Top 5 Factors Affecting Senior Living Communities

Over the past few years, the senior living industry has faced momentous change. With rising costs, a limited labor supply, and weak guidance on future best practices, many senior living leaders struggle to determine their next steps. 

Let’s look at five of the most prominent factors affecting senior living providers, along with tips and strategies to mitigate their impact on profits and cash flow.  

1. Inflation 

Senior living providers are under immense pressure as the cost of operations increases rapidly. At the time of this blog post*, inflation has reached 9.1% in the United States. For producers of goods and services, the PPI (Producer Price Index) has increased to 11.3%!  

Beyond the increase in food and energy prices, the rise of CPI (Consumer Price Index) has also incentivized employees to demand higher wages. A need for increased wages is particularly true in the senior living space, where many caregivers have left the profession due to burnout. 

Our Tip: Proactively account for price fluctuations – as this could just be the beginning. We encourage you to use various scenario plans (what-if analysis) to account for wage increases and the impact they could have on your bottom line.  

2. A Rise in Agency Spend 

If rising wages weren’t challenging enough, a rise in agency spending has also impacted the bottom line. In 2021, senior living and healthcare providers contributed to a 130% increase in agency spending. In some cases, agency spending can be up to 50% more than in-house labor. In-house labor overtime hours also increased by 52%. Overall, it’s safe to say that service margins have taken quite a hit.  

Our Tip: To reduce your agency costs, we suggest forecasting your labor hours and using visual analytics to track variances between actuals and planned labor. Labor forecasts will help signal whether you’re sufficiently staffed and give you ample time to increase headcount, reducing your reliance on reactive agency spending. 

3. Aging Population  

In case you weren’t aware, the population is aging faster than it is getting younger. By 2056, a third of Canada’s population will be over 65. Senior care providers must start planning more strategically for the long term to prepare themselves for the not-so-distant future.  

Our Tip: Many senior care providers only create yearly plans and take them month-by-month. Many senior living leaders don’t bother with longer-term plans because of forecast inaccuracies. However, forecasting technology has come a long way in the past few years, and so has its accuracy. Accounting for external variables like an aging population and the impact it could have on the demand for senior care services is critical to building the foundation you need for tomorrow.  

 4. Interest Rates 

Since the pandemic in March 2020, interest rates have been at historically low levels. These rates prompted many senior care providers to raise their debt capacity to acquire other properties or communities. While this yielded short-term benefits, interest rates are rising again—and providers are seeing the pinch in their monthly interest expenses.  

As senior living organizations look to take on less debt in the coming months, the industry will slow down and re-adjust to a lower growth rate.  

Our Tip: Stay positive, and don’t see this as a negative outcome! This time will allow inflationary pressures to level off until there is market equilibrium. 

5. Recession 

As of today, we haven’t officially fallen into a recession. However, many argue that a recession is a lagging indicator of the current state of the market. Many companies have already started planning for a recession and making decisions to prepare for such an event.  

Our Tip: Be proactive and plan. In senior care, a recession could mean employee layoffs (despite being short-staffed), lower revenues, and residents moving out (affordability). Proper pre-planning before a recession can help protect your business during tough times. 

As much as senior care providers are concerned with the challenges they face today, it’s important not to lose sight of external factors beyond your control. Planning for uncertainty is the key to not just surviving—but thriving.  


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