Running head: STRATEGIC THINKING 1

Strategic Thinking
STRATEGIC THINKING 2

ABTRACT

According to Ebersole (2014), strategic thinking is the ability to come up with effective plans in

line with an organization's objectives within a particular economic situation. Strategic thinking

helps business managers review policy issues, perform long term planning, set goals and

determine priorities, and identify potential risks and opportunities (Ebersole, 2014). In this

presented assignment I will identify and analyze various elements that comprise my health care

industry's trends and policies, define and explain the economic and business conditions,

premises, policies, and other related forces that form the basis for generating change in your

health care organization, identify and analyze specific issues revolving around health care

management and policy analysis specific to your selected organization, and examine the different

types of markets in the health care system and the determinants of supply and demand in each

market specific to your selected organization.

STRATEGIC THINKING 3

According to Ebersole (2014), strategic thinking is the ability to come up with effective plans

in line with an organization's objectives within a particular economic situation. Strategic thinking

helps business managers review policy issues, perform long term planning, set goals and

determine priorities, and identify potential risks and opportunities (Ebersole, 2014). In this

presented assignment I will identify and analyze various elements that comprise my health care

industry's trends and policies, define and explain the economic and business conditions,

premises, policies, and other related forces that form the basis for generating change in your

health care organization, identify and analyze specific issues revolving around health care

management and policy analysis specific to your selected organization, and examine the different

types of markets in the health care system and the determinants of supply and demand in each

market specific to your selected organization.

Elements that Comprise Cedar Hills Industry Trends and Policies

Assisted Living Facilities have become increasingly dedicated to innovation and an emphasis

on hospitality in order to remain competitive during challenging economic times. Understanding

the resulting assisted living trends and policies will be helpful to families that are in the process

of exploring the various options available for aging loved ones. The elements that comprise

Cedar Hill Assisted Living industry trends and policies are the aging population, governmental

regulations, finances, changing social and demographics characteristics, and advancing

technology.

Aging Population

The population of the U.S. and much of the industrialized world is aging at unprecedented

rates as life expectancy improves and baby boomers begin to reach retirement age (University of
STRATEGIC THINKING 4

California, 2006). According to the University of California (2006), by the year 2030, nearly

20% of the population will be over age 65. National trends indicate that the elderly more

frequently choose to receive long-term care services in a variety of settings that are less

restrictive than nursing homes (University of California, 2006). Trends suggest that the most

likely sectors of future growth in long-term care services will be in assisted living/residential

care and home and community based services (University of California, 2006). The number of

beds in assisted living has nearly doubled an increase of 97% in the last twelve years. Consumers

have expressed a preference for less restrictive settings of care (University of California, 2006).

The demand for professionals (physicians, nurses, physical therapists, etc.) needed to care for

the future aging population will be dwarfed by the need for unlicensed formal and informal

caregivers (University of California, 2006). Retirees, youth, and part-time workers, as well as an

increased number of immigrant workers, may be a source of the many new workers needed for

long-term care (University of California, 2006). By the end of the decade, there will be growth

in the number of jobs in all long-term care settings (University of California, 2006). The greatest

increase in jobs for direct care workers will be in home health settings (70%), followed by

assisted living/residential care 67% (University of California, 2006).

Government Regulations

While there are federal laws which impact the ALF industry, the majority of regulation in this

industry comes from the state. ALFs must comply with the Americans with Disabilities Act, the

Fair Housing Act, and typical fire and safety regulations. The high growth and level of diversity

in this industry has made it difficult to regulate. Regulation reform for this industry has the

potential to increase the supply and demand for these services.

STRATEGIC THINKING 5

Financing

Approximately seven out of every ten people who live in an ALF must depend on their

personal wealth or that of their family to pay for their services (Ortiz, 2014). For this reason, the

majority of individuals who reside in retirement communities are those living above the median

wage for their regions (Ortiz, 2014). The growing popularity of assisted living facilities is

prompting many states to expand the scope of Medicaid, in an attempt to help individuals pay for

the high costs of living in retirement communities (Ortiz, 2014). According to Ortiz (2014),

there are currently an estimated 115,000 individuals living in assisted living situations who

receive Medicaid payments to cover the costs for their services. Medicaid, which is financed by

both federal and state governments, pays 73% of the money allocated for the long term care

industry to individuals living in nursing homes, despite the fact that the majority of individuals

prefer to live at home or in a retirement community (Ortiz, 2014). The amount of Medicaid spent

on one individual in a nursing home can support almost three individuals in a retirement

community (Ortiz, 2014). To make assisted living facilities more affordable for low income

individuals, many states are enacting changes to the portion of Medicaid which can be applied to

ALFs (Ortiz, 2014). Until recently, only individuals living in nursing homes were typically

provided Medicaid assistance, but there are now a growing number of states that have recognized

the importance of offering Medicaid dollars to individuals living in ALFs (Ortiz, 2014).

Demographics

According to the U.S. Census Bureau, the number of individuals in the US between the ages

of 65 and 84 will increase by 38.8 percent between 2010 and 2020, while the population over age

85 will increase by 18.7 % (Ortiz, 2014). There are currently large discrepancies in the
STRATEGIC THINKING 6

demographic makeup of retirement communities (Ortiz, 2014). As of 2006, retirement

communities were 69% female and only 31% male (Ortiz, 2014). The typical resident for an ALF

is an 85 year old female (Ortiz, 2014). Individuals over 85 years old make up the largest

percentage of residents at ALFs (Ortiz, 2014). The highest concentration of ALFs is in the

Southeast portion of the U.S., which houses 23% of all ALFs in the nation (Ortiz, 2014). The

trend of retirees moving to the Sunbelt region of the U.S. is expected to spur further growth for

this industry in this region (Ortiz, 2014).

Advance in Technology

As life expectancy continues to rise, technology must be incorporated as a tool to maximize

service delivery and support healthy ageing across the spectrum of care (International Federation

on Ageing, 2012). With the increasing number of older people globally there will be a higher

demand and need to access supportive healthcare environments, such as assisted living

communities (International Federation on Ageing, 2012). As people age, community care

services and assisted living communities will need to accommodate the increased health and

medical needs of older people (International Federation on Ageing, 2012).

Electronic Health Records help lower the incidence of errors and duplications by giving more

accurate and timely information to staff in an efficient manner (International Federation on

Ageing, 2012). Electronic health records also allow medical practitioners to have quick access to

data, patient medical history, and critical decision support when needed (International Federation

on Ageing, 2012). By having comprehensive information in one place, the interdisciplinary

teams can easily access a residents' health record to make knowledgeable decisions in respect to

care plans (International Federation on Ageing, 2012). Coupled with electronic health records
STRATEGIC THINKING 7

there is a growing use of telemonitoring systems by home health care providers in providing

virtual visits for persons managing chronic health and care conditions (International Federation

on Ageing, 2012).

New healthcare technology can support people to take more control and responsibility for

their own health and wellbeing (self-care). Home monitoring systems enable health

professionals to remotely monitor patients physiology or activity in the patients own home to

look for signs of change in their condition, enabling an early intervention and avoiding hospital

admission. The information can also be made available to carers, as primary and secondary users

(International Federation on Ageing, 2012).

Forces that Form the Basis for Generating Change in Assisted Living Facilities

Demography

The aging-in-place movement has been touted as an effective strategy to keep folks in their

homes, either delaying or avoiding altogether the need to enter senior-oriented housing, and this

trend could potentially have chain-reaction implications for senior living communities business

models and marketing strategies (Gerace, 2012). According to Gerace (2012), greater numbers

of people choosing to age in place could mean communities will lose appeal to younger,

healthier prospective residents, forcing them into a growing reliance on older, frailer residents in

order to maintain occupancy. As a community ages and acuity rises, it can become less attractive

to younger and healthier prospective residents; communities are relying more heavily on their

ability to attract older and frailer residents to maintain occupancy (Gerace, 2012).

The average age of those living in independent living has shifted a few years older to the mid-

80s with the average age of assisted living residents in the late 80s to early 90s (Gerace, 2012). It
STRATEGIC THINKING 8

could be challenging to reverse these trends and attract younger residents especially if an

independent living community reaches a tipping point where the community feels more like a

senior home than an active older adult environment (Gerace, 2012). And if newer residents

continue to be older and frailer, the effective market size for these residents is smaller on a

relative basis (Gerace, 2012). Thats because older prospective residents represent a smaller pool

of age and income qualified people and frailer residents are more likely to move into a senior

living community due to current or anticipated health needs than by the attraction of a care-free

lifestyle (Gerace, 2012).

Available Capital

Americas aging population is expected to create a demand for new and expanded services in

our nations senior living communities, as the senior citizen population is expected to grow from

six million to 20 million by the year 2050 (Matt et al., 2014). According to Matt et al. (2014),

long-term care providers have recently adapted to changes in payer models and are continually

seeking methods to increase their marketability by adding amenities such as libraries, pools and

walking paths, and by extending service lines. Therefore, the need to access capital to meet these

changing demands is as important now as it will be in the future (Matt et al., 2014).

Funding a nonprofit senior living organizations growth through the most appropriate

financing methods helps ensure the proper maintenance of its capital structure (Matt et al., 2014).

A strong capital structure is at the foundation of an organizations credit strength and, as such, is

critical to its ability to optimally fund organizational growth, generate operating income, and

deliver enhanced services (Matt et al., 2014). Accessing capital requires the precise matching of

an organizations financial plans with its strategic plans and an informed, unbiased understanding
STRATEGIC THINKING 9

of an organizations ability to borrow (Matt et al., 2014). Whether a provider chooses to build or

acquire a facility, expand or renovate existing facilities, or refinance outstanding indebtedness to

improve cash flows, its strategic plans and credit strength will determine its financing options

(Matt et al., 2014).

Competitors

Competition in the assisted living industry is very high. Low barriers to entry have made it

difficult for providers in this industry to retain high profit margins (Ortiz, 2014). The typical

barriers to entry for this industry include licensing and regulation, economies of scale for the

largest assisted living services providers, and the low cost structure that non-profit ALFs are able

to acquire which are not available to for-profit businesses (Ortiz, 2014). The lower cost for non-

profits can include the ability to finance capital expenditures on a tax-exempt basis and receive

charitable contributions that are unavailable to for-profit corporations (Ortiz, 2014). Factors

influencing the local markets include geographic location, knowledge of the elderly population

trends currently and going forward and regulatory issues (Ortiz, 2014). Also critical are supply-

and-demand forces shaping the local market in its current phase and what is expected for the

future (Ortiz, 2014). The only competition that Cedar Hill has is from the local nursing homes

because the other ALF closed due to lack of funding.

Issues Revolving Around Health Care Management and Policy Specific to Cedar Hill

Financial challenges and uncertainty continue to pervade the general economy. While the

passage of the Patient Protection and Affordable Care Act provided clarity and guidance to the

healthcare industry regarding healthcare reform, and technological advancements may introduce

more uncertainty than expected into the healthcare landscape in the future.
STRATEGIC THINKING 10

Healthcare Reform

While assisted living facilities have been concerned about how the Affordable Care Act

(ACA) will impact them and how they provide health insurance to their workers, they may not

realize that the comprehensive reform bill also contains funding for innovative methods of

providing careincluding for senior living residents (Gerace, 2012). Health care providers can

access these opportunities by participating in a variety of initiatives and programs both new and

old that seek to do several things, including increase the supply of geriatricians, develop

managed care models, and promote community-based, non-institutional care (Gerace, 2012).

When Congress passed the health care reform law in 2010, one of the Obama Administrations

major objectives was to improve care quality while saving money (Gerace, 2012). New ways to

deliver care will improve the quality of care individuals receive in medical and long-term care

settings and will reduce unnecessary costs (Gerace, 2012).

Impending reimbursement cuts will threaten profitability as most of the revenues from skilled

nursing and assisted living facilities are from Medicare and Medicaid (Pavarini et al., 2012). To

reduce costs, the new law also encourages patients to receive home care services, which are less

expensive than receiving skilled nursing or assisted living care (Pavarini et al., 2012). To remain

profitable, facilities may have to raise prices for private pay patients to offset the losses from

government reimbursements (Pavarini et al., 2012).

According to Pavarini et al.(2012), general recommendations for skilled nursing and assisted

living facilities to prepare themselves financially for healthcare reform include changing a

facility's business model to diversify revenue streams, bundling services and contracting with

larger providers. However, to succeed at accountable care, facilities will need to successfully
STRATEGIC THINKING 11

manage high acuity care at a lower cost and reduce hospitalizations (Pavarini et al., 2012). Many

provisions of the Affordable Care Act work to improve access to long-term care and home- and

community-based services and supports to seniors and people with disabilities (Pavarini et al.,

2012).

Technological Advancement

We continue to see health systems at all levels suffer in their ability to implement technology

related to healthcare. Whether this is in the payor processing world or with regard to electronic

medical records, it is not clear whether there is a systematic structural weakness or issues in the

labor force that will not allow systems and companies to use the type of technology that has been

so broadly encouraged by the government.

Electronic Medical Administration Record (e-MAR) is a popular technology that streamlines

and computerizes the necessary collaboration among the groups involved in medication

management. Better communication among physician, prescription fulfillment, facility

management and caregiver are achieved with e-MAR (Baker, 2012). It essentially is a software

system that tracks all resident medication-related activities, facilitates physician orders and

administration scheduling and monitoring (Baker, 2012). It eliminates errors due to illegible

handwriting or poor fax copy readability (Baker, 2012).

Markets in the Healthcare System and Determinants of Supply and Demand in Market

With 10,000 people turning 65 each day for the next 20 years, seniors will continue to seek

housing and healthcare options that meet their growing needs (CNL Securities, 2014). However,

as this demand continues to rise, existing inventory remains fairly steady, placing demand on

track to outpace supply (CNL Securities, 2014).

STRATEGIC THINKING 12

Approximately 21,400 facilities established to care for the elderly exist (CNL Securities, 2014).

These are comprised of Continuing Care Retirement Communities (CCRCs), independent living,

assisted living and memory care facilities (CNL Securities, 2014). Given the 65 and older

population is expected to rise from 40 million in 2010 to 88.5 million in 2050, this creates a gap

between supply and demand that is expected to widen although recently new developments has

increased supply in these markets (CNL Securities, 2014).

The healthcare sector has a finite supply of facilities as well, with approximately 5,200

ambulatory surgical centers, 7,200 hospitals (including specialty hospitals), and 16,500 skilled

nursing facilities (CNL Securities, 2014). As the number of medical visits per capita increases

with age, these types of facilities are expected to see an increase in demand as well (CNL

Securities, 2014). While the market for senior housing and healthcare properties is highly

competitive, as is the leasing market, the supply and demand characteristics within the senior

housing and healthcare sectors portray a favorable outlook both as the senior population grows

and those in it continue to live longer (CNL Securities, 2014).

Strategic thinking is not a mystic art, but a logical process that stems from knowing where

you are and where you want to be, and thinking about how to move from one to the other. Its an

essential part of keeping yourself on track, whether in life or in business, and well worth

spending a bit of time on every now and then.

STRATEGIC THINKING 13

References

Baker, T. (2012). How Technology is Changing Assisted Living Medication Management.

Retrieved from http://www.ssmgrp.com/blog/bid/82901/How-Technology-is-Changing-Assisted-

Living-Medication-Management

CNL Securities. (2014). Retrieved from http://www.cnlsecurities.com/advisor-resources/2024-

Understanding-Senior-Housing-Healthcare-Markets.stml

Ebersole, G. (2014). Strategic Thinking: 11 Critical Skills Needed. Retrieved from

http://www.cssp.com/CD0808b/CriticalStrategicThinkingSkills/

Gerace, A. (2012). How Aging in Place Could Change Senior Living Communities Business

Models Economic. Retrieved from http://seniorhousingnews.com/2012/03/21/how-aging-in-

place-could-change-senior-living-communities-business-models/

Gerace, A. (2014). Senior Living Funding for Innovative Care. Retrieved from

http://www.alfa.org/News/2640/Health-Care-Reform-Gives-Senior-Living-Funding-for-

Innovative-Care

International Federation on Aging. (2012). Long Term Care and Technology. Retrieved from

http://www.ifa-fiv.org/wp-content/uploads/2012/11/som-2012-ltc-and-technology-final-

report.pdf

Matt, K. & Swacki, G. (2014). Financing Options for Nonprofit Senior Living Organizations.

Retrieved from http://www.alfa.org/News/2910/Financing-Options-For-Nonprofit-Senior-Living-

Organizations
STRATEGIC THINKING 14

Murillo, M. (2014). Trends Affecting Healthcare. Retrieved from

http://www.healthadministrationdegrees.com/articles/trends-affecting-healthcare/

Ortiz, J. (2014). Assisted Living Facilities. Retrieved from http://www.sbdcnet.org/small-

business-research-reports/assisted-living-facilities

Pavarini, P., Sanders, S., & Lindsay, M. (2012). Health Care Reform Going Forward: Whats the

Impact on Providers. Retrieved from http://www.beckershospitalreview.com/hospital-

management-administration/health-care-reform-going-forward-whats-the-impact-on-

providers.html

University of California. (2006). An Aging U.S. Population and the Healthcare Workforce:

Factors Affecting the Need for Genatric Care Workers. Retrieved from

http://futurehealth.ucsf.edu/Content/8877/2006_02_An_Aging_US_Population_and_the_Health_

Care_Workforce_Factors_Affecting_the_Need_for_Geriatric_Care_Workers.pdf
STRATEGIC THINKING 15