It’s no secret that the U.S. population of seniors living with dementia is expected to grow in the coming years and thus the demand for memory care (MC) services is expected to increase as well. As a result of anticipated demand, there has been notable growth in memory care units, especially between 2011 and 2016. This has occurred in freestanding memory care properties as well as in properties that offer memory care as part of a continuum of service offerings.  This blog post explores these trends and looks at how well demand has held up and its resulting effects on occupancy. Read further for a deeper dive into memory care in the Primary Markets. 

What Do We Mean by Freestanding Memory Care? 

Freestanding memory care communities offer memory care as the only level of care, whether these properties have a single building, or several. Because many freestanding memory care properties have smaller unit counts than other seniors housing properties, NIC tracks those that have 16 or more units, rather than the 25 or more units and/or nursing care beds that we require at other types of properties. 

The community type data cut was first introduced to the NIC MAP® portal in 2016, partially in response to a growing request from our client base to be able to separate out properties that had a majority of memory care units or properties that were freestanding memory care. As of 1Q2019, 89% of the memory care communities that were open for business in the Primary Markets were freestanding, meaning only 11% were combined properties, and none were continuing care retirement communities (CCRCS). CCRCs are distinct from all other community types using this categorization and require both independent living and nursing care to exist on the same property. Additionally, 97% of all the open MC communities in the Primary Markets were operated by for-profit operators in 1Q2019.  

Freestanding memory care communities are relatively young among the community types that NIC tracks, with a median age of having been open for 16 years versus 19.5 years for independent living communities, 20 years for assisted living communities, 40 years for nursing care communities, and 35 years for CCRCs for the Primary Markets as of 1Q19. This reflects freestanding memory care being the newest product type offered among the group. 

Has occupancy hit the bottom for freestanding memory care in the Primary Markets? 

The chart above shows market fundamentals for freestanding memory care communities in the Primary Markets since 2006 when NIC began reporting the data. The broad trend since then has been falling occupancy rates as inventory growth outpaced demand (as measured by net absorption). Occupancy reached a recent low of 81.5% in the second quarter of 2018 as historical inventory growth dwarfed net demand by more than one third (11,743 units of inventory growth versus 8,438 units of net demand from Q1 2006 to Q2 2018).  Since then, freestanding memory care occupancy has increased by 120 basis points to 82.7% in Q1 2019. Stabilized occupancy stood at 85.7% in 1Q2019, 300 basis points higher than total occupancy, reflecting many units that have been opened, but not yet leased.    

The occupancy improvement reflects a strong year for freestanding memory care communities with 1,360 net units absorbed in 2018. The strongest recorded quarterly absorption for these communities was 611 units in 3Q2018. The strongest recorded quarterly inventory growth occurred in 1Q2018 with net 588 units coming online.  

By Segment, Annual Inventory Growth meets Annual Absorption in 1Q2019. 

Freestanding memory care communities only account for 29.3% of the open memory care units in the Primary Markets. Looking at all memory care as a segment (i.e.: all open memory care units regardless of the property in which they are located), total open inventory in 1Q2019 equaled 87,025 units versus 25,472 units in freestanding memory care.   

The same broad trends of declining occupancy rates as inventory growth outpaced demand occurred for memory care as a segment.  The occupancy rate in the first quarter was 83.3% compared with 82.7% for stand-alone memory care units.   

It’s notable that net demand in the first quarter was stronger than in freestanding memory care (where net absorption was negative 1 unit), with 674 units absorbed in the memory care segment in the Primary Markets. That figure is down 541 units from 1,215 in the fourth quarter of 2018 but is up from 525 a year earlier in 1Q2018. Interesting to note is the recorded high of 1,778 units for memory care absorption for the Primary Markets in 3Q2018.  

Inventory growth of memory care units for the Primary Markets for 1Q2019 totaled 489 units, the fewest since 3Q2010, and 1,001 units less than 4Q2018’s inventory growth of 1,490 units. The recorded high for memory care inventory growth for the Primary Markets was 2,097 units in 2Q2018. 

The chart below shows annual absorption (year-over-year percent change in occupied units) and annual inventory growth.  Both demand and supply show upward trends in the years since NIC has been reporting the data. The annual absorption and annual inventory growth for memory care for 1Q2019 were both 7.2%. This made 1Q2019 the first quarter where the annual inventory growth rate didn’t outpace the annual absorption rate since 3Q2014.  

Opportunity exists for seniors housing. 

Data through the first quarter of 2019 suggests that the bottom may have been reached for occupancy for both stand alone and continuum memory care units. Nevertheless, with occupancy still in the low 80% range, the sector faces challenges as operators and investors seek to meet their business plan requirements and pro formas. Although the first quarter of 2019 had some softer absorption and inventory growth, record high inventory growth and absorption occurred for both freestanding memory care communities and memory care as a segment in 2018.  The market will need some time to better establish an equilibrium position. Because of current predictions of rising dementia rates, and the special considerations associated with serving this population, operators who offer memory care should not only anticipate potential changes in demand when planning their offerings but also how to recruit and keep excellent employees who understand the needs of this population. While some investors prefer to partner with best-in-class operators with strong experience in stand-alone memory care with focused memory care offerings, others prefer operators with properties that offer multiple care levels to serve a wider range of needs (often AL and MC).   

The long-awaited results of “The Forgotten Middle:  Middle Market Seniors Housing Study” will soon be released, in conjunction with two upcoming events. A peer-reviewed manuscript, two perspective articles, and two blog posts, all to be published by Health Affairs, will be released at the upcoming Health Affairs policy forum in Washington, D.C. on April 24^th. The complete study will be released at the upcoming NIC Investor Summit in New York on May 21^st.

Funded by a grant from NIC and conducted by NORC at the University of Chicago, the groundbreaking study defines and quantifies the middle-income seniors’ cohort by its demographic characteristics such as gender, race/ethnicity, education and marital status.  It overlays care needs on top of these demographics and quantifies what portion of the cohort will have cognitive impairment, chronic conditions and mobility limitations.  Thus, the study provides a glimpse into what the housing and care needs will be for this group of seniors today and in the year 2029.   It then provides an assessment of what portion of this population will have the financial resources available to pay for their needs.  The study does not provide solutions to housing and care options for this burgeoning cohort but shines a spotlight on the need for finding solutions for workforce housing for seniors.

The middle market includes Americans whose financial resources disqualify them for government support programs such as Medicaid but are not enough to pay most private pay options for very long.  Those who have spent their careers as healthcare workers, teachers, government workers and trade union members are counted among the many in this middle-income segment.

In addition to providing data to inform housing and healthcare policy, this research provides insights for institutional investors, capital providers and operators.  We hope it serves to spark a national discussion among policy makers and private sector entrepreneurs on how housing and services can be provided to the underserved middle-income senior.

The results of The Forgotten Middle:  Middle Market Seniors Housing Study are being presented at two events:

Health Affairs Policy Forum –OPEN TO THE PUBLIC

• April 24, 2019 policy briefing at the Capital Hilton in Washington, DC
• Release of Health Affairs manuscript by David Grabowskiof Harvard University, Caroline Pearson of NORC at the University of Chicago, Charlene Quinn of the University of Maryland and others
• Release of two Perspectives articles:
  • John Rowe, Mailman School of Public Health at Columbia University, on “Facilitating Societal Adaptation to Aging”
  • Jennifer Molinsky, Harvard University, on “What Can Be Done to Better Support Aging in Community?”
• Blog posts by Bob Kramer, Founder and Strategic Advisor, NIC and Anne Tumlinson of ATI—Anne Tumlinson Innovations
• Event sponsored by NIC with the SCAN Foundation, John A. Hartford Foundation, AARP and the AARP Foundation
• To learn more, visit the Health Affairs website

NIC Middle Market Investor Summit –EVENT FULL

• May 21, 2019 investor briefing at the Yale Club in New York City
• Release of full study with an executive summary, detailed charts and interactive tool
• Analytic file for further research
• Event sponsored by NIC with Institutional Real Estate, Inc. (IREI) and Real Capital Analytics (RCA)
• To learn more, contact NIC at middlemarket@nic.org

Join the discussion.  Together, let’s figure out housing and care options that meet the needs of our middle-income seniors.

Please visit natinvcenterdv.wpengine.com/middlemarket to access content related to the study, which will be added April 24^th and May 21th, in conjunction with the two briefing events.

As a mission-driven, non-profit organization, NIC is committed to supporting and developing the future leaders influencing seniors housing and care. In its selective process, NIC objectively chooses accomplished young professionals in the seniors housing and care and finance sectors to form the NIC Future Leaders Council (FLC). While gaining valuable experience developing their leadership skills, FLC members further NIC’s mission of enabling access and choice in seniors housing and care by contributing to NIC initiatives, committees, task forces, and publications.  

In addition to developing leadership through its FLC, NIC is also a proud co-sponsor of this year’s National Emerging Leadership Summit for Health and Aging Services Executives (NELS). Over three days in Washington, D.C., NELS provides up and coming professionals with opportunities to meet industry leaders, develop their leadership skills, learn about advocacy, connect with fellow rising stars, and contribute to creative solutions for advancing the field of health and aging services.  

Attendees typically hold property-level positions in skilled nursing facilities, assisted living and independent living communities, CCRCs, rehabilitation hospitals, affiliated organizations, and home- and community-based services. In the early stages of their careers, NELS attendees find the event uniquely geared to their needs. The summit offers an engaging, interactive experience focused on professional growth and crafting solutions to improve the field of health and aging services. 

Summit proceedings, outcomes, and key conclusions from each year are published in a white paper that is available for download on the NELS website. The white paper for the 2018 Summit details three primary action plans that attendees worked on throughout the year. A Recruitment and Retention Strategies group created a “recruitment and retention toolbox” with materials and strategies to help address the growing need for engaged workers in health and aging services. A Policymaking Group produced information on how to understand legislative and regulatory processes and how to contact government officials and policymakers. The Educating Consumers Group focused on educating new consumers and family members about the options and resources available when moving to a SNF, assisted living community, or other residential community for the first time. 

Attendees for the 2019 NELS event will similarly identify areas of importance that they will work on over the period of a year to improve the future of professions in health and aging services as well as enrich the lives of residents, patients, and their families. 

This year marks the 10th anniversary of NELS. For this major milestone, former NELS participants and alumni will be networking and mentoring the new class of attendees. Applications to attend NELS will start being reviewed on Friday, April 19th, 2019 with a hard deadline for application of Friday, May 24th, 2019. Scholarships to attend NELS are also available on a competitive basis. Approximately 19 NAB-approved continuing education units (CEs) are available to participants. NIC encourages you to send your best and brightest (or yourself) to NELS in 2019 by applying here. 

The Labor Department reported that there were 196,000 jobs added in March, above the consensus expectation of 177,000.  This marked the 102^nd consecutive month of job growth.  The latest three-month average is 180,000, less than last year’s 223,000 monthly average but still strong and consistent with more modest growth anticipated for 2019.

January was revised up from 311,000 to 312,000 and February was revised up from 20,000 to 33,000.  Combined, employment gains in January and February were 14,000 more than previously reported. Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.

In March, employment in health care rose by 49,000. In the past year, health care has added 398,000 jobs.  Notably, manufacturing employment fell by 6,000 positions after having seen steady growth of 22,000 positions on average over the past 12 months.

The unemployment rate held steady at 3.8% in March.  A broader measure of unemployment, which includes those who are working part time but would prefer full-time jobs and those that they have given up searching—the U-6 unemployment rate—remained at 7.3%.  This was the lowest rate since 2000.

Average hourly earnings for all employees on private nonfarm payrolls rose in March by four cents to $27.70. Over the past 12 months, average hourly earnings have increased by 3.2%, down from 3.4% last month.   For 2018, the year over year pace was 3.0% and in 2017 it was 2.6%.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work fell to 63.0% in March from at 63.2% in February, very low but up from its cyclical low of 62.3% in 2015.  The low rate at least partially reflecting the effects of an aging population.

This report, in combination with other recent data on economic activity, will support the Fed’s recent position of pausing interest rate increases.

A conversation with human resources expert Valerie Armstrong on how to develop programs to match the needs of different generations. 

In a tight labor market, the recruitment and retention of top-quality staff is a big priority.  

The labor pool is not monolithic, however, according to Valerie Armstrong, a human resources expert who speaks at senior living forums.  It’s important to understand the motivations of different generations— older, more seasoned workers, millennials and the newcomers in Gen-Z. The creation of programs tailored to each group within the context of a community’s culture can help promote good hiring decisions while slowing turnover.   

NIC recently talked to Armstrong about strategies to find and keep good team members. She is a human resources business partner at Sodexo which provides services to senior living communities, including dining, facilities management and housekeeping.  

Here’s a recap of the conversation.   

NIC: What is your role at Sodexo?  

Armstrong: I have a multi–disciplinary role within human resources that includes onboarding, leadership and frontline training, engagement and retention. We train Sodexo employees as well as people employed by senior living communities. We are a true partner with senior living communities.   

NIC: What’s your approach?  

Armstrong: We help senior living communities brand themselves and market their stories to attract and retain team members at all levels from executive leadership to frontline staff. We help make sure the community’s branding, culture and behavior is aligned. It doesn’t matter what industry you’re in, if those three things are not aligned you will not be able to successfully identify and retain top talent.   

NIC: What are the different generations looking for in a workplace? 

Armstrong:  Many times, when employers start targeting certain groups, they leave others out. We need to take a broad and flexible approach. We have multiple generations in our workforce. That’s one of the things I talk about at industry meetings. Baby boomers are looking for stability. They want to know what the work hours will be and what they’ll be doing. Boomers want a career path they can see. They also have so much to offer the younger generations.   

Gen-Z and millennials want to learn and engage. So their onboarding plans and career paths look a little different than those for the boomers. Millennials want some flexibility to try new things and Gen–Z wants the ability to help build their own career paths.   

We cannot lose sight of diversity and inclusion. Sodexo has a platform on diversity inclusion because it is important to younger people. In fact, 77 percent of younger people will make their decision whether or not to work for an organization based on diversity & inclusion programs.    

If you step back and think about it, everything the younger generation does is about their brand. Gen-Z displays their lives like a museum on social media. They are the curators who invite us in and provide a tour.  This is their brand: a self-portrayal of how they identify themselves.  

NIC: What are some effective strategies?  

Armstrong: Let people know what it’s like to work at the community. It doesn’t have to be a high cost approach. Grassroots efforts are best. It could be something as simple as hosting a “Bring Your Friend to Work Day.” Or asking employees for referrals. We partner with job corps programs and veterans groups. Tap into community groups such as the YMCA and Lions Clubs.  At Sodexo, we may be working with a college down the street and be able to tap into that employee pool.   

The strategy is similar to the sales strategies that senior living communities use to find new residents by tapping into referral sources and local organizations.  Each community structures its own local approach.   

NIC: What about turnover?  

Armstrong: Turnover is extremely costly for any organization. When you have a lot of turnover, you also start to lose the essence of your culture. Reward and recognition programs work well. Flexible scheduling is a big plus for the younger generations and working parents.  Primarily, we focus on retention programs that meet the employees’ needs with coaching, communication and engagement. You have to listen and follow up with them.  

Over the last two years, we’ve focused on a two-plus-two coaching program. Conversations are held with employees at least quarterly to discuss two things they do exceptionally well and two things that they can work on to improve. That is the foundation of their career development plan.   

When a person joins a senior living community as frontline hourly employee, they may not be familiar with structured performance reviews once or twice a year. The two–plus-two coaching provides reinforcement and direction in a way that is positive, informal and approachable.  It’s an easy win. 

NIC: How do the different generations feel about feedback? 

Armstrong:  Gen–Z and millennials want frequent feedback. Gen–Z likes face–to–face engagement to help them see where their career is headed and how they can be successful. Baby boomers get a lot of personal reward just helping out their peers and engaging with their peers. They have a lot to offer and they like to engage with the younger workforce. Opportunities for mentoring and team projects are very positive.  

NIC: Minimum wages are increasing in a lot of places. Is the wage rate a big factor in worker recruitment and retention? 

Armstrong: We have to comply with state and federal rules on wage increases. But wages are not everything.  We focus on the enrichment of individuals’ lives.    

NIC: What would you like readers to take away from our discussion here today?  

Armstrong:  This is really all about connection. The recruitment and retention process is about that one–on–one connection. It sounds simple, but it’s not. It takes a well thought out strategy and follow through to make it work.   

Valerie Armstrong is director of human resources for Sodexo Seniors in North America. Connect with her on LinkedIn.  

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Feb. 13, 2019 

janekadler@gmail.com