Senior Living has long earned a reputation as a ‘Recession Resistant’ industry as it is more of a needs based industry. It is also becoming clearer, based on the opinions of economists and financial reports that recession, possibly even a deep recession, is becoming more and more likely. This is likely to hurt the ability of families and seniors to pay the bill.
On the other hand, strong inflation is pushing operators to consider significant rate increases to pay their rising costs and to maintain the same level of service.
Talk about being stuck between a rock and a hard place!
So how will that impact Senior Care communities? Seniors and their families will certainly react negatively to any rate increases and would consider other options. Should facilities and operators ignore the risk or should they prepare for it? What sort of preparations should the communities focus on?
Senior care is often touted as recession resistant because as the aging need assistance, they have to turn to Assisted Living or Memory Care for their ongoing care. This is absolutely true and that’s why this asset class is attractive to investors and lenders. But let’s take a look the other side, the customers/families paying the bill. A recession is certainly going to sap their ability to pay big bills. Much as Mom or Dad needs the specialized care of Assisted Living or Memory Care, families will be far more cost conscious in shopping for their future community.
So while the demand will be strong as always, the ability of families to pay will shrink and among the senior care communities, winners and losers will start to emerge based on whether they are expensive, luxury resort style communities that cater to the affluent, or more affordable, core care focused middle market communities. The negative impact on the financials of the families will likely speed up the trend of cannibalizing the luxury segment and driving more residents to the middle market segment.
To operate successfully in the middle market, to successfully attract prospects from the cost sensitive segment of the market, the communities have to plan better and be more proactive in controlling costs and controlling rents. Surviving and thriving this this Middle Market segment is going to be because of careful planning and foresight, not just because of trying to scale down what the luxury segment is doing. Every operational aspect needs to be clearly thought out, and a cost benefit analysis of every step has to be thoroughly conducted, to ensure that you are getting the most value for your spend and fine tuning your marketing message.
Here are a few considerations, though this is not an exhaustive list:
• What activities are we doing, what does it cost and what value does it give to our residents?
• How are we scheduling our staff? Are we maintaining budget discipline in staffing? Are we controlling overtime? (Staffing is about 65% of your regular spend, getting this one line item under control can put you over the top.)
• What are our staff members spending the most time on? Is there a way to speed this up or make it more efficient so we can reduce staffing? Is automation or self service an option?
• How much time and effort are we spending on health maintenance activities for our residents? How can we reduce effort and cost and keep our residents healthy longer to extend the length of stay?
• Are we proving our value to our residents and families? Is this measurable and provable so they buy into this?
• Are we providing a comfort level to our families that their loved one is being well cared for? Are we able to show it to them?
• Can these measures of proof help us in marketing to a wary public, after all the unhelpful news articles during the pandemic?
• How can we ensure that every department such as HR, Dining, Maintenance and others are budget compliant on a day to day basis?
• How can we reduce the paperwork and workload in streamlining communications between the community and the management team and the corporate office?
• What hard costs (out of pocket) are we incurring and can we cut or reduce any of these WITHOUT REDUCING QUALITY OF CARE AND SERVICE?
Given the high probability that a recession is about to start, it is critical that you evaluate your organization to ensure that you are ready to meet this.
What can we do to help?
Though we are only a software company, our focus has been on improving operations while reducing costs and efforts for your community. We have developed workflows within our software that can help you reduce your HARD AND SOFT costs, while maintaining and even improving your level of care and service. If you would like to further explore how we can contribute, please feel free to reach out for a discussion or demo. It will be an informative exercise for you and your team to go through that process.