Four reasons why you should assess the condition of your senior living facilities
Facility condition assessments are more important to strategic planning and repositioning discussions than many senior living providers realize. Have you skipped this important step in developing your master plan?
Not long ago, a senior living provider began the imperative process of strategic and master planning to better address concerns with declining census, direct market competition, and aging assets.
Discussions about potential strategies began with enthusiasm but quickly ground to a halt when the planning committee realized its market study and debt capacity analysis could only tell part of the story. Before creating a new master plan, the team needed a clear picture of the condition of the organization’s current facilities. As a result, the planning process was delayed nearly three months to allow time to conduct a facility assessment that would itemize the existing capital needs.
What is a facility condition assessment?
Facility condition assessments are noninvasive evaluations of existing facilities and equipment for aesthetics, functionality, and end of useful life. They also include projections for costs related to improvements to bring certain aspects of your buildings back to good condition. These reports are used to develop a yearly capital expenditures (cap ex) plan that details the annual budget for critical needs, deferred maintenance, and property enhancements.
Have you skipped this important step in developing your senior living master plan?
Why are facility condition assessments important?
In the midst of a highly competitive market, many existing senior living organizations are taking a long, hard look at their business in order to pivot in ways that will help them grow. Adaptation and strategic thinking are needed to stay relevant in the future. However, before you think about your future, it’s important that you understand the current state of your buildings.
Before you think about your future, it’s important that you understand the current state of your buildings.
Facility condition assessments are essential to strategic planning for four reasons:
#1. They help you understand your existing capital needs
It’s not uncommon for senior living providers to focus a strategic planning or repositioning process on a particular pain point or need within their organization. However, before any meaningful, thoughtful planning can be done, providers must understand their existing capital needs.
Some providers may already have the pieces that constitute a cap ex plan, but it may not be in one place or complete. Having a comprehensive and complete report detailing the condition and budget for yearly expenditures can help your stakeholders make reasonable decisions about the facilities.
#2. They provide projections for long-term capital expenses
In addition to documenting the current state of your buildings, a facility condition assessment is a key piece of the campus master plan that details the capital needs for the long-term. It allows you to plan in your budget for recurring maintenance costs or expensive items like roofs, parking lots, and critical mechanical, electrical, and plumbing needs.
The key point here is that this data allows you to be proactive instead of reactive. If you’re building is 60 years old, it’s not a question of if it fails, but when. A facility assessment and cap ex plan allow you to budget expenses for the next five to 10 years and avoid many surprise maintenance issues that could threaten operations. Projections for long-term planning are especially important for multisite campuses to determine priorities.
Projections for long-term planning are especially important for multisite campuses to determine priorities.
#3. They provide valuable information for discussions around organizational growth
In the case of the senior living provider we mentioned before, the organization had the necessary market and financial data to consider during these strategic planning discussions. But that data only described part of the picture because they did not reveal anything about how expansions or other business changes might affect the cap ex budget.
Before talking about a new business plan, organizational growth, or increasing census, stakeholders must understand:
- Will market support new or existing units?
- What can we even afford?
- What are we starting with?
#4 They tie into other planning tools for comprehensive capital planning
To have all the information you need for a productive strategic planning process and to create a comprehensive capital plan that evaluates the capital needs of your organization holistically, you need:
- Market study — A report detailing the supply of and demand for senior living in a local market area.
- Financial analysis — An analysis of your organization’s existing financial position to determine its ability to absorb additional project debt with consideration for the identified routine capital expenditures and any other desired capital growth initiatives.
- Facility condition assessment — As explained above, a detailed overview of the age, condition, and expected life expediency of buildings, usually also including projections for costs.
- Cap ex plan — As explained above, a basic yearly budget report for maintenance, usually based upon a facility condition assessment.
By using these assessments, you can create a comprehensive capital plan that establishes realistic and appropriate project budgets for any capital improvement investments.
The first step senior living providers must take before strategic planning
The facility assessment process can take several months, and it will be highly collaborative with your internal staff. The assessor will first gather preliminary data and building information, then work with you to understand any specific questions to address in the assessment.
After conducting site tours and interviews, the assessor will take time to analyze the information, organize it by building and category, and develop preliminary cost projections. A well-prepared facility condition report will also define the costs by priority, a step that that will rank critical maintenance items based on your organization’s needs and goals.
If you don’t have a facility assessment report or comprehensive cap ex plan, consider having one completed as soon as possible, especially if you’re planning for the future of your organization.
Plante Moran Living Forward offers services to get you the building assessment, market, and financial information you need while leading your organization through the planning process to make thoughtful decisions about your future. If you’d like help bringing your stakeholders and leaders together in a productive strategic visioning process, contact us today.
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