Monday
April 16, 2001
Seattle—
We recently encouraged readers to attend a conference for long-term care
financiers in New York City (LTC Bullet: Seniors Housing World Conference,
2/23/01). We made this recommendation because we think long-term care providers,
insurers and others need to know what's moving in the minds of long-term care
financiers. The top-level
financiers who attended
this conference control the supply of financial oxygen (debt and equity capital)
on which America's long-term care service delivery system depends to operate and
grow. If they can't make money
investing in the long-term care industry, then all the other questions we
anguish about are moot. Who cares
if people buy long-term care insurance or whether Medicaid and Medicare can
carry their share of the cost, if we have no service delivery system for these
revenue sources to support and no place for our frail elderly to go?
Well, a few of you Bullets subscribers showed up at the meeting and it was great
to see you there. But most of you
didn't make it. So, as promised
earlier, here's a little flavor of what transpired.
The opening session was titled "The Long-Term Outlook for Seniors Housing
Investment, Development & Finance."
Three of the five panelists were interviewed or represented in the Center
for Long-Term Care Financing's LTC Triathlon project, and they confirmed what we
reported in "The LTC Triathlon: Long-Term Care's Race for Survival"
(online in .pdf format at www.centerltc.com/pubs/triathlon.pdf)
about the financial challenges the industry faces. But they went even further:
The seniors housing business is still in trouble, but 60 percent to 70 percent
of the industry is relatively healthy once again. The healthy portion is the for-profit, private-pay,
social-model side of the industry, especially independent living and congregate
care. Assisted living (AL) still languishes, but should pull out of its doldrums
within 12 to 18 months. Under-performance
in the face of unreasonable expectations (and promises) scared off Wall Street
from AL and dampened investors' interest. It
takes time to restructure finances, temper growth, improve operations, and
regain investor's confidence. That
process is well underway.
Here's the scary part. None of the
financiers showed any interest in the not-for-profit, public-pay, medical-model
side of the industry. "Nursing
homes are dead in the water," I heard.
Almost no one wants to send any investment capital in that direction.
Vulture capital is starting to come into the market looking for
near-terminal cases to resuscitate, but that's about all. Medicaid and
Medicare were virtually unmentioned at this conference, because the financially
healthy side of the seniors housing business does not depend on them.
Furthermore, the words "long-term care insurance" were not
uttered once during the whole meeting, except by CLTCF's humble correspondent,
Steve Moses. When the people who
control the long-term care capital spigot have little interest in public OR
private insurance, you know something big and ominous is happening.
The seniors housing industry seems to be saying "a plague on both your
houses." Medicaid and Medicare
won't support financially viable projects and private long-term care insurance
is not a measurable revenue source yet. So,
like Willy Sutton, the big guns are going where the money is--to the seniors
themselves. One presenter predicted
that the hot new market for the future will be seniors' condos and co-ops,
because older people want to own, not rent. "The senior ownership
product is a comer," he said. Another presenter offered this assessment:
"Everyone is searching for a new model.
How do we get them in younger, keep them in longer, and get them used to
the idea of needing more and more services?"
If you are planning to be a public or private payer when the baby boomers
need seniors housing services, this kind of talk should make you very nervous.
What do these trends and developments mean for the long-term care service
delivery and financing market? We
don't know for sure yet, but if you're going to play in those markets, you'd
better find out.
A good way to start finding out about industry-cross-cutting issues is to read
“The LTC Triathlon: Long-Term Care's Race for Survival” (online in .pdf
format at www.centerltc.com/pubs/triathlon.pdf),
attend the professional conferences and subscribe to the trade journals of
long-term care financiers, providers and insurers regardless of your own focus,
and encourage everyone you know to subscribe to LTC Bullets.
We promise to keep beating the drum for more communication, cooperation,
and coordination between the major stake-holders in the long-term care
profession. That is the only way we
can hope to change the status quo before it's too late.