On Tuesday, May 17, 2015 I was featured in a question and answer session over breakfast with subscribers of Senior Care Investor, moderated by its editor Steve Monroe. We covered a wide range of topics.   I summarize below key takeaways from my Senior Care Investor interview and provide a link to the nearly one hour webcast.

Key Takeaways

The public markets are much less important for seniors housing and post-acute care than they were twenty years ago when there were as many as 30 public companies including operators and health care REITs.   If you review the investment history of seniors housing and post-acute care there have been a number of “pivot points” where stocks in these sectors experienced significant sell offs and then rebounded strongly.   These pivot point were driven by overbuilding and reimbursement and operating problems that in some cases led to operator bankruptcies.  If you got the timing right, these pivot points provided very attractive investment opportunities in the stocks of private pay senior housing operators, post-acute care operators and health care REITs, with the stocks within each of these industry groups moving on somewhat different events and at somewhat different times.

I see current industry conditions again creating pivot points for investments in senior housing, post-acute care and health care real estate and believe it is the right time for investors to be studying these sectors and deciding when it makes sense to invest.

Private-Pay Seniors Housing – Overbuilding, few publicly traded investment options and operating issues at the largest publicly traded operator, Brookdale Senior Living, Inc. (BKD), have caused most public market institutional investors to flee the private-pay seniors housing space.   I don’t see a quick pivot in private-pay seniors housing because capital remains plentiful for new construction, underlying demand from older seniors (80+) is slower than it was before 2010 (see Slow 80+ Pop Growth, Elevated Construction Spark Concern For Seniors Housing on this blog), and issues at Brookdale will take some time to resolve. I also believe private equity investors will await a more receptive market before bringing other quality operators public.

Post-Acute Care – Post-acute care currently has more publicly traded operators with scale than private-pay seniors housing, but deteriorating operating fundamentals and high leverage have also driven public market institutional investors away from publicly-traded post-acute care operators.   Major REITs, such as Ventas (VTR) and HCP (HCP) spinning off skilled nursing assets has underlined the risks investors see in this space.     Increased use of Medicare and Medicaid managed care and ever expanding use of bundled payments are reducing lengths of stay (LOS), pressuring post-acute care rates and volumes and eroding operator revenue and EBITDA.   However, because baby boomers are now beginning to turn 70, the pool of post-acute care patients should grow dramatically over the next 5 – 10 years while the supply of post-acute care facilities and beds is flat or declining and quality operators should be able to attract higher volumes of patients from hospitals if they care demonstrate quality outcomes.   A mild flu season and high operator leverage exacerbated poor 1Q16 financial performance.  I anticipate pressures on rates and LOS stabilizing and volume growth providing upside for post-acute care operators over a 1 – 2 year period while operators are rationalizing their delivery systems and paying down debt.   I believe these factors put post-acute care closer to a performance pivot point than private pay seniors housing.

Health Care REITs – Health care REIT share prices have been buffeted by some of the same issues affecting private pay seniors housing and post-acute care operators but health care REIT share price performance has been much more mixed than that of the operators. Many health care REITs are well diversified, have strong lease coverage and are less exposed to overbuilding and revenue pressures than the operators themselves.   Health care REIT stock performance is also significantly influenced by investor’s views on interest rates and overall economic growth.   Some healthcare REITs, with more significant exposure to seniors housing or post-acute care issues, such as HCP, presumably its future SpinCo, and CCP, have been more directly impacted by the industry and operator issues noted above.   These REITs, and some others, offer larger cap, more liquid investment vehicles than seniors housing or post-acute care operators but likely also have potential for upside from the industry pivot points described above.

Having retired as an equity analyst who followed seniors housing, post-acute care and health care REITs for 15 years, I no longer make Buy, Sell, Hold recommendations.   I do recognize that there are significant risks for private pay senior housing operators and particularly for highly leveraged post-acute care operators. However, experience in the 1999 – 2002 crash of private-pay seniors housing and post-acute care and other sell-offs driven by operating underperformance, reimbursement cuts and regulatory issues show that these sell-offs have often proven to be great investment opportunities and have absolutely been a time to look harder at these sectors and develop an investment strategy and timetable rather than to flee the space.

For a more in depth discussion of these issues, listen to the Senior Care Investor webcast by clicking on the link below. Comments, including those with opposing viewpoints, welcome.

 

 

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Posted in Finance, Post-Acute Care, Senior Housing & Care | No Comments »

UnSenior “Seniors Housing”

Earlier this month I toured The Stories at Congressional Plaza, a new type of “seniors housing” project designed to appeal to seniors as well as those of other ages looking for a high-tech, high-service environment in an urban mixed use setting.  The Stories opened in February 2016 and is a joint effort of Federal Realty Investment Trust and Ryan Frederick’s Smart Living 360.

Federal Realty is a publicly traded REIT (NYSE: FRT) that specializes in the ownership, operation, and redevelopment of high quality retail real estate in the country’s best markets and is increasingly developing mixed-use projects in connection with its retail holdings.   Ryan Frederick has long been known as one of the leading thinkers on the future of seniors housing through his Point Forward Solutions consulting company.   Ryan has now created a new company, Smart Living 360, to work with a retail/mixed use developer, rather than a seniors housing company or health care REIT, to bring us his vision of the future of “seniors housing” in a property designed to appeal to seniors but open to those of all ages.

The Stories is a new 48 units apartment building located at 1628 E. Jefferson Street in Rockville, Maryland.   It is part of Federal Realty’s Congressional Plaza redevelopment that includes a high-end shopping center, Federal’s corporate headquarters and an existing 150+/- unit apartment building with structured parking (The Crest), now about 10 years old.   The Stories was developed on a site long designated for residential use as phase 2 of the Crest. According to Ryan, Federal became interested in consciously designing The Stories to appeal to the seniors market because they wanted a way to differentiate the projection from other high-end rental projects in the same area of the Rockville Pike, northwest of Washington and Bethesda.

The Stories is designed to appeal to the baby boomer market, now passing age 67, and other seniors with a “younger” outlook, unlikely to consider independent or assisted living or even a continuing care retirement community (CCRC).   This market is large and rapidly growing and not well served by well served by conventional seniors housing. While those 75 and up are considered part of the senior housing markets in many market studies, the average entrance age for most dedicated senior housing communities is now closer to 85 than 75 (See Slow 80+ Pop Growth, Elevated Construction Spark Concern For Seniors Housing on this blog – http://03c242c.netsolhost.com/WordPress/?p=209.

Ryan and Smart Living 360’s vision for The Stories is derived from a view of what “younger” seniors want in a living environment to enhance their wellbeing and tries to anticipate the growing role of technology for enhancing seniors’ lifestyle and delivering the services they want and need.   It is also purposefully designed to be flexible so it can adapt to the needs of its target market as they are discovered over time.

To understand what Federal and Smart Living 360 have created at The Stories, you need to think outside the traditional seniors housing box regarding design, services and technology.

Physically, The Stories is a attractive 5-story modern apartment community located in high-income, high-wealth, high-education zip code with a unit mix favoring larger 2 and 3 bedroom units (75% 2 bdrms) over one level of structured parking.   With rents from $2,500 to $4,000, The Stories is priced at about half the cost per square foot of traditional IL properties in its market.  But unlike conventional IL properties, The Stories does not bundle food service and activity programs into its rent.   It is part of a mixed-use project including retail, office and other residential uses in a nice residential area a block off a heavily travel arterial street, the Rockville Pike, MD 355.   The property faces other residential uses and fronts on a relatively quiet suburban street.

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Units within The Stories look like high-end non-age-targeted residential rental units with small balconies that are designed with largely invisible accommodations for an aging senior market – wider doorways and master baths able to accommodate a wheel chair with higher toilets, easy entry showers, modest grab bars in the bath with studs behind the wall to allow more to be installed, roll out lower shelves in cabinets, electrical outlets further up on the wall, etc.   These are accessible units that intentionally look like conventional units.

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Common areas include a large fitness room with some specialized equipment for seniors that could also be used by personal trainers or rehab therapists, a central lounge with a refrigerator and cooking equipment and a self-serve coffee bar.  
There is a small conference room that is designed so that it can also be used for a visit by a health professional or for telemedicine care.   The entire building is pre-wired for high speed Verizon Fios internet with pre-installed routers; and service providers are available to install Sonos wireless speaker systems and other electronic amenities in the units.   The electronics designed into the building are intended to accommodate increased use of patient self-monitoring and wellness devices that Ryan believes will become increasingly prevalent, sophisticated and integrated over time.

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The building offers a secure electronic entry system, with an enhanced concierge called a Lifestyle Ambassador (services described below) manning the front desk during the day. The building is monitored in the evening by management personnel from the larger Crest Apartment building that is located at the other end of the block, across a parking lot from The Stories.   The number and length of coverage by on-site personnel is partly limited by the buildings relatively small size, only 48 units.

What really sets The Stories apart as a community that will appeal to seniors is its use of a Lifestyle Ambassador, in this case a hotel industry trained and certified concierge cross-trained in seniors housing design and services.   The role of the Lifestyle Ambassador is threefold – 1. Help residents connect with one another and with the outside community, 2. Provide access to any needed services, and 3. Simplify resident’s lives by taking care of pets and plants while residents are traveling and providing other services.   Smart Living 360 makes use of many off-the-shelf on-demand services, has prearranged for a wide range of additional services to be available to residents of The Stories and will provide referrals to providers, including:

  • Transportation
  • Pharmacy
  • Physicians
  • Food Delivery
  • Financial Advisors
  • Case Managers
  • Home Healthcare
  • Personal Trainers
  • Tech Services

The goal at The Stories is to offer attractive housing, location and services to enhance the well being of baby boomers and other “younger”, generally healthy seniors without the stigma of a traditional seniors housing community with a large percentage of very old, frail people; and to do it in a flexible way that allows it residents to order in any services they may need and to adapt to rapidly evolving technology for medical monitoring and wellness.

Smart Living 360 hopes to monitor residents of The Stories over time to see if the building’s design and the flexible services it offers will enhance residents’ well being compared to those living in other residential settings. This will be done using the Gallup-Healthways Well-Being Index that measures five factors:

  1. Purpose – Liking what you do each day and being motivated to achieve goals
  2. Social – Having supportive relationships in your life
  3. Financial – Managing your economic life to reduce stress and increase security
  4. Community – Liking where you live and having pride in your community
  5. Physical – Having good health and enough energy to get things done.

What is interesting to me about Smart Living 360’s approach compared to a traditional senior housing facility is that Smart Living 360’s Life Style Ambassador begins with the residents’ wishes and customizes activities and services the resident desires while a traditional senior housing facility has a menu of services into which it tries to fit a resident. I see the Smart Living 360 approach as more resident centric, more personalized and more adaptable over time.

The Stories occupies an interesting place somewhere between non-age-restricted market rate apartments and conventional seniors housing.   Interestingly, the project was voluntarily described as 55+ housing in pre-opening marketing material but the developers have now decided to market its advantages for seniors but without the age restriction, which they believe may be a turn-off for their primary but not only target market.   Of the first several residents moving in, two are seniors and one is age 29 but liked the amenities.

It remains to be seen whether The Stories will be successful in attracting baby boomers and other seniors with a “younger” outlook and how Ryan Frederick’s vision of meeting residents’ needs and increased use of electronic devices to monitor and enhance health and wellness will come to pass.   But I believe, even at this stage, The Stories has some interesting lessons for seniors housing and multi-family developer/operators and institutional real estate investors.   These include:

  1. Non-age restricted housing and un-senior “seniors housing”, as I categorize the Stories, may be more appealing to under 80s seniors, and even those over 80 in good health with younger outlook, than more conventional seniors housing projects.   For a significant portion of the senior population today and I believe for even a larger portion of the baby boomers, living in mixed aged neighborhoods or even in mixed age buildings like The Stories may be preferable to living in a senior ghetto or in an isolated age-restricted community.
  2. We have already seen obsolescence in seniors housing communities, such as IL projects without sufficient provisions for handicapped residents, IL and CCRC projects without AL and memory care units, AL communities with insufficient common space for gyms or rehab care and IL and AL buildings with too many small units.   This history suggests that building flexible design into seniors housing communities, which The Stories has very deliberately tried to do, may be an advantage for the community over time.
  3. Seniors housing located in mixed use projects or higher density urban areas, where services and amenities are close-by, while often more difficult and more expensive to develop than stand-alone conventional IL or AL communities, would seem to offer a lot of appeal for the baby boomer age cohort and other active seniors.
  4. In an age of on-demand services, such as Uber and Foodler, planning seniors housing around services delivered by outside vendors may prove both cost effective and better able to meet seniors desires and needs than the service packages typically available in seniors housing communities.
  5. Seniors, particularly the baby boomer age cohort, are increasingly tech-savvy and should be able to adapt to electronic delivery of health and wellness services, as well as other on-demand services, and may see projects designed to accommodate more high-tech amenities as more appealing than conventional care models.
  6. The resident centric and holistic approach to meeting resident’s needs built into the Lifestyle Ambassador approach that incorporates both social and care needs, seems to offer some advantages over the way conventional seniors housing services are organized with responsibility fragmented between healthcare, activities, dining and caregiving personnel, each of whom may only see themselves responsible for a slice of a senior’s needs.   While the staff in any well managed seniors housing project should get to know the “whole resident”, making resident on-demand centric services the organizing principal of your care delivery system appears to offer some advantages and a have a better chance of assuring a residents need are met.

 

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Posted in Finance, Lifestyle Choices, Senior Housing & Care, Senior Housing Innovation, Suburban Office Reuse | 3 Comments »

There is an excellent article in today’s Wall Street Journal, Monday, March 28, 2016 on the difficulties of sorting out your parents’ financial affairs after they become incapacitated.   It includes a number of recommendations on steps you should take with your family while your parents are still healthy to share financial information and avoid the difficulties the author experienced.

http://www.wsj.com/articles/the-difficult-delicate-untangling-of-our-parents-financial-lives-1459130770

 

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Posted in Finance, Medicare & Social Security | No Comments »

Confessions of a Recent CCRC Mover

The question I most encounter when speaking with friends, family members and acquaintances about seniors housing is: How do you get a reluctant family member of advanced age living alone to agree to move to seniors housing? It doesn’t seem to matter if the family member is 79 or 99, there is still a strong reluctance on the part of many of today’s seniors to move to any type of seniors housing despite objective information that such a move improves socialization, nutrition and overall health and wellness, and may increase longevity.

While “How to get a reluctant family member to move?” may be the quintessential question to which families would like an answer, I find very little useful information on the web and from seniors housing organizations on how to address this question.   In order to seek an answer for myself and for those who ask me about it, I interviewed a 97 year-old friend and former neighbor who made the decision to move to a CCRC about 18 months ago.   I wanted to understand her decision to move, what finally convinced her to move and how her experience has been since moving to her CCRC.   For the purpose of this blog, we will call her Ms. F.

Ms. F is a remarkable person in many ways but I believe her decision to move to seniors housing and her experience after she arrived are still illustrative for others.   As I indicated, Ms. F is 97 years old. She moved from the large, single family home where she raised her family to a condominium in 1979, when she was only 60, partly due the health of her husband who died seven years later.     She continued to live in a full-service elevator-served condominium with a wide-range of resident ages until 2014, when she made the move to a CCRC. In her condo, Ms. F had occasional cleaning help but lived independently and drove. When living at her condo, Ms. F attended a Pilates class once a week, played 9-holes of golf regularly through 2013 and had an active social and cultural life. Ms. F is college educated, cultured, very well dressed and had enough wealth so that all housing and care options were available to her.

The discussion of a move to seniors housing started with Ms. F’s children, the oldest of whom is 74, about three years before Ms. F’s decision to move.   Her children, who live in another city at least six month of the year, were concerned about her living on her own and continuing to drive.   Ms. F indicated she finally agreed to move to a CCRC to make her children happy and because after a bout of pneumonia in the winter of 2013 she did not bounce back completely to her previous stamina.   The discussions for her to move also began after her significant-other, with whom she had a very long-term relationship, died.

Ms. F’s reluctance to move to a CCRC or another type of seniors housing primarily arose from the fact that moving to such a facility would require her to “admit she was old”, something she had never really done despite being 95 at the time of her move.   Ms. F, like many in the current generation of Roaring Twenties Babies in their 80s and 90s, also saw moving to seniors housing in a negative light because it indicated to her that she could no longer live on her own and she saw it as giving up some of her independence.

One of the key lessons I took from Ms. F’s experience is that us Baby Boomers, the children of today’s 80 and 90 year-olds, tend to see their parents as very old, frail people in need of care while many seniors do not view themselves as old and cherish their independence. This suggests that any conversation about a move to seniors housing should not begin with the senior’s frailties but how such a move could enhance and prolong independence.   It would be better for us Boomers to approach these discussions thinking about the attributes of senior housing that we would find attractive because a seniors’ view of him or her self, if still healthy and not cognitively impaired, sees 80 or even 90 as the new 60.

The other clear lesson from Ms. F’s experience, and that of other seniors and their families that I have observed, is that the decision to move to seniors housing, if made voluntarily, is often a prolonged process that can stretch to a year or more. It is also important to realize that senior housing facilities offer a broad range of housing and lifestyle choices and may involve trade-offs between housing and lifestyle amenities, something that seniors and, in many cases, their children may not understand.   Visits and short-term stays, which many facilities offer, can help a senior and their families get to know a facility well before committing to move.

It is also worth noting that a mixed-age full-service condominium served Ms. F very well as a housing choice for 35 years, from the time she was 60 until she was 95.    With the growing availability of smart-phone accessed transportation, grocery and food delivery and home care services, it is important for the seniors housing industry to realize that well-designed, mixed-age apartments and condominiums can be a very viable option for many seniors and that seniors may prefer such options that don’t require them to “admit they are old”.

Ms. F and her family did not undertake an exhaustive search of senior housing facilities because they were looking for something high-end and were familiar with many of the choices because Ms. F, at 95, knew people living at a number of the likely choices.   The facility Ms. F chose was relatively close to her condominium, offered extensive educational and cultural programming, which appealed to her, and had friendly and welcoming staff.   The downside of the community Ms. F chose was that it dates from 1984 and did not offer some of the amenities within its units and common areas of other facilities that were newer or which had undergone extensive renovations.   Ms. F looked at a number of different units before she found one on an upper floor that had enough natural light to make it appealing. Ms. F moved from a modern three-bedroom, two-bath condo with larger windows and lots of light to an oversized one-bedroom, one-bath senior housing unit.   She believes the size of the unit is fine but would prefer a larger bath and a separate powder room for when she has quests.     Ms. F’s focus on a welcoming staff, light in units and other factors dovetail well with industry studies of independent living customer satisfaction.   (See my blog on Finding Happiness In Seniors Housing http://03c242c.netsolhost.com/WordPress/2015/08/20/finding-happiness-in-senior-housing/).

It is worth noting that the CCRC to which Ms. F moved is about to undertake a major expansion and renovation that will add larger independent living apartments in response to demand, add a memory care section and renovate public areas to update the look and add casual café-style dining in addition to the formal dining room.

Ms. F’s transition to a CCRC has been relatively easy for her. She only knew one person well at the CCRC when she moved but Ms. F was able to make friends quickly.  Today Ms. F gets around without a walker but does worry about falling and is careful when she walks. Ms. F was still driving at the time she moved to a CCRC but not long after she arrived she had a minor traffic accident and decided to give up driving.   However, using the CCRCs and private transportation services, Ms. F still gets to her Pilates class once a week and to cultural events (She will be traveling to New York soon to see Hamilton) and she has added personal fitness training at the CCRC and is attending many of the programs that the facility offers, including a current lecture series on the Supreme Court planned before Justice Scalia’s death.

I believe Ms. F’s attitude toward her move to a CCRC also eased her transition.   Rather than focus on the space she was giving up and the things she was leaving behind, Ms. F chose to view her move as an opportunity.   She got help from a decorator to design and furnish her new home, bought some new things and recovered some of the furniture she chose to move from her condominium.   So she made it a new beginning rather than a move down.

Ms. F is very positive on her CCRC now that she has moved and agrees that she may have benefitted from moving sooner. But Ms. F doubts she could have made the decision to move until she started to notice herself slowing down following her pneumonia, had lost her significant other and was ready to admit she was old.  One of the benefits she sees at the CCRC is knowing other couples that are older than her but still mentally active and able to get around.   Her close friends at the facility include a couple that are 102 and, while he uses a walker, are still in very good health and very alert.

Top on Ms. F’s list of what makes her CCRC a good place to live are:

  • Activities/Programming – special events (St. Patrick’s Day and Easter Dinners for example), movies including first run movies such as Spotlight and Brooklyn, Lectures that cost residents $25 and outsiders $125, religious services, entertainment every Wednesday and other events like a forum for local mayoral candidates.
  • Volunteer Opportunities
  • In-House Exercise Programs and therapy
  • Housekeeping Services that include weekly linen service, biweekly cleaning and an annual complete unit cleaning as part of the base rate and PAL service that for $21 per hour provide additional light cleaning, laundry and making the bed.
  • Friendly Staff who know you by name and friendly residents. Many of the staff are African American high school students interested in careers in healthcare or food service/hospitality industry that the facility trains.
  • Someone Looking Out For You – It is comforting knowing there is always someone there for you. The facility has an electronic monitoring system that can tell if you are not up moving around your unit by a certain time and uses other checks such as attending meals and taking in your paper to check to be sure you are all right, as well as emergency alert system.
  • A Healthy Future – Ms. F can see that she is not the oldest and certainly healthier than some others.
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Posted in Lifestyle Choices, Senior Housing & Care | 1 Comment »

As my bio indicates, I spent more than 25 years working in the private sector, primarily in equity research and investment banking for publicly traded securities firms.    I, like many with private sector careers and nearly everyone even slightly right of center politically, take as an article of faith that the private sector is more efficient than the government at doing just about anything.    However, when it comes to Social Security and Medicare (technically the Centers for Medicare and Medicaid Services or CMS) my experience over the past year indicates these agencies far exceed private sector insurers in quality of service.

In a single week in January 2016, I applied for Social Security, my wife applied for Medicare and my wife interacted over a billing issue with CareFirst, the Maryland Blue Cross / Blue Shield company.    These interactions highlighted for me the contrasts between dealing with these two Federal government agencies and dealing with a private sector health insurer.  I found the difference in quality in the government’s favor to be so dramatic that I thought it warranted a comment on my blog.

The quality differences with Social Security, Medicare and private insurers start online.    The ssa.gov and medicare.gov websites are well designed and easy to negotiate and the online process to apply for Social Security and Medicare are clear, easy to understand and complete.   Follow up correspondence from the agencies can be couched in bureaucratic language but is timely, understandable and alerts you and your spouse to possible benefits, like Social Security if one of you signs up for Medicare, help paying for drugs or the availability of spousal benefits.

After I recently filed online for Social Security benefits the agency had some questions.  I was contacted via email by an agency employee within 48 hours of filing my application for benefits and asked to set up a time to talk.    I received a call back from a claims specialist within the time slot to which we had agreed.   She was very pleasant and enthusiastic, was able to resolve the questions she had and indicated she would move my application along with formal notification likely coming closer to the month in which my 66th birthday would occur.  She clearly disclosed that the detailed guidelines for staff of Social Security changes included in the recently passed budget bill had not yet been prepared but agreed that May 1 was the deadline, which I had met, for various rules changes.  In short, both my online and telephone interaction with a Social Security claims specialist were easy and pleasant and I believe they will prove effective.

My wife’s experience with Medicare and CareFirst involved only online experiences.   With Medicare she was able to quickly and easily complete her Medicare application and has already received her notice of eligibility with coverage beginning in the month she will turn 65.     She has yet to select Part B and Part D providers, which will be private insurers operating within Medicare requirements.    Contrast this with her almost simultaneous online interaction with CareFirst, which has provided one or both of us with individual health insurance coverage for the last five years or so.

In January, our credit charge used to automatically pay my wife’s CareFirst monthly premium had some information change, so the automatic payment of her CareFirst premium had not gone through.    This was communicated to her with conflicting emails, one auto-generated indicating the payment had been processed and another saying it had been rejected and she risk losing coverage if payment was not received.   This led us to the CareFirst website, where we spent 10 – 15 minutes trying to find the right area to update the payment information and then another frustrating 15 minutes plus because the system would not allow us to update the information on the credit card.   We finally realized we had to first delete the exist card on file for automatic payments and then enter the same card with updated information.   But nowhere was this explained in instructions or in the repeated message that the system was unable to update the card on file.

We have previously had equally or more frustrating experiences with CareFirst online, over the phone and even going to an office and dealing with a person face to face when we initially tried to sign up for individual policies (pre Affordable Care Act Exchanges) and when I shifted from our joint policy to Medicare and we tried to keep coverage in place for my wife.  The letter we received from CareFirst indicating we had first been approved for individual health insurance policies was so badly written that neither of us, despite two sets of graduate degrees, were able to understand it.    It was only when we received a bill that we realized coverage had been approved.   After going to a CareFirst office in person to remove me from our CareFirst coverage when I switched to Medicare but leave coverage in place for my wife, the company still miss-handled the conversion and my wife had to have a number of phone calls with the company before she was able to get her coverage continued.   Lest you think this is only an issue with CareFirst, I have also found Medicare.gov much easier to negotiate than the websites of United Healthcare for Medicare Supplemental Insurance and websites of Medicare Part D drug coverage providers.

So, for seniors and their family members, take heart.   Our experience indicates that Social Security and Medicare are much easier to deal with than your current private insurer.   Kudos to the dedicated employees working at the Social Security Administration and the Centers for Medicare and Medicaid Services and keep up the good work.   America’s seniors need you.

For all of us as citizens, we need to admit there are times when government works and may even work better than the private sector – despite what you will hear during this Presidential election year.   And before you say it – the cost to operate Social Security and Medicare is also lower on a percentage basis than the cost to provide private insurance.

 

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Posted in Medicare & Social Security | 2 Comments »

Beware Of Observation Status At Hospitals

The Affordable Care Act includes a number of measures intended to rein in unnecessary or wasteful spending by Medicare.    These are generally grouped under the label “value-based purchasing”.    One key element of value-based purchasing are penalties for hospitals that have high levels of readmissions after discharge that went into effect in 2012.    The penalties, which gradually ramp up to 3% of inpatient Medicare reimbursement to a hospital, are designed as an incentive for hospitals to provide quality care while in the hospital and to assure that the patient is provided with a smooth handoff to quality post-acute care after a hospital visit.

Hospital readmissions are down significantly since excessive readmission penalties have come into effect but according to an article in the Wall Street Journal on December 2, 2015 entitled “U.S. Rules Reshape Hospital Admissions” http://www.wsj.com/articles/medicare-rules-reshape-hospital-admissions-1449024342 the new rules have also prompted hospitals to reclassify many more hospital visits as “observations” rather than “admissions”.    In most cases, a stay of even a few days may be classified as “observation” rather than an inpatient “admission” and a patient can be on “observation” status even though given a room.    Medicare treats “observation” visits as lower cost outpatient treatment and they do not trigger a readmission penalty because they don’t count as an admission or readmission.

So if you or your loved one is cared for in a hospital on “observation” status rather than as an inpatient “admission”, gets a room and receives the same level of care, why should you care about how the hospital classifies the visit?   The big risk for a patient and patient’s family in an observation visit is that Medicare does not treat an observation visit as a three-day hospital stay that triggers Medicare payments for post-acute care.    As a result, a patient treated for three or four days in a hospital on “observation” status who then needs rehabilitation care or time to recover in a skilled nursing facility would be fully responsible for these costs rather than Medicare fully paying for up to 20 days of skilled nursing care and partially paying for up to 100 days of skilled nursing care if the patient needs that much care and is still making progress toward recovery.     The WSJ article cites families being on the hook for $20,000 of skilled nursing care because a hospital classified a four-day visit as “observation” rather than an inpatient “admission”.

I would urge any patient or family of a patient to strongly advocate to be formally admitted to a hospital for any serious injury or condition and to use right to appeal to Medicare if you or your loved one is not admitted or is admitted but is being discharged in less than three days to skilled nursing care.  It is unfortunate that the stress of any hospital visit for a patient or a loved one needs to be further complicated by worrying about “observation” vs. “admission” status but the downstream costs can be dramatically higher for one vs. the other.

Posted in Medicare & Social Security, Post-Acute Care | No Comments »

Barcelona and Basque Region Vacation

My wife and I vacationed in Barcelona and the Basque region of Spain in October 2015.   We had previously visited Madrid

Placa de Catalunya in Barcelona

Placa de Catalunya in Barcelona

and southern Spain but had never before been to the northern part of the country.    Our itinerary took us directly to Barcelona, where we spent three days, followed by five days in San Sebastian and another two days back in Barcelona before flying home.    We planned the trip and traveled on our own without any difficulty.

Logistics – If you live in Baltimore, or its northern suburbs, flying internationally from Philadelphia can be an attractive alternative.    The Philadelphia airport is only 93 miles from my home in Baltimore and, while further away than either Baltimore Washington International airport (26 miles) or Dulles (65 miles), offers many more international flights than BWI and, if you time it right, is an easier drive than Dulles.   It also happens to offer a direct flight to Barcelona, which Dulles did not.    At the Philadelphia airport, since we don’t know the facility well, we pre-booked parking at PreFlight, which offers both indoor and outdoor parking options and quick shuttle service to the terminal.

Our hotel in Barcelona was in the city center, a 30 to 45 minute drive from the airport.   For our arriving flight we pre-booked a car service online for 39 euros, which was only a bit more than the 33 – 35 euro for the taxis we used for our other trips.     While many guide books recommend train travel in Spain, which is fast and efficient, a friend with relatives in San Sebastian recommended we fly from Barcelona to the Basque region, which only takes an hour and is cheaper than the train.   We flew Vueling, a discount airline active in Spain, from Barcelona to San Sebastian for about $94 per person each way, paying a bit extra for preferred seating and the ability to check luggage.    The plane was a modern Airbus and flights were fine.    The San Sebastian airport is about half an hour from San Sebastian in Hondarribia and there are only a few flights per day.     Another alternative is to fly to Bilbao, which has more flights but is about an hour drive from San Sebastian, or to fly to Biarritz in France, which is actually slightly closer to San Sebastian than Bilbao airport.  On the ride from the San Sebastian airport to our hotel, the cab, which did not have a meter, over charged us by about 10 euros.  The proper fare should be about 33 euros.

Barcelona – is a city of 1.7 million people, the second largest in Spain, and is the capital city of the autonomous community of Catalonia.    Locals prefer to speak Catalan rather than Spanish but understand both and most also speak some English.   Barcelona is a charming, very walkable city with wonderful food, shopping and architecture.    The city is organized by neighborhoods, with the two most important for tourists being Barri Gotic (the old walled city or Gothic Quarter) and Eixample, the fashionable district north of Barri Gotic with amazing Art Nouveau / Modernisme architecture (as the Catalans call it).   These districts are linked by Placa de Catalunya, a main square in an area with many tourist hotels.   We stayed in El Born, which adjoins Barri Gotic and also has small lanes, lots of shops, restaurants and bars, the Picasso Museum and the large Citadel Park.

We felt very safe in Barcelona, even when out late on the street.    The guidebooks all caution you about pickpockets in Barcelona and we did take precautions for this using money belts, anti-theft purses and bags and keeping my wallet in my front pocket with two rubber bands so it could not be easily removed.    But we never saw or noticed a pickpocket incident.

We really enjoyed Barcelona.   The city itself and its architecture and food are the main attractions.  Most guide books suggest you start with Las Ramblas, a street with a wide pedestrian-only median that runs along the edge of Barri Gotic on the line that was the former old city wall.    This walk gives you a glimpse of the people, the lower edge of Eixample if you start at Placa de Catalunya, and the Barri Gotic but is increasingly filled with chain stores and tourists so not the most interesting perspectives on the city.   We much preferred strolling through the windy lanes of Barri Gotic where more local shops, restaurants and many historic sites, including the main cathedral, are located.    Eixample and areas north house the Modernisme architectural gems of Barcelona, which include:

La Sagrada Familia

La Sagrada Familia

La Sagrada Familia church, which is one of the largest and most magnificent religious buildings and architectural achievements anywhere.    Started in 1882, it blends some Gothic elements with the Modernisme style of Antoni Gaudi.    Be sure to book timed tickets in advance and, if you can, try to come in later in the day when the sun streams through the stained glass windows (see photo).    We did this by accident and were delighted we did.

Park Guell, also designed by Gaudi, which started as an exclusive residential development on a high point north of the City, and has evolved into a park featuring fanciful designs and landscaping highlighting the Modernisme style.  Timed tickets purchased in advance also a must here.

Casa Mila, a Gaudi designed apartment apartment building whose interior courtyard, attic, roof and top floor apartment are open to the public while the rest of the building remains a fashionable

Casa Mila

Casa Mila

Barcelona residential address.      You can view the exterior for free but the paid tour including the former owners apartments was well worth the price of admission for us.     Timed ticked in advance essential.

Block of Discord, which features three prime examples of Modernisme architecture designed by Gaudi and two other Modernisme architects.   While one of these building is open for tour, viewing the facades for free from the street is probably sufficient here, particularly if you tour Casa Mila.

 

 

Sculpture at Fundacio Miro

Sculpture at Fundacio Miro

We found two art museums to be really special, the Picasso Museum and the Fundacio Joan Miro.    Collections in both were created with works donated by the artists and their families and both present a broad range of work from the artists student days, in some cases, to very late in life.    The Picasso Museum is more centrally located in three interconnected historic buildings in El Born, just outside Barri Gotic.   Advance reservations are a must for the Picasso Museum to avoid long waits and this Museum has the stronger collection of the two.   We would rate it a must-see for anyone with even a mild interest in art and it explains the historic and cultural influences influencing Picasso’s various periods.   The Fundacio Joan Miro is located in a modern building on Montjuic, a tall hill west of the city center.     In addition to a strong Miro collection, Fundacio Joan Miro has temporary exhibits by contemporary artists.   We found the audio guides temperamental and the directional signage and organization of the building a bit confusing but still well worth a visit.

We ate some great meals in Barcelona and particularly enjoyed two restaurants in El Born, near our hotel – LlAmber and SABoC.

Basque Region –  The Basque region includes parts of Spain and France where the two countries meet on the Atlantic

La Concha Beach in San Sebastian

La Concha Beach in San Sebastian

Ocean.     The Basque people have a long history, a distinct language and culture and are know for excellent cuisine.   We stayed in San Sebastian, which is a very attractive modest-size waterfront resort with an charming old town.   We really enjoyed San Sebastian, with walks along the beach and the two hills that frame the main beach and harbor, exploring pintxo bars in the old town and shopping.    Biarritz in France offers a more upscale beachfront option and St-Jean-de-Luz in France and Hondarribia in Spain both offer smaller, more intimate places to stay and all are within an hours drive of San Sebastian.

For food in San Sebastian, we mostly relied on pintxo bars, finding the full, multi-course Spanish lunches too heavy for us.    Favorite pintxo bars included La Cepa, and Taverna Gandarias.   We also have a very good full lunches at Branka, which overlooks Concha Beach in San Sebastian and at Txoko in Getaria overlooking the harbor, where we had a memorable white and green asparagus salad and terrific grilled fish.

Guggenheim Museum

Guggenheim Museum

The Basque region of Spain and France offers hilly, very green scenery, like Ireland or the Pacific Northwest in the US, great beaches and wonderful food.    We hired a guide and driver in San Sebastian online for visits to see the Guggenheim Museum in Bilbao, the coastal towns of Geteria and Zumaia in Spain and the French Basque region.   Our guide was very good and we we would recommend Basque Tours (info@basquetours.com).   The Guggenheim museum in is an amazing architectural work that we thought worked less than ideally as a art museum but absolutely worth a visit.   We also enjoyed visiting the French Basque region, which offers from dramatic scenery and charming towns.    We particularly liked St-Jean-de-Luz which we visited on market day and where we shopped in small stores on a pedestrian-only street.

 

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According to a report in today’s (10/29/15) Wall Street Journal on page C1, the two-year budget agreement, passed by the House of Representatives on October 28th and headed to the Senate, will eliminate the ability of social security recipients to elect and suspend benefits at age 66  and have their spouse claim spousal benefits while the primary recipient with suspended benefits continues to increase their ultimate payment by delaying their own social security benefits until age 70.   This strategy is described in books such as Get What’s Yours – The Secrets To Maxing Out Your Social Security and in my blog post on May 27, 2015 with the same title.   The change is scheduled to go into effect six months after the budget bill becomes law, after which Social Security will not longer allow family members to submit a new claim for spousal benefits on a suspended benefit.   So there may still be a small window for couples where both spouses will be 66 within the next six months to utilize this benefit.

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Planning For Long-Lasting Retirement Income

After spending 15 years as a stock analyst evaluating healthcare REITs, senior housing and post-acute care companies, I decided to focus my blog on broader senior housing and care issues for individuals and companies, rather than recommending stocks or investment products. I intend to stick with this approach but want to make readers of my blog aware of a recently released white paper from Stifel Nicolaus’s Equity Compass Strategies funds management group. The white paper is entitled Rethinking Traditional Retirement Income and I found it to be a concise, well-written discussion of the tradeoffs between using the traditional 4% withdrawal rate for retirement planning and a 60%/40% equity to fixed income investment split for retirement savings. I have no financial relationship to the Equity Compass Strategies group at Stifel.  You can access the white paper at

http://www.equitycompass.com/pdf/Equity%20Compass%20Whitepaper_FINAL.pdf

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Observations from NIC 25th National Conference

The National Investment Center for Seniors Housing and Care (NIC) http://www.nic.org held its 25th National Conference this week at the Gaylord National Harbor, just south of Washington.   I attended the first NIC Conference, which was a much smaller affair at a hotel in Crystal City, also just south of Washington but on the Virginia side of the Potomac.    Having spent much of my career in seniors housing and care as a real estate analyst, stock analyst, investment banker and now occasional consultant, it was very gratifying to see how much the industry has grown and matured in 25 years.

My only official role at the conference was to address the Future Leader’s Council (FLC), which is a carefully selected group that goes through three years of NIC leadership development activities before “graduating”, with a third of the group rotating each year.    I was impressed with the FLC members with whom I interacted and with the thoughtful way NIC is helping talented professionals grow into leadership roles at their organizations and in the industry.

My address to the FLC group was entitled “Back To The Future” and focused on lessons learned about the impacts of overbuilding and higher interest rates in the severe 1999/2000 industry downturn.   Most FLC members were still in primary or secondary school when this downturned occurred.

I would say the overall atmosphere of the industry at NIC’s 25th National Conference was “nervous optimism”.

The nervousness comes from:

  • generally unsettled economic conditions in the U.S. and around the world that could lead to higher interest rates and growing wage pressures on an industry for which labor is 50% or more of costs,
  • recent softness in private-pay senior housing occupancy,
  • a increase in the number of units being developed (particularly assisted living and memory care) and signs of overbuilding in select markets,
  • integration stumbles at the largest and largest publicly traded senior housing operator, Brookdale Senior Living (BKD),
  • some signs of a plateau in senior housing property capitalization rates and pricing,
  • a late summer sell off in healthcare REITs and generally unsettled conditions in the equity and debt markets, which appear to be driving the pause or potentially a backup in cap rate compression.

The optimism comes from:

  • a 15 year rebound in fundamentals from the last major industry downturn,
  • generally outperforming other real estate sectors through the Great Recession,
  • still strong consumer acceptance of newly open properties, particularly in high barrier to entry markets,
  • plentiful availability and still growing interest in the industry from both debt and equity capital providers, if perhaps at higher prices that were seen a year ago,
  • knowing that the industry continues to get closer to the holy grail of  75M + Baby Boomers becoming seniors housing and care customers (although still 10 – 15 years away).

Unless you are concerned about substantial overbuilding in private-pay seniors housing, which most thoughtful insiders are not (there will be some), the recent pullback in both healthcare REIT and operator pricing is making me more interested in investing in publicly traded healthcare REITs and private pay operators but there are few publicly traded operators to buy.    On the care side of seniors housing and care, there has also been a pull back that makes skilled nursing and post acute care company stocks attractive from a valuation standpoint.    Here, however, the slow evolution of a more integrated healthcare delivery system and new value-base purchasing and an uncertain political situation through the next Presidential election may keep a lid on valuations for another year or two.    Either way, it feels like a time to be considering investments in seniors housing and care for the long term investor.   I will leave it to those still working as equity analysts in the space to recommend specific stocks.

There are also signs at the conference that innovations in technology, property location and design are alive and well.  At least two efforts are underway to develop new senior housing properties in Manhattan.   The most interesting new building model I saw at the conference is a mid-rise product located in an urban main street location that looks more like an upscale yuppie rental project or W hotel, with services delivered on demand by the likes of Uber, Amazon Fresh and online home health providers.     This project is being developed by Smart Living 360 and Federal Realty Trust (FRT) in Rockville, MD and is scheduled to open in the Spring of 2016.   See website http://www.thestories.com/ for more information.

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