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What is the future of NFP assisted living?

What will enable not-for-profit (NFP) organizations to compete for assisted living in tomorrow's marketplace? First and foremost will be the provision of services that span the entire continuum of care. This means that a nursing home will not remain the sole mainstay for most providers. This growing trend will put both the for-profit (FP) and NFP stand-alones at greatest risk in the marketplace. Nevertheless, NFPs may find a competitive edge in the assisted living/long-term care market in the following areas:

* Local sponsorship

* Perception of quality

* Charitable activity

* Diversification/affiliation

* Access to capital

* Lower-cost settings

Local sponsorship. This is one resource most NFP organizations have that can give them an advantage over the FPs. NFPs usually have been community-based sponsors of long duration, giving consumers added assurance from knowing the facility isn't owned and operated by out-of-towners - who might be inaccessible or viewed as not caring about the local community and its people. It is important, however, that consumers know who is behind the program, who is on the board of trustees and who operates the facility.

Perception of quality. This refers to the public perception of a facility's quality of programming. A well-run assisted living facility will develop a good reputation, but it is essential that the value of what is offered is "real" to the consumer. In other words, the public needs to know about the services and how they are provided.

Charitable activity. Obviously, raising charitable dollars to fund new and innovative programs or to establish an endowment fund is an advantage FP assisted living organizations do not have available to them. Charitable fund raising not only builds an NFP's constituency within the community, but it also provides for direct subsidization of residents.

Diversification/affiliation. While it might be difficult for a stand-alone NFP organization to compete against large FP chains - which realize economies across multiple facilities - or hospitals offering "cradle-to-grave" care, an NFP organization can still improve its position. Single facilities lacking the resources to diversify can form affiliations with other NFPs (including hospitals) that offer services different from their own, and together develop a continuum of care. Forming a network of NFPs in the primary market for delivery of services or for managed care contracting can strengthen each organization.

Access to capital. NFPs have a definite edge over FPs in that they can borrow on tax-exempt bonds, with interest rates at a percentage of prime rather than prime-plus. In today's market, that ranges from about 5.5 to 6.5%. This is a unique opportunity for NFPs that they sometimes don't take advantage of. Often they don't view themselves as credible borrowers in the marketplace, but in fact they have many internal and external strengths that can be utilized and emphasized when they are considering borrowing capital to develop new programs.

Lower-cost settings. NFPs should be able to serve consumers with moderate incomes in lower-cost settings as a result of the lower-cost financing mentioned above and the economies realized through the strategy of diversification and larger scale.

All the dynamics listed above can give an NFP organization a competitive edge today. The following are also needed in order to prepare for the future:

Strategic planning. In their long-range plans, organizations must focus on how an assisted living program will fit with their mission in their primary market. Things to consider: assessment of the organization's strengths and weaknesses; solid market analysis and financial feasibility studies. Program planning, management of construction projects and proper planning for fill-up and operational risks also will enhance an organization's future viability.

Market research. Obviously, the key to avoiding an overbuilt market, before an organization expands its services to include assisted living, is to determine the need for more units in the local area. Even despite the tremendous growth in this market, we still encourage NFPs to consider assisted living as a reasonable diversification strategy. It can't be emphasized too much, however, that development without credible market research is risky business.

Besides the obvious benefit - determining the demand for assisted living in an area - organizations can learn a great deal about their current programs by way of market studies. This can be accomplished through a combination of focus groups, demographic analyses and provider comparables research. Another avenue of research is community interviews with various administrators and managers of organizations that serve older adults in the area.

The information gained through these various forms of research can give the "flavor" of an organization's presence and reputation in the community and can reveal how the services now rendered are being received. Even if the organization decides not to develop an assisted living facility, the efforts will not have been in vain.

When approaching market research, it is a good idea to hire an outside company to strategically assess the market demand, market comparables, the sponsor's reputation within the primary market and the location of the proposed project. Independent, third-party opinions and perspectives are important, both in terms of satisfying the need for information and in terms of usefulness as a planning document.

The factors outlined in this article are those that enable NFP organizations to compete in the assisted living marketplace. On the horizon is the opportunity for a great deal of creativity, an attribute that historically has been a hallmark of the NFP activity in long-term care. It is our belief that assisted living should be viewed not only as facilities but as programming in a variety of potential settings.

Kathy M. Boling, NHA, is an Ohio-based consultant with 22 years' experience developing CCRCs who also teaches courses on aging and gerontology at Wittenberg University, Springfield, OH. Phone: (937)465-1655; e-mail: kboling@bright. net. John R. King, MBA, is director of development and finance, Mennonite Health Services, Goshen, IN. Phone: (800)6114007.
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Title Annotation:Not-For-Profit Report; not-for-profit
Author:Boling, Kathy M.
Publication:Nursing Homes
Date:May 1, 1998
Previous Article:Putting long-term care's pieces together.
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