+

Developing the Right Public/Private Partnerships for China’s Emerging Senior Care

Industry

June 2, 2013www.AsiaHealthcareBlog.com

www.RubiconStrategyGroup.com

+Today’s Presentation

The American senior living industry in the 1980-90s.

The role of the American government regulating the sector.

Four main problems America encountered. Poorly planned capacity that went under-utilized. Financially unsustainable communities. Lack of community based solutions. Anticipating how care needs change over time and how

communities need to be built to reflect this.

What can China learn from America’s lessons?

Where do China’s local and central government need to take a more active role regulating the sector?

+The American Senior Living Industry in the 1980-90s

Initially, driven by opportunistic real estate developers. Recognized a demographic change in the

US that should trigger the need for senior housing.

Also driven by a need to take under-utilized mixed-use, residential and hotel properties and repurpose them for senior living.

The US Department of Housing and Urban Development (HUD) had a program in place to protect lenders against losses in the sector. This drove additional investment.

But, many of the developers did not understand the senior housing as a business. They saw it primarily as a real estate transaction when senior living is a combination of real estate, hospitality and healthcare.

They did not have the necessary capital to fund the businesses and many went bankrupt. Some had to be taken over by the government.

This damaged the brand and, in the short term, made it more difficult to attract institutional investment.

+Four Problems America Encountered

Poorly planned capacity that went under-utilized.

Financially unsustainable communities.

Lack of community based solutions.

Anticipating how care needs change over time and how communities need to be built to reflect this.

+The Role of the American Government Regulating the Sector Today, it can take between three and six years from planning to finished

development for a new CCRC to open in the US.

The combination of local and national government regulations, permit applications and approvals.

This oversight ranges, but typically requires the following: Market analysis:

demographics within a specific distance of a planned development, Economic measurements such as the average income of the seniors within a

specific area around the planned development. Objective is to ensure the developer does not assume demand exists and how long

it will take, based on the target market, to reach stable occupancy levels. Permitting by the US Department of Health and Human Services:

Oversight of healthcare services – quality and safety of care. Submission of financial model to state regulator.

Ensure long-term financial viability under various funding and occupancy scenarios.

Termed “financial viability studies” and required during the state licensing process.

+General Steps Required in the US for Establishing a CCRC

Source: United States Government Accountability Office, “Older Americans: Continuing Care Retirement Communities Can Provide Benefits, but Not Without Some Risk,” June 2010.

+What Can China Learn from America’s Experience?

Too little government oversight hurts developers, operators and the elderly.

The more an economy generates growth from real estate, the more government regulation is critical.

The industry will not regulate itself.

If the government is going to have a role as payer, it needs to have expectations and standards.

+Where Does China’s Government Need to Take a More Active Role? Before land is provided to a

developer, require the following: Market assessment of the

number of elderly within a very specific radius from the planned development.

The market assessment must also provide evidence these elderly can pay for the services.

A government regulator must validate the financial model is sustainable at realistic occupancy levels.

Healthcare services for CCRCs must be regularly monitored.

+Where Does China’s Government Need to Take a More Active Role? The 90/7/3 Policy needs to take

additional shape: Home healthcare agencies need to be

offered incentives by the government. Direct subsidies for home healthcare

operators need to be created. Expansion of the yiabao program to

cover home healthcare. Broadening the type of healthcare

services that can be completed in the home (hospice, palliative care, home infusions, etc.).

Allowing registered nurses at public hospitals to also practice on a PRN (as needed) basis for home healthcare agencies.

Offering a third type of healthcare institution that is between a nursing home and hospital.

Building local training programs led by municipal governments.

+Foster Community Solutions

The initial model pursued in the US was a real-estate heavy solution.

China’s central government has already stipulated that only 3% of the need will be met in this way.

The need is for innovative solutions that deliver care close to where the elderly already live.

The NGO and non-profit sectors in the US and across Asia have good community based solutions that China can follow.

+Anticipate Higher Acuity Needs

American developers have been confronted with the unpleasant reality that the average age of those seniors now moving into senior living are older, with more healthcare needs, than originally planned for when the CCRCs were originally built.

Now, they need to rapidly build new capabilities that are more healthcare centric and that offer dementia care services, physical rehabilitation and other healthcare services not originally part of their development or their financial model.

+Contact Information

Benjamin Shobert

Founder, Managing Director

Rubicon Strategy Group, LLC

Two Union Square

601 Union Street, Suite 4200

Seattle, WA 98101

Phone: 206-652-3572

Fax: 206-652-3205

Mobile: 317-777-2926

Email: bshobert@rubiconstrategygroup.com

URL: www.RubiconStrategyGroup.com

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