Major Trends for 2015 in Senior Housing and Rehabilitation
HAPPY NEW YEAR READERS!
With regularity, when a new year begins, predictable changes occur within our NEMT business. Often a rollout of a new Medicare or Medicaid insurance plan takes place, or a new service contract takes effect. The result – many new members are added to our transports, and many previous members move on to receive benefits from other insurance programs and providers. We at “All Points” welcome the new arrivals to our services, and we will miss those who have moved on. The “insurance churn” effect is part of our business just like the tides are part of the seashore.
This post, however, is focused on a more recent and major trend for 2015 that has captured the attention of many observers of the health care industry.
Merger and Acquisition Trend within the Senior Housing Market
Beginning early last year we started to hear more chatter regarding mergers and acquisitions, or “M&A”, within the senior housing and rehabilitation industry. I have been reading several articles regarding predictions for 2015 with regard to senior housing and rehabilitation segment, and I would like to share some of the results.
Senior Housing News Report
Senior Housing News, just released an article discussing “The Top 10 Senior Housing Trends for 2015”. The very first item mentioned on their list states:
#1) M&A Accelerates As Efficiencies Are Needed for Shareholder Returns
“The course of frenzied mergers and acquisitions reached more than $16 billion in 2014 and will continue into 2015 as both not-for-profit and for-profit providers and service providers are driven to evaluate combinations by any number of factors including.”
- Relative consensus that reimbursements will remain flat
- Continued rising pressure on operating and overhead costs
- Uncertainty of regulatory and audit processes
- Increasing compliance complexity with industry regulations
- Continued low cost of capital
“Given these factors, the trend for more M&A (within the senior housing segment) is almost a certainty, but are there more complex opportunities that may yield greater long-term results yet are complicated from a systems, personnel and culture standpoint.”
The article concludes with: “Regardless, M&A discussions and thoughts will be on the minds of almost every industry participant in 2015.”
GE Capital Survey Results
“Spurred by changes in the post-acute environment and improving industry fundamentals, U.S. senior housing and care investors and providers are aggressively pursuing a variety of expansion strategies.” James Seymour, senior managing director of GE Capital, Healthcare Financial Services’ real estate financing team states that senior housing investors expect to acquire even more health care real estate in the coming year as they look to growth primarily through acquisition. And despite an anticipated rise in interest rates as well as more regulatory oversight, they are expecting business performance to improve further.
Such are the findings of a survey conducted in September 2014 by GE Capital among 150 senior housing executives. The executives were surveyed via email on their concerns and plans for the coming year in senior housing. Largely they are bullish on the opportunity that the sector continues to present, with several shifts in their attention versus years past.
“Acquisition activity has continued to be strong,” says James Seymour. “This is driven by a couple of factors: one, the strength of the industry and overriding demographics. Combine that with an environment where interest rates are pretty low and that makes for a good economy for acquirers.”
Among those surveyed by GE Capital, 67% said their primary growth strategy in the next year is to buy or merge with existing properties or operators, and 26% said they will upgrade and revitalize existing properties. Due to their demand for acquisitions, more than half said the most important financing they seek will be acquisition financing, with 31% reporting they are likely to seek construction financing.
Opportunity or Challenge
But an opportunity—or challenge—is also rising in the shift of providers toward working with larger health care systems to improve health care delivery overall.
“To some it’s an opportunity and to others it’s a threat,” Seymour says. “All the changes are about reducing the cost of the health care system. Operators who either don’t have the capital or bandwidth or acumen are probably those that will end up being sellers in the next few years.”
Conclusion
As we are providers of transportation services to a customer base largely comprised of clientele residing in the senior housing environment, we can only act as spectators as the mergers and acquisitions take place and the trend plays out. All Points Assisted Transportation pledges the finest personalized service to our clients regardless of whether they reside in their own home, a locally owned board and care facility, or a chain of skilled nursing facilities owned by a multi-national conglomerate.
Tags: Major Trends, Merger and Acquisition, Rehabilitation, Senior Housing Market