1998 ALFA Survey highlights.

Since 1993, PricewaterhouseCoopers, LLP (through its former legacy firm Coopers & Lybrand, LLP) and the Assisted Living Federation of America (ALFA) have conducted their periodic "Overview of the Assisted Living Industry," in order to identity noteworthy trends occurring in the assisted living industry. This survey is one of the primary resources financial analysts turn to when examining the assisted living business, as well as providing useful and otherwise hard-to-come-by benchmarking information that providers can use to compare their operations with others in their regions and across the country.

Represented in the just-released 1998 survey report (based on 1997 data) were 29,622 residents, living in 23,525 units at 402 assisted living facilities. Of those responding, 46% of the facilities were associated with small providers (either single facilities or one of 2 to 10 residences in a multifacility organization). Of those 402 facilities, 68.9% were freestanding; 10.6% were part of a CCRC; 15.1% were part of a facility providing independent congregate living; and 5.4% were part of a facility providing skilled nursing care. Slightly more than two thirds (68.1%) were located in metropolitan/suburban areas with populations of 50,000 or more; 31.9% were located in rural areas, villages or towns of less than 50,000 people.

Several trends were identified in the 1998 Overview, one of which was a slight decline in the national average occupancy rate, from 92.2% in 1996 to 90.8 % in 1997. Although the movement of this statistic is downward rather than upward, it is not overly alarming when viewed in light of some additional information.

First, the median rate of occupancy across the board, for four regions of the country combined, was a more favorable 95%. The 90.8% calculation was reached by averaging the occupancy rates for all the responding stabilized facilities - regardless of whether they had 100% or 40% occupancy, while the 95% figure is the midpoint above and below which 50% of all the participating facilities' occupancy rates fell. The narrow margin between the average and median figures might actually indicate a trend toward market stability.

Developers should complete a thorough analysis of their specific markets before launching any assisted living projects because some locales, especially in metropolitan/suburban areas, might have to contend with market saturation. Nevertheless, the findings regarding overall occupancy rates continue to indicate market acceptance.

When considering the occupancy trend, also keep in mind .the average size of the facilities responding to the survey: The national average was 59 units (ranging from 36 to 68 units for the four regions). Adding just one resident to the census of a residence of that size would essentially bring its occupancy up to the 1997 average, which places the slight decrease into a more realistic context. Providers wishing to increase their occupancy levels are considering offering respite care, short-term stays and also Alzheimer's specialization.

This year's survey also pointed to some other positive trends. For example, there was a notable increase in the total square-footage-per-unit for the reporting facilities under development in 1997 compared to 1996. The average total square-footage-per-unit was 666 in 1996 and 750 in 1997. Common area percentages in these facilities under development amounted to 42.5% and 39.1%, respectively. Resident comfort and quality of life may be leading providers toward a move to planning and developing larger resident living units.

The consistency between many of the 1996 and 1997 statistics was encouraging. For instance, the average number of ADLs per resident remained at three, and average ages of residents and average lengths of stay were nearly the same for both years. Once again, this appears to indicate strong market acceptance and suggests that there's been no decline in product recognition in the marketplace.

From the resident's perspective, one interesting finding of the 1998 survey was that the average basic daily rate fell slightly, potentially reflecting a movement toward facilities' serving a wider population base. Many companies are beginning to broaden their service, going beyond the higher-income residents and into the moderate- and even low-income settings.

The 1998 survey featured some categories of questions not included previously - for example, examining facilities' interest in becoming involved with managed care. Specifically, when respondents were asked, "Are you interested in contracting with MCOs?," 42.7% said yes.

Another new area surveyed pertained to how providers feel about their state regulations. Almost 60% responded "yes" when asked if their states' regulations were consistent with their preferred policy for admitting or retaining residents. Of the 40% who answered "no," 77% indicated that, if allowed, they would admit/retain residents with greater health needs; 92.9% said they would admit/retain residents with greater ADL needs; and 73% stated they would care for residents with greater cognitive needs. While "pushing the acuity envelope," providers, if permitted, appear to be willing to edge closer to the immediate or skilled care levels.

The success of the 1998 Overview of the Assisted Living Industry and the previous surveys is due to the continued participation of industry providers. Speaking for ALFA and PricewaterhouseCoopers, we'd like to thank those facilities that participated in our survey - both this year and in the past - and encourage their continued participation. The responses we receive each year enable us to continue to provide an invaluable tool, not only for assisted living providers and their administrators, but also for developers and lending institutions throughout the United States.

Ronald K. Tinsley is a partner with PricewaterhouseCoopers, LLP, an international accounting and consulting firm with specialists serving the senior living and post-acute care industries. For more information, phone [phone]. The 1998 Overview of the Assisted Living industry report can be purchased at a cost of $75 to ALFA members and $125 to nonmembers. For information, call [phone].