Dr. Yulun Wang, chairman, founder & chief innovation officer of InTouch Health believes that senior living should be an extension of the healthcare system, with telehealth capabilities allowing senior living to care for chronic conditions and keep people healthier than hospitals can.

In his NIC Talk, The Future of Telemedicine, at the 2019 NIC Fall Conference, he opens with: “I’m here to tell you about why, and how, the healthcare delivery system that we have today is going to be virtualized. This is important to you because if you have a virtualized healthcare delivery system you can actually bring healthcare to the seniors as opposed to the seniors having to travel into the healthcare delivery system to get their care.”

As Dr. Wang points out, over the last 150 years, life expectancy has risen about a year for every four to five calendar years, but at a cost: increased complexity within the system. He pointed to the number of medical subspecialties, which has increased from 20 in 1970 to 150 today. Meanwhile, the number of doctors per patient is decreasing, from 7.3 per 100,000 people in 1980, to 5.0 today. With the significant rise of healthcare costs, which Dr. Wang describes as unsustainable, the challenge of providing quality care to everyone, without negatively impacting our economy, is a major one.

Dr. Wang characterizes the rise of digital technology as our fourth industrial revolution, shaking up markets and industries, and believes that healthcare, while not the first industry to be disrupted, will nevertheless feel the impact of today’s new technologies – and must embrace them in order to become better and more cost-effective.

Telehealth will allow the healthcare system to leverage new technologies to solve its greatest challenges. In today’s system, the expertise of our 150 subspecialties is scattered across the vast network of hospitals, doctor’s offices, and all sorts of brick and mortar locations. Virtual technology allows those experts to be distributed far more efficiently, while keeping frail elders out of the hospital. Dr. Wang shares a vision of the near future, in which we will have a virtual care delivery layer on top of the traditional brick and mortar layer, enabling clinicians to deliver care far beyond their geographic boundaries. “Beaming in” a clinician through the internet is possible with today’s technology – and is becoming more commonplace already.

Dr. Wang points out that a major barrier slowing the adoption of telehealth is a restrictive regulatory and reimbursement environment. But we are at an inflection point right now. Just in the past year, 40 congressional bills were introduced, and have either been passed or are in the process of being passed, that enable telehealth to be used in a wide range of applications, ranging from behavioral health to COPD, congestive heart failure, and more.

The RUSH Act, which stands for “Reducing Unnecessary Senior Hospitalizations” is close to passing this year, he said. It will allow CMS reimbursements to skilled nursing and senior living for technology, in recognition of the fact that, according to CMS, 45% of transfers from SNFs to hospitals can be avoided. Other regulatory changes, which are either already in place or on the near horizon, expand payment policies and increase payments for telemedicine.

Dr. Wang said that the use of telehealth is far from hypothetical. “Now is the time to link your senior living facilities with healthcare systems in partnership, with financial business models that work.”

This and all of the 2019 NIC Talks can now be viewed on NIC.org.

A frequent question NIC receives is how much seniors housing will be needed for tomorrow’s aging baby boomers.  Using the most recent U.S. Census population projections, NIC has estimated the number of seniors housing units that will be needed through 2040.   Since projections are as much art as they are science, we have also created a few scenarios that project needed new supply based on different penetration rates and different household age cohorts.

It is important to note however that these projections are based solely on demographics and do not consider consumer preferences. This is particularly important because the emerging cohort for seniors housing is the baby boomers and they are known as a generation that does not do things the same way as prior generations.  Hence, assumptions on future usage and penetration rates may be different than today.

Base Case Results 

For the base case analysis, we used the 80-plus household cohort.  Prior analyses have used 75-plus households.  We believe that the age of residents in seniors housing has increased in the last decade, with many observers placing the typical age of a resident higher than 80.  Hence, the 80-plus household cohort better represents today’s residents. 

Based on our estimates of existing inventory and 80-plus households, the penetration rate for the 80-plus household cohort is 18% (1.592 million units / 8.860 million households = 0.18).   With this penetration rate and cohort, there are an estimated 881,000 additional units of inventory that will be needed to serve seniors between 2019 and 2030.  Due to demographic patterns, the rate of change in demand accelerates further out, with a need for roughly 54,000 units per year required between 2020 and 2025; 95,000 between 2025 and 2030 and 105,000 between 2030 and 2040 (see chart below).  In the immediate term, however, 31,000 units are needed in 2019; 36,000 in 2020; and 41,000 in 2021–fewer units than were added to inventory in 2018.

Scenario Analysis

A set of scenarios looks at different penetration rates for the 80-plus household cohort.  If the penetration rate were to increase to 23% from 18%, there would be an additional 247,000 units needed through 2030 compared with an 18% penetration rate (1.1 million units versus 881,000 units). And at a 13% penetration rate, a total of 638,000 units would be needed through 2030 (244,000 fewer than in the base case scenario). 

The chart below looks at the annual inventory growth needed for 5-year intervals through 2040 under these three penetration rate scenarios.  As the chart indicates, for both the base case (18% penetration rate) and the higher penetration rate scenario (23% penetration rate), the pace of annual inventory growth needs to be higher than the rate recently experienced in the U.S., i.e., more than the estimated 48,000 units that were added to the stock of seniors housing in 2018. 

For the 2020-2025 period, nearly 70,000 units per year will need to be added to the stock of seniors housing in the 23% penetration rate scenario.  This accelerates to 121,000 in the 2025 to 2030 period. 

In the lower 13% penetration rate case, roughly 39,000 units of new inventory per year would be needed between 2020 and 2025, fewer than the recent pace of inventory growth.  It is not until 2023 that the demographically-driven demand would require more than today’s pace of inventory growth—in that year, nearly 56,000 units of new inventory would be needed.

Conclusion.  This analysis presents several scenarios that project future seniors housing needs at different penetration rates.  In aggregate, the results show that significantly more housing will be needed for America’s aging population if today’s penetration rate is maintained or grows over the long term.  Moreover, even if the penetration rate were to decline, sheer demographics will support future inventory growth, as the lower 13% penetration rate for the 80-plus household cohort scenario shows. 

The timing of when new supply is needed is important to consider, however.  Under the base case scenario of a 18% penetration rate for 80-plus households, incremental inventory growth slows to less than 32,000 units in 2019, 36,000 in 2020 and 41,000 in 2021.  It is not until 2022 that the demographically-driven demand estimates suggest that the pace of inventory growth needs to exceed the 2018 pace of supply growth.  After 2021, the pace of incremental new supply accelerates and peaks at 135,000 units in 2027. 

As stated at the beginning of this article, it is also important to keep in mind that these estimates are solely based on demographic demand and do not consider changing consumer preferences regarding their housing and care needs. 

What separates the winners from the losers? 

The question took center stage at a panel discussion on skilled nursing at the recent 2019 NIC Fall Conference in Chicago.  The panel included three industry experts and was moderated by NIC Senior Principal Bill Kauffman.  

Though the skilled nursing sector has been through a rough patch, the panelists agreed that winning in today’s complex environment depends on close collaboration with insurers and healthcare partners.  

“Skilled nursing providers must be able to partner with the local hospital system and health plans,” said panelist Dava Ashley, president at Covenant Care.  

Providing context for the discussion, panelist Mark Parkinson, president & CEO at AHCA/NCAL, gave an overview of the sector.  

Operating margins have declined because of dramatic changes in Medicare and the growth of managed care. This has resulted in a shorter length of stay which has had a big impact on the bottom line of skilled operators.  

The promise of a quickly aging population hasn’t helped yet, said Parkinson. The oldest baby boomers won’t turn age 80 until 2025. But demographics are starting to shift in the industry’s favor with a growing population of those ages 82-86. 

Occupancy has started to improve in U.S. skilled nursing facilities which reached 83.7 percent in the first quarter of 2019, representing the first year-over-year increase since January 2015, according to NIC.  “Hopefully margins will show an uptick,” said Parkinson.  

Despite the slowdown in the sector, every local market, no matter how challenging, has its winners, the panelists said.  “It starts and stops with the operators,” noted Dave Sedgwick, COO at CareTrust REIT. “Sophisticated operators figure out a way to succeed.” 

The winning operators have strong local leaders. The most important positions are that of executive director and director of nursing. Effective managers know the market and understand the needs of the local hospital system and health insurance plans. An effective leadership team also results in less staff turnover, said Ashley. “That’s critical.”   

NIC’s Kauffmann asked the panelists how skilled nursing operators can successfully collaborate with managed care organizations and health systems. Here are their top recommendations: 

• Focus on the relationship. Develop a partnership with managed care companies and health systems. “The most successful strategy is to understand what managed care companies want,” said Ashley. Skilled nursing operators need to provide clinical metrics and demonstrate how managed care patients are handled.  Ask the health system or plan what new clinical capabilities could be provided that might help their operations. 
• Tell your story. How will your facility deliver high-quality outcomes in the managed care organization’s timeframe? 
• Transparency. Provide clinical metrics. Transparency helps to build trust which is essential to a solid working relationship.  
• Embrace managed care. It’s not going away. Connect with local managed care organizations, said Sedgwick. “Work with them.”  Aim to capture more of their patients. Skilled operators can become very valuable to managed care partners, resulting in leverage for future contract negotiations on payment rates.  
• Expand types of managed care patients. Hospitals prefer skilled partners with the flexibility to take patients from different health plans.  
• Cluster. Skilled operators with a cluster of projects can leverage those facilities to take more patients from local managed care organizations and hospitals. “It can result in better volume, better pricing and a better relationship,” said Sedgwick.  
• Cost out the patient. Analyze patient needs prior to admission. A fee-for-service patient might be more expensive to treat than one in a managed care plan. For example, a savvy administrator with a good relationship with the managed care company may be able to carve out a patient’s expensive medication.  
• Consider becoming an insurance company. One of the most innovative developments in skilled nursing is the ability of operators to become their own insurer, said panelist Parkinson. “It’s incredibly exciting.” A skilled nursing or assisted living facility can introduce an institutional special needs plan, what’s known as an I-SNP. The facility takes on the risk of their patients or residents, but also can enjoy the savings realized for efficiently managing their population. There are already 62 I-SNPs owned by skilled nursing providers, noted Parkinson. “Every provider should look at this opportunity,” he said. “This aligns the interests of the residents and the facility, and the clinical outcomes are amazing.” Panelist Ashley noted that other hybrid-type arrangements are emerging that partner insurance companies and post-acute nursing facilities. “Skilled providers have the ability to control premium dollars,” she said.  

With record attendance, the 2019 NIC Fall Conference in Chicago last week brought together more than 3,300 participants for three days of networking, educational sessions, receptions, and high-profile speakers such as former Federal Reserve Chair Janet Yellen.   

Programming focused on current market trends and innovations as well as how to best address the disruptions facing the industry. Experts provided insights into effective operational strategies as well as changing capital flows and deal structures. 

Session participation got a boost from new formats including town halls, peer-to-peer exchanges and a seven-minute lighting round of tech innovations. 

New NIC-sponsored research on the growing demand for middle–market seniors housing—“The Forgotten Middle”—was spotlighted along with possible solutions. And NIC Talks returned as eight speakers took the stage to challenge our views on aging.  

“The Fall Conference is instrumental in helping deliver on our mission by providing a platform to connect, educate, and discuss,” said Brian Jurutka, NIC president & CEO.  “It is a gathering that allows key industry stakeholders to share ideas, learn about best practices, and exchange views on where the space is headed.”  

Timely themes included how to recruit and retain good workers, the impact of the ongoing shift to value-based healthcare, and the role of technology. In a continuing effort to improve transparency for investors, NIC announced a new partnership with PointClickCare to further enhance NIC’s rental rate data initiative. 

Other program highlights included: 

• Opening General Session. In a Q&A discussion, former Federal Reserve Chair Janet Yellen provided insights on the economy and interest rates.  
• Active adult. Two sessions addressed the emerging category of rental active adult properties. The segment shows promise to attract baby boomers. 
• Consumers. What do they want? Keynote luncheon speaker Joe Coughlin of the MITAgeLab drilled down into the psyche of the baby boomers. In short, they expect a lot. Another session on consumer insights presented lessons from other industries. 
• Capital. Three sessions brought tougher experts to discuss capital concerns. Topics included sources of debt and equity, valuations, and innovative financial instruments. 
• Workforce development. Labor shortages and rising wages are making employee recruitment and retention a top priority. Operators shared their real-life success stories.  

• Skilled Nursing. As payment reform and changing referral networks take shape, two sessions reviewed current market metrics and addressed the challenges ahead for operators, equity investors and debt providers. 
• Innovations. Presenters highlighted solutions to current challenges, including staff turnover and resident engagement.  
• Demand trends and home health. Panelists explored seniors housing development cycles while another session addressed whether to own or partner with home health providers. 

Attendees will be provided access to video and audio recordings for most of the sessions via nic.org. Publicly accessible highlights and sessions, including NIC Talks, are being posted to NIC’s YouTube page. 

Join us for the NIC 2020 Spring Conference, March 4-6, San Diego.  

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September 16, 2019 

janekadler@gmail.com 

No one ever thinks of anything good coming from a Tsunami. A Tsunami is an unmitigated disaster of unparalleled proportions, that causes mass destruction in its wake. The phrase, “Silver Tsunami,” even as it’s used within the aging field, furthers an old and outdated view of aging; it also undercuts society’s ability to see the opportunities that arise from the incredible achievement of lengthening the average American lifespan by over 30 years just in the past century. This outmoded view of aging is bad for our economy, an enormous loss for our workforce, an even greater loss for our social fabric, and is bad for the health of our elders. Rather than thinking about a catastrophic “Silver Tsunami” we need to be thinking about the potential benefits of a “Silver Stimulus.”  

If you live to 65 today you have a better than 50% chance of living past 85. In other words, millions of “retirement age” Americans have over a third of their adult lives still ahead of them. The greatest barrier to that last third being productive, and of older Americans continuing to contribute to society, is not age at all, but outdated views of aging that no longer fit our new realities. Too often, once an individual turns 65, society views them as past their prime, and no longer of value, and hence “retired” because they no longer have anything to contribute. We need to encourage our elders to “re-fire” their passions, interests, and societal engagement rather than force them to retire because we view them as useless.  

According to a 2015 U.S. Bureau of Labor Statistics report, by 2024, 25% of the U.S. labor force will be over the age of 50 in a trend that has been on the rise since the mid-1990’s. This cohort also accounts for a major part of our economy. European Commission studies find that the economic contributions of over-50 workers, termed the “silver economy,” is today the world’s third largest economy, behind only the U.S. and China. A joint report from Oxford Economics and AARP found that in 2015 Americans over 50 accounted for $7.6 trillion in direct consumer spending and controlled more than 80% of household wealth. Countless studies have shown that increasingly older workers are not only gaining satisfaction and purpose with extended working years but are having a significant positive impact on the world’s economies. The idea that one should retire at 65, and cease to contribute, is an unsupported prejudice; an outdated view that hasn’t been true for decades.  

As we see rapidly declining birth rates, workforce shortages, a shrinking pool of available family caregivers, and a host of social issues that are threatening the very fabric of our society, we must shed the outmoded “Silver Tsunami” attitude that views an aging America as a destructive force. Because today’s 65-year-old is healthier and far more productive than his or her counterpart a few generations back and is likely to want to stay connected to society, we have to change the way we view the coming wave of aging baby boomers. We have to switch our thinking about aging in America from a deficit model, which sees aging almost as a disease, to be avoided at all costs, to a benefit model, that sees the aging of society as an opportunity. 

Look for a more in-depth article on the “Silver Stimulus” in next month’s NIC Insider.