Assisted Living Business – What are the Main Challenges?

Couple in an Assited Living Business

There are significant challenges facing the assisted living business. The U.S. Census Bureau has projected that by 2030, the over 65 population will be at 74 million, and nearly one in five residents will be an older adult.  Trends in senior living are profound and complex!


Industry Trends

Owners and operators of assisted living facilities always need to be looking to the future to stay competitive in a very competitive market. These are just a few of the current trends to watch.

  • The labor market will remain competitive. Labor is the major component of assisted living operating expenses.  Providers will continue to experience significant challenges in recruiting and retaining staff as they compete with other industries for staffing needs.  Further, an aging population with fewer younger workers will exacerbate this issue.  While strides in technology in the assisted living space may help to make labor more productive, at its heart, the assisted living business is a labor driven industry.
  • Baby boomers are creating change. Aging and more educated baby boomers are looking for more amenities than seniors of the past.  Assisted living communities will need to offer wider ranges of amenities to attract residents who are looking for communities that will cater to and recognize their individual needs and desires.
  • Technology continues to evolve. Technology is already having an impact on care, such as managing medications on smartphones, keeping track of vital signs with connected wearable devices, motion-detected lights, and smart security systems, to name a few.
  • Senior-friendly communities are growing in popularity. Today’s seniors are more and more interested in maintaining an active lifestyle. Assisted living communities will need to design amenities that address this active lifestyle and cater to the individual needs of a more sophisticated baby boomer population.
  • Building designs are changing. As older adults seek more amenities, communities are looking into a wide range of innovations in their building design. Restaurant-style dining, community centers, spacious apartments, walk-in closets, larger bathrooms, and coffee bistros are just a few of the types of amenities residents might find tempting.  In addition, communities are designing more spaces that can offer versatility in their use to address the varying and individual needs of their residents.
  • Residents’ healthcare needs are increasingAssisted living communities will need to continue to expand their healthcare services capability as resident acuities continue to increase, resulting in more medically complex medical issues than in the past.  The advent of more in-home care choices and coverages allow residents to remain at home for a longer period of time.  This results in a resident with more acute medical needs by the time they choose to come to a community.


Challenges in Assisted Living Facilities

What are some of the challenges in managing assisted living business that make it particularly complex?

  • Staffing challenges. The assisted living industry competes with other, more attractive, less challenging industries for their staffing base.  Potential employees have the option of working in the hospitality or restaurant business, to name a couple, where regulations are less onerous, and duties are less demanding.  This can make recruitment difficult.  In addition, there is a lack of uniformity when it comes to staffing regulations on the state and federal levels.  Assisted living providers must offer a blend of hospitality and medical services to remain competitive.  Providers must be able to flex staffing to meet the need of their residents, especially in the area of healthcare services.  Staffing has been and will continue to be one of the greatest issues facing the industry.  Special Healthcare Recruitment Strategies can be an effective tool in addressing staffing needs.
  • Competitive benefit plans are integral to the recruitment and retention of top employees. Recruiting and retaining staff is a major challenge for the assisted living business. Assisted living facilities need employees who are well-qualified and can administer to the welfare of their residents. Some communities are thinking creatively, beyond the usual benefits of healthcare and paid time off, and offering such additional benefits as rewards for long-term retention, employee lotteries, training and advancement opportunities, profit sharing, and even pet insurance.
  • Expense control. Some of the largest expenses for assisted living facilities include labor, food, and energy.
    • Labor costs. The ability to secure a stable and reliable workforce is an essential element in controlling labor costs.  It serves to reduce turnover, lower overtime expenses, and improve the quality of care a provider can offer its residents.  While wages and benefits can help in this regard, employee engagement through recognition and effective hands-on management can go a long way towards stabilizing staffing.
    • Food costs. Effective menu planning with seasonal foods that residents enjoy eating can cut down on meal expenses. Food waste can be limited by keeping careful control of inventories in kitchens.  The use of group purchasing programs can assist with expenses.  Food is one of the main amenities in assisted living communities, and it is vital to “get it right”.
    • Energy costs. Renovating lighting plans to switch out fluorescent and incandescent lightbulbs for LEDs will not only reduce electric bills but also reduce the need for maintenance as LED lightbulbs are designed to last for 20 years. Using automatic sensors that can turn lights off and control the temperature of empty rooms, will help to control costs. Heating, ventilation, and air upgrades can be looked at, but the overall cost of replacing these systems may take years to recoup those costs of energy savings you may incur.  As we age, our vision gets poorer, so effective lighting, including adequate and strategically placed natural lighting can be good for residents and the provider’s pocketbook.
  • Emergency preparedness. Assisted living facilities face greater difficulties than the average business in the event of natural disasters. Residents may be disabled, have reduced mobility, or be unwilling or unable to respond to instruction as expected.  Communities need to be sure they have an adequate plan ready before disaster strikes. The staff needs to be trained on the plan and residents need to have experienced drills and exercises that involve first responders. Additionally, communities should have plans in place to deal with active shooter incidents. Just like schools, assisted living facilities will need to be prepared if the unthinkable happens. When staff and residents are prepared to act in an emergency, they will be more likely to take action rather than panicking.
  • Crisis Communication plans need to be well developed and an integral part of daily operations.
  • HIPAA compliance.  The Health Insurance Portability and Accountability Act (HIPAA) was implemented in 1996 to protect the health records and demographic information of patients. HIPAA ensures that patients have a right to their medical records and can easily obtain them. All organizations that handle protected health information (PHI) must comply with HIPAA standards.  Not all senior care facilities are required by law to follow HIPAA standards. This is determined if the assisted living facility is considered a covered entity. However, HIPAA has been established as a best practice, and most communities strive to meet their compliance, even if they are not considered a covered entity to best protect their residents’ privacy. If a community works with a hospital or other healthcare provider, then they are required to follow HIPAA.
  • Payor sources.  Traditionally, the assisted living business has been one that largely deals with private funding.  Medicare does not cover assisted living services, and not all states provide Medicaid funding for assisted living.  However, there are now long term care plans that have some coverage and there is potential for Medicare Advantage plans to do the same.  As the population continues to age, the government and insurers will look to address this trend by providing coverage for assisted living services.  Clearly, providers will begin facing more payment options, which will bring on a whole new set of challenges.


How to Grow Assisted Living Communities

An investigation of the market is critical before planning expansion, new development, or a new service line. A thorough assisted living feasibility study can properly assess the potential of the project.  Market studies represent an essential and cost-effective first step in the development process and should be undertaken before moving forward with development activities.

Market feasibility studies provide critical information in the decision-making process of deciding if a new project should go forward, as this short feasibility case study for an assisted living/memory care project shows.  It’s best to use a team of experts to ensure that you are capturing all the relevant data and correctly interpreting the results.

There is no denying that the population both here in the United States and globally is aging, and the older population will represent an increasing part of the overall population.  With that trend comes a whole set of issues and opportunities.  While the assisted living business appears to be very attractive because of that aging trend, it is one that requires close examination and planning before jumping in.

The assisted living industry is a highly competitive and complex one, and while opportunities are out there, the issues associated with the assisted living business must not be underestimated.  Have a specific question?  We can provide you with complimentary feedback on your issue.

When you need proven expertise and performance

Craig Fukushima, NHA, MBA

Mr. Craig T. Fukushima’s health care experience spans more than 35 years with special expertise in the long term care sector, including implementation of innovative health care projects in domestic and international locations.