The Middle Market is now transitioning from a topic of discussion within the senior living industry to the rollout of actual new concepts of care. We are seeing the rapid development of Assisted Living communities in more compact spaces. By this I mean a smaller footprint for the buildings and grounds, 50,000 sq. ft. or less, with all common areas designed for multi-use rather than unique functions.
Whether you’re an investor, a management company executive, a services provider or a prospective resident, here are a few things you should know about the trend towards Middle Market senior living solutions.
1. Focus Is on Quality of Care vs. Quality of Amenities. Lap pools, fancy gyms, hair salons and chef-prepared gourmet meals are nice, but are they essential to the well-being of residents? In reviewing the latest discussions and research, we have found that well-trained caregivers, those who are incentivized to create strong human connections with those under their care, make a bigger difference in the lives of the residents than upscale amenities.
Furthermore, Middle Market communities that invest in their caregivers generally get higher praise from residents and their families for embracing compassionate and expert care over expensive amenities. This is especially true for Middle Market communities that offer dementia care.
2. Building Smaller Conserves Capital. The cost of building from the ground up is significantly less for a Middle Market community. Making do with a smaller square footage affects the size and, therefore, the cost of acquisition of the parcel. With less square footage, the building costs also go down substantially. A more compact footprint also gives you more flexibility in choosing a site. Serving more residents in a smaller space positively affects the community financial pro formas. Big is flashy, but small can, indeed, be beautiful.
3. Flattening the Layers of Management Creates Cost Efficiency. The Middle Market model features fewer managers and more diversification of responsibility. The back offices are opened up, with all supervisors on the floor helping with care in addition to their own management duties. A lower managerial headcount means reduced executive personnel costs and higher margins without sacrificing care standards.
“Successful Middle Market operators have always known how make do with less, how to be savvy purchasers of goods and services without sacrificing the quality of what they offer.” – Teri Conklin, Burdell Consulting LLC
4. Middle Market Senior Living Is More Affordable to More People. Because the vast majority of Baby Boomers have not saved sufficiently for their retirement, they need a place they can afford. And what they can afford is not the high-end of senior living.
Middle Market operators, by necessity, become expert in marshalling 3rd-party funding sources to assist moderate income seniors in finding affordable solutions. In doing so, they enlarge the overall market by bringing a more attractive value proposition to a wider group of potential residents and their families.
“Mastering the intricacies of third-party payers has been critical to our long-term success. For example, the PACE Program is a four-way win/win for not only seniors, but for the industry itself.” – Mark Cimino, CEO, CiminoCare
The four benefits facilitated by the PACE Program are:
1. Seniors themselves have more options and more home-like options, 2. Third-party payers have less-costly options to expensive nursing care, 3. The Assisted Living industry has grown with the growth of these programs, and 4. Skilled nursing now has more and better care options for their patients.
Middle Market communities typically serve everyday American families. They know how to create a meaningful experience of daily life without relying on luxury amenities and food prepared by a chef de cuisine. Basically, they know where to spend and where to hold the line.
5. Sales and Marketing Are Less Expensive. The Middle Market relies much more on professional referrals from physicians, social workers, discharge planners, clergy and other nonpaid referral sources. This reduces the advertising costs for generating sufficient leads to maintain a full census. It is also why Middle Market websites and social media profiles tend to be adequately maintained but with fewer bells and whistles. Due to limited budgets, outbound marketing is highly targeted.
Nonpaid referrals include government agencies such as Medicaid and Medicare through PACE (Programs of All-Inclusive Care for the Elderly) and other similar programs. The PACE model of care enables states to provide PACE services to Medicaid beneficiaries as state option. Financing for this program allows providers to deliver all the services that participants need rather than limit them to those reimbursable under Medicare and Medicaid fee-for-service plans. And these are direct referrals with no payments to referral sources.
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At SGD, a large part of our current work is helping senior living communities to succeed. Our goal is to create and maintain regular conversations with residents, prospects and their adult children. We understand the language to use in helping prospective residents to come to the right decisions about where to move, and what to expect. We use this knowledge to serve all market sectors, from independent living to full spectrum care (CCRC), from Middle Market to luxury retirement living.
As older Americans ourselves, my partners and I also inhabit the lives of the people we serve. This gives our voices authenticity. Being older is a gift. It’s one that we share with our clients and their residents, and one that you may find useful as well.
SGD is the Bay Area advertising, marketing and branding agency specializing in the senior and boomer markets. We’ve successfully positioned, branded and rebranded senior-oriented companies, weaving traditional and online tactics to create compelling stories that drive response.
About the Author: Duff Reiter is a Partner at SGD Advertising.