Industry forecasts are as routine at the beginning of a new year as New Year’s resolutions, regardless of the industry. The senior living and care industry is no exception, and a variety of experts have weighed in on their predictions about the senior living market in 2019, including Cambridge Realty Capital President Jeffrey Davis. Davis is optimistic about 2019, at least as far as Cambridge’s involvement with senior living is concerned. “We are looking forward to a busy year, with an increase in both conventional and HUD loan applications,” he stated.

2018 was somewhat of a sluggish year for some senior living owners and operators, as new facility construction outpaced the demand for beds in some places. However, not all senior facilities experienced an oversupply, and perhaps this is why senior living industry stakeholders seem to be divided when it comes to the outlook for 2019.

A report by Senior Housing News suggests that oversupply of spaces/beds in senior living facilities, particularly independent and assisted living, will continue to plague operators in 2019. A robust year for new construction in senior living facilities, 2018 saw developers building in anticipation of the “Silver Tsunami,” the wave of baby boomers who have or are expected to reach retirement age between 2011 and 2030.

The problem is that, while many baby boomers have already hit age 65, the majority will not be looking at transitioning to assisted living or require ongoing skilled care for another ten years or so. While planning for the future of the industry by building earlier rather than later may be prudent, it means that many beds across the US are empty and may remain so for awhile yet, at least according to some experts. Others, though, play down the occupancy issue, believing that 2019 will show signs of significant improvement over 2018.

The upcoming introduction of the new Patient-Driven Payment Model (PDPM) by Medicare, scheduled for October of this year, may influence the way senior facilities cope with oversupply issues.This model was designed to reduce over-delivery of therapy services, such as physiotherapy, which bill Medicare for by-the-minute service, in favor of a more individualized model of patient care where various therapies may only be minimally-needed. It aims to free up more money for other areas and services, like hiring more nurses.

Some senior living stakeholders speculate that the new PDPM system will lead to asset repurposing in existing facilities: converting beds from skilled nursing to other types of specialized care: traumatic brain injury, memory or mental health care. All of these, as well as assisted living beds, have been in greater demand in recent years and pose an opportunity for facility operators to offset losses in other areas.

One thing that everyone agrees on without any hesitation, including Davis, is the state of the labor market for senior facilities of all types. The vast majority of stakeholders feel that the biggest challenge facing senior living in 2019 is a shortage of both skilled and unskilled labor which will leave facilities struggling to cope with demand and perhaps even make it more difficult to open new beds for lack of personnel to staff them. More and more stakeholders are calling for an end to competing for staff in favor of collaboration for an overall solution to the employee shortage and retention problem which will benefit everyone: facility owners, staff and residents.

Others have predicted that, in an effort to attract new employees as well as retain existing staff, some facilities will opt to undergo renovations, particularly older facilities. Many of these, they say, are dated, dark, cramped and overall unpleasant places to work. In a challenging labor market where workers can choose more inviting work spaces for the same pay, renovating dated facilities, they reason, may help with the recruiting and retention efforts by facility operators.

Davis remains confident about Cambridge’s business in 2019 in the face of predictions of slowed growth. With many conventional lenders pulling out of loaning to senior living developers and operators for the very reasons previously described, there will be a gap in capital providers that Cambridge is eager to step forward and fill. “Cambridge is, and always will be, exclusively in the business of funding senior living,” Davis stated. “We anticipate seeing more and more conventional bank clients turning to Cambridge for capital in the coming years.”

https://www.cms.gov/medicare/medicare-fee-for-service-payment/snfpps/downloads/pdpm_technical_report_508.pdf

https://www.nreionline.com/seniors-housing/review-and-outlook-national-seniors-housing-market-2019

https://seniorhousingnews.com/2019/01/01/senior-living-executive-forecast-2019-business-trends-challenges-opportunities/

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