Linking market research to strategic planning.

The tool? It's the "community needs assessment"

Rapid fire change within the continuum of care has exerted pressure on operators to provide services that best meet residents' needs. Not only must operators provide desired services as resident enter the system, they must also be able to modify those services as residents' needs evolve.

Today's growing continuum of care represents more than 30 products and services.

Most long-term care operators have remained unresponsive to these inexorable market forces and entrenched in the traditional and longstanding service mix of intermediate and skilled nursing care. The next several years will see mere survival for the majority of provider organizations, and growth and expansion for only a select few. Those select few will be organizations that actively monitor a continuously changing landscape and develop strategic plans, products and services that respond to the characteristics of the local marketplace. One way operators can maintain and expand market share is through a process known as "community needs assessment."

A community needs assessment is a strategic planning tool that provides direction on how to maximize an institution's patient mix. It also points the way toward new products and services by documenting unmet needs in the marketplace. Sometimes referred to as a market analysis, the assessment process was once limited to quantifying general nursing home bed need and private-pay potential. However, with the power of computer-aided analysis and new data on use rates, providers can now ascertain the service demand for at least eight distinct market segments:

1. Retirement housing;

2. Assisted living;

3. Social and medical Alzheimer's;

4. Adult day care;

5. Home care;

6. Nursing home care and census mix by payor source such as private-pay, Medicaid and Medicaid;

7. Hospice; and

8. Subacute care.

The first step in the community needs assessment, applicable to all levels of care, is the study of overall senior adult population trends - specifically, whether market strength is increasing or decreasing among the numerous age and income cohorts that comprise the 65-and-older population. Operators can obtain extensive current year and projected demographic information on their market service area from a number of long-term care industry-specialized marketing data vendors. These vendors provide detailed reports on age categories, household income, household composition, and home values specific to a defined geographic area. This proactive quantification of market trends enables an operator to:

1. Capitalize upon market growth or hedge potential market declines; and,

2. Determine whether or not the service mix should be weighted toward community-based services, institutional-based services, or some combination of these.

The next step in the needs assessment process is to measure precisely the economic characteristics of the market. For example, what percentage of an operator's service or beds should be devoted, respectively, to private-pay, Medicare and/or Medicaid? An operator's pricing structure needs to be based on the number of individuals whose income qualifies them for various services - not what the competition is charging, or the prerequisites for, and availability of, federal and state funding. While important, these factors are secondary to establishing an optimum price that matches the economic characteristics of the market. Economic data also provide a basis for developing meaningful census goals by payor mix, and a benchmark by which to measure census improvement.

By factoring industry use rates, the market potential for virtually every segment of the continuum can also be identified, resulting in the provision of programs and services tailored to the health care and housing needs of the marketplace. Through the assessment process, an operator whose service mix is concentrated in nursing home beds may find that the market is saturated in long-term care offerings, while there is untapped potential in assisted living or home care. This information would thus suggest repositioning the unit mix to a less institutional service model.

Once the potential for each aspect of the continuum has been identified and ranked, continued due diligence is essential prior to initiating diversification. Detailed, competitive audits should be conducted to identify the extent to which the market is already being served. The audit would capture information on current and proposed providers, including their services, rates, rate inclusions, and marketing sophistication. Competitive data of this sort can be obtained by facility management or staff making phone calls and site visits to area providers, as well as reviewing state directories. Interviews with key referral sources also provide insights. This subjective information, combined with a review of occupancy and service enrollment levels, can indicate pent-up demand or market saturation.

The cost of market entry also should be assessed in order to identify the strategic fit between proposed new products and services and the existing operation. For example:

* What is the capital requirement to enter the new market?

* Would the new service or unit mix require physical plant or staffing reconfiguration?

* What are the licensure requirements and implications?

* Would the new program direction be a logical extension of current offerings, or a significant departure from traditional business (which translates to risk)?

The benefits of diversification should be measured in tandem with identified costs and risks. Risks include slow enrollment or fill-up, not achieving targeted census goals, and negative cash flow. Benefits include positive return on investment, increased cash flow, expanded market share and referrals, or simply maintaining and protecting market share and presence.

The strategic planning process should be guided by the following aspects of informed decision making:

* Avoid knee jerk reactions to the latest industry trends. The potential for profitable diversification needs to be confirmed or denied through a quantifiable analysis of local market data.

* Don't mimic the competition. Their new product or service may have already usurped any potential market, and there is always the possibility that the competition is headed down a wrong path; and,

* Do not base diversification decisions on guesstimates, instinct or past practice.

Informal and "seat-of-the-pants" approaches to strategic planning are often ineffective - and sometimes disastrous. The select few operators who grow and expand will be those who take advantage of the objective decisionmaking and analytical tools and techniques now available.

Community needs assessment - don't diversify without one.

RELATED ARTICLE: Continuum of Care and Services

Community-Based Services

Ambulatory Services:

* Outpatient Clinics

* Adult Day Care

* Mental Health Care

Home Care:

* Home Health

* Hospice

* Durable Medical Equipment 

* Home Delivery of Meals

* Homemaker and Personal Care

Outreach and Linkage:

* Case Management

* Information and Referral Systems

* Emergency Response Systems

* Transportation Services

Wellness and Health Promotion:

* Educational Programs

* Exercise Programs

* Recreational and Social Groups

* Volunteers and Support Groups

Institutional-Based Services

Housing:

* Independent Senior Housing

* Independent Living with Services (Congregate Care)

* Continuing Care Retirement Communities (CCRC's)

* Assisted Living/Personal Care

Extended Care:

* Nursing Home Beds

* Inpatient Hospice

* Nursing Home Follow-Up

Subacute Care:

* Rehabilitative Therapies

* Wound Care, Infectious Diseases 

* Pre- and Post-Operative Care

* Ventilator Unit

* Dialysis Unit

* Cardiac Rehabilitation 

* Neurological Rehabilitation 

* Pain Management

Acute Care:

* Medical/Surgical Inpatient Unit

* Psychiatric Inpatient Unit

* Rehabilitation Inpatient Unit

* Interdisciplinary Assessment Team

Phyllis M. Thornton is President of Signum Marketing Services and a principal of Ethos, Inc., Louisville, KY, firms that specialize in marketing and customer service programs designed for the long-term care and retirement housing industries. This is the second of a series of articles by Ms. Thornton.