By John Gonzales
Nine years ago, I wrote an article titled “Rethinking Profit Margins in Senior Housing.” The article was well received by most folks but wasn’t as popular with several C-suite executives. It focused primarily on the rising acuity levels in assisted living communities, stagnant wages, and the pressure to reach and maintain operating margins that were based on an outdated model.
I’ve been in this industry for 35 years and was privileged to be aboard from its inception. Born of a “cruise ship” model for independent seniors, we evolved as our residents aged in place and the demand for alternatives to skilled care facilities grew. Higher acuity levels necessitate increases in staff hours just as much as occupancy does.
Since writing that article, additional factors have come into play, putting pressure on industry operating expenses and margins. Inflation, recession, the pandemic aftermath (and potential for another), supply chain problems, and the shortage of workers in the workforce continue to impact our industry. Combined, these problems create a perfect storm.
To manage the resulting increases in operating expenses, ensure investor returns remain attractive, and remain a competitive employer — without many other solutions, owners and operators are implementing peak resident rate increases. A recent article in McKnight’s sourcing an Argentum panel of experts quoted, “… operators already are discussing how aggressive to be with annual rate increases for next year. Many operators have settled on hikes of between 8% and 10%. … [A]nything higher might be a little aggressive.” If inflationary pressures do not moderate, these percentages will likely be higher, and this is on top of 2022’s rent increases.
Full-Blown Crisis
Middle-income seniors continue to be priced out of the market.
While there are many factors contributing to this problem, let’s focus on labor. Not only is the shortage of workers increasing expenses such as wages, overtime, and agency costs, but it is rapidly becoming a full-blown crisis that threatens the health and safety of our nation’s elderly population. Since January 2020, over 400,000 nursing home and assisted living staff have quit — many citing PPSD (post-pandemic stress disorder), exhaustion, low pay, and the perceived lack of growth opportunities for these frontline positions.
Juxtapose this with the fact that six years ago, the 85-year-old U.S. population reached 6.4 million. If you’re 45 years of age today, by the time you reach age 85 you will be among 19 million other octogenarians. We’re going to need a lot of lifeboats.
So, Where Are You Going to Live, and Who Will Be Taking Care of You?
Quoting a recent article from Politico,
America will be a country where its seniors do not live or die with dignity …. The quality of care will deteriorate: fewer baths, fewer people to prepare food, or help with toileting. An understaffed, demoralized workforce leads to more disease transmission …. More seniors will be bedridden; there will be more falls, when people do try to move about, with some discovered days later.
Our ship, the USS Senior Care, is hitting very troubled waters, and too many companies are still busy rearranging the deck chairs.
Intriguing Solutions
One of the most intriguing solutions is to increase legal immigration — specifically for frontline caregivers — just as we’ve done for highly skilled professions in science and technology. Executing this solution must include a pathway to citizenship and a visible career ladder for these new frontline employees.
Our industry will need to partner with state and federal agencies, area community colleges, certification providers, and others to define parameters and create incentives for both employer and employee alike. We’re already taking on water, so it is vital that we avoid analysis paralysis. We cannot get bogged down in bureaucracy.
I fear that having been slow to act, we’ve already extended the invitation for increased governmental oversight of our industry. Regulations already exist in Massachusetts, New York, and New Jersey, where staffing ratios are strictly controlled. As the article in Politico boasts, these regulations “ensure a limit on profits so that more expenditures are directed to care.”
This Should Get the Attention of Every C-suite Executive.
The Politico article chronicles the experience of Momah Wolapaye, a 53-year-old dedicated and driven immigrant caregiver from Liberia now working his way towards becoming an RN. His experience is quite amazing and somewhat unique today, but with concentrated effort, we can replicate his success — a potential life preserver for an industry in distress.
We have always had problems attracting frontline workers. There are many higher-paying, less stressful, and “sexier” jobs out there. Hiring the right people to care for our residents will continue to be a high priority, but something Momah shared in the article struck me. He said that in his country and culture, he was raised to revere elderly people. It is apparent he learned that there is profound meaning and honor in caring for seniors.
Maybe that’s what we did wrong.
Mayday.
