Independent/Assisted Living Industry inthe U.S.

Contributed by Parks AssociatesFebruary 2011

Commissioned by Wellness and Health Innovation, Scotland’s national initiative designed to support Scottish companies developing innovative products or services for the wellness and health sector. www.wellnesshealthinnovation.org

A WHI White Paper

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Independent/Assisted Living Industry in the U.S.

A WHI White Paper

1. AGING SENIORS AND THEIR NEEDS

The world is greying. The U.S. Census Bureau projects the65+ population will increase by 48% in 2005-2020. Duringthis period, the oldest age group – 85 years and above – willincrease by 43%. Outside the U.S., the situation is equallychallenging. Each month, the world's elderly (65 and plus)population increases by 795,0001. In Japan, the proportionof the population aged 65 years and older hit 20.8% in2006 and consumed more than 50% of the national healthexpenditure2. As this population will increase to around 40%of total population by 2050, their share of the healthcareexpenditure will increase as well 3. In China, the world’sbiggest developing nation, more than 88 million people areseniors. By the end of 2050, more than 100 million peoplewill be 75 years or older 4.

Longevity is a blessing but creates its own social and economic implications. For example, the Alzheimer’sAssociation expects the number of people over 65 whosuffer from Alzheimer’s disease to increase from five millionin 2007 to 7.7 million in 2030. By 2050, 60% of people with Alzheimer’s disease in the U.S. will be 85 or older 5.The ballooning senior population also strains an alreadyfragile long-term care system. In the U.S., a shortage ofnursing-home staff, high turnover rates for home aides, lack offunding for long-term health insurance, and experiences with(or expectations of) less than adequate service all contributeto people’s reluctance to move into a long-term care facility.

Instead, seniors prefer living in their homes and own communities. Technologies are gradually making it possiblefor them to live an independent life. However, user demandsare increasingly expanding beyond basic safety and healthneeds to expect an experience of connection and fulfillment.Technologies, although currently focused on making theenvironment more intelligent in tracking seniors’ health statusand activities, will catch up to these demands with morefunctions such as communication channels with family andhealth professionals.

1 World Health Organisation (WHO); 2 Ibid; 3 Ibid; 4 National Bureau ofStatistics of China; 5 The Alzheimer’s Association

INTRODUCTION

In this white paper, we review the US independent/assisted living industry byanalysing industry drivers, consumer perceptions and needs, market structure,prevailing business models, and outlooks.

ATTRIBUTION

Authored by Harry Wang, Parks Associates

Commissioned and Published by Wellness & Health

Innovation (WHI)

© February 2011 WHI and Parks Associates

Glasgow, Scotland, U.K./Dallas, TX, USA

All rights reserved. No part of this book may be

reproduced, in any form or by any means, without

permission in writing from the publisher.

Printed in the United Kingdom/United States of

America.

Disclaimer: Wellness & Health Innovation (WHI) and Parks

Associates have made every reasonable effort to ensure

that all information in this white paper is correct.

We assume no responsibility for any inadvertent errors.

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Figure 1: Seniors’ Needs and Wants Are Multidimensional

Connection

• Family members• Circle of friends• Community access• Fun for life

Contribution

• Sense of fulfillment• Legacy left behind• Satisfaction of life

Health

• Control symptoms• Prevent hospitilisation• Manage medication• Comfort diagnosis

Safety

• Fall detection & prevention

• Safe environment• Emergency response

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A WHI White Paper

2. THE ROLE OF TECHNOLOGIES ANDSENIORS’ PERCEPTIONS

General technology adoption among seniors is alreadyreaching a mass-market level in the U.S. Parks Associates’consumer survey reveals that among seniors 65 years andolder in the U.S., 81% have broadband Internet access,73% subscribe to pay-TV services, and 72% have a basicmobile phone, with 6% owning a smartphone. However,adoption of technologies specific to health and safety, suchas location trackers and home sensors, is still at an earlystage (Figure 2).

In the next five years, Parks Associates expects to see significant advances in body area network sensors, siliconfor medical use, mobile app-enabled care solutions, andembedded wireless monitoring technologies (Figure 3).These developments will further expand technology’s role inend users’ pursuit of wellness and independent living andcreate business opportunities for aspiring entrepreneurs.

Figure 3: Technology Hotspots for the Next Five Years

Body Area NetworkSensors

• Its embedded low-powerradio enables wirelessdata transfer from sensors to recordingdevices

• printed battery technology makes it a disposable digitalband-aid

Silicon for Medical Use

• Its Tylenol capsule-sizedEndoSure® sensor is animplantable wireless sensor to transmit cardiac output, bloodpressure and heart ratedata to an external electronic module formonitoring and reporting

Mobile App-enabled Care Solutions

• Its DiabetesManagermobile app supportsmedication adherenceand securely provides for the capture, storage,and real-time transmissionof blood glucose dataand other diabetes self-management information

Embedded WirelessMonitoring Technology

• Its Mobile CardiacOutpatient Telemetrysolution uses mobilebroadband to send ECG data to physiciansfor arrythmia monitoringand detection

Figure 2: U.S. Ownership of Health or Safety Monitoring Devices (Q3/10)(Among 644 seniors 65 years and older, +/-3.86%)

Blood pressuremeter

Glucose/Bloodsugar meter

Emergency responsebutton or pendant

Drug dispenser withelectronic reminder

Home presencesensor

Locationtracker

17 million

8 million

1.4 million

1 million

210k

100k

49%

23%

4%

3%

1%

0% 20% 40% 60%

<1%

That he/she may fall andhurt themselves

His/her inability to call forhelp when or if needed

That he/she will forgetto take medicine or

take the wrong drugs

An acute event causedby this person’s underlying

chronic conditions

That he/she may wander offin the neighbourhood and notbe able to find the way home

Mental instability that willresult in violent or

disruptive behaviours

71%

44%

40%

35%

17%

16%

5%Others

0% 20%% indicating concerns

40% 60% 80%

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Seniors’ adult children are an increasingly viable consumersegment for the senior independent living market. In theU.S. alone, about 18%, or 20 million households, are currently taking care of one or multiple family memberswith age-related problems. An additional eight millionhouseholds anticipate looking after an elderly parent witheither age-related problems or chronic ailments. Their topconcern is that their parents might fall in the home and hurt themselves, which could lead to more serious consequences (Figure 4). Inability to call for help, taking thewrong medication, suffering an acute attack, and gettinglost in the neighbourhood complete the list of caregivers’top-five concerns. Because of their concerns, they are farmore interested than their loved ones (the people for whomthe solution is designed) in finding a solution. Family caregivers show strong interest in basic services such asPERS (personal emergency response service), and theyalso indicate growing interest in advanced services such asin-home activity monitoring and telehealth monitoring withthe hope it will bring comfort knowing their parents are safe.

Challenges, however, still remain in place. Besides lowawareness about the benefits of these technologies, manyseniors are put off by the complexity of the hardware andsoftware. Often companies adapt these devices fromindustry designs that lack consumer appeal. As a result,early-adopter seniors find these devices awkward to use,with user interfaces crammed with functions and no intuitiveflow to the product design. Compliance consequently goesdown, and consumers’ value perception turns negative.

The high costs of such devices and associated services areanother inhibiting factor. For example, a wearable GPS trackeris currently priced at £128-£256 ($200-$400) plus a monthlyservice fee of £31.50 ($49) and up. Advanced medicationdispensers, in another example, can cost between £193($300) and £4,490 ($7,000), plus a monthly monitoring fee.In contrast, seniors and their grown-up children indicatedin Parks Associates’ consumer survey6 that they are morecomfortable with hardware costs under £64 (about $100)and monthly service costs of £19-£22.50 ($30-$35)7.

Figure 4: Concerns about Seniors among Family Caregivers“Q6020. What concerns you most about this person?” (Among respondents taking care of or anticipating caring for loved

ones/fragile conditions or Alzheimer’s/Parkinson Disease, n=340, ±5.31%)

6 Personal Health Tools andApplications (2Q2010), a Parks Associates consumer survey of 1,958consumers of their adoptionand interest in digital healthtechnologies and services.7 All Pound values in thisparagraph are based on the exchange rate of 1 Pound=1.558 dollar as of December 31st 2010.

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A WHI White Paper

mass-market business model remains the top challenge forthe industry. Many blame the lack of reimbursement as thekey inhibitor, and given the current state of the globaleconomy, these conditions are unlikely to change. In manycountries, including the U.S., government programs fundsenior care, and legislative actions to expand reimbursementof senior independent care equipment and services are aremote possibility at best, particularly in the near termwhen governments around the world are facing significantbudget shortfalls or heavy debts.

3. DEVELOPING SUCCESSFUL BUSINESSMODELS FOR THE SENIOR INDEPENDENTLIVING MARKET

Companies of all types are targeting the senior independentliving market (Figure 4), but few have found the magic formula to drive mass-market adoption. Some have chosento offer a service with recurring fees while others focus onmaking and supplying hardware or software. Despite thevariety of business approaches, developing a successful

Figure 5: Vendors in the Senior Independent Living Market

Software and Application Developers

Develop software or service platforms and do notown hardware or run service themselves. Their goal isto enable health and ageing-in-place services byworking with partners and licensing the platform toservice providers.

Equipment Vendors/Distributors

Manufacture and distribute health and senior ageing-in-place products like sensors, medication remindersand home health monitoring platforms.

Safety Service Providers

Offer home emergency response, fall detection andwander off prevention services. Most also use a homegrown solution that may or may not work with thirdparty hardware.

Safety and Health Service Providers

Offer not only home safety monitoring solutions, butalso blend it with health vital sign collection, personalhealth education, communications with care providersand family members etc.

Traditional PERSServices

70%

76%

15%

9%

30%

Other Aging-in-placeTechnologies-based Telecare Services, such as mobile PERS, home activity monitoring/fall detection, wander-off prevention etc

Direct Servicesto Consumers

Through Reimbursement of a Care Program

Through CareProvider Re-sale(Including Trials)

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PERS providers are upgrading their service offerings andstepping up marketing activities in order to rejuvenateindustry growth. Many have picked senior independent living solutions and bundle them with base PERS services.Fall detection, for instance, has become a top value-addedservice for PERS providers, and demand for this solutionhas attracted many independent solution providers, including Wellcore, Halo Monitoring, and AFrameDigital.

Developing a successful business model in this marketcannot succeed without good partners. Vendors must pairup with partners to reach out to new funding sources orexpand distribution channels to boost consumer awarenessand sales. WellAware Systems, for instance, successfullyconvinced the Evangelical Lutheran Good SamaritanSociety, a large homecare service provider, to run a five-state,three-year trial using $8.1 million funding from The LeonaM. and Harry B. Helmsley Charitable Trust. As part of thetrial, 1,600 seniors will use WellAware Systems’ homeactivity sensor solutions.

Another example is Intel-GE Care Innovations, the jointventure of Intel’s Digital Health group and GE’s home healthdivision. It is expanding the distribution of its HealthGuidethrough partners like Fujitsu in the Netherlands, Orange inFrance, Telefonica in Spain, and Asklepios Hospital Groupin Germany. These partners will add more touch points fortechnologies to reach seniors more effectively and efficiently.

Partnerships are also likely to reduce vendors’ costs onsolution development and lead to new directions. BL Healthcare, for instance, is building its solution intoexisting consumer electronic devices, and its partners,such as Verizon, are helping the start-up to make the totalsolution less costly to own and less intrusive to consumers’digital home user experience. These efforts are a primeexample of the innovative thinking brought in by a newbreed of solution developers that aim to address seniors’independent living needs and wants in a holistic mannerand at a lower cost.

The consumer market may provide better near-term opportunities. Consumer spending is historically the pillarof the senior independent living industry as it accounts for76% of the industry’s 2009 revenue in the U.S. The majorityof the spending is on the PERS8 service (Figure 6).

Figure 6: Industry Revenue by Technology and Funding Sources

U.S. Aging-in-Place Revenues By Technologies (2009)

U.S. Aging-in-Place Revenues By Funding Sources (2009)

8 Personal Emergency Response System

A WHI White Paper

©2011 Wellness and Health Innovation

To access our FREE services contact:Wellness and Health Innovation www.wellnesshealthinnovation.orgTel: 0141 585 6300 Email: wellness@innovationcentre.org

ABOUT WELLNESS AND HEALTHINNOVATION

Wellness and Health Innovation (WHI) is a national initiativedesigned to support Scottish companies developing innovative products, services and applications for the wellness and health sector. Delivered on behalf of ScottishEnterprise, WHI fulfils this key role by building a communityof WHI companies and providing market intelligence, product, technology and innovation support and businessdevelopment assistance to enable Scottish SMEs to produce market-ready innovations that meet clear market needs.

ABOUT THE AUTHOR

Harry Wang is the Director of Research at Dallas, TX-baseddigital technology consultancy Parks Associates. He studiesemerging technologies with a focus on portable and mobileCE hardware, software, and associated applications andservices. He is also the lead analyst for Parks Associates’digital health research program. Harry has presented hisresearch in numerous industry events including CES,Digital Hollywood, Photo Marketing Association AnnualShow, American Telemedicine Association Annual Show,World Health Congress, and Parks Associates’ CONNECTIONS™ conferences.

INDUSTRY EXPERTISE: Portable and Mobile AccessPlatforms and Applications, Digital Imaging Products andServices, Digital Health Products and Services

4. OUTLOOK FOR THE INDUSTRY

Looking to the future, WHI are excited about the newopportunities in digital health technologies introduced bythe healthcare reform law in the U.S. The Patient Protectionand Affordable Care Act passed last spring first will establish a national voluntary insurance program for community living assistance services. Seniors enrolled inthe program could use a cash benefit (no less than $50 perday on average, with no lifetime limit) to pay for long-termcare services or technologies. Secondly, the new law willencourage setup of accountable care organisations, whichwill provide coordinated care for patients in inpatient, outpatient, and home-based environments. Homecareagencies and services can be part of the accountable careorganisations, and senior independent living services maybecome eligible as components of coordinated care andshare the revenues with other care providers participatingin the organisations. These prospects, together with themomentum and opportunities in the consumer market, are putting the senior independent living sector on a sustainable long-term growth track.