Smart money: Ancillary services push
William C. Fisher
The senior living industry currently has very favorable supply and demand dynamics. Occupancy is trending higher and financing avenues are opening.
An operator with unique or strong ancillary services is preparing for the future and positioning itself well in its marketplace.
Most often, ancillary services revolve around outpatient therapy and home health service. Combining such services with existing products will often give the operator a full continuum of care.
The industry is undergoing consolidation and that will provide opportunities to leverage the costs of ancillary services while providing incremental cash flow.
Another important factor in providing ancillary services is to figure out who will pay.
The private-pay model is the best for senior living organization but the realities are that Medicare often is the largest form of payment. The correct payment mix will help with the cost structure and cash flow.
Mark Ohlendorf, co-president and CFO of Brookdale Senior Living, speaking at the Deutsche Bank Health Care Conference, said, “The ancillary platform serves 42,500 units with outpatient therapy and just over 37,000 units with home health among its 646 communities in 35 states. One of the key parts to our story is the long-term demand dynamics and aging demographics in the U.S.”
Russ DenBraber, president and CEO of Christian Living Communities in Colorado, added, “We provide a full spectrum of living options and care services, and reach seniors in their own homes through our home care and adult day services. This is an important component of our business model, providing incremental cash flow while moving people within the continuum of care services.”
The demographics for ancillary services are strong.
The affluence of seniors born between 1925 and 1945 will provide the foundation and market demand for the kind of services discussed here.
William C. Fisher is president of Investment Advisory Group LLC, a business development company partnering with some of America's leading financial companies to provide independent financial services to nonprofit organizations.