The senior living sector, which is experiencing a period of unprecedented disruption, has begun to show signs of a major transformation. Several weeks ago, Tim Mullaney, editor of Senior Housing News, wrote a fascinating article (behind a paywall) on the significance of the recently announced Lifespark acquisition of Tealwood Senior Living. Central to Mullaney’s analysis is the recognition that the acquisition is an early sign of major changes taking place in the senior living sector. As Mullaney writes, the transaction suggests that the industry is “not just rebounding but transforming.”
I believe that Mullaney’s analysis should be required reading for every senior living operating company executive and every investor who has more than a two-to-three-year investment horizon. Here’s why. For several years, a number of us in the senior living field have been predicting that managed care companies would either acquire or build their own senior living platforms. Now, as Mullaney points out, this concept is no longer just a theoretical possibility but is happening – and is “about to become more commonplace.”
Mullaney sees the integration of the two platforms as a template for a new operational model of senior living that’s more integrated across the continuum of providers and payers. The model will also challenge the way real estate-based investors view value creation in the sector. Lifespark is a home care provider whose model is rooted in home and community-based services (HCBS) and who contracts with health systems and payers, assuming financial risk and reward. Mullaney sees five pain points or shortcomings in today’s senior living product that he believes at least on paper, the innovative Lifespark senior living model will address.
Enhanced consumer appeal
Mullaney notes that Lifespark’s “life care manager” will help address the many frustrations of adult children who currently must connect all the dots of the health care and long-term care systems for their loved one. Typically, the eldest adult daughter must coordinate care for their parents even when they reside in a high quality private-pay senior living community. By communicating with the family and caregivers, as well as the different providers and payers, the “life care manager” will help address this common frustration of adult children, especially the adult daughter, when they’re paying $4,000 to $10,000 a month, but find themselves still heavily involved in coordinating care.
Too often, families are the point people for figuring out the right setting and the right care for their parent, and for ensuring that healthcare and senior care providers are communicating with each other. This is in addition to figuring out who will pay for the care, and how. Senior living options that leave the burden on the adult child or spouse to connect will be replaced by models that truly provide what the adult children think they’re paying for.
Joel Thiessen, CEO of Lifespark, believes that by bringing all the payment sources together under one experience, and by taking on global risk, savings will be generated – and could be invested in housing and services. The model opens the door for providers to improve the affordability of care without impacting quality. As quoted in Mullaney’s article, Thiessen says, “We think we can use both sides of a person’s wallet, their insurance or their Medicare/Medicaid benefit as well as their private pay and put those together under one experience versus one butchering the other.”
Health and Wellness
As Mullaney points out, wellness was already a hot topic before the pandemic. Consumers and value-based care providers and payers alike are demanding engaging and healthy lifestyles. With their “electronic life record” which records not only medical-based and care-based key data, but also lifestyle-related information, Lifespark is in a better position to address this trend. Integrating lifestyle data into the record enables ongoing preventative health, management of chronic conditions and an increased emphasis on vitality and staying well rather than sick care only once one is sick. This approach reflects the likely model of healthcare delivery of the future that is predictive, preventative, and participatory, rather than reactive, curative, and after the fact.
Changing Capital Structures
While real estate investment returns have been high across the sector, capital structures are in need of change. Pointing to problems such as oversupply, and to heavy regulatory criticism of private equity ownership, as well as the fact that Lifespark promises a more competitive offering, Mullaney argues that REITs will quickly recognize the need to adapt. He highlights examples of this recognition, such as Welltower’s joint venture acquisition of HCRManorCare with health system ProMedica, and the new Formation Capital strategy, which bears some resemblance to the Lifespark move.
The Home Care Threat
Finally, Mullaney suggests that the recent boom in home care need no longer be viewed as competition with the senior housing and care industry. Instead, Mullaney argues, “senior living providers should emphasize that they are HCBS settings, while also finding ways to extend their services beyond the walls of their buildings.” Rather than be distracted from the mission of providing better care for the growing population of older adults, leaders such as Thiessen see an opportunity in the home care business. The moves they make now should be watched closely. They may, indeed, define the industry for years to come.
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