Life expectancy rates over the past century have nearly doubled. And as Terry Fulmer, president of The John A. Hartford Foundation, sees it, increased longevity is the greatest success story of the 20th century.  

Speaking to an audience of seniors housing and care leaders gathered for NIC Talks at the 2019 NIC Fall Conference last month, she said “Here’s your moment, your inflection point, your opportunity to think about how we celebrate this wonderful success and take a look at how we can maximize these additional years in life.”  

Fulmer believes with this extended lifespan comes a call for age-friendly health systems that adapt to the needs of the older population. Age-friendly health systems celebrate and maximize longevity, provide the best care, offer greater customer satisfaction, and at a more reasonable cost, she noted.  

The World Health Organization (WHO) launched an “age friendly cities” initiative in 2006 to, among other things, bring focus to ways cities could become more accommodating to older adults and their families. AARP then brought focus to age friendly communities, described as those that are inclusive and considerate of the perspectives of all residents, of all ages and all persuasions.  

Without age friendly health care systems in those communities, Fulmer noted, older adults may not be fully served. “You’re not an age friendly community if you can’t get someone the care they need, the way they want it, in the time that it should be delivered,” said Dr. Fulmer.  

She then presented the 4Ms framework health care providers can use to inform their work with older patients.  

Developed in partnership with the Institute for Healthcare Improvement (IHI), the 4Ms framework was based on research into “the 70+ care models that we know, based on science, improved care for older adults,” said Fulmer.  

The research resulted in identification of four elements of senior health they labeled the 4Ms: What Matters, Mobility, Mentation, and Medication. According to Fulmer, these four elements need to be working, and in balance, for the older adult’s health to be working, “Any one of those off kilter will set the others into a cascade of problems.”  

What Matters 

“Healthcare providers should be asking ‘What matters to you?’ instead of ‘What’s the matter with you?’,” said Fulmer. This, she said, will fundamentally change the clinical encounter. It allows care providers to focus on patients as individuals, thinking about their wants and needs, for more personal care. 

Medication  

Older adults typically take several medications, often prescribed by different doctors with inconsistent monitoring across the health care system. According to Fulmer, “about 80% of people in a given year have some sort of adverse drug effect, and that’s a problem.” Age friendly health care requires a better way to monitor a patient’s medications, both what is prescribed and what is taken. 

Mentation 

Despite common misperception, depression is not a normal part of aging, noted Fulmer. When evaluating older patients’ mental acuity, care providers should consider other causes that could contribute to an apparent decline in cognition. Is the patient’s medication causing cognitive changes, for example, or perhaps he isn’t wearing his hearing aids consistently? 

Mobility 

“Mobility is one of the things people want most in their life, and is so essential to our sense of wellbeing,” said Fulmer. Beyond preventing falls, age friendly health systems should work to enhance mobility. 

Fulmer and her team have partnered with the American Hospital Association (AHA) and the Catholic Health Association of the United States (CHA) to implement the 4M model. Their goal is to hit 20% of health systems by 2020.  

“But,” said Fulmer, “do not think of this as just a hospital problem. This is all of us— continuity of care across settings.” She challenged the audience to consider what they will do differently in their age friendly work tomorrow.  

To watch a replay of Dr. Fulmer’s 2019 NIC Talk, visit NIC.org.   

1. Occupancy decreased from first quarter, up from year-earlier levels.

2. Medicaid revenue mix over 50%, Managed Medicare revenue mix down from first quarter.

NIC released its second quarter 2019 Skilled Nursing Data Report two weeks ago, which includes key monthly data points from January 2012 through June 2019.

Here are some key takeaways from the report:

• Skilled nursing occupancy decreased 52 basis points to 83.3% in the second quarter of 2019 from the first quarter. However, occupancy was up 48 basis points from year-earlier levels, reflecting the stabilization pattern that has been evident over the past year. Since March 2018, occupancy has fluctuated about one percentage point. A quarterly decline is not unexpected as occupancy usually decreases from March to June due to seasonality. The decrease could be related to flu season coming to an end in the second quarter. The second quarter drop in occupancy was not evident in all geographic areas as occupancy increased slightly in rural areas, while urban areas experienced a decline.

• Quality mix decreased 66 basis points to a near seven-year low of 33.5% in the second quarter and was down 57 basis points from year-earlier levels. Quality mix fell due to declines in both private pay patient day mix and Medicare patient day mix. However, the main driver of the decrease in quality mix has been the decline in Medicare patient day mix, which fell 72 basis points quarter-over-quarter and now stands at a time-series low of 11.5%. Medicare patient day mix has fallen 525 basis points since January 2012. The quality mix trends vary when comparing geographic areas as rural areas saw an increase in the second quarter 2019, while urban areas decreased.
• Medicaid revenue per patient day (RPPD) increased from the first quarter to end the second quarter of 2019 at $215. It was up $6, or 2.7%, compared to a year ago when the RPPD was $209. Medicaid continues to be the fastest growing payor in terms of RPPD on a year-over-year basis, but the concern continues to be that Medicaid RPPD may not cover the cost of care for residents in some states. The growth in Medicaid RPPD is evident in both urban and rural areas as it increased on both a quarterly and yearly basis in both geographies. It ended the second quarter 2019 at $219 in urban areas and $198 in rural areas. Meanwhile, Medicaid revenue mix ended the second quarter 2019 at 50.4% which underscores the importance of following the Medicaid RPPD trend.

• Managed Medicare revenue mix decreased 218 basis points from the first quarter to the second quarter 2019 ending at 10.3%. It was relatively flat from year ago levels. The decrease in overall occupancy along with only a small decrease in managed Medicare patient day mix in the second quarter suggests that the decrease in revenue mix is likely due to RPPD pressure and patient admissions. Managed Medicare RPPD decreased on a quarterly and yearly basis to end the quarter at $432. Managed Medicare RPPD is down $78 since January 2012. The revenue mix trend differed between geographic areas as urban areas drove the overall quarterly trend, declining 231 basis points to end the second quarter 2019 at 12.1%. Rural area revenue mix was flat at 5.2% for managed Medicare.

To get more trends from the latest data you can download the NIC Skilled Nursing Data Report here. There is no charge for this report.

The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. NIC continues to grow its database of participating operators in order to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form here. NIC maintains strict confidentiality of all data it receives.

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.