This blog post is a case study for a recently completed assisted living feasibility project designed and fulfilled by Research & Marketing Strategies (RMS).
Background: A client recently commissioned Research & Marketing Strategies (RMS) to assist its organization with the feasibility of an upcoming assisted living facility project. There is an 18,000+ square foot building located in rural Upstate NY in which the client would like to convert into an assisted living facility. The feasibility work included both primary and secondary research validating the demand and interest for the development of an assisted living facility. Key objectives included: (1) Determined the Primary Market Area (PMA), (2) Identified whether it is feasible to open an assisted living facility in the proposed location, and (3) Approximated user costs based on a competitive analysis of other facilities.
Approach: In order to address the objectives at-hand, RMS recommended the following components of market research:
- Demographic and Trends Analysis – this component used secondary research to assess the defined PMA’s demographics. This included population growth in the target age group, gender, marital status, income, and current housing information. RMS reviewed industry trends for assisted living facilities and incorporated those findings to understand how they would impact the facility.
- Competitive Inventory – this component of the market research will profile like-competitor facilities in the PMA. The inventory included a breakdown of occupancy rates, monthly fees, and unique amenities. RMS attained state provided occupancy rates for similar complexes in the PMA from the State Department of Health.
At the conclusion of the market research, RMS provided the client with an independent market research report detailing the feasibility of an assisted living facility. Letters from the Department of Social Service and Office of Aging will be requested on behalf of the client as well. The PowerPoint report detailed findings and demand versus supply estimations derived from both components of the market research. This was used for business and financial applications.
Results: Here were a few key takeaways from the assisted living feasibility report:
- The RMS study found that there were currently 149 assisted living beds (including ALR, ALP, EALR and SNALR) at four licensed facilities within the targeted four-county area. An application is pending to add an additional 65 beds in a nearby county. This means there could potentially be 204 assisted living beds serving the population of the four counties. In addition to those four assisted living facilities, there are a total of nine adult homes (a combined 303 total beds) in the four-county area that do not currently offer assisted living beds. The lack of assisted living capabilities means that these adult homes would not represent direct competition with the client’s facility, but they are worth noting because they do offer many services found in assisted living facilities and are designed to meet the needs of elderly residents who fall short of requiring assisted living. As such, they represent potential sources of referrals of future residents for the assisted living facility and also an indicator of the broad need for adult care at all levels in the region.
- Modeling in the RMS study found the 149 assisted living beds to be well below the need in the area. RMS estimates that, beyond the capacity of those 149 beds, there are 3,882 individuals in the area who are age 75+ that require assistance with 1 or 2 Activities of Daily Living (ADLs). Furthermore, the number of those individuals with the financial resources to afford private pay beds is over 9 times greater (415) than the number of beds proposed for the proposed assisted living facility (45).
- Monthly private pay assisted living rates in the PMA range from a low of $3,250 to a high of $4,750. The average private pay rate was $3,762 – below the 2012 statewide average of $4,011. Rates within a facility can vary depending on the room size and type (i.e., private versus semi private, studio, 1 bedroom, etc.) and the cost of the assisted living component itself (separate from the room) can vary depending on the level of assistance required for the resident. For Medicaid/SSI eligible ALP beds, a standard $1,225 out-of-pocket cost applies at all facilities.
- The one assisted living facility in a nearby county was at 93% capacity (2 available assisted living beds) in April 2014. Beyond the county’s PMA, the assisted living facilities currently in the market are all at or very near capacity. Mystery shopping calls to the four licensed facilities in the service area found that the average occupancy among all the facilities was 97%. Administrators at all of the facilities reported that assisted living beds have a fairly high churn rate and occupancies tend to vary from month to month, but are usually at or very near capacity. All of the facilities maintain waiting lists, none of which was reported to have more than 9 names at the time of the calls.
- Broadly speaking, the assisted living facility intends to serve seniors requiring ADL assistance at a level that does not require EALR or nursing home care. Most typically, that would be an individual over the age of 75 requiring assistance with 1 to 3 ADLs who already resides in the service area and seeks an assisted living facility close to their home. While the overall population growth of the proposed service area is projected to remain flat for the foreseeable future (0.8% growth between 2013 and 2018), the senior population of the area is growing rapidly. The number of people in the 65 to 74 group will grow at a 16.5% rate. Meanwhile, in the age groups most likely to use assisted living, the number of those aged 75 to 84 will rise 6.7% and the 85+ group is expected to increase 9.4%. Because of this pattern, the median age for the PMA has been increasing. It was estimated to be 43.2 years in 2013, and is projected to rise to 44.4 years by 2018. All of these trends speak to a large and growing need for additional long-term care resources in the area, including assisted living. A full demographic analysis of the market is included in pages 7-15 of this report. Moreover, the number of households headed by someone age 75+ is expected to increase 7.2%, with the largest increase coming in higher income, indicating a greater ability to utilize options such as the assisted living facility to provide residential housing.
Research & Marketing Strategies (RMS) is a market research located outside of Syracuse, NY. Our Analytics and Healthcare team specialize in feasibility studies completed for independent living residences, assisted living facilities, enhanced living residences, and nursing homes. If you are interested in commissioning an assisted living feasibility study or any other type of long-term care feasibility study contact our Business Development Director Sandy Baker at SandyB@RMSresults.com or call 1-866-567-5422.
For other case studies on the feasibility of senior housing read these: