Looking Ahead to 2018: If We Build It, Will They Come?

Insights | February 21, 2018 | by Stephen Maag

While the rest of us were fashioning our personal New Year’s resolutions at the end of 2017, a group of prognosticators was taking stock of where the field of aging services is, and where it should be heading in 2018. Steve Maag read their predictions. Here’s what he learned.

Just 30 days into 2018, most of us have already abandoned the New Year’s resolutions we adopted as the clock ticked toward midnight on Dec. 31.

I count myself among those resolution backsliders. But that won’t keep me from making similar resolutions next year. That’s because the process of making resolutions is what’s important to me.

Assessing where we’ve been during the previous year, and then taking time to dream about where we’d like to go in the next, is a good personal exercise. It’s also a good exercise for the field of aging services.

Fortunately, while the rest of us were fashioning our personal resolutions at the end of 2017, a group of very smart people was taking stock of where we’ve been as a field and where we’re going. I read their predictions. And here’s what I learned.

We’ll Face Some Hurdles In 2018

A variety of prognosticators suggested that providers of aging services will have to deal with some challenges during 2018:

Post-acute concerns: Skilled Nursing News predicts that post-acute concerns could be a “thorn in the side of nonprofit life plan communities during 2018.” Citing a report from Fitch Ratings Inc., Alex Spanko reports that “industry-wide declines in census, admissions and revenues amid changing payment models” are prompting life plan communities to shutter their short-stay rehab options entirely or reduce “their overall reliance on the business line.” This is an issue we’ll continue to face in 2018.

Taxes: The new tax law may translate into higher borrowing costs for nonprofit life plan communities, according to Lisa McCracken, senior vice president of senior living research and development for Ziegler. Lower corporate tax rates could mean higher capital costs for nonprofits with bank debt, McCracken told McKnight’s Senior Living. While nonprofits can still use tax-exempt private activity bonds to finance acquisitions, new construction and renovations, they can no longer use one-time advance refunding of a bond to lower borrowing costs. Over the short term, that change may keep providers from starting new projects. But, over the long-term, initial financing deals may be structured differently to account for the change, says McCracken.

Workforce: No will be surprised by McCracken’s other prediction: recruitment and retention of workers will remain a challenge for all type of aging services providers in 2018. She recommends that providers tackle this challenge by getting back to basics. “In addition to compensating people well, you've got to know how to engage with your staff and provide a meaningful workplace,” says McCracken.

We’re Ready To Expand

Asked by Senior Housing News to consult their crystal balls, 3 LeadingAge members made a strong case that 2018 will be a year of expansions on several fronts. During the next 12 months, they predicted, life plan communities will:

Expand their offerings to consumers: Mary Leary, president and CEO of Mather LifeWays, predicts that our field is headed for disruption. “So-called ‘old school’ services and programs will not be enough for future residents, who will very likely have a more holistic or organic approach to their next chapter,” she says. “Continuing education and volunteerism—including ways for residents to contribute to and interact with the larger community—will be important.”

Expand into new markets: Sean Kelly, president and CEO of The Kendal Corporation predicts that providers of aging services will reach beyond their walls in 2018 and establish deeper partnerships with hospital systems, institutions of higher learning and community organizations; reach out to older people who want to stay in their own homes; and “foster communities, on and off campus, where residents and staff are engaged in meaningful ways with one another and the wider world.”

Expand their partnerships: Doug Leidig, president and CEO of Asbury Communities, predicts that there will be a “greater emphasis on collaboration than ever before.” Life plan communities will collaborate with competitors on service delivery to reduce duplication, create efficiencies, and increase market share. “I expect much more actual collaboration activity between hospitals and (life plan communities) versus just talking about it,” he adds.

We Need To Start Building

Talk of expansion is music to my ears, especially after reviewing a third-quarter report from the National Investment Center for Seniors Housing & Care (NIC) about trends in the life plan community market. On Dec. 6, the NIC MAP Data Service reported some very good third-quarter numbers that I think should lead us boldly into the new year.

Specifically, NIC MAP reports that occupancy at nonprofit life plan communities is currently 4.9 percentage points higher than for-profit life plan communities (92.3% vs. 87.4%).

I urge you to read Lana Peck's blog to learn the details of the promising occupancy numbers. These numbers illustrate the impressive strength of the nonprofit sector, and convince me that we are well positioned for strong financial performance in the coming year.

But what will we do with that strong financial performance? To my mind, the answer to that question should form our boldest New Year’s resolution: start building more life plan communities.

Our nonprofit sector is strong and well respected. We are known for our innovative programming. We attract forward-looking leaders, including those featured in the Senior Housing News article. And now we know that we are leading the market in almost all measures of occupancy.

We could be tempted to sit back and rest on our good numbers and our reputations as leaders in the field. But that would be a mistake. Instead, we need to be proactive about maintaining our strong position by planning for an even stronger future.

I believe future consumers will be eager to move to a life plan community that understands and meets their needs and preferences. So let’s resolve to build more great communities to meet that demand.