Perhaps the most visible sign of St. Louis’ baby boomers growing old is the local construction surge of senior licensed care facilities. Over the past three years, construction, renovation and expansion projects in the metro area have added up to nearly one quarter of a billion dollars with more development on the way.
For decades, experts have anticipated the U.S.’s roughly 76 million citizens born between 1946 and 1964 would be transforming the retirement landscape, said Paul Ogier, CFO for Lutheran Senior Services, which in March opened a new assisted living quarters at Meramec Bluffs senior living community just north of the Meramec River in Ballwin.
“Obviously, the underlying pin is demographics. We’re just starting to get to where the baby boomers are hitting the age of [needing] senior housing,” he said.
With advances in health care and healthier lifestyles, however, the boomers have taken a few years longer than expected in driving up demand for senior care services, said Ogier.
“Even though we’re getting older, we’re also getting healthier. So now the age when people are really starting to need care is late 70s and early 80s, which is why the baby boom has hit later than what people were predicting,” Ogier said.
Missouri, and St. Louis in particular, appears to be one of the areas of the country where this shift is happening first. According to a report by the East-West Gateway Council of Governments, St. Louis currently has the fifth highest per capita of residents over 65 among the nation’s 35 largest cities. Census data show that roughly 185,000 residents, or 13.2 percent of the city and county’s population, is older than 65. The Population Resource Center estimates that 20 percent of Missourians will be over 65 by the year 2020, which is 10 years ahead of the national average.
It’s hardly a surprise then to see so much construction across the metro area. Some of the larger projects include a $32 million expansion and renovation at McKnight Place Assisted Living in University City and a $65 million expansion at Friendship Village’s two campuses in Chesterfield and Sunset Hills. In addition, a proposal in Sunset Hills is moving forward for a $20 million assisted living facility. And, Lutheran Senior Services is planning further expansion with a $50 million senior care community in Lake Saint Louis.
Driven By Deregulation
The overwhelming majority of the area's new construction has been for what’s called assisted living facilities or ALFs. In 2006 the state permitted these facilities as an alternative to traditional nursing homes known as skilled nursing facilities, said Ron Present, a certified nursing home administrator in Missouri and a consultant for the firm Brown Smith Wallace.
With looser regulations, said Present, these facilities essentially are allowed to provide much of the same services once exclusive to nursing homes, which traditionally provide more advanced care and are subject to federal regulations because they receive federal dollars.
“One of the values you have with assisted living [facilities] is they’re much cheaper to build than a nursing home,” he said. “Estimates are roughly a third cheaper.”
Under the regulations, for instance, ALF structures can incorporate more wood in their construction, while more materials for skilled nursing facilities have to be non-combustible.
“The requirements in terms of the air flow systems, and the width of the halls and the physical plant requirements are different and are more regulated [for skilled nursing facilities] than on the assisted living side,” said Present.
As a result, assisted living facilities have been an attractive investment for for-profit developers. They’ve also helped drive a pretty lopsided building boom in St. Louis. That’s due in part to how residents pay for the services, said Mary Lynn Donovan, director of the local senior advocacy group Voyce.
“The problem is assisted living is all private pay,” she said.
Medicaid in Missouri generally doesn’t cover assisted living care, which is a big part of why such facilities are only popping up in more affluent neighborhoods, where seniors can afford to pay out-of-pocket.
This, said Donovan, also helps explain why none of the new facilitiess have been built in the city of St. Louis, where the poverty rate for seniors is almost 18 percent.
“So, if you don’t have money, there’s no funding stream to pay for it and if you look at the beds in the city, 92 percent are Medicaid beds,” she said.
Making Future Beds
One way to look at where the market is most expected to grow is in the number of additional beds that providers have sought approval for from the state. As a means of keeping occupancies high and costs low, Missouri requires providers to acquire a Certificate of Need to add more beds to an area. More approvals granted are a good sign of where providers are expecting growth to occur.
The latest records from the Missouri Department of Health and Senior Services show that in St. Louis County, 972 beds have been approved but are not yet being offered. In the city, there are no additional beds approved.
To industry experts like Ron Present, these two figures are related when looking at the options most seniors have in paying for care.
“From a business perspective, [ALFs are prone to] taking the cream of the crop patients — residents that are all private pay [who] can afford to move in there — and then keep them until they can’t afford it anymore and then they go to the nursing home,” he said.
“So, the burden for the nursing home owners or providers is now they have a fixed, lower payment level because Medicaid is typically lower than private pay," Present said. "So now they’re being potentially burdened by residents at a lower revenue stream.”
In the future, this could increase the burden on facilities serving lower-income seniors. As more ALFs open and draw away those senior citizens who can afford it, nursing homes will have less incentive to expand facilities in lower income neighborhoods where the need for senior care is growing as well.
According to Lutheran Senior Services’ Paul Ogier, the simplest way to even the playing field would be to increase the amount of funding that skilled nursing facilities receive through Medicaid.
“While there’s been this explosion in AL there’s been little growth there may even be a small decrease — in the number of skilled beds. So our population is increasing. There’s more people needing the service, a higher percentage of them is going to assisted living," Ogier said. "The skilled [nursing] area is staying the same and actually we’re predicting it will decline.”