By Rob Love, President & CEO
As a strategic advisor and marketing partner, one of the most common needs we hear from Life Plan Communities is to broaden revenue sources. With the shock of COVID-19 still reverberating throughout the senior living sector, diversifying revenue streams in both the short and long terms is especially important.
This is the topic of our March 31 webinar, “Beyond Our Walls: Opportunities for Expanding Life Plan Community Services.” During the session, I’ll be joined by colleagues in the sector who have had experience and success with using home- and community-based services (HCBS) and Early Advantage Programs (EAPs) to generate additional revenue while maintaining their organization’s margins—and mission. To register for the 90-minute presentation and Q&A, click here.
Here, I will cover some key considerations your organization should note before it pursues adding HCBS. Unsurprisingly, the discussion should begin with understanding your primary market area.
Look at competing providers (not just prospects) in your area
Everyone in our field knows that within a Life Plan Community, skilled nursing services bring the most volatility and the lowest margins. So, many organizations are looking to use home care and home health services as higher-margin revenue streams.
When a community asks us to prepare a market study to aid it in its plans to add home care and home health, looking at the market depth of age- and income-qualified prospects has its limits. This, of course, is because Medicare drives the home health portion of the market, and determining market depth is much more fluid than just homing in on the income and net worth of seniors in an area.
Instead, what is most important to examine is the competitive environment in the market. Because in almost any market today, a lot of home care and home health providers exist.
Whereas a Life Plan Community is able to create demand to support a new or expanding community, home care and home health have to take market share away from existing providers. A critical success factor for communities is being able to enter the market with a strong product, service structure and brand presence from day one. And that is much easier said than done.
Furthermore, home care and home health are totally different business lines that require distinct infrastructure and experienced management, and an organization must commit to investing in the needed skills and experience if it wants to succeed. HCBS cannot be your Life Plan Community’s side hustle.
“When we started home care, we did a survey that found that there were 171 home healthcare agencies near Carolina Meadows,” said Kevin McLeod, President & CEO of the Life Plan Community in Chapel Hill, North Carolina. “Eventually, we learned that if we continued with home health for just our residents and a small group of future residents, we would just break even, so we need to either find a way to grow our market share or to develop an exit strategy. HCBS provide many opportunities, but you need to look at the market and be sure you’re entering at the right time.”
Kevin, a fellow panelist on the upcoming webinar, added that organizations always need to be looking at other revenue sources, but must consider the competitive landscape in their area.
“If you think you will get extra revenue from existing residents, you won’t, and raising entrance and monthly fees down the road won’t work either,” he said. “When we developed our Early Advantage Program (EAP), we were looking at similar programs around us and trying to protect what was already in our catch basin. A competitor came to market first, but we came to market right behind them and were able to lock in about 200 people who might have gone elsewhere.”
Where to grow first
The order in which a Life Plan Community expands its services has much to do with its success.
When adding HCBS to your organization’s service line offerings, a good method is to begin by adding the highest-margin services, then add others from there. Westminster Canterbury on Chesapeake Bay, which has had strong success with HCBS, followed this process:
- First: Home care services and EAPs
- Next: Hospice
- Last: Home health
“That’s the order in which I would do things if starting from scratch,” said Ben Unkle, fellow webinar panelist and President & CEO of Westminster Canterbury on Chesapeake Bay. “Starting with the high-margin services will allow your organization to justify the investment to the board of directors and allow it to build the infrastructure it needs for other HCBS down the road. That is what worked for us: We built our other HCBS using the return on the initial investment.”
Bolster referral networks
Just like with any line of service that a Life Plan Community offers, referral networks boost and sustain census. This is the same for HCBS, but the approach is a bit different. Nancy King, President of advisory firm Senior Options and also a panelist on the March 31 webinar, explains:
“Healthcare referral networks for HCBS are similar to those for nursing home admissions, but we use standards and commission plans because those are what make you successful when connecting with key influencers, such as physicians and hospitals, in the greater community.
“And because HCBS are connected to Life Plan Communities, the organization running the HCBS needs to make clear to the market that individuals do not need to be current residents or of the sponsor’s faith to join—or refer someone to—the program. Communicating our openness is key, and how our criteria meet the needs of the senior.”
Mind the margins
We understand that the reality for mission-driven and not-for-profit Life Plan Communities is that—without margins—there is no mission. Over the years, I have heard many providers state that the margins of HCBS are too low to warrant the investment.
If a community only focuses on providing services to its residents and wait list, this is likely true. But if a community is willing to commit to building a strong competitive presence for HCBS in its market, the potential to develop a strong margin is absolutely there, as evidenced by Westminster Canterbury on Chesapeake Bay’s success with its programs.
“Even in modest markets, not big cities, you can get very attractive volumes, and thus good margins,” Ben said. “And a lot of times, it’s simply a matter of focusing on the right metrics and having the right doggedness and dedication to your approach.”
“The black eye we’ve gotten as a field comes from there being so many organizational failures with HCBS,” Nancy shared. “We’ve noticed that most of the failures have come from poor operation and administration. It’s hard if you don’t follow the model. When adopting programs like these, it’s not a menu you can choose from; it’s a model you need to follow. If you don’t design what the customer needs, it’s not going to work.”
That brings us back to our very first point: understanding your market, understanding your consumer, understanding the competitive landscape, and understanding how fundamentally different HCBS are from the typical operations of a Life Plan Community. Before your organization begins planning its own service line additions to generate additional revenue, please be sure you have considered all of the above.
In the weeks leading up to our March 31 webinar, “Beyond Our Walls: Opportunities for Expanding Life Plan Community Services,” we will be sharing more articles on the topic of expanding the services that your Life Plan Community offers. I hope that you enjoy reading them, and I hope you will join us on March 31!