steve monroe managing editor and partner irving levin associates, inc. [email protected]

Predicting The Future

Steve MonroeManaging Editor and PartnerIrving Levin Associates, Inc. [email protected]

www.levinassociates.com

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

Skilled Nursing Facilities-Average Price Per Bed

Skilled Nursing Facilites-Average Price Per Bed

Pric

e Pe

r Uni

t

The SeniorCare Investor The Senior Care Acquisition Report

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

Average Price Per Unit (AL and IL)

Average Price Per Unit (AL and IL)The SeniorCare Investor The Senior Care Acquisition Report

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0

5.0

10.0

15.0

20.0

25.0

Dollar Value

Dol

lar V

alue

(in

Billi

ons)


DOLLAR VALUE OF PUBLICLY ANNOUNCED SENIORS HOUSING & CARE TRANSACTIONS

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0

50.0

100.0

150.0

200.0

250.0

PUBLICLY ANNOUNCED SENIORS HOUSING & CARE ACQUISITIONS 1994-2013

Number of Publicly annonced dealsThe SeniorCare Investor The Senior Care Acquisition Report

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$0.00

$2,000.00

$4,000.00

$6,000.00

$8,000.00

$10,000.00

$12,000.00

$14,000.00

$16,000.00

Dow Jones Industrial Average

Dow Jones Industrial Average


1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Average 10 Year Treasury Rate

10 Year Treasury Rate

The Senior Care Acquisition ReportThe SeniorCare Investor

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

10000

20000

30000

40000

50000

60000

70000

Distribution of Existing Inventory By Year Opened


Num

ber o

f Uni

ts

The SeniorCare Investor The Senior Care Acquisition Re-port

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

IL/AL CAPITALIZATION RATES Average

IL/AL CAPITALIZATION RATES Average


1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

10 Year Treasury Rate

Dow Jones Industrial Av-erage


IL/AL CAPITALIZATION RATES

Skilled Nursing Facilites-Average Price Per Bed

Average Price Per Unit (AL and IL)

Number of Publicly Announced Deals

Dollar Value of Transaction


Reaching a Market Peak?

HJ Sims Presentation

Anthony ArgondizzaSenior Vice President and Chief Operating Officer

Organizational Growth - 2014 and Beyond

Purpose• Expand mission• Lower overhead costs• Improve revenue through management fees• Serve new markets

12

New Construction

Long lead timesEntitlement approvalsFinancingWorking capitalFinally break-evenConstruction / Occupancy risk

13

Mergers / Affiliations

Shortened lead timeZoning and approval issues easierCapital considerationsCash flowOperating efficiencies – staff, systems,

leverageAccess to capital and funding

14

Consideration

Affiliation

Merger

Shared services agreement

15

Growth Considerations

Geography

Risk profile

Mission

Culture• residents, trustees, staff

16

Springpoint Merger Activity

Navesink Harbor – July 2006

Winchester Gardens – June 2013

Un-named CCRC

17

Case Study - The Atrium at Navesink Harbor

Extremely challenged• Small units• Physical disrepair• Deferred maintenance• No cash• Financial distress• Weak board• Partially occupied

18

Case Study - The Atrium at Navesink Harbor

Repositioned:• Façade replacement• Total interior reconstruction

Larger units (total unit count: from 213 to 138)

• Deck replacement• New addition – 60 units• External challenges

2008! Investment much larger than planned

19

Case Study - Winchester Gardens

Challenges we all face in CCRCs:• Heating and cooling upgrades• Decorating• Changes in space utilization

Strengths:• Very strong balance sheet• Strong demographics• CEO and Board of Trustees vision• New marketplace for us• Impossible entry otherwise

20

Summary Assumptions

Projected Springpoint Savings Based on Preliminary Analysis – 2013:

Administration $649,000

Dining $111,000

Marketing $250,000

Legal $53,000

Purchases and Insurance $264,000

Service Contracts $100,000

Refinancing $830,000

Forward Purchase Utility Contract $150,000

Total Projected Savings $2,400,700

21

Case Study - Unnamed CCRC

Similarities/Fits:• Geography • Familiar organizational type

Challenges:• Declining occupancy (substantial)• Capital needs ($10.0MM+)• Decent demographics• Very large debt burden• Reputational risk• Estimated 7-10 year fill

22

Clinical Decision Unit

A new opportunity for growth of Skilled Nursing Home

Services

Issues Facing Short Term stays..

• Managed plans, “Medicare Advantage”

• Shorter Stays• Decreased Reimbursement• Part B Therapy Shrinking• Narrowing Hospital Networks • Short Term Beds are available, but

not full!

The Opportunity• A unique care opportunity• Sought by managed care companies & “incentivized”

primary care physicians• A new ‘admission’ type to SNF• Downstream impact to AL, Home Health etc.• Alignment w/ a large primary care physician practice• Alignment with Managed Care organizations • Innovation is our mission ‘call’• Reduce the cost of care • Add a new revenue stream to the CCRC• Gain experience in “Incident of Care” risk based

payments

What is a Clinical Decision Unit?

• Dedicated unit (5-10 bed) within a skilled nursing or short term rehabilitation facility

• Treat patients that don’t yet need hospital admission– Similar to a hospital Observation Unit

• Patients awaiting a “clinician’s decision” for care pathway• Short length stays (3-10 days)• Types of Diagnosis:

– COPD Pneumonia

– CHF Uncontrolled Blood Pressure– Failure to Thrive Uncontrolled Blood Sugar

• Staffed by RN, (ratio 5 to 1) • Supervised by “on site” Physician or Nurse Practioner

Proposed Clinical Structure• Physicians will provide clinical support, on site and with EMR• Patients will be “managed Medicare” ONLY!!!

– Preapproved and Not Requiring the “3 day stay”

• Physicians will be initial referral stream:– From Observation Unit at Hospital and– Direct from Physician Offices

• Clinical Decision Unit will manage:– Transport from referral site– Lab and Imaging– Respiratory and Other therapy– IV Fluids– Pharmacy needs

• Patients will be monitored until Discharge (home or skilled unit)

Patient Flow

AL,LTC, SNF

Clinical Decision Unit

Direct from Office

COPC Patient Presents at ER

Admit to Obs Unit

Discharge to Home or Admitted

Discharge to CDU

DISHCHARGED

Steps to CDU Opening

• Development of Financial Structures– Billing Status for Medicare– Avoidance of out-of-pocket costs for patients

classified as observation– Contracts with Medigold and other payors

partnered with COPC in risk management contracts

• Development of Clinical Pathways• Staff Hiring and Training• Projected opening date 6/1/14

2014 HJ Sims Conference

The 4 P’s of Marketing

1. Product. The right product.

2. Price. The right product offered at the right price.

3. Place. The right product at the right price available in the right place

4. Promotion. Informing prospects of the availability of the product, its price and its place.

Todd SwortzelPresident and CEO


Product

• Rehabilitation / Physician Practice Business• Pilot CMS Bundled Payment Project with

Illinois Bone and Joint Institute• Product/Catered Living for Independent

Living (All IADL’s)•


Pricing


Promotion

Let’s Hear from the LeadersSenior Living Trends

March 6, 2014

AGENDA

36

• Welcome

• Occupancy / Rate Trends

• Construction Activity

• Transaction Activity

• Trends in Acuity

• Regulatory Trends

• Impact of the Internet

• Technology

Mar

ch 6

, 201

4

Assisted Living occupancy strengthened in 2013

37

Note: Represents majority AL and MC, excludes IL and SNF

Mar

ch 6

, 201

4

Annual rent growth slows slightly in late 2013

1/10/2012

38

Note: Represents majority AL and MC, excludes IL and SNFSource: NIC MAP Data and Analysis Services

Mar

ch 6

, 201

4

Construction pace slows as completions outpace starts and inventory increases

39

Marc

h 6

, 2

01

4

40

Public buyers, generally REITs, continue to be the most active buyers, however the private sector regained momentum after a lull in 2011

Mar

ch 6

, 201

4

Trends in Acuity

41

• Average age of our residents is 88, compared to 82 ten years ago

• 53% of our residents are on a care package which means they need assistance with Activities of Daily Living• Today’s residents move-in with 3-5 ADL needs, where previously residents

moved in for socialization

• 65% of our residents are receiving assistance with medications• 72% of our residents take 3 or more medications, this number has more

than doubled since 2010

• In 2013, 43% of our residents moved out due to death• Move-outs due to death in <1 year length of stay has increased 54%

• The Top 5 diagnosis for our resident population are:Hypertension, Dementia, Depression, Congestive Heart Failure, Diabetes

Mar

ch 6

, 201

4

Regulatory Trends

• Do current State Regulations Support Caring For Frail Residents?• Basic assisted living, or create a second tier for providers who can

offer “enhanced” services?• Skilled nursing services within assisted living?

• Alzheimer’s Care: Training requirements, Safety precautions (such as “Silver Alerts”), Specialized Programs, Research Funding

• Prevention of Elder Abuse and Financial Exploitation: increasing emphasis on mandated reporting, prosecution

• Increased Consumer Disclosure requirements to clarify and manage expectations

• Medicaid & Assisted Living: Recent CMS regulation clarifies AL’s role in the Home & Community Based Waiver program

• Review of Life Safety Code issues 42

Mar

ch 6

, 201

4

Impact of the Internet on Senior Living

43

• 60% of our leads come through the internet, both directly from our website and through paid internet sources (A Place for Mom, SeniorLiving.Net, Caring.com)

• Leads are coming to us much more educated from doing research online.

• Paid internet lead sources provide qualified leads to communities but there are numerous drawbacks• Very costly – 70%-100% of one month’s rent/care - with residents coming in

more frail and with shorter lengths of stay we are paying more and getting less.• Internet sources pass along information to numerous communities• Leads don’t always understand what is going to happen when they fill out a form

and it can be a very overwhelming and frustrating experience and often makes the process more confusing

• Social Media is becoming a player in the marketing of senior living• Facebook enhances the customer experience for residents and family members,

engages associates and captures the true essence of a community for prospective residents and their families

• Online review sites are impacting the research and decision making process

Mar

ch 6

, 201

4

steve monroe managing editor and partner irving levin associates, inc. [email protected]

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