successful assisted-living development
By Fred W. Tanner, Senior Living Solutions Inc.
 The familiar
statement, "Build it and they will come," does not necessarily apply to
assisted-living facilities. Some facilities are experiencing difficulties achieving a
profitable bottom line. Many variables must be considered in order to ensure a successful
assisted-living project. This article will identify key variables for all developers and
owners to consider as they move a project from concept to reality. Assisted living can be
a profitable and successful venture if all developmental and operational aspects are
addressed.
The Feasibility Study
Most assisted-living projects require a feasibility study to be prepared prior to
financing and construction. It enables the owner to make a "go" or "no
go" decision, and helps secure long-term financing. In the past, projects have gotten
into trouble by being too aggressive in the assumptions used in the feasibility study.
A key component in the feasibility study is determining the demographic characteristics
of the market in terms of age- and income-qualified prospective residents. The market area
must also be clearly defined in terms of geographic size and competition. The purchase or
selection of demographic information must truly reflect proper age and income parameters
for the market. Competing facilities must be visited, evaluated and utilized in the demand
calculations. To assume that competing facilities will not have an impact on a proposed
project is not valid, but seems to be the norm for some potential owners. Demand for units
should be calculated using reasonable demographic data and competitive information. Some
assisted-living projects have not reached sustained occupancy because the developer built
too many units for the market area or priced them well above the existing competition.
The pricing structure and service package should be analyzed based on the number of
age- and income-qualified prospective residents in a market area. If the feasibility study
indicates a market with a high percentage of moderate-income prospects, then the project
should not be developed with high-end or luxury amenities and services that require
expensive service fees. Pricing must also accurately reflect the costs of the service
package and be competitive in the marketplace.
One component of the feasibility study involves the development of the operating
proforma. One should size a facility based on market demand, however, an efficient
operating-unit size must be determined. Smaller facilities have experienced problems with
profitability due to the lack of operational efficiency and economy of scale. In the
smaller facilities, the "universal employee" concept has to be implemented to
reduce expenses. In some markets, it is difficult to recruit and retain employees that
work in this role, which requires them to clean, cook and provide resident personal-care
duties. Larger facilities are able to hire nurses' aides for resident care, housekeepers
for cleaning and cooks for cooking. Overall, cost or expense per resident is also reduced
in larger facilities through economy of scale and bulk purchasing.
Fill-Up Rates
Developers who enter the assisted-living business without any prior experience in the
field often do not have a true understanding of the project fill-up rate of an
assisted-living facility. Achieving maximum occupancy requires a unique and focused
approach. Properties that have used overly aggressive fill-up projections in their
feasibility and financial proformas have found themselves in a cash-flow crunch. In
developing projects, it is imperative to consider a worst-case scenario. If the project
can remain financially solvent even with worst-case scenario fill-up, the project has a
good chance for success. A developer of a proposed assisted-living project should also
consider the occupancy levels of the competition in determining fill-up rates.
Location, Design and Character
As with most businesses, location can make or break an assisted-living development. In
the past, developers were enticed into buying inexpensive property to save on development
costs. They built their facilities off the "beaten track," ignoring demographic
density studies and the importance of nearby community amenities, such as shopping
centers, hospitals, physicians' offices and churches. Some projects were built in an area
that was difficult for prospects to find. Successful assisted-living projects often
attribute much of their success to location near a residential area. Commercial areas are
not appealing to a prospective resident or anyone looking for a place to live.
The design of an assisted-living facility can affect its market appeal and
profitability. The design and level of interior and exterior finish must meet the market
the project is targeted to serve. Some facilities have used institutional vs. residential
architecture and interior-design features. It has been proven that residents prefer a
homelike environment. Unit sizes and layout must provide for what the prospective resident
or family desires. In the past, financially driven developers have made the costly mistake
of sacrificing unit size to maximize unit numbers and supposed profitability.
The facility design can also impact the operational efficiencies and operating expenses
later on. Assisted-living projects need to have input from an experienced operator in the
design process to achieve a design that is efficient to operate. It is also prudent to
evaluate the building design from a future capital expenditure and operating-cost
perspective. The owner may wish to consider low maintenance and energy efficient features
to reduce costs in the future.
With the abundance of new assisted-living products in some markets, it is imperative
for the new project owner to determine a market niche for the facility. In reviewing the
competition, it would be beneficial to assess their strengths and weaknesses in the
marketplace. If Alzheimer's care is missing in the marketplace, the new facility may want
to offer an Alzheimer's-care component.
Marketing Effort
Great location and appealing physical structure are not enough to ensure a successful
assisted-living facility. A well-trained sales staff is a must. Selling assisted living to
seniors and their families requires great skill. Traditional real-estate methods are often
ineffective in marketing an assisted-living facility because prospective residents must be
sold more on lifestyle, services and need than on the "unit" itself. Sales staff
must know what they are selling and should all be selling the same program for continuity
and resident satisfaction. An untrained and unfocused sales team spells disaster. The
"let's-make-a-deal" approach used by some sales staff may help meet short-term
occupancy objectives, but often causes long-term financial problems.
In marketing assisted living, it is also important to assess the physical and mental
condition of the prospective resident. In an effort to fill facilities quickly on the
front end, some facility admissions staff have not been selective in not accepting
heavy-care residents. This creates a burden for staff and staffing levels that were
designed for lower-acuity residents. Compounding this problem is a rate structure that
does not compensate the facility for the added care requirements. A resident-assessment
process initiated at move-in and continued through the life of the resident is very
beneficial in care planning, staff scheduling and ensuring that extra charges are passed
onto the resident or family.
 Name awareness
is essential for the successful assisted-living project. Money for marketing is typically
limited and must be spent wisely. Facilities need to know their market niche in the
marketplace and assure that their distinctive advantage is being promoted effectively.
Millions of marketing dollars are wasted annually on unfocused advertising. A marketing
plan should be a part of every assisted-living project and should serve as a "road
map" for implementing marketing strategies. In filling assisted-living facilities,
there is no substitute for networking in the community with the major referral sources.
Building alliances and referral relationships with hospitals, nursing homes, homehealth
agencies and independent-living retirement communities without an assisted-living or
healthcare component are important in building occupancy.
Finance and Management
In the operational start-up of an assisted-living community, it is difficult to monitor
and provide parameters for operating expenses due to the variable occupancies from month
to month. Ideally, the project staffing should be phased in based on census and resident
acuity levels, however, this does not always occur. Some facilities staff at levels that
could support a high occupancy and this causes financial strain. Other projects fall in
the mode of offering services to the residents that exceed the revenues received through
the fee structure. Once this occurs, it is very difficult to lower service levels, and
such a move could destroy resident/family satisfaction and referrals--a major source of
prospective resident leads.
Management of an assisted-living facility must have experience in the industry in order
to promote the success of the project. Inexperienced managers may create unhappy and
unstable staff, which will not only add expense, but will, in turn, affect resident morale
and occupancy. Line and supervisory staff morale is critical for success. A strong
guest-relations program with all levels of personnel participating will enable each staff
member to effectively market the project through their actions.
Green Light
In conclusion, the assisted-living facility can be a very rewarding development and
business venture if the keys to success are followed. But, before the green light is given
for groundbreaking, the developer and owner need to research a facility's feasibility and
pay attention to all the details--big and small--in order to have the best assisted-living
facility possible.
Fred W. Tanner is president of Senior Living Solutions Inc., an
assisted-living/senior-housing consulting company. He has more than 22 years of experience
developing, marketing and operating assisted-living and retirement communities nationwide.
His company provides services to developers, owners/operators and lenders/investors of
assisted living and all types of senior-housing facilities. For more information visit www.seniorlivingsolutions.com or email info@seniorlivingsolutions.com.
Designs for Alzheimer's Care
By Jeffrey W. Anderzhon, Anderzhon+Carlson+Architects
Is the assisted-living environment an effective tool in dementia therapy? Obviously,
the environment can't cure Alzheimer's, or any other dementia, but knowing what we do
about Alzheimer's disease and the way it affects the resident--physically, cognitively and
behaviorally--we can safely say the environment can be manipulated in order that these
manifestations can be mitigated. In combination with other therapies and high-quality
caregiving, a built environment that specifically addresses Alzheimer's disease can have a
positive effect on the extension of independence for those who suffer from it. We can
agree that there is validity to the therapeutic effects of a consciously and sensitively
designed and built environment specifically for those with Alzheimer's.
At minimum, if we are committed to the improvement of the quality of living for those
struck with Alzheimer's disease, we must also be committed to using every tool available
for that therapy. Therefore, we must make a commitment to the use of the built environment
as a therapy tool at some level.
As Alzheimer's medical research continues at its current rate, early diagnosis of
Alzheimer's disease is becoming more commonplace, public awareness of the disease's
symptoms is increasing at a rapid rate, and drug therapies are allowing for the
retardation of the disease's symptoms. If all of these are combined with the fact that in
a few short years we will have 14 million Americans afflicted with Alzheimer's, one can
see that there will soon be a large population of individuals who have been diagnosed, but
who are in the early stages of the disease and remain in the early stages of the disease
for a longer period of time. This is the population that needs and will demand the
assisted-living product that extends the independence of the individual and maintains that
individual's dignity of living. Without regard to the huge capital that would be involved
to improperly institutionalizing these individuals, our society can't afford to throw away
the experience, dignity and quality of these individuals' lives because we were unwilling
to provide an environment that allowed them the full appreciation their souls could reach.
Unfortunately, most facilities currently housing these residents were designed on an
acute-care medical model that accentuates the institutional aesthetic while diminishing
most of the humanizing aspects of caregiving. We have developed the paradigm of "one
type of caregiving fits all of our elderly." Even now, we are housing our early-stage
Alzheimer's individual in institutional facilities where watchtower nursing stations are
overwhelmed with charting racks, and dining rooms are easily as cold as some of the mashed
potatoes. We know that we are serving individuals, not stereotypes, but we are locked into
economies and regulations that discourage innovation and individual need.
We can initiate a new paradigm of care-giving by inclusion of each individual involved
in the built environment. The model of the total environment includes the victim of the
disease, the caregivers, both professional and familial, and the environment's designer.
How the balance of control by each of these three legs of this triangular relationship is
achieved determines the effectiveness of the resultant social environment as an outgrowth
of the built environment. If the caregiver is too rigid in setting and adhering to a firm
meal schedule when the resident prefers a differing time, the level of resident anxiety is
bound to increase. Providing a design that accommodates varying schedules can only go so
far in alleviating such a situation, and the program must pick up from that point.
The result of a truly holistic approach, which entails initial and ongoing
participation by all members of the team, is at least a partial return to the functional
independence of the individual. Good design for environments are readily available and
increasingly easier to obtain. But if we try to shoehorn an individual personality into
any design without regard to loss or perceived loss of that individual's control over
life, we have done him a disservice. An integral part of good design is good
administrative policies.
Our real challenge is to use this common sense in a way that truly makes a difference
in the lives of the Alzheimer's resident within an assisted-living setting, which are
designed for functional independence. Our challenge, not only as designers and caregivers,
but as a society, is to provide environments that add to, or at the very least maintain,
the security, dignity and independence of the individual. In addition, they must provide
appropriate stimulation and flexibility in rhythm and patterns for the individual, and to
do so within the context of an environment that is not overtly institutional, but is at a
scale that allows individual transition from the home.
Our success as a society can be measured by our treatment of those who cannot provide
for themselves. If we recognize how the environment can be effective as therapy, then we
can create spaces that are not only functional and beautiful, but that are truly
meaningful--especially for residents with Alzheimer's.
Jeffrey W. Anderzhon, AIA, is president of Anderzhon+Carlson+Architects, an Omaha,
Neb.-based architectural firm offering services exclusively to the lifecare industry
throughout the United States. He is licensed to practice architecture in 20 states. Mr.
Anderzhon holds a National Council of Architecture Registration Board Certificate and is a
licensed interior designer. He is currently serving a two-year term as president of the
Alzheimer's Association of Omaha and Eastern Nebraska.
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