Moving into assisted living.

Advice from one of the field's leading providers

Advocat, Inc. got into assisted living in 1980 with the acquisition in Ontario of a very large complex that was in deep financial trouble. Today we operate 86 facilities, 20 of which are assisted living. We have approximately 7,500 nursing home beds and 2,300 assisted living units.

That first "assisted living" complex actually had 246 nursing home beds, 287 seniors apartments, and some commercial space in a large U-shaped building. The apartments were predominantly independent living, with only about 20 residents using services provided by the nursing home staff.

Little effort had been expended to develop any linking services that took into consideration the stage between independent living and full nursing home residency. What we had, in fact, were two separate concepts - independent living and nursing home care - sharing a building. As nursing home operators we thought, "Oh gee, we can turn this property around easily; we know all about old people."

Within three years we came to recognize how very little we knew about the elderly, especially those who didn't need nursing home care. Once we achieved that realization, we were able to develop a new mind-set, one that made it possible to begin to learn what this continuum of care concept - elderly residents moving from independence, to frailty, to infirmity - is all about.

The key to being able to operate what is truly a continuum of care facility - from full independence to full dependence and all the shadings in between - is to look at the needs as a customer, not as a provider. As a physician who has been in everything from private family practice to service in a hospital emergency room, I've come to realize that much of the definition, organization, and development of health care has been for the convenience of the provider. That is most definitely the wrong mind-set, and we have to be much broader than that. We have to really focus on the customer, who in our business is typically somebody over the age of 80, usually a widow, and no longer completely able to take care of herself in her own home. We have to ask what it is that she needs in the way of help with her daily living activities and health care. Then we need to provide that help in a way that allows her to retain as much of her independence as possible.

In an assisted-living setting that means far less standardization. For example, nursing home regulations say there will be so many square feet per person - perhaps 250 to 300 square feet per bed. We are operating assisted living facilities at $28 and $32 a day that don't have any more room than a nursing home does, and we are operating them at $90 and $100 a day that provide apartments with 800 to 1000 square feet.

In the 15 years since we acquired that first Ontario complex it has become very successful. When we bought it, there were 20 vacancies in the apartments. Today it is the only apartment complex in town with a waiting list, and after much conversion, 110 of the units are true assisted living residences. The nursing home has been full ever since we took it over, and we are about to add 28 beds for patients requiring heavier than usual nursing home care.

All of these changes reflect the fact that people are aging in place. Many people who today are residents of the nursing home were living in the independent apartments 15 years ago, and many in the assisted living units were apartment residents five years ago.

By the mid '80s we were taking the lessons we had learned and were expanding into both assisted living facilities and nursing homes. However, we still viewed these as different businesses requiring different skill sets. Therefore we organized them into separate divisions. We saw the nursing home business as one of expense control and the assisted living/retirement housing business as one of revenue maximization. Now, some 10 years later, we are combining the two divisions into one. That is because the care requirements for assisted living are expanding and becoming increasingly important. I firmly believe the assisted living facility of the year 2000 will be the equivalent of the intermediate care nursing home of 1975. We have come to the view that what drives both sides of our business is providing the best quality care possible.

Providers have always wanted to see clear breaks between home care, assisted, living, and nursing homes. Older persons - the customers - don't recognize such clearcut distinctions. Rather, their viewpoint is need-driven; they're looking for services. From that perspective a continuum-of-care complex that can care for people as they age in place makes a lot of sense. The ideal is a campus environment coveting the full spectrum of services, from senior housing through assisted living to nursing home care.

At Advocat our future lies in providing to seniors whatever they may need to allow them to live with grace, dignity and as much independence as possible. We are thus in the process of surveying all of our nursing home sites to determine whether the market is there to add an assisted living facility. Hopefully that alternative will be one of the main ways we continue to expand our assisted living business. The other avenue we are taking, and the one we prefer, is the acquisition of existing facilities with good reputations and strong occupancy. That is because new facilities take time to fill, and don't like front-end losses!

I once said, only half-jokingly, at an industry conference, that the best way to buy an assisted living facility was to be at least the second owner and hopefully the third, because the price kept going down. That is because many people, primarily residential real estate developers, have tried to get into assisted living, and made the mistake of thinking this is a housing business. Assisted living is a care providing business, and that's why it is an area of expansion that traditional nursing home operators are finding both attractive and profitable. But in order to do it right, nursing home operators have to realize that assisted living is part of a spectrum, a continuum of care, and one that is focused on customer needs and desires.

Dr. Charles Birkett is CEO of Advocat, Inc., an NYSE listed company owning and managing facilities providing a continuum of care to seniors in the U.S. and Canada.