In December 2017, LeadingAge Virginia convened a Cabinet with the charge of developing a community prototype(s) that successfully serves the mature middle market. The primary challenge to the Cabinet was, “How can not-for-profit providers develop a model that will attract middle market consumers, justify the risk to our boards and expand our mission into new arenas?” We gathered thought leaders around the table who brought their expertise, passion, problem-solving and willingness to consistently engage until we found the solution.
The Middle Market Need
Rarely in the history of the senior living field has the need for creativity and the imperative for action been clearer. The rapid growth trajectory of the 75+ middle market is more dramatic than the growth of low-income elderly for the first time in memory.
Middle-class Americans have very few alternatives available to them. Government-subsidized programs help provide alternatives for low- and very low-income families, and there are Life Plan Communities for upper middle- and upper-income elders, but the 56% of older adults that are in the middle market are falling between the cracks.
A high percentage of these people will have future care and mobility needs. There is a broad range of financial personas regarding asset/income mix that makes up this market; one size does not fit all.
The Cabinet believes that there is a strong social and ethical imperative to solve this problem and to serve this market. It also believes that it can represent an opportunity for providers.
The bottom line is:
- Very rapid growth trajectory of the 75+ middle market
- Very few secure alternatives available to these older adults
- Multiple financial personas regarding asset/ income mix make up this market
- There will be a significant need for services after age 75
- It will take a creative approach, distinctly different from the current product array to meet the need
Defining the Middle Market
LeadingAge Virginia’s Cabinet broadly defined the “middle market” as those older adults who have too much income to qualify for government-subsidized housing such as HUD housing or tax-credit housing, and too little in assets and income to qualify at age 75 for residency in a Life Plan Community.
We used 75 as the age on entry because we believe that the benefits of living in a community— higher wellness, higher social engagement, lower depression and less utilization of healthcare—are unrealized when the move to a community setting occurs at an advanced age.
The following are some of the questions that will lay the table for your organization as it determines whether and how to develop a middle market project:
- How do we define success for a middle-market project?
- What are the non-negotiables that must be included for our organization to feel that we are fulfilling our mission?
- Does serving a middle-market customer fit within our core competencies?
- Is our organization willing to take on the risks and challenges of a new model?
- What financial resources would we be willing to commit?
- What levels of living and services are required?
- Do we have the discipline to operate a community with a different operating philosophy/cost structure from our existing model?
- Where will the management for this initiative fall on our existing organizational chart?
- Do we have to control all components of the project, including delivery of all services, or are we willing to partner with other providers for service delivery?
- What type of commitment of care are we willing to make? Where are we willing to let partners and other providers take over?
- Are there schools or religious institutions nearby that could volunteer their time to both offset certain operational functions, as well as integrate an intergenerational component to the community?
- Is dining necessary to have on campus or can we partner with a local restaurant or service?
The Value Proposition for a New Alternative
After a lot of analysis and financial modeling, our Cabinet proposed a service-enriched independent living model to serve the middle market based on socialization, community-mindedness, partnerships, care navigation and access to services.
Our model is financially viable, mission-consistent and would:
- Provide an enhanced model to a currently underserved market
- Address changes that occur with aging
- Address different needs of residents and families
- Create a new model that depends on:
- Creativity (on multiple levels) to achieve affordability
- Community partnerships and volunteerism for lifestyle
- Technology/disruptors to power some services
We sought to design an approach that might do a better job of ensuring engagement and of offering some sense of safety/peace of mind about future healthcare needs.
“A Middle Market Playbook” is offered to LeadingAge Virginia Members, LeadingAge National and all LeadingAge state association staff at no charge. Non-members may purchase a digital copy online. For more information, please visit: https://leadingagevirginia.org/store/viewproduct.aspx?id=17211147.
For more articles covering senior housing trends and how providers must adapt to them to continue fulfilling their missions, click here. To download Love & Company’s brand-new white paper, “Senior Housing Trends: 2021,” click here.