What lessons should China learn from the American experience in senior housing during the 1980s and 90s? What is the right role of the Chinese government as regulator of the sector?

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Developing the Right
Public/Private Partnerships for
China’s Emerging Senior Care
Industry
June 2, 2013
www.AsiaHealthcareBlog.com
www.RubiconStrategyGroup.com

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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?

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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
www.AsiaHealthcareBlog.com