Recent intense focus on the role of private investment in healthcare could create “unintended consequences” that would deter investment in the senior living industry at a time when it can least afford it, two senior living associations told federal agencies Wednesday.
Argentum and the American Seniors Housing Association sent a joint letter to the heads of the Federal Trade Commission, the Department of Justice and the Department of Health and Human Services regarding the influence of private investment in senior living. Such investment involves “necessary capital partners” currently being scrutinized by the agencies, they said.
The letter was in response to a general request for information put out by the three agencies seeking public comment on deals conducted by health systems, private payers, private equity funds and other alternative asset managers that involve healthcare providers, facilities, or ancillary products or services.
Although assisted living is not directly included in the scope of stakeholders identified by the request, the senior living associations seized the opportunity to share the role that private equity and real estate investment trusts play in meeting the needs of older adults who live in such communities.
‘Premature’ regulation could derail private investment
Argentum President and CEO James Balda and ASHA President and CEO David Schless called attention to the differences between assisted living and clinical healthcare settings, noting the residential nature of senior living, its role in facilitating access to healthcare services and its lack of reliance on federal programs and private insurance. Private investment is critical to the sector, they said.
Assisted living, the CEOs said, is a market-driven, private-pay residential living setting that creates value for residents and families, benefits the greater healthcare system and reduces reliance on public resources such as Medicare or Medicaid.
Balda and Schless raised concerns that “premature” regulator and/or legislative action could derail private investment in the sector at a time when demand is expected to outpace supply.
By 2030, they pointed out, all baby boomers will have reached the age of 65, and the 85-and-older population is projected to more than double to 14.4 million in 2040. In addition, they said, more than 6.9 million older adults live with Alzheimer’s disease, and that number is projected to reach 13 million by 2050.
“The population is aging and creating significant demand for our services, which can only be met when all capital sources are available, including private investment,” the letter read. “This model stands in contrast to most healthcare settings that rely on federal reimbursement or insurance benefits that create a steady stream of income.”
To meet the needs of the aging population, they pointed out, the National Investment Center for Seniors Housing and Care estimates that 881,000 additional assisted living units will be needed by 2030, and estimates suggest that development costs associated with those units will exceed $1 trillion by 2050.
“Inadequate funding of new development activity and supply growth, as well as limited investment for improvements in the existing supply, will dramatically limit access to quality living options for some seniors and make existing options more expensive for all,” the CEOs wrote.
‘Necessary capital partners’
Calling private equity and REITs “necessary capital partners” to assisted living communities, the associations said they are a significant source of funding behind much of the current stock of assisted living communities built since the 1990s.
“Assisted living is a capital-intensive business, and private investment is critical to ensure the continued availability of housing and care for seniors,” they wrote, adding that there is “scant evidence” of negative effects or harms from private equity and REIT investment in assisted living communities.
In an addendum to the letter, the two laid out the effects of REIT and private equity investment on the pursuit of quality by senior living providers. In particular, they pointed out how REITs supported their senior living operating partners and tenants during the COVID-19 pandemic by facilitating access to supplies, testing kits and vaccines. REITs also worked with operators through rent deferrals, abatements and restructuring to help maintain occupancy and pay for increased operating expenses, Balda and Schless said.
