February 2014 Insider

Keynote Preview with Senator Bill Frist

With the NIC Regional Conference just weeks away, keynote speaker Senator Bill Frist gave NIC an exclusive pre-conference interview and spoke about his extensive personal and professional experience in seniors housing and care as well as his take on some of the key issues currently playing out both in healthcare and in seniors housing and care specifically. He also reflected and spoke fondly about his father’s influence.

Senator Bill Frist, who represented Tennessee for 12 years, was the first doctor in the U.S. Senate since the 1920’s, and served on both the health and finance committees. He will be speaking at NIC’s networking luncheon on March 18 on The Transformation of Healthcare: A Dialogue with Senator Bill Frist.

NIC: Tell us a little about your professional and personal involvement in the seniors housing and long term care segment of the healthcare industry?

Senator Bill Frist: During my teenage years, my dad had a particular interest in geriatrics. He was an internist at a family practice in Nashville, but his interest always focused on seniors and senior living. As a little boy growing up, I would go on rounds with him and he told me stories about his commitment to our seniors. Under President Eisenhower, he went to Washington as a young doctor and testified before what became the Senate Committee on Aging. He later founded a senior living facility for the Presbyterian Church and went on to found Hospital Corporation of America. HCA initially was in the senior living and nursing home businesses.

Those early experiences with geriatric medicine impacted me. I retained an interest in caring for our seniors when developing in my own medical practice. In fact, even though I was a surgeon, I was very much a part of the movement that helped to establish geriatrics practice as a specialty.

Currently, I work as a partner in a private equity firm which provides funding for companies looking to expand into the post-acute care space. I’m on the board of Select Medical, a long term acute care hospital as well as a rehabilitation facility that practices in the post-acute space. In the policy arena, starting on the Finance Committee, I was involved with the reimbursement issues of long term care and was one of the primary authors of the Medical Modernization act of 2003. I was also instrumental in setting up the Medicare advantage program.

NIC: In what ways do you think the Affordable Care Act will have the most impact on the seniors housing, long term care and post-acute care sectors?

Senator Frist: Despite being about Medicaid expansion and the purchase of private health insurance, the ACA will actually impact the long term care and post-acute sectors in several ways.

• The ACA approves $900 million for innovation grants. These grants support private companies interested in trying new options in value based healthcare delivery and that focus on a more integrated model in the post-acute space. These new options are incubators for innovation in this space. These new models will challenge current reimbursement models with new ideas like bundling payments for an entire post-acute care episode and by shifting risk from the traditional government and insurance companies onto the individual.
• Secondly, the ACA also reduces reimbursement for Medicare advantage plans, which will likely change the purchasing habits of seniors using this supplemental coverage for outpatient services. As you well know, these “outpatient services” include long-term care options. It’s unclear how much this will affect their utilization of long term care but it will have an impact.
• This leads to a third potential impact – consumerism in healthcare. The rise of the patient-consumer is upon us, especially with the permeation of high deductible plans. We are heading towards a world where the patient-consumers of long term care and assisted living will be asking more questions, demanding more data transparency as well as more accountability than they have in the past.
• Finally, the CMS readmission penalties are pressuring significant change. Healthcare systems are developing data systems and analytics which will more accurately identify those at risk for readmission. The impact here is that the people involved in assisted living and in any healthcare related entity for seniors, will need to pay more attention to this data because it will be demanded not only by the ACA, but, more importantly, by the patient-consumer.

NIC: What are the top healthcare trends that you currently have your eye on?

Senator Frist: I see many trends emerging, but I have my eye on six in particular.

There is a definite rise in government sponsored healthcare. The implication for companies working in senior living is that they will be forced to comply with the government regulations that come with the government money.

Another trend is a movement towards value-based healthcare. This means the restructuring of payment models, bundling of care, and a requirement for outcomes evaluation. Specifically, accountability for outcomes and a correlation with the cost of care will be a massive cultural change in medicine.

Third, we are witnessing the rise of the patient-consumer. This means a shift from the paternalism of medicine to an empowered patient-as-a-consumer model where the patient shops around. The rise of consumerism imparts a need for branding in healthcare that we have not before seen.

I also see this as an era of innovation in technology. And not just EMRs and new gadgets, but an influx of actual disruptive technology that will revolutionize not just the way we record healthcare data, but also the way we actually deliver care.

Finally, there is an overall movement towards home as the locus of care. And this will redefine the post-acute care space. This is certainly a trend that is most impactful for the senior living and long term care industry and potentially disruptive. But I see it as an opportunity – an opportunity for innovative business models that will improve the overall quality of life of our seniors.

NIC: In a recent interview you talked about traditional technology versus new technology in the health care sector. What role do you see new technology playing in the seniors housing and care industry?

Senator Frist: Technology will impact all sectors of the healthcare industry. Recently I have been very interested in direct to consumer applications as well as technology that actually changes the way we deliver care. Specifically for senior care I think technology will actually help make seniors more independent. There are many applications and remote monitoring services that are targeted at helping seniors live more independently be that in an assisted living or in their own existing homes. This includes ambient and body sensors that will detect an individual’s place in the environment and warn of changes in physiology, body chemistry and activity patterns and they enable families to keep their loved ones at home and independent longer.

One of the most exciting things also happening right now is the revolution in laboratory technology. We are moving towards doing lab tests at lower cost and with less invasive techniques. In looking at populations that need lots of lab monitoring and are often difficult subjects for veni-puncture, this could change lives and the care of the patients.

NIC: With the audience at NIC’s Regional Conference evenly split between providers of and investors in seniors housing and care, what is the key takeaway you want to leave this audience?

Senator Frist: In the next five years we will see a push in the seniors housing and care business to move to a world of greater transparency that provides accurate data and information to allow empowered patient-consumers to make choices. Choices that will show us where money is best spent and will guide investor decision making. It’s going to have an impact that was not evident two or three years ago. Technology coupled with increased consumerism will drive change. Change that gets people out of their individual practice silos and fosters integration into a larger system. These pressures will be real and they will foster change.

NIC: What is your outlook for the private pay seniors housing, skilled nursing and post-acute care sectors, and do you see these sectors increasingly converging or becoming more distinct?

Senator Frist: There will be a move to integration. This transition will begin with transparency and an easier flow of information from provider to provider, resulting in more seamless transitions from location to location for patients. This will move towards larger systems of care that will be increasingly formalized over time guided by market influences. And I think this is exciting. A more integrated system will provide exciting opportunities for innovative business models with good returns on investment as well as better patient outcomes and satisfaction. The key will be a modernized data-driven system that focuses on outcomes and results.

NIC: You have been named one of the most powerful people in healthcare in the U.S. by Modern Healthcare magazine for five consecutive years. What legacy do you hope to leave in terms of an impact on healthcare in America?

Senator Frist: I have worked on an organic level to remove gaps in healthcare, both in intervention and treatment, and, at the same time, aspirationally worked towards a healthcare system that guarantees affordable access to prevention and treatment. Working on these two levels, I hope my legacy will be commitment to a system that values individual outcomes and results related to the actual patient benefitting. That image of everything benefiting the individual patient goes back to my dad with his doctor’s black bag when I was 5 years old. It all has to be about the most important part of healthcare – the patient.

IREI Conference Participants Bullish on Seniors Housing

John Blumer, NIC’s National Sales Director, attended the recent ‘Vision, Insights and Perspectives (VIP) – Americas Conference’ of the Institutional Real Estate, Inc. (IREI) Conference attendees included more than 250 institutional real estate investors and fund managers.

The overall tone of the conference was positive regarding institutional investments in real estate in 2014 and beyond. Participants were also bullish on the future of seniors housing, in particular. One of the questions posed for discussion was, “which niche real estate property type is the most likely to become the next core property type?” The overwhelming consensus of the round table participants was that seniors housing is well positioned to become the next core property type.

Participants at the conference discussed positive factors impacting seniors housing including the compelling demographics of an aging population and the growing need for care. A fund manager already active in the seniors housing market noted that investors and managers new to seniors housing will be pleased to learn that there’s greater transparency in the market thanks to reliable, time series data from data services such as NIC MAP^®.

Possible headwinds were also discussed and affordability of seniors housing was noted as the primary concern for the future of the sector. When it comes to real estate investments overall, potential concerns noted included rising interest rates and a large amount of debt due to be refinanced in 2015-2016.

Check out the recent Seniors Housing Investor Briefing webinar sponsored by NIC.

A Discussion with Joel Treffert, Executive VP and General Manager, Aptura

As the seniors housing and care industry continues to evolve to meet the changing needs and preferences of its customers, service providers are also evolving and positioning themselves to efficiently and creatively serve a growing demographic. Aptura is the design and development arm of Direct Supply, which is a major supplier of equipment and furnishings. Joel Treffert, Aptura’s executive vice president and general manager, talked to NIC recently about the firm’s decision to expand its focus, the importance of flexibility in design and construction and meeting the needs of the baby boomer generation.

NIC: Tell us why your company, more traditionally known for serving skilled nursing properties, decided to launch Aptura and broaden your focus to include seniors housing?

Joel Treffert: The concept for Aptura was actually launched almost 15 years ago. Customers who were ordering furnishings out of Direct Supply’s catalog started asking for design assistance. Over time, the requests for help with renovation projects broadened in scale and complexity. In 2008, we re-branded the business as Aptura, and we’ve been growing rapidly ever since. Over the past few years, our focus has turned more heavily to development, which has coincided with Direct Supply’s corporate initiative to grow our seniors housing business. We are still bullish on the skilled nursing market both in terms of repositioning and new development, but we see a huge market need for new seniors housing products as well.

NIC: In the design and development of seniors housing properties, how do the needs and desires of tomorrow’s customer influence what you’re designing and building today?

Treffert: It’s no secret that the incoming baby boomer generation has a completely different mindset than the silent generation that makes up much of today’s resident base. They will have, on average, seven times the wealth of today’s seniors. We are certainly accounting for higher-end amenities and increased resident choice as we design for this clientele. The dining experience is critical, and we are seeing on-demand, hospitality-style concepts put into play, including pubs, cafés, menu service and grab-and-go food areas – all with the intent to create a level of resident choice that is more akin to a resort.

By no means do we see a single right answer for this market as a whole. We believe that great design is highly dependent on market position, level of care, local heritage, budget and more. Collaborating with active clients like Mainstreet, here in the U.S., and Baybridge in Canada enable us to explore the most creative options for each individual project. Together, we are intent on developing models that will be in high demand in their respective markets.

NIC: Flexibility and adaptability are going to be critical for seniors housing and care operators to survive and thrive. How is this reflected in your design?

Treffert: The saying on Wall Street is that “past results are not a guarantee of future performance,” and the same can be said for practices and strategies in the design of senior living communities. What worked well yesterday for a different generation of residents may not work tomorrow for the next generation. In order to stay ahead of trends, our design team invests significant time researching both the changing needs of seniors as well as the changing dynamic of the broader design and construction industry – all to ensure we always bring best practices to our market.

The growing necessity to continually adapt to market changes has materialized in the creation of flex spaces in many of our communities. By creating physical assets that are expandable and contain spaces that can serve as a family lounge today, a restorative dining area tomorrow, and a transitional therapy room well into the future, our team guarantees that our clients’ investments in their communities will be adaptable, allowing them to adapt to the needs of an ever-changing revenue mix.

NIC: One of your seniors housing properties recently won the ‘Best Memory Care Design’ designation by Senior Housing Forum. What is it about the design and construction that made it stand out from other memory care properties?

Treffert: The Cottages at Cedar Run were designed with two things in mind: resident comfort and operational efficiency. While the features supporting operational efficiency are invisible, the aesthetics shine through with welcoming residential-style finishes that offer the durability required for memory care residents. This aesthetic, along with the neighborhood design, allows residents and visitors to participate in activities in a homelike setting that provides both social interaction and dignity to residents who call this community home.

NIC: When designing a new property, what types of features do you think give seniors housing owners the most return on their investment?

Treffert: The features of any given property are going to be influenced by a number of variables, but establishing a strong strategy upfront is most critical in maximizing return. We encourage our clients to be as clear as possible on what their offering is and who they are targeting. Once that is established and verified with market data, determining the site and delivering the design becomes much easier and more effective. All our design decisions are made with efficient operations in mind. We know there are countless great designers out there, but if they don’t really understand how seniors housing buildings operate, the design won’t work.

Softened Home Sales Unlikely to Impact Seniors Housing Performance

The pace of residential home sales stumbled to finish 2013, causing expectations for housing to be lowered for the first part of 2014. Data for December showed the pace of existing home sales (seasonally adjusted annual rate) was 10% below its pace in August. Based on the Pending Home Sales Index, which tracks contract activity, the softness in existing sales is apt to continue through at least February. The decline in the pace of new home sales (13% since October) reinforced the view that home sales demand softened towards the end of the year.

Despite the slowing in home sales, the impact on seniors housing performance is likely to be minimal. Absorption has only loosely followed actual existing home sales (unadjusted for seasonality), which suggests existing home sales are not a major correlate of seniors housing fundamentals. However, the data seems to be directionally consistent, so prolonged weakness in home sales could negatively affect absorption, but underlying housing fundamentals still point towards eventual recovery in the home sales market.

Seniors Housing and Care Industry Calendar