New and sophisticated healthcare technology systems offer another sector of opportunities for integrators.
May 17, 2011 | by Dan Daley
If you’re looking for a market sector with unlimited potential for growth, look no further than commercial healthcare facilities. Life expectancy tables show the average 65-year-old can expect to live to almost 84, according to data released by the Centers for Disease Control and Prevention. And more of America’s senior citizens are turning to assisted living and independent living facilities, as well as increasingly advanced nursing homes.
For the nearly 38 million Americans over the age of 75, according to the Census Bureau, there are 2,779,000 living or care units at 21,130 independent-living, assisted-living and nursing facilities in the U.S., according to National Investment Center (NIC) for the Seniors Housing & Care Industry. Many of those will likely be looking at electronic systems solutions to help them cope with rising tide of residents.
Related: Why Telemedicine is Necessary
There’s more than sheer numbers compelling the growing application of audio, video and automation systems into such facilities, however. The assisted living industry has undergone some significant corporate consolidation during the recession. The biggest such move was the most recent — healthcare real estate investment trust (REIT) Ventas acquired the assets of Atria Senior Living Group last October in a deal valued at $3.1 billion. The transaction was for 118 housing assets comprising around 13,500 individual units and established Ventas as the largest owner of seniors housing communities in the United States. In a similar move, Health Care REIT last year formed a partnership valued at $817 million with Seattle-based Merrill Gardens Retirement Communities.
This activity speaks to two major trends. First, the merging of REITs and assisted living facilities gives those facilities access to the capital needed to expand and to integrate more sophisticated technology systems into new and existing facilities. Second, a common collateral of any significant consolidation is the reduction of staff to eliminate redundancy and decrease overhead costs. And as it has in many other industrial sectors, integrated systems technology will be looked at to help cost-effectively boost productivity.
A Wide-Open Market
Commercial systems integrators are used to a fairly stable array of products and systems to choose from; they are also used to a rather consistent and predictable client base that is at least aware of most of their broad systems options and solutions. Those wandering into the nascent commercial healthcare systems monitoring and caregiving sector won’t find that kind of orderly familiarity.
Recent years have seen a growing procession of dedicated healthcare technology systems come to market. GE’s QuietCare is already in assisted and independent living facilities to monitor resident movement. The system uses IR motion sensors to alert caregivers to falls or wandering. The same sensorbased approach is employed to build a knowledge base about institution residents by following and logging their daily routines: when they usually go to bed and get up, leave and enter their apartment units. Analysis of these data alerts caregivers to any deviation, such as leaving the bed in the middle of the night to use the bathroom but not returning within the usual 15 or 20 minutes, which could indicate a fall.
GrandCare, distributed by Home Controls, is a fast-growing customizable solution that combines aspects of home automation technology, Internet connectivity and “telewellness” in a single wireless package that consists of a CPU connected to a standard video display and the web. The system outputs a continuous display of news, weather, pictures, email and reminders to the resident and at the same time monitors a range of wireless sensors around the living unit, such as bed occupancy, door opening and closing times, and measurements from connected scales and blood pressure from connected scales and blood pressure devices. That data is archived, processed and is accessible to a central station in the facility (or, in the residential version, to the caregiver or family member). If something is amiss, it’s programmed to generate an email, text or phone call.
A plethora of systems from Home Free Systems, It’s Never 2 Late, Simply Home and other companies are rapidly coming to market. Many are recent entries, like Simply Home, a two-year-old spin-off of an affiliation of long-term-care facilities that decided to develop its own systems and products to address the growing numbers of institutional residents through technology. But there are also behemoths entering this landscape: Last August, Intel and GE announced a 50/50 joint venture to develop and market products, services and technologies aimed at connecting seniors at home with institutional caregivers.
Integrators will also find a sector in which the line between commercial and residential systems is narrowing to the point of invisibility: most systemic product approaches have very little difference between their home and institutional versions (the commercial versions are generally scaled for multiple terminal installations), prices are already declining — some basic but effective systems can be had for as little as $800 — and they are overwhelmingly wireless and geared for a DIY market.
Easy Does It
Stacey Pierce, director of senior solutions at The Oaks, an independent and assisted living community in Orangeburg, S.C., is neither NSCA nor CEDIA certified but nonetheless installed GrandCare systems in all 37 living units of the community campus’ three dormitory halls herself. (The company’s IT specialist made the Internet router connections.) “It’s not exactly plug-and-play — you do have to have a working knowledge of X10 and Z-Wave to get it installed properly,” she says. “You need some training, but it’s pretty straightforward.” But Pierce adds that she’s considering retaining a traditional systems integrator because she adds that she’s considering retaining a traditional systems integrator because she can’t keep up with the demand for systems at The Oaks’ other locations in Georgia and the Carolinas.
That’s a double-edged sword for commercial integrators. The real opportunity for them will lie in scaling these systems for institutional-type facilities that often have multiple levels of occupants, from relatively independent residents and those needing assistance in everyday basics like medication management and dressing, to those with Alzheimer’s-like impairments and nursing-home patients. “The systems may seem relatively simple to operate and install, but what integrators really need to understand is that this is a caregiver business,” Pierce emphasizes. “A lot of [integration] companies may be looking at this market because their business in other markets is off, but what they have to understand is that you’re not just installing and walking away. You’re becoming part of the family. You’re with them till death.”
Jason Ray, director of business development at Simply Home, says many of the healthcare monitoring and reporting systems on the market now were initially developed for residential applications (Simply Home’s system was developed in 2004 for use in their affiliated companies’ long-term-care and assisted-living facilities and offered as a retail proposition starting in 2007) but he says that the next generation of systems will be more sophisticated, more scalable and will put more emphasis on professional installation and integration.
The company’s Butler monitoring system, now in use in nearly 300 senior-care facilities, will be rolled out early this year rebranded as the Simply Home System. It’s based on the Zig-Bee-like 802.15.4 wireless protocol, integrates cellular communications, and a broader range of sensors, such as a patent-pending stove monitor, and can perform “sequential decision making” — if a stove is on too long and an adjacent door is left open, the CPU can determine that someone left but forgot to turn off the appliance and then send the appropriate alert. It will also have extended scaling capabilities, as well as the capacity to monitor facility employees as well as residents and patients, a key function in light of rising liability costs for institutions.
Ray says that’s just one of many characteristics that sets the senior-care technology sector apart at the commercial level. For starters, assisted living and other senior-care companies have been hit by the recession, too; according to data analysis by the NIC for the Seniors Housing & Care Industry, the independent living occupancy rate was 87.1 percent in Q3 2010, down 30 basis points from the previous quarter.
In contrast, assisted living occupancy was at 88.7 percent in Q3, up 40 basis points from the previous quarter and that suggests continuing revenue fluctuation. In particular, independent living occupancy rates are continuing to establish new cyclical lows, Chuck Harry, NIC’s research director, stated in a recent forecast. And while facilities are looking to technology to reduce staff and costs and increase efficiency, they are trying to accomplish that at as low a cost as possible.
“Also, this is a healthcare space first and foremost, with all the regulatory issues that that brings with it,” says Ray. “Regulations can be pretty dense and they can vary subtly from state to state; for instance, South Carolina regulations prohibit the use of wireless nurse-call paging systems. That knowledge gap is a hurdle for integrators, and there’s no single resource to go to about it.”
While new, more sophisticated healthcare monitoring systems are already under price pressure (Simply Home’s newest system will cost several hundred dollars less than its predecessor), they also come with a silver lining in the form of recurring revenue. Monthly service fees (monitoring or rental/lease) can range from $25 to more than $100, depending upon the level of care and services included. GrandCare, for instance, recommends its dealers charge $49 monthly for software updates and for access to the company’s portal, which generates the text, email and mobile phone alerts if the system detects an anomaly in a resident’s room. Of that amount, $30 is paid to the distributor and $19 is paid back to GrandCare. Dealers are allowed to set the monthly fee higher though the distributor, while GrandCare payments remain the same.
In fact, says Ray, once more large and small systems and product providers jump aboard what he believes will be a very big bus as affluent Baby Boomers continue to age and require more services, the healthcare technology landscape will look very much like the installed security systems sector, with a recurring revenue model for dealers and tiered packages. “What will set it apart, though, will be the increasingly sophisticated data correlation and analysis capabilities of these systems,” he predicts.
Not everyone is seeing the explosive growth of healthcare technology systems as a land rush. Companies that have been in the higher end of the sector, such as Rauland-Borg, which markets and installs patient monitoring and responder management systems in acute-care facilities, have limited presence in the assisted living and other commercial residential facility business because they see it evolving quickly into a CE type of paradigm, with thinning margins and itinerant systems installers. Maureen Pajerski, VP of sales and marketing at Rauland, says its package has to include both system installation and maintenance by a company authorized contractor. “Our systems sell based on total cost value, not just the cost of acquisition,” she explains. “At this level, they have to.”
There are not a lot of systems integrators in the commercial side of this market yet. (The greater availability of consumer-type systems, though, has seen a number of residential installers jump in.) But those who are say that choosing among systems is important. Carlos Lugos, owner of Intersekt, a Coral Gables, Fla., integrator, says he researched the market for a year before deciding to use the Safely Home system, but held off entering the market until the commercial version of that company’s product became available.
He thinks the market is ripe. “The number and average [wealth] of retirees in south Florida makes this a very good place to start,” he says. But Lugos watched as several home automation companies rapidly expanded their distribution and dealer base during the boom years in the early 2000s. That, he believes, led to many less-than-perfect installations as more integrators came into the business. “A lot of our business recently has been going back and fixing bad home automation installations by other integrators,” he explains. “And when that happens, the client doesn’t blame the installer, they blame the brand. We don’t want that to happen with this market, which we think is going to be huge.”
Lugos says he chose the Simply Home solution over the one from GrandCare, which he acknowledges is a good technology proposition, but based his decision solely on his perception that GrandCare is already available to too many distribution and installation channels. Dan Milligan, president of Acme Audio Video in Scottsdale, Ariz., is using GrandCare but is integrating it with the Crestron automation systems he’s long been installing. Most of Acme’s business is residential, and Milligan acknowledges that the falloff in residential construction prompted him to look into commercial projects. Serendipitously, one of his home theater clients happened to be an investor in a local assisted living facility, and Milligan quickly saw a niche.
“We researched the assisted living market and we saw that the average age of most residents was around 85 years old. That means that we can set 40 HVAC zones at similar temperatures from a central location, and that saves them from having to send a maintenance person all over the facility several times a day to adjust thermostats.” Milligan says adapting other typical automation system capabilities, like using the same feature that generates an alert when a projector bulb goes bad to alert facility management where a light bulb has burned out. He notes that the first assisted living facility they installed the Crestron/ GrandCare solution was able to reduce its staff quickly thanks to the automation.
“GrandCare is all about monitoring the living space, but when we integrate it into an automation system, we can fill in the monitoring and reporting gaps between residential units, in the halls and common rooms, tracking people outside their living units,” Milligan explains. “There are a number of ways you can configure new and existing technology products for senior living facilities. Finding the right balance of solutions will take time and experimenting.”
Is The Market Right for You?
Getting into the commercial healthcare tech market may take starting what will likely be an extended conversation between integrator and healthcare facility. A source at one of the larger healthcare systems manufacturers said that the assisted-living and independent-living markets, and to some extent the long-term care business, suffer from intrinsic technophobia. “Sometimes I’ll be in an assistedliving facility and there’s only one computer in the whole place,” the source states, adding that, unlike acute-care facilities and hospitals that are used to high-tech systems, assisted living facilities are concerned about how the vast amounts of new information these systems output can be integrated into their current, mostly paperbased workflow. (The Health Insurance Portability and Accountability Act of 1996 [HIPAA, Title II] that brought continuing concerns about liability over patient recordswill apply here, as well.)
They’ve also raised concerns that more technology will dehumanize senior care. And the industry’s high rate of staff turnover — as much as 100 percent annually in some facilities — means any training that staff caregivers get on the systems also leaves with them. The challenge — and the opportunity — for the integrator, the source says, is to allay the technophobia and demonstrate how new monitoring data can actually improve efficiency and facility performance, particularly if it’s integrated with other office systems, which offers the pro an upsell opportunity for systems and ongoing training. And, he says emphatically: “Once they have that information, then the future for this technology sector is very bright. Instead of the episodic model used now at assisted living, where a resident sees a doctor every six months and a course of treatment is based on that, imagine if the data was continuous and automatically updated, and treatment plans can be modified immediately. That’s transformative. That’s what the integrator can accomplish.”