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Predictions for the Senior-Housing IndustryBy Erin Hogan If you wish you could predict what lies ahead for the senior-housing industry, put away that crystal ball. Instead, we've asked some of the top minds in the business to offer their projections for what is to come in the near and distant future. Each year, the American Seniors Housing Association (ASHA) compiles a list of the nation's 25 largest senior-housing owners, based on the number of congregate-living units, assisted-living units, and skilled-nursing beds, which are part of a larger retirement-living complex (such as continuing-care retirement communities). Assisted Living Success interviewed the leaders of four of the top five ranked senior-housing owners for 2001 to get their perspectives on some key issues.
Leading the list of top owners is Colson & Colson/Holiday Retirement Corporation, headed by CEO William Colson. Holiday Retirement, with its related entities, is the largest owner and operator of retirement housing in the world. Holiday and its affiliates manage more than 260 retirement facilities in 39 states, as well as in Canada, the United Kingdom and France, for a total of nearly 30,000 units. The second largest operation is Alterra Healthcare, directed by president and COO Steven Vick. Alterra is a provider of assisted-living residences for the physically frail elderly and the nation's largest operator of free-standing residences for individuals with Alzheimer's disease or other forms of memory loss. Alterra operates nationwide with more than 430 residences in 26 states. Paul Klaassen, chairman and CEO of Sunrise Assisted Living, oversees one of the nation's oldest and largest providers of assisted living for seniors. Sunrise has more than 200 homes either in operation or under construction in the United States, the United Kingdom and Canada with a combined resident capacity in excess of 16,000. Health Care REIT Inc., headed by CEO George Chapman, is a real estate investment trust that invests in healthcare facilities, primarily nursing homes and assisted-living facilities, plus specialty-care facilities. It currently has investments in 146 assisted-living facilities, 48 nursing homes and nine specialty-care facilities. Nationwide Health Properties Inc., with CEO Bruce Andrews at the helm, rounds out the top five on ASHA's list. Nationwide is a real estate investment trust that invests in healthcare facilities throughout the United States. It is currently invested in 318 facilities, including skilled-nursing facilities, assisted-living facilities, and continuing-care retirement communities, with units totaling nearly 10,000. William Colson, Steven Vick, Paul Klaassen and Bruce Andrews offered their insights into what lies ahead for the industry. George Chapman was unavailable for comment. What are your short-term and long-term growth predictions for the industry? Colson: Due to the unprecedented number of assisted-living facilities in the United States, I don't foresee any need for a lot of new product in the next three to five years, so there will not be nearly as much construction. Our plan is to continue with 15 to 18 new projects per year, and we'd consider new acquisitions if the price is right. Vick: I think that in certain locations, especially the local markets, there is saturation. But as a whole, I believe the market is good. Long term, the demographics are there. There is also a tremendous need in some niche markets, such as those who offer affordability. Klaassen: In the short term, I believe we will continue to see less new construction and more consolidation among assisted-living providers. In the long term, I think we'll see additional growth. Consumers have voiced their preference for assisted living as a long-term-care option, and as larger segments of our population reach a period in their life when they need assistance, they will turn to assisted living. Andrews: In the nursing-home sector, I expect both the short-term and long-term growth to be limited to just 1 percent to 2 percent. In the independent, assisted-living sector, I think the short-term growth will remain slow for the next three to four years, but after that I believe we'll see steady, orderly growth at around 5 percent to 6 percent a year. How will successful facilities survive financially? Colson: For us, the most important thing we can do is manage our expenses. We're dealing with clients who are generally on fixed incomes, so we have to watch costs. That can be difficult with the direction insurance and utility costs are going. Vick: We're now more focused on value and customer service, versus occupancy. The majority of our clients are private pay, so we need to make them happy. As stewards of their money, we need to instill in our employees that our clients want value and service. Klaassen: First and foremost, assisted- living providers must make customers their top priority. The marketplace will deal fairly and forcefully with any organization that consistently fails to please its customers. It's also important for providers to retain a flexible balance sheet and efficient capital structure if they wish to succeed financially. Andrews: Three words: Management, management, management. Those companies that offer good management--those who recognize the role of operations and the need for marketing savvy--will be successful, in spite of past overbuilding. What will future customers expect and demand? Colson: It is apparent to us, having more than 30 years of experience in congregate senior housing, that our residents want more amenities, including larger units, more activities, more choices in food, and more independent home healthcare. Vick: We're finding a greater demand for "mix and match" services. Clients want to be able to pick and choose how they can get the best value for their money. They don't want a mandate, as things were done in the 1960s. They want variety, and now we've got a lot more flavors. Klaassen: I think in the future there will be far less standardization within the assisted-living industry and more choice. The baby boomer generation grew up with choice, and they not only like it--they demand it. Giving consumers more choices among assisted-living providers and within their own assisted-living communities supports the resident-centered worldview. Andrews: We need to provide an environment for the elderly that is stimulating and interesting for them. It's more than just providing good, capable care for the frail. We need to offer a place that's hospitable and enticing to the elderly. Will the seniors of tomorrow be able to afford the level of care they want? Colson: Our small market niche is all private-pay, and we must be constantly figuring out new and creative ways to keep our rent as low as we possibly can, while still maintaining the margin of profitability that we desire. Vick: Today's middle-aged and senior populations are much more attuned to planning for their future. They're more focused, and they're making knowledgeable decisions and choices. They're becoming more informed about money management and options like long-term-care insurance, so I think they're prepared. Klaassen: Assisted living provides excellent value per dollar, and in most cases, the marginal cost of assisted living is just $30 to $40 per day more than living independently. Making it even more affordable is the fact assisted living is almost always tax deductible. Assisted living has become more of a "when" option--not an "if" option. Andrews: Seniors have more money than is commonly understood. Between Social Security, pensions, investments and home ownership equity, money can be turned around and reinvested appropriately to make sure they're well taken care of. Seniors need good financial counseling, though, so that can be an important component of what we offer. What legislative and regulatory issues do you expect to arise in the future, and how will they impact your business? Colson: In our segment of the market--retirement housing--we have to be constantly vigilant not to allow the state and federal government to regulate. What we do works, and we see regulation as creating more unnecessary bureaucracy. Our facilities are the personal homes of our residents and should be regulated no more than our own private residences. Vick: Hopefully there will be more tort reform. Our insurance costs are going through the roof, and there will have to be dramatic action taken or it will jeopardize services. I'd also like to see consideration given to innovative concepts, like a voucher system, which reimburses consumers--not the building--for the services they choose. Klaassen: I am hopeful more providers will view regulations and standards as the floor and not the ceiling when providing care and service to residents and their family members. The state regulatory system for assisted living continues to serve consumers and the industry well, and an increasing number of states are enhancing their licensing and regulatory requirements to make them more meaningful for consumers while preserving the flexibility of the model. Andrews: I hope state and federal regulations get more realistic and less mean-spirited in the future. Regulatory actions are currently designed to punish people, and that doesn't benefit seniors. We can offer a good level of care at a relatively inexpensive cost, but it will require that we do more to educate the regulators who make these decisions. How would you describe the "ideal" senior housing facility of the distant future--the one YOU want to live in? Colson: The most recent facility that Holiday opened is the one I could live in, with all seriousness. Given a nice location, good managers, and good foodservice, any one of our residences provides a gracious and quality-living environment. Vick: I want variety and choices--and not just for healthcare services. I want selection in my food and my activities and access to amenities like shops and concierge services. If I want to go fishing, have a garden, have a pet, or have a hot dog at 10 p.m., I should be able to. Klaassen: When my wife Terry and I and other early pioneers of assisted living got started, the intent was to introduce a consumer-centered model of long-term-care, which focused on residents and their changing needs and personalized services. As an advocate of this model, I, along with the entire Sunrise team, have spent 20 years refining it by listening to consumers and providing consistent quality care. The best assisted living has yet to be created, and continual improvements will make assisted living even more resident-centered in the years ahead. Andrews: I like the campus environment -- the continuing-care retirement community model. It's especially good for couples who might need different levels of care, or whose needs change over time. As needs change, you already have a support group in place, and you know that you or your spouse will be taken care of. While there may be some bumpy roads ahead, it is reassuring to know that those in the driver's seats are well prepared for the journey ahead. As the industry thrives in the future, so will the seniors who benefit from our services. Steven Vick sums it up this way: "People want to be able to continue their lives as they were before. It should be, and can be, a wonderful time." Erin Hogan is a freelance journalist specializing in healthcare and human services. She can be reached at erinphogan@aol.com. Top Five ManagersIn addition to ASHA's list of top senior-housing owners, ASHA compiled an annual list of the largest U.S. senior-housing managers. The top five for 2001 include: No. 1-William Colson; Colson & Colson/Holiday Retirement
Corp.; Salem, Ore. Interested in learning more about any of the companies? They can be contacted at: Colson & Colson/Holiday Retirement Corp. Salem, Ore. Alterra Healthcare Milwaukee Sunrise Assisted Living McLean, Va. Health Care REIT Inc. Toledo, Ohio Nationwide Health Properties Newport Beach, Calif.
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