One of the most important elements of success for a business or an industry is the continued development of leadership to ensure that the necessary human capital is available to embrace the challenges of the future, prepare for growth, and navigate critical issues. NIC and the seniors housing and care sector are no different. Leadership development is essential, especially for the continued success of delivering on the NIC mission which is to support access and choice for America’s seniors by providing data, analytics, and connections that bring together investors and providers. As the need for housing and care increases with an aging population, so too does the need for innovative thinking and the ability to solve the challenges ahead and embrace the opportunities for the future.

Over the years and since its founding in 1991, NIC has been driven by very talented volunteer leadership in its numerous industry initiative committees and in its Board of Directors. These talented volunteer leaders are largely responsible for the success of NIC and the need to have this continue is vital for the industry to continue growing and serving America’s seniors.  An avenue NIC has pursued to ensure this leadership continues is the NIC Future Leaders Council (FLC).  Established in 2009, the Future Leaders Council represents the best and brightest of the industry, which continues to develop emerging leaders within the industry bringing innovative thinking, fresh ideas, and new energy to ensure the industry/NIC is prepared for the future. The FLC has been extremely dedicated over the years and continues to grow into more of an important role for NIC and the industry. For example, the FLC was instrumental in delivering the latest version of the NIC Investment Guide which was released last Fall in 2018. 

The FLC is comprised of only 24 members and given that, it is very selective.  These smart and dedicated professionals come from the companies in the seniors housing and care and finance sectors that have volunteered time and resources to support NIC’s mission. As members of the FLC, these individuals contribute a significant amount of time to the NIC mission which includes working on various NIC committees and task forces and initiatives.  They also get the chance to develop volunteer leadership skills and have ample opportunity to form meaningful professional relationships with current NIC leaders while functioning as an extension of the Board.   

The selection process for the FLC is a highly competitive one, which includes a member application in addition to a nomination submission. Nominations originate from senior level executives within the industry.  The emerging leaders that are nominated are individuals within their companies that represent passion, commitment, strong leadership potential, the ability to think creatively and strategically, in addition to having 5 to 10 years of relevant work experience. The FLC is a three-year commitment, and members meet as a group quarterly. Each class focuses on different NIC initiatives and programs, always working closely with each other, the NIC Board, and various committees and task forces. 

One of the overall goals of the Future Leaders Council is to produce future volunteer leaders for NIC, and truly, the industry and NIC needs this as the next generation cycles through to leadership positions in an industry that is now more than ever in the spotlight given its importance to serving an aging population. Embracing the talent of the FLC is one way NIC is providing a solid path to prepare for the future and continuing to deliver on its mission. 

Please see the link below for current members of the FLC: 

https://www.nic.org/nic/future-leaders-council/senior-housing-investment-members/ 

We have to think about what’s best for this person, this patient, this resident, and carry that expertise throughout the different settings.

In today’s value-based care model, the focus is increasingly on incentivizing providers to do what’s truly best for the individual, the customer. Good outcomes are the goal, and the intent is to incentivize provider behavior that will produce such outcomes, at lower cost. That’s led to the realization that we need to have good hand-offs from one setting to another. In order to achieve coordinated, integrated care, information must immediately be transferred along with the individual. That means patient information including prescriptions, the treatment plan, the conditions they’re being treated for, and so forth, all must go along with the individual, from one setting to another. All of this is good – and important. But it’s not enough. 

Under the fee-for-service system, each of the silos within the continuum of care was incentivized to hold on to the individual using their services for as long as possible. Should that person have reentered a given care setting after being discharged or transferred elsewhere, it was all the better because payments would continue to be made as long as that person was in your bed. It was a perverse incentive, sometimes resulting in the hope that that patient would return, rather than heal and move on. It also placed different settings at odds, competing for dollars, rather than focusing them on working together to achieve good outcomes. As a result of these and other pressures, each setting functioned as a stand-alone silo and profit center. 

It’s time for those silos to break down and start working with each other. If that doesn’t happen, and coordinated care is just about good handoffs from one silo to another, we won’t actually benefit the customer, nor will we truly save money in terms of total healthcare spend. We will still be furthering that siloed mentality, in which experts in each silo still make decisions, independently of the experts in other silos, such as the hospital, skilled nursing, assisted living, or home health care settings. 

Each time you hand off to a new setting, the senior healthcare professional in that setting becomes like a dog marking its territory.

I can offer two illustrations of this problem. The first was related to me by a skilled nursing executive. Because the family members of a resident knew this executive, they called him to discuss their mom. She was on a managed care plan and had just been discharged to one of his properties from the hospital. Within 72 hours, they received three phone calls, from three different care coordinators: one from the health system, one from the managed care plan, and one from the skilled nursing facility. In each case, the call was to advise the family as to what was the best care plan for their mother. They clearly had not spoken to one another, let alone coordinated, as they each offered a different approach to her care. The family’s reaction was “no wonder health care is so expensive, and so screwed up.” All of the calls were made in the name of executing a good handoff. 

Another illustration I use comes from my time as a Maryland state representative. I sat on the committee which regulated all the different healthcare professions in the state and got to see all of their turf battles. Every group, from Podiatrists to Ophthalmologists, would come in and argue about who was qualified to do what. Each group would argue that only they were qualified. Today what I see, in terms of these different settings, even if there’s agreement on the need for integrated, coordinated care, reminds me that not much has really changed.  

If we just have a different team of experts in each setting, we’ll have turf battles – and the loser will be the individual receiving care. 

Each time you hand off to a new setting, the senior healthcare professional in that setting becomes like a dog marking its territory. They routinely overrule the other silo. You might hear a hospitalist say: “I don’t know why the consulting doctor in the skilled nursing facility recommended this prescription and that you do that therapy.” The skilled nursing physician might say: “I don’t know why they put you on that in the hospital; that’s nuts, given your history – they must not have looked at that.” Then the managed care company comes in, saying: “I don’t know why either one of them is doing this; that’s so expensive, and so uncalled for.” In each case, they’re saying, “we’re the experts” and they show it by stepping all over the advice the patient got from the other care settings. 

This dynamic is why, if all we focus on is good hand-offs, we will fail to truly produce the best outcomes for the patient, at the lowest possible cost. Instead, we have to have coordinated, integrated care not just in the hand-off, but across all the settings and throughout the individual’s care journey. We have to think about what’s best for this person, this patient, this resident, and carry that expertise throughout the different settings. If we just have a different team of experts in each setting, we’ll have turf battles – and the loser will be the individual receiving care.  

There are practical examples in which coordinated care teams disrupt old silos and achieve integrated care at lower cost. For an excellent read on the practical aspects of coordination, you can download the paper “How Disruptive Innovation Can Finally Revolutionize Healthcare”. Written by Clayton Christensen, Andrew Waldeck and Rebecca Fogg of Innosight and Christiansen Consulting, the paper, which is subtitled, “A plan for incumbents and startups to build a future of better health and lower costs” provides evidence that this approach is not only cost-effective, but necessary if we really wish to achieve great outcomes for Americans. We recommend anyone interested in achieving better outcomes, at lower cost, read the paper. I welcome further discussion and comment from those in the business of caring for people – across every setting – on how best to achieve meaningful results. 

NIC is pleased to welcome you to the new look and feel of our blog, which up until a week ago was titled NIC CARES. The old blog, which was designed and launched back in March 2015, was, according to our marketing vendor, in need of an update. We’re excited to have launched the new platform over the July 4th holiday, with no major bugs or any complaints – but, of course, will be looking for any feedback from our subscribers and readers.

Not every new feature will be visible to visitors. The new blog is operating on a platform that is easier to work with on the publishing side – and has better tools for tracking visitors and their reading habits. It is our hope that, in addition to reducing the effort required to publish each post, the new platform will help provide some insight into which posts are valuable to our readers, and which ones perhaps fail to attract attention. Over time this approach should help us fine tune the blog to suit our readers’ needs and interests. 

The update provided an opportunity to make some design changes as well. The new interface, which is easy to read on any type of device, also makes loading images easy – so we’re planning to include images in most of our posts going forward. The new layout was designed to be easy to read and to make scrolling through easier as well. 

The new blog’s search function has also been refined. We have developed a much shorter, more useful list of search categories, designed to make it easy for our various audiences to quickly find relevant material. You will find the categories in a drop-down list next to the search button at the top of the page. The entire catalogue of posts, which still dates back to 2015, can also be searched by any keyword users wish to enter. 

Another change, of course, is the name of the blog. “NIC Notes” replaces “NIC CARES” to help remove any misconceptions around our mission and brand, particularly as new readers, and those who may be new to the sector, continue to find the blog online. “NIC Cares,” for some, may imply a medical or skilled nursing focus, which would be inaccurate. While this is not a big problem, we have been aware of the possibility for confusion, and took the redesign as our opportunity to better align the blog with our overall brand. 

Please keep reading NIC Notes – and look for further updates as we continue to refine and improve what has become one of NIC’s favorite sources of insight, news, and commentary on seniors housing and care. 

The Labor Department reported that there were 224,000 jobs added in June, above the consensus estimate of 160,000. The June increase in jobs marked the 105th consecutive month of job growth. The latest six-month average increase is 172,000, less than last year’s 223,000 monthly average. Nevertheless, the pace of job gains is strong and generally stronger than the levels that have usually prompted the Federal Reserve to cut interest rates in the past. This suggests that the Fed will not be cutting rates immediately despite other concerns about a slowing economy or trade-related threats to the economy. In recent months, the Fed’s has indicated that it is paying close attention to the risks of an economic slowdown.

Revisions subtracted 11,000 to the prior two months. The change in total nonfarm payroll employment for April was revised down from 224,000 to 216,000, and the change for May was revised down from 75,000 to 72,000. 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 June, employment in health care rose by 35,000. In the past year, health care has added 403,000 jobs.

The unemployment rate edged up 3.7% in June from 3.6% in May. This is still close to the lowest rate in 50 years. 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—rose to 7.2% from 7.1%.

Average hourly earnings for all employees on private nonfarm payrolls rose in June by six cents to $27.90. Over the past 12 months, average hourly earnings have increased by 3.1%, the same as 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 was unchanged at 62.9% in June, 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.

Part III—Operators Highlight Successful Approaches 

As new research shows that the number of middle-income seniors is growing quickly, forward-looking seniors housing providers are already experimenting with new and more affordable models of housing and care. Innovative ideas include smaller building footprints, private-public partnerships, and efficient designs and staffing models.

These ideas, and others, were recently showcased at an investor summit May 21 in New York City. The NIC-sponsored summit brought together industry stakeholders to share ideas to cut costs and streamline operations to improve affordability for middle-class elders.  

The investor summit followed the release of a new study, “The Forgotten Middle,” which highlights the need for more housing options for the growing number of middle-income elders. The study was recently published in the journal Health Affairs and discussed at an April 24 policy forum in Washington, D.C. 

The study shows that the number of middle-income seniors will double, and most will not have the savings needed to meet their housing and personal care needs.  

The investor summit included three separate panels of industry participants: equity investors, debt providers, and property operators already piloting middle-market options. Each panel discussed what is needed to make middle-market solutions work from their perspectives.  

What follow is an edited transcript of the third panel discussion, focused on building operators. (A link to transcripts of the other panels is here.) 

The operator panel was moderated by Kai Hsaio, CEO, Eclipse. Panelists included Thomas Grape, chairman and CEO, Benchmark Senior Living; Gaurie Rodman, director, development services, Direct Supply; and Judy Marczewski, CFO, Leisure Care. NIC Founder Bob Kramer wrapped up the investor summit with remarks about the next steps for the industry.  

Hsaio: The question is whether we can make this middle–market operating model work. Tell us about your companies. 

Grape: Benchmark Senior Living has 58 communities, mostly in the Northeast. We have rolled out a shared occupancy model with reduced construction costs and staffing changes.  

Rodman:  Direct Supply supports operations. So we see a wide array of concepts brought to the market. Innovations in technology can have an impact on the cost of operations.  

Marczewski: Leisure Care has 50 communities of independent living, assisted living and memory care from middle market to middle upper market. We just opened our third middle market product in Raleigh, North Carolina.  

Hsaio:  Why are you doing middle market buildings? And what were the initial steps you took? 

Grape:  We were drawn to it for the same reasons that motivated the study.  We knew there was an underserved middle to tap into as rents and costs increase. We’re pleased with our success.  We tried the first community as an experiment to see if we could make it work. Now we have a couple more ready to open.  

Marczewski: We wanted to design a product that met our philosophy for seniors housing but at an affordable price. In 2014, we designed a product based on monthly rent of $2850, which matches where middle market turned out to be. We started from scratch to design and operate this model from a customer perspective within that rent price.  

Hsaio: Where did you get financing? 

Marczewski: We just opened our third project and each one has a different equity partner. The secret is to build an efficient operating model. An efficient capital structure is what’s missing.  

Grape:  We targeted rent of $50,000 per year, an average of $3,300 a month for assisted living and memory care is higher. That’s 25% less than competitors. We reduced staffing by 15 percent compared to our other properties but without touching care levels. Instead, we reduced overall staffing by tinkering around the edges. Building size is 25% percent less than our traditional buildings. We used conventional financing. It would be great to have a financing mechanism like the low income housing tax credit to marry with this kind of operating model to help target the middle market.  

Hsaio: If I looked at a pro forma for your traditional product and for your middle– market product, how would they compare? 

Grape: We are located in a more blue collar market where land costs are less. Construction cost per unit was 25% less. We did a smaller building size and memory care is on a single floor and assisted living on two floors. We did wood frame construction in the two-story portion to keep costs down. On the operating side, we reduced staffing by 15% percent. We have no dining room manager and we reduced the activities staff by half of a full time equivalent. We nibbled around the edges without touching the care staff.  We did not market the building as lower cost, but as a high sociability option.  The vibe in the building is electric. There’s a great sense of volunteerism from residents and families. The more compact building size and common areas have created a great culture and it has worked with less staffing. The smaller building requires fewer housekeeping staffers and maintenance workers. The margins are about 5% less. The NOI per unit is $2,000 less, but we get the same unlevered returns and the same projected IRR over the whole period.  

Marczewski:  Similarly, we focused on efficiency. Thoughtful design helped us to reduce staffing levels. We offer high quality food, but fewer options. Food is prepared throughout the day rather than all at once to allow for better staffing. We spent time very thoughtfully designing the building from the inside out. We focused on operations, not on how to make it look pretty on the outside. We operate at significantly less cost.  In 2014 dollars, project cost was $26 million, or less than $200,000 per unit. Our portfolio has been built over 40 years with expensive and moderately priced buildings. For what we are doing, repurposing another building would not work. Operational efficiency is where you get returns.  

Grape:  Our cost was $440,000 per unit, but $221,000 per bed compared to $339,000 for a typical building, or 35% less. The trick was shared occupancy. We could not build today for those numbers because of the rise in construction prices.  

Hsaio:  How do you think about the middle–market product?  

Rodman: We look at every layer of the development and operating process from the beginning.  It might mean finding land in communities where you can have a conversation around getting real estate taxes reduced, increasing the floor area ratio (FAR), and leveraging community taxes for infrastructure improvements.  It means looking at partnerships with local home health agencies, hospitals, universities, and high schools for volunteers. Technology is providing a lot of innovation that we need to embrace.  

Hsaio: Any lessons learned? 

Marczewski:  Our first project did not fill that fast. It’s in too small a market. The second one is doing well. The building design as well as the operational efficiencies has proved out. Our margins are incredible and the third building is off to a wonderful start. We will start our fourth building depending on how quickly the third one fills.  

Grape: Our first building has done well and opened near full. It had shared occupancy units. The next two buildings have a few one bedroom units to add some variety.  

Hsaio: Looking forward, which will grow faster: middle-market or other products? 

Grape:  For us, we’ll see how the next two do before we launch more. We are feeling our way.  We want to understand the customer and operations and know we have it down. We’re not there yet but we’re encouraged.  

Marczewski: It depends on land and construction costs. It’s challenging now to build because construction costs are up. The next cycle is coming, so we’ll see.   

Rodman: Regulations have to change. We need to take a look at the required number of ADA compliant units and see if we can build for less and still meet consumer needs.  Maybe it’s the difference between building a closet vs. adding a wardrobe in the unit. Little things can add up. Maybe we can leverage the land with another user to produce different revenue streams. Our next population of residents will desire that. We need to start thinking out of the box.  

Hsaio:  Is CapEx different for these projects? 

Marczewski:  The kitchens in our moderate buildings are the most expensive kitchens we’ve built.  We put high–quality equipment in kitchen to reduce staffing. You can trim expenses through less staffing with good design and equipment. The equipment is easy to clean and maintain and the costs associated with that can add up.  We are not willing to compromise on providing great communities for residents. We don’t do shared units. There are a lot of ways to do this, but the building has to be thoughtfully designed.  

Hsaio:  What about acuity levels? 

Marczewski: Our middle market product is independent living, but with space for physical therapy, occupational therapy and home health which operate in the building. That allows us to keep pricing down. We’d like to do assisted living too and that is coming next.  

Grape:  We offer assisted living and memory care, no different from our other product.   

Audience Q: Are these places the vision of the life residents will want?  

Marczewski:  We designed a model not around what we have done in the past but what people will be looking for in the future. It’s a modern, social model with the kind of apartment future customers would want based on their psychographics.  

Grape:  We market the community as a sociability model, not as an inexpensive alternative. The building is located in a modest income community but people are drawn to the sociability and that’s what they want. The community is based on research of people who want a social setting.  We’ve done a good job in this middle market community by not having people feel like it’s a middle-market product but one that’s highly social because that’s what they wanted.  

Rodman: We shouldn’t call it seniors housing just because people are in the later stage of life. We need to think about it differently.  

NIC Founder Bob Kramer summarized the ideas presented at the investor summit and offered insights into the future of middle-market seniors housing.  

Kramer:  If you look ahead to 2029, the middle-income segment represents a huge market for seniors housing which will only grow in the following two decades. How are we going to take advantage of this opportunity and meet the need?  

We’ve touched on the need for a combined public–private approach to this challenge. And if the private sector is not part of solution, we will pay a price because there will be pressure on safety net programs such as Medicare and Medicaid. Should seniors housing only care about the wealthy? If so, tough regulations will come and there will be mandatory set asides for middle-income folks.  The reality is that this is an untapped market and a huge unmet social need. We will have more flexibility going forward as an industry if we demonstrate our commitment to this market and offer practical solutions.  

What I heard today is that the equity component presents the greatest challenge, but that the debt piece will be there to finance middle-market projects.  

Our industry has been focused to a great extent on offering the same product with different bells and whistles. But our operator panel today showed a different way of looking at things by looking at a price point and figuring out a way to deliver what the customer wants. Efficiencies can be found with technology and a better use of staff.  

It’s easier to create an independent living product that’s a fun socially engaged community where there is not as much focus on care. Real estate capital is more comfortable with that model.  

The tough challenge is solving the care piece for the 85– plus population.   Maybe real estate equity won’t be part of the solution. Instead, insurance plans might see the opportunity to wrap a managed care product around a seniors housing platform to serve a middle–income market they have risk for. Healthcare investment funds might be more interested in that kind of product than real estate funds.  

Other ideas might be prefab, modular units with lots of technology. Labor will continue to be an issue and regulations will have to change to find creative solutions, such as volunteer family caregivers or allowing the less frail to care for the more frail. Middle-income seniors represent a huge market and a great opportunity, but we have to be more flexible.   

It’s critically important as we talk about 2029 to understand how customers are changing. They are not going to accept a condescending model of senior care. They are looking for social connection and purpose. It has to go deeper than care or a real estate product. Maybe it’s the village model or co-op housing—a college-style place where you can reinvent yourself in your 70s.  Activity directors could become purpose matchmakers with the care component running in the background. Today’s image of assisted living is a place where you need care. But people don’t want to move there.  Selling a lifestyle and the human connection is different.  

Go back with your team and discuss this. We want to bring a spotlight to ideas in four areas:  development, capital, operations and regulations. NIC hopes to highlight our need to come together to provide more and different types of housing and care options for middle-income seniors. They’re hoping not just to age, but to age well, in other words, to thrive.