What do Amazon, Kroger, Walmart, and Best Buy have in common besides being big retailers? The somewhat surprising answer is that they are all jumping into the healthcare business joining other retailers such as Walgreens and CVS that have a more obvious connection to the space.  

Why does it matter? The move into healthcare is likely to open collaboration opportunities with senior housing and care providers that house many of the retailers’ customers. Senior housing communities can act as a valuable hub for health services and deliver on the promise to focus on the health and longevity of residents.  

“The senior housing industry needs to get creative about what the future could look like,” said Anne Tumlison, who moderated a panel discussion on the implications of retail healthcare strategies at the 2024 NIC Spring Conference.  

Providing context, Tumlinson, founder and CEO at ATI Advisory, noted that annual Medicare expenditures exceeded $1 trillion for the first time in 2023. Over half of that total went to private health insurance companies primarily focused on value-based care models meant to keep people healthy and reduce costs. “Food, housing, and special support services are becoming part of what we think of as medical care,” said Tumlinson.  

The panelists included representatives of big retailers who discussed their strategies during the well-attended main stage session.   

In 2003, Amazon acquired One Medical for $3.9 billion. One Medical is a membership-based primary care practice with 250 offices in 24 markets. 

“Amazon is customer obsessed,” said panelist Lindsay Botsford, M.D., market medical director at One Medical. “It’s a good cultural fit.” She emphasized the importance of easy access to care and the patient experience—goals similar to those of senior housing providers.  

The Kroger grocery chain entered the pharmacy business 45 years ago to provide convenience to shoppers. The evolution of that strategy has continued, and Kroger now operates 2,200 in-store pharmacies, along with 225 clinics that offer primary care. Registered dieticians are also available to help customers plan nutritious meals to combat chronic diseases such as diabetes and obesity. “Food as medicine can help,” said Marc Watkins, M.D., chief medical officer, Kroger Health. “Healthy communities are good for business.” 

Panelist Chip Gabriel believes that senior living has to change. He is a partner at Senior Living Transformation Company (“SLTC”). SLTC has a 113-unit assisted living and memory care community in Tennessee that acts as an innovation center for technology and data solutions for the industry.  

A goal is to track resident health and outcomes to show that senior housing is a critical link in the healthcare continuum, “We are part of the system,” said Gabriel. “But we don’t get credit for the money we save the health plans.” 

Geriatrician Carla Perissinotto, M.D., noted that the existing healthcare system does not work well for older adults since it is overly focused on treating illnesses. She instead advocates for person-centered care that includes conversations about aging. “Talk to residents,” said Perissinotto, a professor at the University of California San Francisco (UCSF). “Ask what is important to them.” She worked at UCSF Care at Home for more than 10 years. It provides medical care to home bound older adults.  

The conversation turned to risk management. Tumlinson noted that senior housing offers an environment with “eyes on the resident” around the clock. Senior housing providers can intervene before a health condition becomes critical and requires a trip to the hospital. She suggested that technology could be used to unlock that value for operators.  

One Medical uses technology and a team approach to manage risk and deliver a better patient experience. Instead of episodic visits with multiple doctors, patients have an established relationship with care providers. Support staff are part of the team, reporting patient changes they notice such as forgetting appointments. “We pick up on cues of rising risks,” said Botsford.   

More data does not necessarily mean better care, according to Perissinotto. While remote patient monitoring is a huge opportunity, she is concerned about relying too much on the technology. “The senior living staff knows the residents,” she said, adding that sometimes it’s better to wait and watch the resident before taking more drastic steps such as a trip to the hospital. “Slow down.” 

As the session wrapped up, Tumlison challenged attendees to work toward aligning incentives between health plans, senior living providers and retailers that are growing their footprints to facilitate accessible care. “The solution to problems with healthcare is to move more aggressively and faster,” she said. 

The NIC Analytics team presented findings during a webinar with NIC MAP Vision clients on April 11 to review key senior housing data trends during the first quarter of 2024.  

NIC Analytics utilized a relatively new webinar format in which the second half featured a deep dive on a special topic. In April’s webinar, David Fasano, Managing Director with Berkadia, discussed the transaction and capital markets environment in senior housing with Lisa McCracken, NIC’s Head of Research & Analytics. NIC hopes attendees enjoyed the new webinar format and welcomes any comments or suggestions.  

 Key takeaways from the first quarter data included the following:  

 Takeaway #1: Occupancy Increased for the 11th Consecutive Quarter  

• The occupancy rate for the 31 NIC MAP Primary Markets rose 0.5 percentage points to 85.6% in the first quarter. This marked the eleventh consecutive quarter of occupancy gains.   
• Occupancy is only 1.5 percentage points below its prior peak of 87.1% in the first quarter of 2020.    
• Robust demand coupled with moderate levels of new supply have driven occupancy gains, and at this current pace, senior housing occupancy rates are on track to recover to pre-pandemic levels in the second half of 2024. 

Takeaway #2: Occupied Units Continue Climbing to Record Highs  

• The total number of occupied senior housing units in the Primary Markets set another high in the first quarter, rising to more than 603,000 units. This was 34,400 units higher than the pre-pandemic first quarter of 2020 level. 
• This trend is similar for the Secondary Markets and shows that today more older adults than ever before are residents in senior housing properties.  

Takeaway #3: Annual Inventory Growth Rate Remained Low  

• Inventory growth rates were steady compared to the fourth quarter of 2023, with assisted living at 1.4% and independent living at 1.2% year-over-year. 
• Overall, inventory growth has trended down from 2019 rates. 

Takeaway #4: Senior Housing Units Under Construction Least Since 2015   

• The number of senior housing units under construction in the Primary Markets continued to decline and stood at less than 30,000 units in the first quarter of 2024, which was the lowest level in nearly 10 years.  
• By property type, majority independent living properties and majority assisted living properties each comprised roughly half of the construction under way. 
• As a share of existing assisted living inventory, units under construction totaled 4.4%, well below its peak of 10.2% in 2017.  
• For independent living, units under construction totaled 4.0% of existing inventory, down from its peak of 6.6% in mid-2019. 

NIC SHARK Series: First Segment Report 

NIC Analytics launched the first segment of the new NIC Senior Housing Analyst Review and OutlooK (SHARK) report series. The NIC SHARK report series is intended to deliver actionable, data-informed insights, and forward-looking perspectives for senior housing capital providers, operators, and developers to prepare for the future and better serve America’s older adults.

This NIC SHARK first segment report reviews with a forward-looking outlook (2024-2026) senior housing market fundamentals and dynamics, including demographic trends, construction activity, supply and demand, absorption-to-inventory-growth velocity (AIV Ratio), occupied penetration rates, and occupancy rates in the 99 NIC MAP Primary and Secondary Markets and by region.  

To learn more, download the NIC SHARK report. 

Key Takeaways:  

• New Senior Housing Construction Lagging: The current pace of new senior housing construction is not keeping up with population and demand growth. While encouraging signs are emerging in the Mid-Atlantic region, where construction activity is shifting towards green territory (positive growth) compared to 2019, the industry needs to focus more on efficiency developments, especially in construction, to reduce costs and timelines and meet the growing demands in the years ahead. 
• Projected Supply Falling Short: Assuming the completion of all units currently under construction within three years, the projected inventory is expected to increase by 4.1% or 44,000 units from 2023 to 2026, representing half to one-third of the projected demand growth. This shortfall is compounded by aging stock and prolonged construction timelines, which are likely to drive a trend towards repurposing buildings and increasing Capital Expenditures to enhance efficiency, competitiveness, and appeal to future residents. 
• Demographics are Destiny: The pace at which Americans are reaching 80+ is staggering. It is projected that from 2023 to 2026, an estimated one million additional 80+ households will emerge, reflecting a Compound Annual Growth Rate (CAGR) of 3.4%. This figure is expected to double to two million in the subsequent three years, 2026 to 2029, with a CAGR of 5.8%. These growth rates vary across regions within the 99 NIC MAP Primary and Secondary Markets.
• Anticipated Increase in Occupied Penetration Rates: The recent surge in demand, particularly in need-based segments, e.g., assisted living and memory care, suggests a new normal rather than pent-up demand. Senior housing occupied stock is projected to grow by 8% to 14% (+75,000 to 128,000) from 2023 to 2026, two- to threefold the projected inventory growth. At this rate of absorption and considering demographic growth rates, occupied penetration rates are anticipated to rise across all regions by 2026.  
• Improved Economics with Sustained Positive Momentum: 2024 is expected to mark the end of a three-year pandemic occupancy recovery in senior housing market fundamentals. The robust absorption-to-inventory-growth velocity (AIV ratio), significantly exceeding the AIV threshold, has been the driving force behind the increase in occupancy rates in 2022 and 2023. Continued strong momentum is anticipated in the AIV ratio over the next three years. This positive trend is projected to set new occupancy records and lead most regions to achieve occupancy rates in the mid-90% range by 2026.
• Call to Action: Senior housing is on the cusp of a notable upswing, with occupancy expected to continue improving over the next three years, in some cases nearing maximum capacity by 2026. This growth is driven by anticipated demographics and demand expansion. Yet, challenges may arise in meeting this surge, including aging inventory, potential supply shortfalls, and lengthy construction timelines. Seventy-five percent of new senior housing properties take nearly three years to develop from groundbreaking, excluding pre-construction phases.

The key question is: Will senior housing stakeholders capitalize on these trends and proactively prepare for the future, or will they maintain a passive wait-and-see stance?

NIC Analytics anticipates that the sustained positive momentum in market performance metrics is likely to spark a “fear of missing out” (FOMO) among investors.

We would love to hear your feedback! For questions or feedback, please contact analytics@nic.org 

Stay tuned for upcoming segments of the NIC SHARK series. 

Insights on senior housing and care from the agency’s top administrator.  

More data. More dialogue. That was the ask of the industry by the director of the Medicare program during a candid discussion at the 2024 NIC Spring Conference in Dallas.

“We all have to partner together to provide better care, improve population health and spend the healthcare dollar in a more effective way,” said Dr. Meena Seshamani, MD, PhD, Deputy Administrator and Director of the Center for Medicare. “I want to drive everyone to a call to action.” 

In a lively Q&A format, the well-attended, keynote session addressed the direction of the Medicare program and what it means for senior housing and care, dovetailing with the conference theme “Insights into Action.” The discussion was facilitated by David C. Grabowski, PhD, Professor of Health Care Policy, Department of Health Care Policy, Harvard Medical School.  

Attendees got an insider’s look at Medicare’s priorities. Top of the list is the shift to value-based care arrangements. All Medicare beneficiaries are expected to be treated by a provider in a value-based care model by 2030, according to the Centers for Medicare and Medicaid Services (CMS). Seshamani explained that value-based care is an effort to rethink how healthcare is provided. Instead of treating illnesses on a fee-for-service basis, value-based care models treat the whole person with the aim of keeping them healthy to ultimately drive better outcomes at a lower cost. 

“Can senior living be part of holistic care?” asked Grabowski. “Is there an opportunity to provide care on site?” 

“Yes,” said Seshamani, adding that there is an opportunity to provide people with care where they live. But she noted that senior living is not considered a provider under the Medicare law. “That is where partnerships that are data-driven to demonstrate quality and cost, can enable what we all seek to provide. That is where the power of value-based care comes into play,” she said.  

Possible partners for senior living providers are Accountable Care Organizations (ACOs) and Medicare Advantage plans, both value-based care models.  

ACOs, for example, take responsibility for the cost and quality of care provided to patients. If an ACO meets quality metrics and saves Medicare money, then the ACO shares in the savings. “ACOs have knocked it out of the park on quality measures,” said Seshamani. “It’s an example of how partnerships can work to everyone’s benefit.” 

CMS recently issued a request for comment on Medicare Advantage plans to gauge the effectiveness of the model. Seshamani challenged the audience to submit their ideas by the end of May.  

“We need data and transparency to encourage innovation and market competition in ways that are central to our mission,” she said.  

Measure Results 

Grabowski asked what metrics senior living providers should track.  

CMS has created a universal foundation of quality metrics that can drive change.  

Measures include tests such as screening for depression, blood pressure, and diabetes, among others. CMS also has an innovation center to test new program models and metrics.  

Medicare doesn’t cover long-term care, but Grabowski wondered about Medicare Advantage plans that offer a supplemental benefit for long-term care.  

Seshamani said this is another case where CMS needs more data to assess the effectiveness of the benefit. Do people understand the benefit? What is the uptake? Does it improve health? Medicare Advantage plans have been asked to report their data. “We want to make sure that what is being offered is being delivered,” she said.  

Grabowski observed that prior authorizations and denials of care required by Medicare Advantage plans are common pain points for skilled nursing providers. In an example of how dialogue with stakeholders can impact policy, CMS asked for comments on the issue and received 4,000 replies. The feedback was used to change the policies. For example, as of January 1, 2024, denials can only be made by providers with clinical expertise.  

NIC Co-founder and Strategic Advisor Bob Kramer fielded audience questions in an animated back and forth.  

Question: What about staffing shortages? 

Seshamani: Providers are encouraged to look for partnerships. For example, Medicare pays for certain community health services. 

Question: How can senior living providers partner with Medicare Advantage plans for non-medical services? 

Seshamani: Medicare wants more information on the kinds of benefits that are working. Providing data is a good way to engage with Medicare.   

Kramer wrapped up the session emphasizing that the senior living sector has an enormous opportunity. Providers have their eyes on Medicare beneficiaries 24/7. 

“Dr. Seshamani is here to spur a dialogue,” said Kramer. He added that as senior living moves to center stage on quality-of-life issues for older people, the industry must provide data. “We can’t just say we do a great job,” said Kramer. “Dr. Seshamani has opened the door for us to show our results.” 

Conference attendees can view the entire session with Dr. Seshamani on the conference app. 

Two developers share lessons learned. 

As the active adult rental segment attracts more investors amid a quickly growing pool of potential customers, a highly interactive session at the 2024 NIC Spring Conference took a deep dive into the product type. Two broad-reaching case studies of successful strategies were highlighted. The audience was also polled throughout the discussion for their input. 

The session was led by NIC Senior Principal Caroline Clapp, NIC’s subject matter expert on the active adult rental sector. It is one of the key focus areas of NIC’s strategic plan to increase data and transparency in the segment.  

Joining Clapp on stage were two veteran active adult developers: Jane Arthur Roslovic, CEO and co-founder of Treplus Communities; and Robert May, managing director of Avenida Partners.  

Putting the discussion in context, Clapp noted that NIC MAP Vision tracks 540 active adult properties with 80,000 units nationwide. The penetration rate among potential residents is less than 1%. 

Clapp identified four key factors in a successful active adult strategy:  

• Understanding the consumer;  
• Choosing a product type, design, and location conducive to downsizing;  
• Selecting amenities and activities distinct from traditional multifamily products; and 
• Implementing and maintaining a strong sense of hospitality and brand. 

Understanding the consumer comes first. “We can’t do enough research,” said May, whose company has been building active adult communities for 14 years. When choosing a location, he focuses first on the demographics, mostly baby boomers.  

About 60% of residents come from a seven-mile radius. In his experience, baby boomers have high expectations but need to be educated about the product and lifestyle.  

In audience polls, attendees indicated that demographics and opportunities for product diversification were most appealing in the space and that multifamily expertise would best transition to active adult, followed by senior housing. Both Roslovic and May cautioned that neither multifamily nor senior housing expertise were a simple transition into active adult. “Our customer is very discerning,” added Roslovic, whose company has five projects in Ohio. “They are usually coming from a home and think hard about where to spend their money.” The Treplus strategy is to select three sites in a metro area. The company builds communities with roughly 120 single-story cottages. “Municipalities are getting more difficult to deal with,” noted Roslovic.   

Both developers emphasized the importance of working with a local team of attorneys, engineers, and construction crews. Another key is understanding the area’s culture and consumer preferences.  

Active adult communities should be located near retail shops and service providers.  “I like in-fill locations,” said May. “It’s all about activity, connectivity, and accessibility.” 

Rental rates are market dependent. But generally, Treplus apartments are priced 20% over multifamily products and 40% under independent living products. 

May looks at the same data but generally uses other active adult project pricing as a reference point.  “It’s all about selling the value proposition,” said May. Active adult is not a need-based product, he added, but the consumer wants to feel like they will be happier and have more fun at the community.

Desirable Tenants 

The active adult tenant profile is attractive to potential investors. Residents typically rent for a period of 5-10 years, lengthier than both traditional multifamily and independent living residents. Compared to traditional multifamily, active adult residents generally are quieter; timelier with payments; and less destructive of property due to lower turnover. “They’re not as sensitive to rent increases either,” said May.  

Most renters are downsizing from bigger homes, and designs should take that into account. Communities feature large apartments or attached cottages or villas. Units have lots of storage but no stairs.   

A hospitality approach is key. Both developers agreed that successful lease-up and operations largely depend upon the on-site lifestyle coordinator.  “You can’t sell the lifestyle without a lifestyle coordinator,” said May. “They are a critical part of the value proposition.” The lifestyle coordinator also provides a tenant feedback loop to the leasing office and property manager, further bolstering residents’ hospitality experience.   

Treplus has a resident activity committee that works with the lifestyle coordinator to put programs together. The company has one lifestyle coordinator that serves the organization’s four communities in Columbus, Ohio, and its newly opened community in Dayton. A sixth community is planned for Columbus.   

The final audience poll asked attendees for their largest barrier to entry or expansion in the active adult rental space, and access to capital was the first choice, followed by consumer education. 

Both developers agreed that pre-leasing is important and begins well before construction. “Education is key the minute you pick the site,” said Roslovic. Both developers build the community clubhouse first, which operates initially as a space for leasing and events. Stabilization at Treplus properties takes 24-36 months from groundbreaking.  

Avenida has an informal partnership with Greystar to handle property management. Treplus takes a different approach and self manages its properties.  

Both developers believe the active adult rental segment will become institutionalized as the capital markets improve and more investors recognize the opportunity. “There is demand out there,” said May. 

Conference attendees can view the entire Active Adult session on the conference app.