More than 25 years ago, when private-pay assisted living burst on the scene, there was a large percentage of nursing home residents that had no other choice in their local communities, but had the financial resources to pay out-of-pocket. Many of them turned to assisted living. For those on Medicaid, the choices were slim.
We have long advocated that states could save money with their Medicaid-funded residents if Medicaid covered more assisted living for those who truly can’t afford any private pay living arrangement, especially those needing any kind of nursing care. The fear, of course, was that the Medicaid pie would expand as opposed to merely shifting where the money goes.
Now, with the pandemic cutting nursing home occupancies to the bone, SNF expenditures have dropped and the “fear” of a nursing home bed shortage, which we always thought was overblown, may be in the rearview window for several years to come. The reality, however, is that there are many very-low-income elderly who do not have any options for appropriate care but don’t need the level of care offered in SNFs.
States like Indiana and Illinois have succeeded in dealing with this problem through their supportive living programs, which are a hybrid where private-pay and Medicaid-funded residents live together in communities that are often newly built and quite attractive. To our knowledge, very few, if any, are 100% Medicaid waiver.
Until the pandemic, nursing home occupancy rates were among the highest in the country in Washington, D.C. They also fared better than most states, and there remains a need for settings that are a step below skilled care. In Ward 8 in the District, one of the poorest in the capital, there really was no assisted living for low-income residents. In the entire District, there were only 40 assisted living beds for this demographic. That has changed with the development of Livingston Place at Southern, a nearly $67 million development with 152 assisted living units, including one-bedrooms and studios. That comes to a total development cost of about $440,000 per unit – for 100% Medicaid waiver units!
Working with the local housing authority, department of health and many other local agencies, this project was penciled out in 2017 with construction starting in 2019. A lot of hurdles had to be jumped, but it didn’t hurt that the mayor was for it. The ownership group was led by Gilbane Development Company and included Dantes Partners, Carding Group and H Street Community Development. But it was not easy.
Just ask Sevy Petras, CEO and co-founder of Priority Life Care, a growing manager of assisted living communities, especially those with a large Medicaid population. She has teamed up with the owners to market and manage the community, which just opened this past June. Given how the building looks, one might think future residents would be rushing in to get a spot. But they need to qualify, which includes a medical assessment, income qualification, already being in the EPD waiver program (Elderly and Persons with Physical Disabilities), and a physical exam by a Medicaid approved doctor. There are currently a little more than 4,700 people already in the EPD program.
Ms. Petras is no stranger to Medicaid-waiver assisted living programs, having made a name for herself in Indiana with various conversions of properties purchased. With a strong background in finance, and now years of operating experience, she “gets it” with the potential for Medicaid waiver programs, and along the way has become somewhat of an expert in the Low-Income Housing Tax Credit program (LIHTC) and how it can work in assisted living.
All states have low-income housing tax credits, which can be sold to financial institutions and the proceeds used as the equity for projects such as Livingston Place. In this project, these tax credits were sold to generate about $15.4 million of the “equity” component of the capital stack. These tax credits were issued by the Housing Finance Agency along with the Department of Housing and Community Development. In addition, the District of Columbia Housing Finance Agency issued $47 million in tax-exempt Multifamily Assisted Living Program bonds plus $3 million of taxable bonds. These had 20-year maturities and 40-year amortizations, and came with 6% interest rates. The rest of the funding came from the developers. As you can see, there are a lot of moving parts, and the process is not for the impatient.
The reception of this new community has been tremendous, and according to Petras, about half the people who have stopped by are interested in moving in, and the other half interested in working there. Because the eligibility screening process is so rigorous, and could not start until the community was licensed and received its certificate of occupancy, only about 10 residents have moved in and they are currently processing another 40. Now that everything is in place, the process will go faster, and Petras expects that they will be 100% occupied by spring of next year, and maybe earlier. That is an envious fill-up rate, especially in this environment. The demand is strong, partly because the apartments are nicer than what many residents have ever lived in. Two more communities are in the works for different Wards in Washington.
While we do not know how much these types of developments will take off in the future, there is definitely a pressing need, and we are sure Petras and Priority Life Care will be right there to manage them.
