CCRCs As Healthcare Providers

HCG1Earlier this month Steve Maag, LeadingAge’s Director of Residential Communities, shared an insightful video presentation (a Quickcast) on environmental and industry trends that are anticipated to impact the future of continuing care retirement communities (CCRCs). If you are in any type of leadership position in an organization that owns and/or operates a CCRC with some level of responsibility for that organization’s future direction, then I strongly encourage you to find 15 minutes to watch this presentation.

There are three broad areas Steve addresses, including consumerism, healthcare reform and technology. This being a blog on healthcare public policy, a couple of years back I shared some of my own thoughts on the risks and perils that CCRCs face in assessing their role as a healthcare provider in the post, CCRCs: Healthcare Providers—Or Not.

Now having some additional data points I thought it might be interesting to revisit what I wrote back in August 2012. I then identified five major areas that CCRC organizations needed to be cognizant of as they assess strategic positioning as a healthcare provider in their market:

Healthcare delivery related cost pressures
New care delivery and payment models
Increasing demand for home and community-based services
The need for infrastructure investments
Potential future tax consequences for nonprofit organization

In considering the impact these areas could have on organizations unwilling or unable to effectively address that impact it was my opinion then that those organizations would be further ahead to get out of the healthcare business altogether than to wait on the sidelines. Fast forward 29 months and I will double down on that assessment.

Successful CCRC organizations of the future are making the requisite investments today to assess their healthcare market environment and determine how they can effectively and profitably integrate into that environment. To assist organizations with that process I recently updated my whitepaper: A Framework for Strategic Planning & Positioning in an Era of Healthcare Reform. Please feel free to download and use to help your organization with this critically important assessment.

Cheers,
  ~ Sparky

A Failure to Communicate

ht_lorraine_bayless_nt_130304_wg2The topic of End-of-Life Care took another turn on February 26th with the passing of Mrs. Lorraine Bayless (pictured left) at Glenwood Gardens in Bakersfield, California.  As I write this, there is still a lot of conflicting information circulating on the Internet about what happened that day and why.  And there is certainly no shortage of opinions about what went wrong – or not. There also appears to be a great deal of misunderstanding on what a CCRC is, what services and care are provided – and what care responsibilities a CCRC has to its independent living residents.

There are elements of this story that, if for no other reason than respect for Mrs. Bayless’ family, should remain with this story – i.e., primarily an assessment of Glenwood Gardens’ policies and procedures. But there are also elements of this story that transcend our need to better understand and assess models of care relative to individual rights and end-of-life care. It is in the latter interest I offer this post.

Last August, I wrote a post, CCRCs: Healthcare Providers – Or Not? I wrote then,
for a segment of the senior population, typically over the age of 75, CCRCs are a very attractive retirement housing option. They offer the comfort and security of a community tailored to meet the physical and emotional needs of seniors, the social energy of a community setting and the critically important peace of mind that personal services, assistance and care are available, when and if needed, removing that potential caregiving burden from their adult children raising families of their own.”

Ah, but there’s the rub that I think this story will eventually wind its way towards: what constitutes, “when and if needed?” And who gets to decide when and if its needed? On the afternoon of February 26th at Glenwood Gardens, the 87-year old Mrs. Bayless clearly needed assistance if she were to have a chance to live (it was subsequently determined by her physician that she passed away from a massive stroke, most likely owing to what had been previously diagnosed as disease of the blood vessels supplying the brain).

Many of the news stories I have read characterize Mrs. Bayless’ residence as being independent living – as if it were conceptually unique and separate from the other offerings at Glenwood Gardens; i.e., assisted living, nursing care, Alzheimer’s/dementia care and hospice. While there is physical separation between the facilities providing these services and care, the underlying market positioning of a CCRC is their availability on a single campus.

The overt selling point being that someone does not have to move from the campus when and if they need services and care that extend beyond what is available through independent living. In fact, Glenwood Gardens’ website promotes having 24-hour access to staff. Whether this can be interpreted as having access to emergency medical care provided by nursing staff in other areas of the CCRC I think is going to get a lot of discussion and debate.

I think the more immediate questions here, however, are first, whether Mrs. Bayless would have wanted life-saving efforts performed.  In statements afterwards her family seemed to indicate she would not, though Mrs. Bayless did not have any advance directives in place, and the paramedics that arrived on the scene ultimately provided CPR in any event.  And second, would CPR, if started earlier, have been helpful. Very often, CPR is ineffective in such situations – and when it is effective in reviving a frail elderly person it can often result in terrible injury, leaving the individual incapacitated and facing a prolonged and painful death.

As challenging and difficult as they are, it would be nice to think these were the questions guiding management’s and staff’s decision making of that afternoon. But that doesn’t appear to be the case.  In a statement, Brookdale Senior Living, owner of Glenwood Gardens, said, “this incident resulted from a complete misunderstanding of our practice with regards to emergency medical care for our residents. We are conducting a company-wide review of our policies involving emergency medical care across all of our communities.”

When the dust finally settles I think  what we will find is a failure to communicate on multiple levels and between multiple parties. If Mrs. Bayless’ wishes were clearly understood by her family, why was a DNR order not in place? If management at Glenwood Gardens understood corporate policy and procedure, why is Brookdale Senior Living now leaving them out to dry? If the staff at Glenwood Gardens clearly understood policy, why was the person on the 911 call seeking the input of others to affirm her position?

So the key takeaway I have from this story and all of the opinions surrounding it is that it reinforces the critical importance of effective communication – and how very often its lacking stands in the way of better healthcare. The same core ability that must be a critical element of any strategic planning effort we engage in with leadership teams at healthcare provider clients is just as applicable to any effort that involves human beings for which there are expectations those individuals will work together to achieve desirable results.

As I have written before, it is truly amazing that today we live in a world where communication has never been easier – yet never been more difficult.

Cheers,
  Sparky

CCRCs: Healthcare Providers–Or Not?

To be, or not to be – in the business of healthcare.  That’s the question continuing care retirement communities (CCRCs) are facing today – even though my anecdotal experience would suggest the board and c-suite leadership at many of those organizations have yet to be fully reconciled of such reality.

As reported by Alyssa Gerace in Senior Housing News, a recent panel discussion held at SHN’s inaugural Senior Housing Summit in Chicago on July 26th painted a concerning economic forecast for the future of the CCRC model.  Having been involved in near 50 CCRC project developments since the early 90s, I have some familiarity with that model – the good, the bad and what is apparently largely misunderstood.

For a segment of the senior population, typically over the age of 75, CCRCs are a very attractive retirement housing option. They offer the comfort and security of a community tailored to meet the physical and emotional needs of seniors, the social energy of a community setting and the critically important peace of mind that personal services, assistance and care are available, when and if needed, removing that potential caregiving burden from their adult children raising families of their own.

The fatal financial challenges faced by several CCRCs have been largely driven by economic realities beyond the control of those communities’ management teams.  Yes, there have been a few bankruptcies – isolated cases of weak and exposed capital structures, poor planning, mismanagement and a phenomenon the industry has always been challenged with: service creep.  But the economic malaise of the past several years has not been selective in its impact on any business enterprise involving real estate – and so it has not spared CCRCs.

Though understandably self-serving and a tad superfluous in its explanation of the development process, LeadingAge nonetheless prepared a very useful piece that effectively addresses this phenomenon of spotlighting the unfortunate exceptions in,  CCRCs Today: The Real Deal About Retirement Communities.  I refer Pub Patrons there rather than take up space here for a good rebuttal of media attempts to extrapolate isolated misfortunate into industry condemnation.

What concerns me about the future operational and financial viability of the CCRC model a lot more than market influences and capitalization, however, is the impact of Healthcare Reform.   In explaining why this concerns me, it might be helpful first to provide a short summary of how CCRCs contact with residents for post-acute/long-term care.

CCRCs generally contract with individual residents under three agreement types:
Type A: Life care ~ residents typically pay an initial entry fee (often a significant portion of which may be refundable) and a monthly fee that is adjusted for cost-of-living, but if in need of assisted living or nursing care pay no additional fees of any significance.
Type B: Modified ~ the difference from Type A is that some additional payment is required for assisted living or nursing and the amount depends on the nature of the agreement (e.g., there may be a number of free days provided before payment is required or a percent discount from full rate per diems).
Type C: Fee for Service ~ residents requiring additional care pay the full amount for that care, the same as if they had moved in directly to assisted living or nursing without having first been a resident of the CCRC, though priority access to that care may be provided them.

In my experience over the past decade, new project developments have consistently migrated away from Type A contracts to Type C in an effort to avoid the actuarial risk of providing healthcare to an aging population without the contractual means to significantly realign the revenue base generated by that population as a reflection of caregiving costs above what had been projected.  This has been a trend bolstered by the relative lack of success of long-term care insurance policies and annual healthcare inflation.

But even CCRCs that contract with residents under a Type C arrangement – and this is especially true for nonprofits (of which LeadingAge estimates comprise over 80% of all properties) – assume a consequential market and brand risk of being expected to provide healthcare to residents that may not be able to afford that care.  As noted above, the security of having access to personal assistance and nursing care as and if needed has been a fundamental part of the CCRC’s value proposition.

Healthcare Reform is going to significantly increase and accelerate these risks.  So, my counsel with respect to how CCRCs seek to strategically position themselves as healthcare providers is therefore clear: go all in or get out.  I believe the prospective economic benefits of going decidedly in either direction is a plausible strategy for long-term financial sustainability.  I believe trying to hang out in the middle until the dust settles, short of having a substantial endowment, is a recipe for financial disaster.  I have identified below several of the more compelling ramifications of Healthcare Reform to be cognizant of as those leadership teams contemplate this reality.

Intense cost pressures: although the contractual arrangements to provide nursing care at CCRCs most typically include some form of direct payment from the individual receiving care (i.e., whether through an entry fee, monthly fee or per diem fees – or some combination thereof), most communities still have significant exposure to Medicare and Medicaid.  As I have written here before, these payment sources will continue to see tremendous pressure to control aggregate spending on national healthcare, regardless of what happens politically this fall and into 2013. 

And, as of now anyway, accepting these payment sources exposes organizations to the ACA’s future reporting and transparency mandates, which need to be seriously understood and considered.  On the other hand, it is highly unlikely that future quality of care outcomes (which will directly impact revenue) can be met without incurring annual increases in direct caregiving labor costs well above general inflation.  All healthcare providers are going to have to struggle with how to reconcile that which cannot be reconciled.

New care delivery models: ACOs, medical home models, insurance exchanges, payment bundling, the potential redesign of Medicare Advantage Plans – as these models are implemented they will have an unquantifiable impact on the healthcare buying behaviors of CCRCs’ targeted market populations. They will also impact historical patient referral patterns. One can only hypothesize at this juncture the ramifications of these impacts – but to remain economically sustainable means aggressively and proactively monitoring and understanding how these care delivery models will affect an organization’s operations and financial viability.  It also means actively developing clinically-based relationships with other healthcare providers in those organizations’ markets.

Home and community-based services: Primarily driven by market demands, this appears to be an area where CCRCs have been most proactive (e.g., the CCRC Without Walls concept). But from what I have seen so far, most of the interest and activity has been in socialization, hospitality and personal/home care services. If wanting to stay in the business of healthcare, CCRCs should learn quickly what it means to be part of a community-based integrated care delivery network where revenue is tied to clinical quality performance standards that depend, in part, upon other healthcare providers through contractual relationships.  As an aside, I cannot envision a future viable business model for a CCRC that stays in healthcare and does not include home healthcare as a core element of its care continuum.

Infrastructure investments: to be a competitive provider of post-acute/long-term care in lieu of healthcare reform is going to mean having the operational, clinical and technological infrastructure necessary to assess payment risk, monitor and report on outcomes in real time, be effectively positioned to negotiate capitation contracts and be ever vigilant in assessing the emerging local market dynamics of healthcare delivery.  This is an expensive proposition that in all likelihood cannot be funded out of operations: meaning the necessary investment will require either use of equity, incurring debt or leveraging the infrastructure of other healthcare providers in the market through contractual relationships.

Tax exempt status: Though Section 9007 of the Affordable Care Act requires that only hospitals having tax-exempt status complete a Community Health Needs Assessment, how long will it be before a similar requirement is mandated for nonprofit CCRCs – especially when consideration is given to the average wealth and incomes of the populations served by many of these communities across the country.  Being licensed as a nursing care provider with tax-exempt status will ultimately require addressing the justification of that status in terms of how the CCRC benefits its surrounding community.

These are a few of the important considerations that come to mind when contemplating whether TO BE or NOT TO BE in the healthcare business.  I know there are quite a few CCRC organizations that have already recognized this reality and are proactively planning to stay in healthcare.  I have had the very good fortune to have worked with a number of them.  One thing I found they have in common: they each have assumed a decidedly outward looking vantage with respect to their future strategic positioning.

For better or worse, they have embraced the reality that being (staying) in healthcare very much means being proactively integrated into the surrounding community and healthcare provider network.  The resultant consequences of that reality may not create an attractive positioning for some CCRC organizations – and the resident populations they serve.  This is completely understandable and in many cases ought to be thoughtfully anticipated.  Those organizations may be much better served by moving toward an active adult model.  But they should get out of the healthcare business now, before it’s too late.

  ~ Sparky