Urbanization, Aging & City Planet

IAHSA's Global Aging Network blog had a recent post about China's Silver Tsunami and linked to CSIS articles on China's retirement policy and aging population.

I think it's cool that the IASHA blog is drawing on top-shelf foreign policy think tanks.  And I'm thrilled to have already found a way to enjoy my new career through the lens of culture and international relations, which are among my favorite subjects.

The IASHA blog had another post about 'Age Friendly Cities' but the link was misdirected.  A recent UN article explains:

The Global Network of Age-friendly Cities is part of the agency’s broader response to rapidly greying populations. The greatest changes are taking place in less-developed countries, and it is estimated that 80 per cent of the expected 2 billion people over the age of 60 will be living in low- or middle-income countries.
“Older people are a vital, and often overlooked, resource for families and for society,”

And the article refers us to the World Health Organization's page on age-friendly cities.

This is especially important due to the rapid urbanization of earth as described in an intriguing talk (audio here) by Stewart Brand on the City Planet (in PDF).

People are rapidly moving to cities all over the developing world.  Cities are still growing and the country-side is emptying even in the developed world.  What does this mean for providers of aging services?  What does this mean for Continuing Care Retirement Communities in North America?

It sounds like a huge opportunity if you have proven systems that deliver the experience of genuine community.  You can expand into new markets which are increasingly affluent.  Maybe CCRC's will locate in growing cities in order to benefit from an energetic young workforce.  (According to Brand, current population momentum means 2 billion additional people born in cities during the next decades.)  There could even be a growing niche for international destination retirement communities (a play on 'destination weddings').

Industry Organizations

Key organizations that represent those who serve elderly people, including the CCRC industry (thanks to Rob Love).

Focused on non-profit:

American Association of Homes and Services for the Aging (AAHSA) www.aahsa.org

"Our 5,700 member organizations ...offer the continuum of aging services: adult day services, home health, community services, senior housing, assisted living residences, continuing care retirement communities and nursing homes."

 In Pennsylvania there is http://panpha.org/

"Our members – nonprofit providers of long-term care and aging services"

Focused on both for-profit and non-profit providers:

International Association of Homes and Services for the Aging (IASHSA) www.iahsa.net 

"represents more than 20,000 ageing services providers worldwide who serve almost 5 million elderly daily."

American Health Care Association (AHCA) www.ahcancal.org

"the nation’s largest association of long term and post-acute care providers...advocates for quality care and services for frail, elderly and disabled Americans"

National Investment Center for the Seniors Housing and Care Industry (NIC) www.nic.org

"resource to lenders, investors, developers/operators, and others interested in meeting the housing and care needs of America's seniors"

5-10 year Future: Red Ink, Mergers, Boomers?

More impressions from talking to Senior Marketing Specialist, Rob Love, of Love and Co:

Over the past decade Rob has been concerned to see many communities run a negative operating margin and make up the difference on their investment portfolios (often heavily dependent on interest income). They had lots of cash flow but were actually losing money on operations.  Now that their portfolios have shrunk and investment income is down significantly, their previous operating practices are clearly unsustainable.

The next 5 to 10 years are likely to be volatile for the CCRC industry.  Stronger players will acquire or merge with weaker ones.  Many top managers will resist this necessary development for a while.  Rob expects that most of these mergers will be local affairs, with several (say 4 or 5) established communities coming together to achieve economies of scale - to provide similar levels of service, but with just one Director of Nursing instead of five (for example).  Mergers will be challenging, requiring the Executive Directors to sit around a table and negotiate 4 of 5 of them out of a job! 

Rob mentioned Erikson, one of the biggest players in the CCRC industry, as an example of the economies of scale that smaller regional CCRC mergers may try to emulated.  I asked if Erikson will be one of the big consolidators but Rob thinks it unlikely, due to Erikson's current dance with bankruptcy.

On the demographic front, the U.S. population is moving South and South West.  The CCRC industry generally serves an audience that is upper middle class and above.  The growth over the next decade is likely to come in the higher end of this market.

But the big question is whether affluent Baby Boomers will actually buy into the CCRC or Life Care model and move into communities the way their parents did.  It remains to be seen.

IRS Changes Rules for CCRC's Refundable Entrance Fees?

From a recent article:

The Internal Revenue Service surprised and alarmed retirement community operators recently when it challenged an operator of luxury continuing care retirement community’s tax treatment of refundable entrance fees.

Classic Residence by Hyatt...followed industry practice by treating the refundable portions of residents’ entrance fees as loans with obligations to repay. In December 2009, the IRS sent a notice of deficiency for almost $129 million for the 2005 tax year to Classic insisting that the company should have treated the more than $318 million it received in mostly refundable entrance fees that year as taxable income “from rental/occupancy of the living units.”

Will this ruling stick and how might it change CCRC financial management?  Are operators actually alarmed?  Erikson, for example, which operates many communities (including Ann's Choice near me in Warminster, PA) still highlights its "Refundable Entrance Deposit" as a key selling point.

Baby Boomers and Continuing Care?

Today I have mostly questions.  Here are just a few...

• Today's new retirees, now age 65, are baby boomers.  Will they become the next generation of residents moving into CCRC's?  (I bet that enough of them will want a very different kind of long-term community to support some very interesting niche-markets in the near future.)

•  Who is serving the 'cultural creatives' - the boomers who shop at Whole Foods or listen to NPR?

• Who is positioned to serve the over-65's who want to live in eco-villages, or who might prefer a more age-integrated community (not just over 55), but will also eventually need continuing care?

• Will baby boomers even move into CCRC's or are their tastes and needs so different from their parents that the CCRC industry faces decline in 10 or 15 years?

•  Are CCRCs essentially a North American phenomenon, and mostly in the U.S.?

• Is there a CCRC industry in Europe or Asia and what does it look like? Can we learn from them or can they learn from what's been done in the U.S.?

• What does the global trend toward urbanization mean for senior living and CCRCs in particular?

•  And is urbanization relevant to senior living and retirement communities in the U.S. and other developed countries?

The CCRC industry needs Innovators

Last week I spoke with Rob Love of Love and Company, a senior marketing specialist who serves the continuing care retirement community (CCRC) industry.  Rob was very generous with his perspectives on the current state of the CCRC market, possible futures for the industry, and where I might fit as a newcomer.  Here are just a few of the impressions I gathered during our conversation.

My friend Bob Milanovich, who referred me to Rob Love, works in the not-for-profit segment of the CCRC industry.  Rob Love focuses on serving non-profit communities, and he explained that he prefers to work with mission-driven rather than profit-driven organizations.  Rob believes that the quality of care tends to be a bit higher in a non-profit setting. (I'd like to find the research he mentioned that demonstrates this difference.)  He also has the sense that non-profit communities are a bit more stable, not beholden to shareholders or focused on quarterly profit reports.  There may be a bit more risk or volatility in for-profit continuing care retirement communities.  (I wonder how/whether this affects the employees and residents.)

According to Rob, many continuing care communities are 10 years behind what today's potential residents want and need.  Their facilities may not have been updated and their approaches to selling the benefits of their communities may have become stale.  Both the physical and social infrastructure of many CCRCs need to be upgraded.

Who works in sales/marketing?  Rob informed me that the typical marketing director is a woman in her mid 50s, who returned to work when her kids started school.  Often she started as a receptionist and eventually worked her way up in the sales/marketing department until she became director.  This observation is not meant to disparage these people, only to point out the potential benefits from a broader range of disciplines and experience as the industry moves forward.  The CCRC industry really needs innovators.  Some of the most effective executive directors that Rob knows have come from other industries.  One of the best CCRC executives came from banking, making a significant impact with strategic-planning and team-building in the CCRC setting.

Inspiration for hands-on community building

A few weeks ago I spoke to Bob Milanovich at John Knox Village (Pampano Beach, FL) about changing careers and working in the senior living/CCRC industry.

I've known Bob for 16 years.  Our friendship developed during family visits to my great-grandmother who lived at John Knox Village (JKV).  My great-grandmother died about 9 years ago but my paternal grandmother still lives there.


I met Bob while I was a teenager, the oldest of 9 kids, when we drove from Kitchener, Ontario, Canada to visit my great-grandmother and grandparents over Christmas.  Somehow we ended up singing on stage at the John Knox Village holiday program.  My youngest sister was a toddler at the time.  At one point I knelt beside her holding the microphone while she sang "Jesus Loves Me".  As Bob tells it, he fell in love with my entire family at that moment.


After the show we spent a very memorable evening with Bob driving around the village crowded into a golf cart.  (We obviously didn't all fit, so we took turns walking.)  Bob took us caroling to the 'villas' where residents lived independently.  We caroled through the assisted living building and sang to the little groups sitting in the common areas of the nursing center.  We completed the evening by going room to room, crowding around individual beds in the nursing center, singing to people who were unable to get up.  My parents had taken me on a number of visits to nursing homes while I was a boy so the delighted smiles, the soft hands, and the thin arms were very familiar as we sang and hugged our way through John Knox.


After that, our caroling became something of an annual tradition.

What I noticed about Bob that first night became more apparent as I got to know him during our visits. (We sometimes lived for a week on the JKV campus as Bob's guests.)  He was Director of Marketing and I understood that his job was to sell JKV to new residents, yet he did so much more.  His presence lit people up.  Bob deeply cared for his residents' well-being and by extension, for the whole community.  Though he may technically have been 'only' an employee, as Bob walked around JKV he behaved as though he was the host or proprietor.  He always seemed to be walking around the community or whirring along in an open golf cart, stopping to shake hands, answer questions, give hugs, or to thank and encourage staff.  He made it his business to ensure that everyone felt appreciated from the lowliest staff in housekeeping or dining service, to residents and visitors.  I watched as Bob drew people in and made them part of the enterprise.  He was both humble and in-charge.  He exercised a kind of leadership that was subtle yet very effective - making residents feel at-home, cared for, and part of a meaningful community.

As I began considering a career in senior living and community entrepreneurship, I realized how deeply Bob Milanovich's example had touched me.  I am very grateful for his encouragement and his kindness to my family.