How Creative Models, New Payment Sources Help Senior Living Operators Reach the Middle Market

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The opportunity ahead for senior living operators with middle-market models is sizable – so why aren’t more senior living operators doing it?

The answer to that question changes depending on who you speak with. But generally, operators that have not dipped their toes in the space cite tricky financial math as the biggest barrier to making such models work. And in 2024, many operators are seeking to maximize the rates they are collecting from residents to elongate margins – another barrier to middle-market success.

But in recent years, organizations have devised working middle-market models that both preserve affordable rates for residents and make a margin amenable to their bottom lines. One such organization is Marion, Ohio-based United Church Homes, which is forging ahead with a middle-market strategy based on a new model hammered out during the Covid-19 pandemic.


Today, the organization has a portfolio that includes six middle-market communities totaling 450 units, with another two in development. Its model, which has three tiers based on a resident’s income, is capable of carrying starting rates for independent living that are 53% lower than competitors, on average, according to a recent NIC case study.

At the same time, there are advances in payment sources underway that could help power the next generation of middle-market senior living communities. Although there are still some barriers to implementation, both the Program of All-Inclusive Care for the Elderly (PACE) and value-based care could be other levers for middle-market senior living operators to capture demand from the middle-income demographic in the future.

“Many older adults are living on fixed incomes and Social Security. The rising of property taxes in municipalities has really impacted a lot of older adults,” Daniel said. “We’re hearing a lot from low- and middle-income people who suddenly are finding a majority of their monthly fixed incomes too stressed. So there is a growing interest in a product that has the ability to soften that for them.”


Inside the United Church Homes model

Several years ago, United Church Homes decided to leverage its experience winning funding through the HUD program and service coordination to create a middle-market model for private-pay senior living.

UCH’s model breaks middle market offerings into three offerings, with rent dependent on the resident’s income, ranging from $900 to $4,500 depending on income and broken up by income brackets, with the lowest bringing in between $25,000 and $40,000, and the highest making $61,000 to $73,000 annually. As residents need additional services, they are able to buy their own or pay privately for them, such as home care and dining services, as a way to focus on cost control without sacrificing quality.

Previous reporting from SHN states UCH offers services including “personal care, housework, errands and pet care in as small as 15 minute increments” and a variety of dining options, from as little as no onsite dining, but access to a service coordinator to help with meal prep, up to three meals daily.

Among UCH’s new-build middle-market projects are a 60-unit, semi-detached home model for low-middle income residents in Plain City, Ohio and a 60-unit acquisition in Catawba Island, Ohio that includes additional acreage for the organization to expand into.

The organization rebalanced its portfolio last September in a move aimed at better preparing for the senior living industry’s value-based care future.

The organization keeps cost bases relatively lower on new projects by partnering with real estate developers in a joint-venture relationship where the non-profit underwrites some of the pre-development expenses of design and marketing.

“Once the project goes forward, then we have a return on our investment, it’s like an opportunity fund; it comes back to us with interest,” Daniel said. “And then we typically will pick up the long term management program for those buildings, which has a margin opportunity for us as well.”

Daniel added that United Church Homes has made use of the active business partnerships it has developed to grow over the years.

“It’s more than a business relationship, especially in the nonprofit world, where we don’t develop and flip properties to make a profit quickly. We invest and develop and devise an experience that we can own for a long time horizon,” he said. “That’s our ultimate goal.”

Daniel is also the CEO of Radiant Alliance, a group UCH formed with Metta Healthcare, the parent company of Ohio’s Hospice and Pure Healthcare. The entity was founded as an affiliate of CareSource, a nonprofit health plan based in Dayton, Ohio.

PACE, value-based care enable lower rates

One of the biggest barriers to middle-market senior living is the cost residents incur on care services. A viable strategy to meet the middle-market is to use public payment sources in Medicare and Medicaid to help unburden residents from those costs.

One such payment source is PACE, which provides certain kinds of help to older adults in their homes and in day centers. Nearly half of Medicare beneficiaries make less than $30,000 per year and are unable to afford most private-pay senior care services, according to Shawn Bloom, president and CEO of the National PACE Association.

Using PACE, older adults can access important services they need to age in place in their homes, including exercise, activities and meals – and at a cost that is far lower than private-pay senior living.

“The notion of paying for … nursing home care is completely price prohibitive for those individuals. Further, even if they were to access some home care, [they] probably don’t have enough money to really fulfill their needs,” he said. “Individuals that are not quite Medicaid eligible, that are not quite in need of a full battery of long term care services, are kind of left on their own.”

But there lies a big barrier to PACE: Medicare part D. Because of the demographic of the older adults that PACE serves, people who take part in the program are often paying around $1,000 per month to take part. That’s a significant discount to the average cost of senior living, but it’s still too big an obstacle for the low-income population that PACE serves, Bloom said.

“The model itself yields very good outcomes.100% of the people that enroll in PACE are eligible for nursing home care,” Bloom said. “But our statistics over the years [show] only 5% of individuals are permanently placed in a nursing home.”

Still, demand for the program has ticked up during the pandemic, and today there are 50 additional PACE programs planned in several states, according to Bloom.

“I think there’s a clear recognition that nursing home capacity is not what it was prior to the pandemic, in terms of occupancy, labor, consumers willingness to go there,” he said. “And states are motivated to look at supporting community based services because of an enhanced federal match to under Medicaid.”

Another way senior living operators have sought to grow in the middle-market is by joining up with companies offering special plans to help residents pay for services. Those companies include Pine Park Health, which launched in 2020 to help senior living operators coordinate and offer primary care services through specialized insurance plans.

Jim Lydiard, Pine Park’s chief strategy officer, believes that there is an opportunity ripe for the taking in senior living in the form of better managing resident health outcomes. Pine Park is a “primary care partner trying to ease the burden of care” for communities by sending in mobile primary care, care management and care coordinator teams into communities.

“There’s a sense of urgency and working with groups like us that I think a lot of the middle market communities really appreciate,” Lydiard said. “When buildings help primary care improve in the way of quality, compliance, avoiding rehospitalizations … many of those activities can be monetized and can be reimbursed in a way through increased resident length of stay and avoidable move-outs. It’s the beginning of something important, which is for the middle market buildings that are now fitting into being a healthcare provider, and not just a hospitality place where people live.”

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