The Future of Elder Care: What hath COVID-19 Wrought?

My company Skylark Senior Care is an adult day and home care provider.  Our adult day centers closed in mid-March because of the coronavirus.  A week later, I received a call from Elaine Wright from Health Facilities Regulation at the Georgia Department of Community Health asking: “Do you know of any adult day centers still open?”  I did not.  From what I can tell, most all adult day centers have closed in Georgia. 

Skylark is participating in a Johns Hopkins study called ADS Plus.  They were checking by email on the status of the centers and how they were coping.  A sad litany of “we’re closed” followed.  I think probably most all centers are closed nationally.  This means that more than 250,000 disabled adults and frail seniors have been forced to suddenly find new care options.

What about other Elder Care service options?

Home Care:  Demand appears to remain steady and has probably increased as other services have been suddenly constrained. Yet, home care is feeling constrained.  We hear about front line staff refusing cases because they want to protect themselves and their families from the coronavirus. 

Assisted Living/Personal Care Home/Nursing Homes:  These facilities are on lock down.  Residents have been confined to their rooms with very limited social options.  Visitors have been blocked.  It’s difficult to control the Coronavirus once it enters a building.  As reported in Senior Housing News, two industry associations, Argentum and American Senior Housing Association assert that the industry is looking at a $40-57 billion dollar negative impact . 

Importantly, the industry as been receiving horrific press.  One of the first outbreaks of the coronavirus happened in a nursing home in Washington State.  A large number of seniors died because of the outbreak.  Major newspapers bring constant reminders that the virus continues to infiltrate buildings resulting in significant adverse impacts.  In Georgia, Governor Kemp has called up the National Guard to help sanitize facilities that have experienced the coronavirus. 

Worse yet, CNN is piling on.  In an article entitled “How to decide whether to bring your elderly parent home from assisted living during the pandemic,” CNN discusses the reasons why one would take a loved out of a residential care facility and what criteria to use.  Senior Living has an article: “Second thoughts: Some opting to remove parents from senior living communities” which again discusses the same decisions that CNN highlights.  And the Dallas Morning News reports that Dallas County Judge Clay Jenkins says: “people should consider removing their loved ones from nursing homes.” The important theme of all these articles is that families are making the decision to remove loved ones from residential care.  It appears that families are concerned by the health implications of the virus, but they are also concerned about the social isolation that comes with the mandatory social distancing.

There is more bad news from BMO Capital Markets as reported in McKnights Senior News ), they predict occupancy rates falling by 50% should move-in rates come to a halt because of the virus.  It’s hard to imagine that move-in rates will stop completely, but it’s easy to think that move-in rates will decline dramatically with disastrous implication for occupancy rates for the next few years.  McKnight Senior Living also reports that the National Investment Center for Seniors Housing and Care found that approximately half of nursing homes experienced an occupancy decline, while a third of independent living, assisted living, and memory care facilities experienced an occupancy decline.

What does this mean in the Short Term?

With Adult Day closed, Home care stressed, and residential care in lock down, what does this mean for elder care right now and for the next year or so.

During the present time, families are clearly taking a more hands on role in the care of their loved ones.  Home care is probably expanding, but experiencing pain because of caregivers needing to care for their own health and families and having difficulty outfitting staff with adequate personal protective equipment.  The residential care centers are working heroically trying to keep the virus at bay, but are and will be stressed by increased costs surrounding coronavirus mitigation and decreased occupancy rates.  We will be lucky if we can maintain the majority of adult day centers through government relief programs such as the Payroll Protection Program (PPP), SBA Disaster Loans, and possible Medicaid retainer payments. 

It’s hard not to imagine a wave of bankruptcy filings over the next 12-24 months.  Residential senior care has been feeling significant pressures as of late because the massive addition of senior living facilities.  Adult day centers have no revenue.  This will create an opportunity for investors to consolidate and reduce debt and other expenses.

There is also clearly a growing avalanche of seniors needing care with families providing the care and delaying the search for care.  As families return to work or become exhausted by the non-stop caregiving, the need for professional care for our most vulnerable seniors will increase.

Who will be the winners?

The winner in the short-term will be home and community-based services: home care and adult day.  Home care will continue to have the advantage over adult day as it is the better-known service in the community.  If adult day can prove to families they can maintain a safe setting in the face of the coronavirus, they will still have the advantage of offering more services, for more hours, at a lower cost.  This is a big if though. Families may become wary of the community aspects of the adult day setting in a world of social distancing. Both services will need to increase their charges for service, but daily home care coverage during working hours will remain out of reach for the vast majority of families.

What about the long-term?

The growing demographic trajectory will ensure that providers who survive and can manage their employment needs will thrive.  The ownership is likely to be significantly different because many won’t be able to survive the turbulence.  Seniors are not going away; their numbers continue to explode. The need for care is an inexorable reality.

The successful providers will also need to adjust their business models.  For example, many adult day centers are too focused on adult day.  They do not have a significant diversity of revenue streams.  Consequently, many were extraordinarily impacted by the virus and likely will experience a death blow.  Residential senior care providers face the same reality. 

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