A breakthrough in creating affordable assisted living.

In 2001, a statewide study by the Iowa Finance Authority indicated that more than 50% of the elderly aged 75 years and older could not afford what was currently available on the assisted living market. This was based on a comparison between the costs of such facilities and the average area income of seniors in this age group. At that time, the average monthly costs for market-rate assisted living ranged between $1,472 and $2,517 (amounts self-reported and averages based on efficiencies, one-bedroom, and two-bedroom units; rents may not include any type of minimal medical care). Yet one in four seniors statewide aged 75 and older had a monthly income at or below $884 (from the U.S. Census Bureau, 2000), and 50% of the annual median area income ranged from $17,300 to $23,550 (from the U.S. Department of Housing and Urban Development).

Based on the study's estimate that approximately 5% of the state's seniors aged 75 and older would be willing to move to assisted living and would have need of services, the state needed 3,662 additional units to meet this demand. If more than 50% of this population could not afford market-rate assisted living, then an estimated 1,831 affordable units were needed.

This gap between what was needed and what people could afford was accentuated by the inability of assistance programs to make up the difference. Because the Medicaid Waiver Program pays for the costs of personal and medical services only, the costs of rent and board are paid by the tenant. Market-rate assisted living programs at the time of the study rarely had rent and board rates below $800. They were simply not purpose-built as affordable properties and, therefore, had capital and staffing costs that significantly exceeded this amount.

It is well known that the additional services referred to most commonly as board--including activities, meals, and emergency response--help prevent assisted living residents from developing conditions that would lead to placement in an institutional setting. Furthermore, reducing social isolation and depression and providing adequate nutrition and hydration clearly benefit elderly and disabled residents.

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A June 2002 report to Congress from the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21st Century, titled "A Quiet Crisis in America," summarized the human side of this critical problem in this way:

    ... A large and growing number of seniors will face triple jeopardy:
  inadequate income, declining health and mobility, and growing
  isolation ... For some, family supports disappear when they outlive
  spouses or when children move to a distant place. For others, old age
  is a time of discovering that, with declining or fixed income, they
  are simply unable to purchase the goods and services they need.
    ... For those fortunate enough to have caring families nearby, their
  caregivers may face more stress than they can endure. When family,
  friends or caregivers search for help, they often encounter confusing
  requirements and eligibility standards as well as exorbitant costs.
  Those in rural areas face a dearth of available services....
    ... [The] result of this could be a substantial increase in costly
  and premature institutionalization of older people.... Nursing
  facilities should be places that care for the very ill and not the
  only alternative for people who cannot afford to live elsewhere.

Mirroring these concerns, the home health agency we have collaborated with for our affordable assisted living program was experiencing these problems one-on-one, frequently discovering that low-income individuals had few choices as their level of care changed. As a home care agency, they were able to serve clients in their own homes, thereby extending their ability to be independent as long as possible, yet there came a time when these individuals needed more assistance or socialization than could be provided in their own homes. Assisted living was very appropriate for these individuals, but because of the rising cost of assisted living facilities, they were forced into nursing homes so they could receive services that Medicaid only covers if those services are provided in a nursing home. Tragically, the healthcare providers found a direct correlation between these individuals' entering nursing homes and their declining health.

Through a home health agency's use of Medicaid and the Elderly Waiver, delivery of the same services is allowed in an individual's home or apartment if that person can sustain his or her home and afford the cost, and if his or her condition is compatible with a supportive housing arrangement. Individuals living alone often do not have such a supportive housing arrangement, but it is present in an assisted living facility.

The state program that had been designed to assist frail seniors with the cost of assisted living paid such a limited percentage of the program cost that many--in fact, most--market-rate assisted living facilities did not accept residents using the Medicaid Title 19 Waiver Program. Clearly, there was, and still is, a critical need for an effective solution to the problems of this vulnerable population.

Our Planning Process

Our goal was to respond to this critical need by providing assisted living communities that would not only offer an affordable option for moderate- to low-income seniors, but also would maintain the same quality and scope of housing and services as those available in market-rate assisted living communities. This meant we had to develop facilities that could take advantage of a variety of financing options to lower development costs, as well as developing facilities designed to minimize operational costs, so that we could pass the savings on to future residents in the form of lower rents without sacrificing high standards in housing and services.

We also wanted to harvest everything that had been learned to date about the relatively new concept of assisted living and bring this information to bear upon the assisted services, programming, and interior design of these facilities to facilitate our goal of providing a place where independence and wellness were encouraged, families remained engaged, and seniors felt safe and supported while living purposeful lives.

Our Method

One effective means of developing affordable housing is through tax credit financing, whereby developers receive tax credits in exchange for promising to provide affordable rental units for a specified period of years. They sell these tax credits and apply the proceeds to lowering the cost of the mortgage, thus enabling them to pass on the savings in the form of lower rents.

Two problems created barriers to our using this approach:

* Tax credit funding parameters prohibit the use of tax credits in nursing homes, and many investor funds prohibit any investment in tax credit projects that provide health-related services.

* Any services that are mandatory for our residents must be included in the rent, and rental rates in tax credit housing must be maintained at or below a set amount based on the median area income for the county in which the facility is located. To reflect the cost of services in our rental rates therefore would have clearly exceeded our household rent guidelines for affordable housing.

It was clear that we faced significant hurdles to providing both affordable housing and quality assisted services within the same assisted living project if we followed the established model in the existing assisted living market. Instead, we determined that to accomplish these goals required developing an innovative approach, one first proposed by the Iowa Finance Authority: combining the Low-Income Housing Tax Credit (LIHTC) program with other state and federal subsidy programs to build the affordable housing units and establish affordable rent levels, while separately tapping into the State Waiver Program (primarily the Title 19 Waiver Program) and other subsidies for the elderly to cover assisted services.

In essence, our plan separates housing from services. Under this program, housing and services are purchased separately, and all services are optional. Seniors may rent apartments in the facility and either obtain the optional services from the building owner or its affiliates, or obtain them from any provider they choose. The same is true with meals: Residents may purchase a flexible meal plan from us, cook on their own, or have meals catered to them if they wish.

Such coordinated services require detailed policies and procedures to ensure that the facility's licensing requirements are met by all vendors and that there is uniform delivery of apartment-related services, health- and home-related services, and related programming. It is this successful delivery of coordinated services for the apartment--as well as assisted health and homemaking services, meals, and social programming--that enables our program to respond effectively to the critical need for affordable assisted living.

Based on the requirements established for our tax credit housing program, referred to as Section 42 Housing, to be considered "affordable," rental housing must be available for no more than 40 to 60% of the Area Median Income. In 2004 and 2005, those figures translated into rental rates of:

2004 Rent Rates:
1 bedroom:  40% -- $483
            60% -- $724
2 bedroom:  40% -- $580
            60% -- $870

2005 Rent Rates:
1 bedroom:  40% -- $500
            60% -- $750
2 bedroom:  40% -- $600
            60% -- $900

Our original target dates included opening in March 2005 and achieving full occupancy of 56 units by March 2006. Our on-site assisted services provider set its three-month goal at ten clients.

Implementation

The Iowa Department of Elder Affairs commissioned a statewide, county-by-county study of the need for assisted living. We used that report, in addition to our own market study, to document and support the need for a facility in the Ames, Iowa, market.

Our tax credit financing required that we rent only to persons with the following maximum household incomes: $27,060 for one person and $30,900 for two in 2004, and $28,020 for one person and $31,980 for two beginning on February 11,2005. Therefore, we targeted our mailings to people aged 70+ in households with incomes of less than $35,000 within a 50-mile radius.

In consultation with our partnering home healthcare agency, we selected income-qualified tenants according to criteria set forth in the state assisted living regulations. These criteria included stipulations that residents' service needs not exceed 28 hours per week and that residents could not require more than a one-person assist. All residents were to wear a 24-hour call pendant to access on-site medical assistance 24 hours a day, seven days a week. At this time, we chose not to be dementia-specific and to accept only tenants who did not have a cognitive disorder.

Obstacles

As noted previously, our challenges began even before we officially got started, and they persisted at each main juncture. For example:

1. We had to redefine the concept of assisted living, which had previously been associated with package plans that included both housing and services. We created a new paradigm by separating housing and services to make both more affordable by enabling seniors to qualify for lower-cost programs and local, state, and federal subsidies in both areas independently.

2. We had to gain the confidence of the tax credit investment community and convince them that we could organize our management structure to satisfy the funding parameters of the tax credit program; i.e., separating the tax credit ownership entity from the healthcare services while providing adequate service to residents.

We submitted project pro formas to regional and national syndicators and investment brokers. Many of the syndicators fund via multi-investor funds, which include Fannie Mae and Freddie Mac, both of which prohibit investment in tax credit projects that provide health-related services. It was at the eleventh hour, just before the contingent purchase agreement redemption period expired and the carryover agreement deadline, that we obtained a sufficient letter of intent from our investors to allow us to buy the land and proceed with completing our due-diligence requirements.

3. Finding a willing home healthcare provider proved equally daunting. First, delivering quality services at a profit remains a tough job in any medical model. Second, no local home healthcare provider had operated in the proposed assisted living environment. In fact, tackling this project required totally rewriting policy and procedure manuals that merged the different requirements and regulations of home healthcare and assisted living. These standards are very different, and developing procedures to fulfill both sets of regulations proved very challenging. We relied heavily on the resources of the Iowa Finance Authority and the Iowa Department of Inspections and Appeals to guide us in writing these policies and procedures and to provide insight regarding the obstacles we might face.

This challenge proved to be so difficult that our initial home healthcare provider withdrew from the project two years after we began working with the company and just six months before we opened. Fortunately, we had already been in dialogue with another company, Lutheran Community Health Services, that was interested in providing the same service for a future project we planned 35 miles away, and that provider bravely stepped in to meet this challenge under extremely demanding conditions.

4. Not surprisingly, such a project requires an extremely high level of dedicated teamwork, mutual respect, and a commitment to a vision of a model that was literally being created day-to-day in a just-in-time framework. Every form, every page of every manual, every paragraph in every marketing piece, every legal document--literally everything associated with defining and operating this program--had to be developed, designed, written, and produced by a member of our team. Different perceptions of appropriate guidelines and procedures had to be openly discussed and resolved to mutual satisfaction so that, in the end, the residents would be appropriately served. This process remains an ongoing challenge and will continue to require communication and negotiation among the providers of housing, healthcare services, meal plans, and activities. To date, this challenge has been successfully met, based on resident satisfaction indicators (see "Evaluation," p. 42).

5. We had to build our brand image from the ground up, since we were offering a new concept in a new field. We had no reputation to build on or history to point to, so we had to develop a place for ourselves in the community. We thought it was a tribute when someone who was recently asked, "Where did you hear about us?" responded: "Where haven't I heard about you! Everyone's talking about you!" Best of all, much of that talk is originating from our residents, their families, caseworkers, and other community members whose enthusiasm helps to market our community and produces our best referrals.

Key Players

To address such a critical need and produce such a strong, positive response in the marketplace has required incredible efforts from our highly dedicated team of professionals from diverse sectors, including: real estate development, finance, investment, law, healthcare, marketing, training, design, food and nutrition, senior care and activities programming, and maintenance. Each team member, drawing from his or her own set of skills and experience, has contributed in a unique way to launching this groundbreaking concept in assisted living. Here, identified by position only, are the players and their contributions in the order they joined the team:

Initial Developer: He used his knowledge of, and experience with, the existing assisted living industry to recognize the need and opportunity described in early studies of senior living conditions. He also conceived the vision for our program and entered the political arena to gain support for the project, as well as identifying a viable site and initiating the first steps for the tax credit financing.

Second Developer: A lawyer and developer of affordable multifamily housing, he entered at the crucial juncture when a lack of investors jeopardized the project. He filled the critical role of finding a willing investor, purchasing the land, and completing the carryover. Since then he has assumed the role of managing general partner, doing everything from overseeing construction to writing policies and procedures to assembling furniture.

Marketing Consultant, Community Liaison, and Interior Designer: This is another multitasker whose business, education, public relations, and creative experience and talents have been effectively applied to researching resident needs and trends in assisted living, and who has incorporated that knowledge into: (1) an effective public relations and marketing campaign, (2) the establishment of a customer relationship management model, (3) development of service learning projects with university faculty and students, and (4) codesigning the public rooms to create distinct environments that produce a variety of settings within the community to match the tastes and preferences of residents while encouraging their interaction and enjoyment of activities.

Second Interior Designer: A lawyer by day and a decorative artist by night, she applied her artistic eye to the choice of colors, furnishings, art, and general decor to produce a beautifully appointed facility that has drawn rave reviews for its warmth and style. Each public room was designed to create a different impact, appropriate for its use, so that even residents whose limited mobility greatly restricts their travels may enjoy a variety of environments and varied visual stimulation each day.

RN Administrator: Although she had been employed by the home healthcare provider only three weeks when she was asked to step in and oversee the collaborative tasks associated with developing this joint program over just five months, she never flinched. Instead, she set about to make it happen. She contributed heavily to the writing of the new procedures and policies and to securing the facility operating license, while working closely with the developers to establish how the housing and services would be coordinated.

Administrator: She quickly applied her passion for senior care--kindled when she was just a teenage volunteer--as well as her experience, formal training, and newly acquired MHA degree, to launch a new concept in senior care. She developed policies and procedures, forms, and training in a just-in-time manner and quickly developed a warm, yet efficient, relationship with residents.

Branch Manager, Home Healthcare Provider: A 30-year veteran of healthcare environments and a dedicated caregiver, she has applied her multisite management experience and her warmth and "tough love" approach to create efficient and effective delivery of healthcare services. She has attracted and trained a Nursing and Assisted Services Staff, whose sincere and caring relationships with residents have greatly contributed to the high regard people have for our services. Her strong following by former clients has also resulted in their referring residents or becoming residents themselves.

Chef: Formerly a catering chef for a major university, as well as a chef for a four-star restaurant, our chef enjoys preparing residents' favorite foods while maintaining the required standards for senior nutrition. He has developed a reputation for excellent food and offers cooking classes to residents. With quality of food often named the number one reason seniors favor a given facility, he has been one of the major reasons for our popularity and enviable reputation. An Assistant to the Chef and a Dietary Aide assist in food preparation and serving.

Maintenance Supervisor: He keeps the building and grounds in top condition and responds to residents' housing needs. He is an important link in customer satisfaction because he is the troubleshooter who first responds to residents' problems in their homes and addresses necessary improvements to keep them satisfied.

Activities Coordinator/Assistant Director: Our newest team member, she brings her experience in not only directing senior activities but also in coordinating volunteers to enrich our residents' engagement with their community. Her role is vital in fighting the effects of depression and reducing the possibility of social isolation, with the ultimate impact of improving attitudes and enjoyment oflife. She coordinates the activities sponsored by our optional social club for residents.

Evaluation

We anticipate full occupancy by March 2006, although instead of the projected 10 clients expected by the assisted-services provider within the first three months, 18 residents were being served by that date. These achievements reflect the conservatism of the forecasted need for affordable assisted living for seniors with moderate to low incomes and the success of this model for addressing that need.

Subsequent months have seen the opening or planned opening of similar projects in Des Moines and Waterloo. Roughly a dozen are in the works altogether.

Resident Data

The statistics for our first 28 residents as of spring 2005 tell the story of our success:

* Whereas 61% (17) moved from their own home, mobile home, or affordable independent living apartment where they lived alone, 68% (19) now request assisted services to help them when needed, and 100% of them wear a 24-hour emergency-response pendant for summoning help from on-site staff. This translates into better care and peace of mind for both our residents and their families and friends. Services most requested, in the order of frequency, are: housekeeping, 50% (14); nurses' aide visit, 43% (12); bathing assistance, 32% (9); skilled nursing visit, 29% (8); medication monitoring and administration, 25% (7); dressing assistance, 14% (4); and shopping assistance, 11% (3).

* Documented results of this care include: 18% (5) with decreased depression, 18% (5) who are eating healthier, and 7% (2) who now self-administer medications and previously required assistance.

* The remaining one-third (9) who do not contract for any services have the best of two worlds: They live totally independent lives in their own apartments, complete with fully furnished kitchens (including dishwasher), while knowing that a full range of services, including healthcare, housekeeping, shopping assistance, assisted bathing, beauty and barber shop, and a wide array of activities and community events, is available if they choose to participate. Once again, they have peace of mind, knowing that when they need services, they can access them on-site in their own community and home.

* 79% (22) have joined the optional activities and social club designed to provide entertainment, socialization, activities, education, and purposeful engagement in the community, thus reducing the potential for social isolation and depression and increasing residents' sense of engagement and purposeful living. Participants develop new interests and skills, as well as new friendships.

* 79% (22) participate in the meal plan; 36% (10) eat one meal a day in the main dining room, and 43% (12) eat two meals a day there. This meal plan has been directly correlated with healthier eating in 18% (5) of the residents. Each meal is approved by a dietitian to supply one-third of the minimum daily nutritional requirements for elders.

* 11% (3) have moved from market-rate assisted living facilities, and 11% (3) have transferred from nursing homes. Both situations have resulted in cost savings to residents and their families. Residents moving from market-rate assisted living facilities are preserving their financial resources and slowing down the spending of their limited savings. Residents moving from nursing homes are no longer paying (or receiving higher subsidies) for the unnecessary (for them) higher level of care in nursing homes. This results in lower costs both for residents/families and government agencies.

* 18% (5) have moved from the homes of their adult children where they resided because they needed assistance but were unable to afford market-rate assisted living. Not only do residents express appreciation for regaining their independence, but the adult children also report less stress on themselves and their families.

* In addition to the obvious benefit of more affordable living, the next most frequently cited benefit that all residents attribute to their new home is their preserved independence paired with greater peace of mind. They can choose what assistance they want and need, and pay only for those selected services.

* Our population matches the typical assisted living population: We currently have 5 male residents and 24 female residents in 28 households, ranging in age from 52 to 96. The average age is 76.3, and the median age is 77.5. All are single except for one married couple. Although there was high initial interest in our four two-bedroom units, all units rented to date are single bedrooms.

Resident Satisfaction

The June 9, 2005, Initial Certification Monitoring Evaluation Report completed by the Iowa Department of Inspections and Appeals included the following Tenant/Family Satisfaction Results:

    A community meeting was held and 14 residents attended. The
  residents reported their apartments and common areas are clean and
  they feel at home. Residents reported staff to be competent,
  efficient, and friendly. Residents stated the administrator is
  approachable, listens to concerns, and seems to care about them.
  Residents reported they never lock their apartment doors at night;
  most said they leave their doors open during the day. Most of the
  residents stated they administer their own medications, but the
  nursing staff answers questions about medications and services they
  receive. Residents stated they make their own decisions and come and
  go as they please. Residents like the food served and stated there are
  plenty of choices offered. Residents believe there are plenty of
  activities offered by the program and they are getting the services
  they expect.

In summary, we believe we have not only addressed a critical need in long-term care but also exceeded our goals and objectives. We hope that recognition of our program will motivate other developers and investors to replicate our success.

To send your comments to the editors, please e-mail [e-mail].

BY THE STAFF OF THE ROSE OF AMES SENIOR ASSISTED LIVING COMMUNITIES

RELATED ARTICLE: Timeline

May 2001

* State study indicated critical need for affordable assisted living units: More than half of state's seniors age [greater than or equal to]75 were unable to afford existing market-rate assisted living communities.

June 2002

* Report to Congress reinforced awareness of critical problem for seniors with moderate to low income who needed assisted living services.

July 2002

* Initial developer began looking for a site and made first contact with potential home healthcare agency to provide on-site assisted living services.

August 2002

* Initial developer contacted city government (staff and city council) to seek support.

November 2002

* City council voted to approve the tax abatement essential to the project and rezone the property, and they gave the project a formal resolution of support. (Note: This vote passed on November 12; the tax credit application deadline was three days later.) The developer picked up the supporting documentation from the city on November 15 and hand-delivered the application to the Iowa Finance Authority the same day.

* Received letter of commitment from initial home healthcare provider to serve as available on-site assisted living services provider.

March 2003

* Iowa Finance Authority awarded tax credits to initial developer.

August 2003

* Early-bird mailing generated initial list of 41 potential residents/couples.

September/October 2003

* Because of difficulty in locating investors, a second developer was recruited to identify necessary investors before tax credits expired in December 2003.

November 2003

* Original carryover date (date that 10% of the cost of the project must be expended) was extended to December 20, 2003, because of difficulty in securing an investor.

December 2003

* Investor was secured; tax credit carryover was completed just in time to meet December 20, 2003, extended deadline. Contingent purchase agreement was closed and land purchased just prior to expiration of redemption period.

May 2004

Ground was broken for the building. Part-time marketing consultant and community liaison was contracted.

September 2004

* Designers contracted to begin interior design of public rooms.

* First home healthcare agency withdrew from potential collaboration, less than six months before first residents were expected.

October 2004

* RN Administrator was hired as a consultant to prepare documentation for facility application to Elder Affairs Department.

December 2004

* Assisted services provider agreement was executed with the second home healthcare agency to provide optional on-site assisted services.

* Administrator was hired, and first applicants completed their formal applications.

February 2005

* State granted Certificate of Occupancy (February 4) and Facility Operating License (February 25).

March 2005

* First resident moved in on March 5; Grand Opening was held on March 13.

June 2005

* Half of all units were filled; we projected that all units would be filled by October 2005, based on pending applications.

RELATED ARTICLE

The Rose of Ames Team Leaders

Angela Adam, Administrator

Vicki Truby, Activities Coordinator/Assistant Director

Don Sturtz, Chef

Mark Skadburg, Maintenance Supervisor

Candace McClenahan, Marketing Consultant, Community Liaison, and Interior Designer

Richard Helgeson, Co-Owner and Developer

Gregory McClenahan, Co-Owner and Developer

Dianne McClenahan, Interior Designer

Lutheran Community Health Services Team Leaders

Diana Hanner, RN, Administrator

Lou Ann Williams, Branch Manager, Ames