The CFO of a rural hospital listened in silence as the consultant spoke to the assembled board members and managers about the future of the hospital’s senior services. As the consultant described the broad continuum of care that could be developed for seniors, he laid out a vision that went far beyond the hospital’s 40-bed nursing home.

The next day the CFO approached the consultant. “You threw open a whole new set of windows for me yesterday - things I’d never even thought about,” he said. “Last night I went home and told my wife - she’s a nurse at the university hospital - about all the options you described in that continuum. You know what she said? ‘Yeah, so where have you been?’”

For many in the health care business, long-term care and other senior services remain as little-understood afterthoughts to acute and primary care. When anyone mentions health care, hospitals and physicians spring to mind. Even when the conversation turns to reform and change, senior services and long-term care are rarely mentioned.

Pressure for change is building

Those who overlook the new realities for this area of health care may be in for a rude awakening. A variety of factors have emerged that will alter the age of isolated, stand-alone facilities and continue the creation of new continuums of care. Recognizing the power of these pressures is essential, because they will force changes whether or not any particular senior services organization decides to embrace them.

There are five basic realities driving this change:

1. Seniors’ expectations for long-term care have changed.
2. The volume of baby boomers will steadily grow over the next three decades.
3. Competitive alternatives to nursing homes are here to stay.
4. State governments are increasingly reluctant to pay for traditional options.
5. The shortage of health care workers is getting worse.

Given these realities, the options for where and how seniors will be cared for will grow. The vision for this growing continuum of options will be rooted in a long-term care system integrated with acute care, primary care, home and community care, and mental health care.

It won’t be necessary for every health care organization to offer a comprehensive continuum of care, but relevant elements of the long-term care continuum should be assessed and developed. For the rural hospital, this could mean linking with providers of assisted living and home care services. It could involve an array of retirement living options, with or without services. And it might not include a nursing home or a hospital, so long the focal points of senior services and health care offerings.

Turning the long-term care pyramid on its side

As Len Fishman, the former president of the American Association of Homes and Services for the Aging (AAHSA) and the current CEO of Hebrew SeniorLife, said recently in a Boston Globe editorial, he no longer views the nursing home as the base of the long-term care pyramid. Rather, he views his organization as a funnel.

“Services such as adult day health, in-home care, assisted living, transportation, geriatric sub-acute care, and rehabilitation must now represent the largest portion at the top of the funnel,” he wrote. “Only when these resources have been expended should nursing-home care be considered.”

In short, Hebrew SeniorLife is actively creating a continuum of care that is consistent with the needs of the organization and the communities it serves.

Other providers of senior services will face a choice: to follow suit, or to wait until external pressures force the organization to react. Either way, they no longer have the option of staying the course - unless they prefer not to survive at all.

Reality #1: The expectations of seniors have changed.

A generation ago, when the average life expectancy was around 70 years, seniors faced limited choices for where to live after retirement. For the most part, they stayed at home. If necessary, they moved into a nursing home. For those with limited incomes, subsidized housing was an option before infirmities set in.

Many nursing home operators have upgraded their facilities in recent years, but the current generation of seniors is adamant about shunning them. Rightly or not, nursing homes are perceived as cold and institutional - suitable only for “old people.” In fact, many of today’s seniors have made their sons and daughters promise never to send them to a nursing home.

Instead of nursing homes, seniors are demanding - and receiving - more choices, whether in their own homes, in retirement communities, or in the community at large. Sharing a double-occupancy room and bathroom with a stranger is no longer acceptable. Neither is the regulated regimen of the traditional nursing home.

Quality of life is now a critical driving force in the emerging continuums of care. Quality of life ranks equal to quality of care as today’s seniors decide where to live, and quality of life includes privacy, dignity, choices, and independent decision-making authority.

Reality #2: The volume of baby boomers will steadily grow.

The coming of the baby boomers has been heralded for years. Howver, contrary to the popular assumption, the great senior boom has not quite arrived for providers of senior services and long-term care. Boomers won’t start turning 65 for another five years, in 2010. And with a life expectancy of more than 77 years, there won’t be a sudden onslaught of seniors with debilitating conditions; instead, it will take another 20 or 30 years before large numbers of baby boomers need higher levels of care.

In the meantime, it’s better to look at the senior boom not as a monolithic trend but rather a fragmented one. In short, the senior boom is not one big market. It is a multitude of specialized markets. The following graph showing the senior population by age cohorts reveals some relevant distinctions.

U.S. Population Aging Projections, 2000-2010

Several insights are suggested by the population trends. First, from a chronic caregiving perspective, the number of seniors in the 75-plus and 85-plus categories - those most likely to need health and supportive services - is not increasing significantly in the short term. The trend is flat. The increase in the 75-plus population is 15 years away, and the growth in 85-and-up seniors is 25 years in the future.

Second, the 65-74 age group also is flat in the short term. It will increase rapidly in just a few years, but this is a largely independent, ambulatory population. Since this group will be eligible for Medicare, the number of Medicare hospitalizations (for hip and knee surgeries, for example) will increase, along with the short-term, post-discharge, rehabilitation-focused stays in nursing homes. The potential demand for at-home convalescent care also is great. But keep in mind that this is a narrow, specialized market niche, centered on Medicare and rehab services. These people won’t need nursing homes except on an occasional short-term basis.

The harbinger of the “great senior population boom” is seen in the trend for the 55-64 group, younger and still working for the most part. It already is starting to increase, but they are the sons and daughters of seniors in assisted living and nursing homes - not occupants.

The data suggests that a window of opportunity exists for facility operators wishing to expand their services and become continuum-of-care providers. The challenges will include identifying those services relevant for the organization and community, marketing the new services aggressively, and staying one step ahead of the competition.

Reality #3: Competitive nursing home alternatives are here to stay.

Although the surge in seniors has yet to arrive, the upswing in competitive alternatives already is apparent. The impact of this change can be seen most profoundly in the demise of the traditional, stand-alone nursing home and in the decreasing number of available nursing home beds.

Take Wisconsin, for example. The numbers vary from state to state, but the following table makes clear why the nursing home can no longer be relied upon as the foundation of the retirement community or the continuum of care.

As the table shows, there were 17 percent fewer nursing home beds in Wisconsin in 2003 than in 1990, before the burst in assisted-living development. Even with the decrease in beds, both the occupancy total and the occupancy rate continued to shrink - a clear indicator that the senior market is looking for (and finding) competitive alternatives.

In a nutshell, seniors have more choices. Besides better general health and economic status, they have more options for where and how they live. Assisted living, with its multitude of manifestations, has grown to the point that it also recognizes specialized niches and has begun developing its own mini-continuums of care.

Independent-living providers have diversified as well, offering a more complete range of congregate services that typically includes meals, light housekeeping, laundry, transportation, and some medication management.

Dementia care offers another prime example. In the past, elderly people with dementia had little option but to stay at home with a caregiver, usually a spouse, until nursing home care became inevitable. Today, community-focused assisted-living providers are increasingly specialized and offering dementia care services.

Home care generally is the preferred option for those who have supportive family members or neighbors (or can afford to hire a caregiver). However, home care is threatened by limited reimbursements and a growing shortage of qualified caregivers. Access to this option has already become more difficult in many areas, and staff shortages could limit access even more. On the other hand, community-based services have become more accessible and more affordable over the last decade.

All of the newer options are fed by the desire of seniors to stay in their homes longer, and their success is changing the way seniors expect to be served - and the way providers need to think about where and how they serve seniors.

In the near future, high-tech competitors will emerge, getting into the homes of seniors with cameras and other monitoring devices, two-way in-home communication systems, and even robots. These high-tech alternatives are likely to evolve erratically over time. However, they offer incredible opportunities for providers who embrace technology to add to their continuum of care - for example, by developing monitoring and emergency-response systems and linking them with provider-friendly reports that analyze needs and use.

Reality #4: The government is reluctant to pay for traditional care.

No assessment of the senior markets can ignore the role of government reimbursement. Medicaid, the state-federal program to serve the poor, underwrote the growth of the nursing home industry three decades ago. Now, in state after state, both the carrot and the stick are being used to limit government’s reimbursement for nursing home care.

Community-based care is touted as the alternative. Yet it is a different model of care, and providers must think differently if they are to build bridges from their campuses to the community.

Medicare reimbursement for nursing home services has provided a reliable revenue source for operators, but if the federal government decides to restrict reimbursements for services from nursing homes and home health agencies, that revenue stream could shrink. The growth of the 65-74 population in the next decade may place additional strains on the program. Rehabilitation programs in assisted-living settings may be an outgrowth of these converging trends.

It’s almost certain that Medicaid (and to some extent, Medicare and its limited home-care support) will strongly advocate for moving senior services and long-term care into new settings. It’s equally certain that the stand-alone facilities of the past cannot survive independently. Diversification and development of continuum-of-care models provide the hope of the future.

Reality #5: The shortage of health care workers is becoming more acute.

Even if all the other forces discussed above were not enough to force changes on senior services and long-term care providers, there is one other reality to contend with: the growing competition for staff as the baby boomers retire and diminish the available pool of workers to care for seniors.

The good news is this force for change is on the horizon - not an immediate issue, but one that needs to be considered in making the big strategic decisions impacting the next two decades.

The long-term implications, however, are devastating. While each state’s demographics will vary, the trend in the following graph on Wisconsin’s declining caregiver ratios provides the message:
even if the demand for such services were to remain steady, it would be impossible to meet that demand in the traditional labor-intensive way if the workers were not available.

Ratio of Working-Age People (20-64) to Seniors (65+) in Wisconsin, 2010-2030

While the decrease in the caregiver ratio - the total labor pool - is projected to be only 10 percent from 2010 to 2015, it drops dramatically after that - by 24 percent in 2020, 36 percent in 2025, and 43 percent in 2030, when the baby boomers start turning 85 and are more likely to need more care.

Out with the old assumptions, in with the new

In the past, the continuum of care for providers of senior services has been primarily campus-based. The continuum of the future must go beyond the campus and into the community and the homes of seniors. To accomplish this, those involved in the senior services industry must discard the assumptions of the past.

Outdated assumptions to discard

• Nursing homes are the base and focal point of the long-term care, senior services organization.
  
  
• Stand-alone facilities can survive by themselves.
  
  
• One way or another, enough government reimbursement will be there when you need it.
  
  
• If the government comes up short, private-pay residents and clients for nursing homes will provide enough revenue to make up the difference.
  
  
• Seniors will take what they are offered.

In looking to the future, senior services providers can learn some lessons from the transition made by hospitals and physicians 20 years ago. During this transition, the once-independent physician became an employee of expansive hospital networks, tied by contractual necessity to HMOs and their variations.

New assumptions to adopt

• A continuum of care, in all its variations, offers the model with the most chance of maximizing survival.
  
  
• A campus-based continuum will not be enough. The broader community and the home, the hospital and the physicians, nurse practitioners, physician assistants, the allied professionals, and the related commercial entrepreneurs must become part of the long-term care continuum.
  
  
• As the number of seniors grows, their preferences will constantly change, raising the need to continually assess and refocus services on those preferences.
  
  
• The competition must be constantly monitored, and adjustments made to remain on the cutting edge.
  
  
• Development of models that draw on private-pay sources - long before they enter the nursing home - will be essential.
  
  
• New technology will completely revise what it means to be a provider of senior services and housing.

The key to surviving is to recognize that maintaining the status quo is not an option. Only those organizations that anticipate and respond to the forces of change will be able to meet the radically altered expectations of the seniors of the future. The alternative is to become the Pony Express of the 21st century.

History buffs may recall that the Pony Express was the first fast mail line across the North American continent, from the Missouri River to the Pacific coast. For a brief period during the 1860s, the Pony Express provided the most regular and predictable mail service in the West.

The Pony Express closed three days after the first transcontinental telegraph message was sent.

John Keefe is a partner in Wipfli’s Madison office. He has 28 years of experience working exclusively with long-term care facilities and other health care providers. He can be reached at 608.270.2952 or jkeefe@wipfli.com.