There is no doubt that memory care is a growing, unfulfilled need in senior housing. Traditional assisted living/memory care communities work because a community’s current AL residents may require memory care. Even so, opportunities for stand-alone communities exist despite the uncertainties and risks. The crux is uncovering great opportunities. This process has three components: assumptions, gut-checking demand estimates and partnership opportunities.
Assumptions are simplifying tools that provide foundations for analysis. Some people view good analytics as complicated methods used to analyze data. Good analytics, however, use the simplest methods to analyze data and help people make decisions. It’s about using the right tool for the job. As the late Nobel Prize-winning economist Milton Friedman wrote, “A hypothesis is important if it ‘explains’ much by little, that is, if it abstracts the common and crucial elements from the mass of complex and detailed circumstances…”
Any number of “what ifs” surrounding a Memory Care development adds to “the mass of complex and detailed circumstances” list. When evaluating demand, the goal is to distill down to “the common and crucial elements.” At heart, there are three questions to answer:
- Who needs memory care?
- Can they afford it?
- Are they living in memory care already?
The answers allow us to identify diagnosed/undiagnosed needs, understand the affordability of memory care, and account for other memory care communities in a market. Simple assumptions facilitate quick, reasonably accurate assessment of markets leaving the best ones for gut-checks and deeper dives to verify the validity of the results.
Gut-Checking Demand Estimates
Factors like demographics, culture, amenities, and other “extras” are important too. Even though extras impact marketing/operations more than demand estimates, they still impact opportunity because occupancy stabilization requires good market demand and good marketing/operations.
Expect five analysts to have five different demand estimates – another reason why gut-checks are crucial. A process that gut-checks demand with the extras and anecdotal information allows for confirmation of demand when these pieces speak to its favor. When these pieces disagree, discussions and deeper dives are encouraged. An analytic process where all stakeholders are engaged is better because discussions are more informed and thorough.
Finally, how an operator positions itself in a marketplace affects market opportunity. Research indicates that seniors with Alzheimer’s disease are often hospitalized for mismanaged chronic conditions. Residents are living longer with higher acuities. As a result, we expect more medically complex seniors with memory care needs. Providers with proven track records of high quality outcomes are top contenders because hospitals are trying to reduce readmissions. Relationships with hospitals and post-acute care providers become all the more important.
Using simple assumptions, gut-checking demand estimates and identifying partnership opportunities offers a great recipe for success. Simple assumptions extract essential information within a market. Gut-checks allow a verification of the results through deeper dives into the facts. And lastly, partnerships set communities up for success by matching the community to the market’s needs.
Dan Lindberg is an analyst with Direct Supply Aptura and has a Master of Science in Applied Economics