Investor Bets on Medicare Advantage

Some forward-looking investors are taking stakes in Medicare Advantage (MA) providers and plans, which this group of investors believe will likely produce new revenues streams for seniors housing operators and owners over the next five years. 

Take, for example, Chicago Pacific Founders (CPF), a healthcare investment firm led by a partnership that includes John Rijos. He is co-founder and operating partner of CPF and chairman and CEO of its seniors housing subsidiary CPF Living Communities, which owns 37 senior living properties, and property manager Grace Management.  

With roots in hospitality, Rijos is well-known throughout the senior living industry. He headed Brookdale Senior Living for 13 years during its growth phase prior to its merger with Emeritus. Rijos was appointed in January to the NIC Board of Directors. 

Over the last two years, Chicago-based CPF has invested in two physician-led healthcare companies which provide services for MA plans. CPF also expects to purchase an Oregon-based MA plan with 30,000 members. 

“Seniors housing has an incentive to work with MA plans,” said Rijos, a recent panelist at a session on underwriting healthcare in seniors housing at the 2019 NIC Spring Conference. He explained that MA plans will likely pay for services in the years ahead that seniors housing providers already offer but do not get paid for, such as transportation to the doctor’s office.  

“MA plans see value in what we do,” said Rijos, quickly adding that partnerships between senior living providers and MA plans are at a “very early stage.” 

But the link between housing and healthcare is gaining momentum. New rules allow MA plans to cover certain types of in-home care which could apply to assisted and independent living communities.     

Seniors housing on insurers’ radar 

At the NIC Conference session, Rijos mapped out the growth of MA plans and the significance to the seniors housing sector. About 60 million people have health insurance through Medicare—a $600 billion business underwritten by the government with the help of its members. About 40 million people are enrolled in the traditional fee-for-service Medicare program.  

As of last January, 22 million people were covered in MA programs. These plans, sponsored by private insurers, are growing quickly by about 8.5 percent a year. Some prognosticators believe that by 2030 about half of all Medicare recipients are expected to be enrolled in MA plans.  

MA plans are growing in popularity because they typically offer more benefits to members and at a lower cost than traditional Medicare coverage. However, some plans can limit freedom of choice in health care providers and/or may require doctor’s referral and plan authorizations for some services and procedures. With MA plans, value-based care, with its emphasis on better outcomes at a lower cost, has a widening role to play as well. The emphasis is on prevention and early detection of health issues to keep frail seniors out of the hospital. 

The risk equation is shifting too. About 8 percent of MA plans are already in capitated arrangements with providers. In other words, the provider shares in the risk and/or the savings of the plan’s management. “Medicare is quietly privatizing the government’s responsibility for the elderly’s healthcare,” said Rijos.  

Recognizing the opportunity, CPF has made investments in two Medicare Advantage provider companies which assume risk for the healthcare of members. P3 Health Partners, Henderson, Nevada, has 22,000 members. Florida Elite Medical Group, Tampa, has 6,000 members. The Oregon MA plan that CPF will purchase also assumes risk for its members.  

How does seniors housing benefit?  

“Medicare Advantage plans have a financial incentive to keep your residents healthy,” said Rijos. He foresees four areas where MA plans may provide new revenue for senior living communities: transportation to the doctor; fitness programs; nutrition expenses for special diets; and home health. The home health component would likely be a partial payment for care coordination as long as the outcomes are provable. “These four areas will have a significant impact on a community,” said Rijos.  

To succeed, seniors housing providers need electronic records, he added. This will allow them to share information with healthcare providers and to help coordinate care efficiently. 

The collaboration between MA plans and seniors housing will take time to evolve, said Rijos. A lot of MA plans are on the market which is highly fragmented, he observed.  

But insurers and providers are beginning to recognize the importance of housing in the healthcare continuum.  “Senior living was not on the healthcare radar five years ago,” said Rijos. “Now MA plans are coming to us.”