Portland Business Journal: Meet the Oregon pioneer who quietly created a $30B industry
Author: Elizabeth Hayes, Portland Business Journal
Posted: August 23, 2018

Read the original story in the Portland Business Journal.

Keren Brown Wilson’s mother suffered a stroke in 1969 at the age of 56 and moved into the first of a series of nursing homes.

For the next decade, Jessie Richardson's world consisted of a room off a long, fluorescent-lit hallway containing a bed, a two-drawer nightstand and tiny cubby hole, a curtain separating her from a roommate. Her name was marked on her clothes and she was told when to eat and when to sleep.

She longed for a place of her own with a little kitchen and bathroom. She envisioned a place where she could have a cat, her Vick's VapoRub, her cigarettes, her old magazines and Goodwill treasures and watch her favorite soaps.

Wilson, meanwhile, was embarking on a career as a gerontologist, hoping to become a college professor and to study the aging process. One day, her mother asked, "Why don't you do something to help people like me? I want to live a normal life."

That question sent Wilson, now a faculty member at Portland State University, on a multi-year mission to create the framework for what would become the $30 billion assisted living industry, upending the way the world thinks about senior care.

It would be a long path, requiring years of persistence in obtaining government approvals, of selling an unorthodox concept to skeptical lenders and investors.

In the late 1970s, the notion that the frail elderly who needed some care, though not 24 hours a day, could live independently and age in place outside of an institutional setting, was newfangled — even radical. It sounds so normal by modern standards: residents could lock their door, eat what they want to, control their room's temperature and furnish it as they please, but also receive some assistance with dressing, bathing or medications.

“It wasn’t normal then,” Wilson said. “They had a routine set by the facility. That’s how you lived.”

After Wilson opened the 117-unit Park Place in Tigard near Washington Square in 1983, she fought for Medicaid recognition, formed three assisted living companies, including the first to go public, helped develop and manage 200 assisted living projects and exported the Oregon model to other states. About 31,000 assisted living communities housing 811,500 residents have sprung up across the U.S.

The source of the demand and interest from investors is clear. The number of adults between the ages of 65 and 74 is projected to nearly double to 38.6 million in 2030 from 21.7 million in 2010, according to the Joint Center for Housing Studies at Harvard University. Those receiving long-term care will also nearly double, to 27 million in 2050 from 15 million in 2000.

The hybrid model Wilson first envisioned — combining housing, hospitality and health care — has proved both durable and profitable. At the same time, the industry has suffered from growing pains, including criticism from advocates for the elderly and federal investigators alike over a lack of uniform standards and gaps in regulation.

As Wilson sees it, assisted living must keep evolving if it is to serve the growing ranks of low-income elderly who don’t qualify for Medicaid but can’t afford a room in many assisted living developments — if they can find one at all outside of large metropolitan areas. At 70, she not only hasn’t slowed down, but has a few ideas for how to get there. Hint: the sharing economy, 3-D printers and drones.

“What started out as a mission imperative for her is becoming a demographic imperative,” said Mary Jaeger, who served as the long-term care ombudsman for Oregon for six years and now sits on the board of the Jessie F. Richardson Foundation. “She’s very much not done.”

'The Stovetop Lady'

Before Medicare and Medicaid passed into law in 1965, the elderly in frail health had limited, and often grim, options — mainly boarding homes and “homes for the aged,” Wilson wrote in a 2007 article for The Gerontologist. With Medicaid, states could use federal funds to pay for nursing home care, prompting many boarding homes to convert. As regulations mounted over the years, life for nursing home residents became “pretty awful” and regimented, Wilson said — summed up by the phrase “Three hots (hot meals) and a cot."

“People who were in nursing facilities had very little control,” she said.

That was the reality when Wilson, a coal miner’s daughter from West Virginia and Tennessee, came to Portland in 1979, the year her mother died. Wilson had a fellowship in aging, while she was working on her doctorate in urban studies at Portland State.

Two years later, Oregon formed a Senior Services Division and became the first state to apply for and receive a waiver for home- and community-based services — a crucial development. Wilson tried to convince the state to allow her to try a new model, one incorporating a fully accessible apartment building for the elderly that would offer round-the-clock health-related services, such as help with incontinence, insulin injections and blood pressure monitoring and daily tasks such as dressing and personal hygiene.

“We know a lot about how people function best, and it’s when they’re in an environment where they retain as much autonomy and control as possible, so the idea was to have a collaborative approach to designing a plan of service, so people would say, ‘I know I’m a diabetic, but I’m not going to eat that diabetic meal, I want to eat regular food,’ or, ‘I know I’m at risk of falling, but I’m not going to sit in a wheelchair all the time,’” Wilson said. “We were trying to make something where people felt this wasn’t a bed, this was a home.”

She earned the nickname "Stovetop Lady" in Salem for all the time she spent advocating for stoves in apartments.

Despite her efforts, it took several years to make any progress.

Wilson said she had to force the state to give her a special license and pressed officials to prove whether her ideas violated any existing rules. "They couldn’t show me," she said. "There were no rules. It just wasn’t how things were done, not that there were regulations against it."

Finding financing for her ideas presented another hurdle. When Wilson and her husband, Michael DeShane, set out to build Park Place, they couldn’t obtain a commercial loan. The model was seen as too risky and had no proven track record. So they convinced the Oregon Housing Authority to fund the project with housing bonds, since it met the criteria for a regular senior apartment project. At the time, “congregate care” buildings offered housekeeping and laundry, but not health services.

Wilson cannily downplayed the novelty of the project to gain approval from the housing agency.

“I don’t want this to sound easy,” Wilson said. “This was the first (of its kind), period. It was like talking out of two sides of your mouth. We were telling the housing agency, this is housing, and telling the state, this is health-related care.”

Wilson obtained a waiver in 1983, and Oregon became the first state to license assisted living. Park Place became the “prototype of the Oregon model of assisted living,” though at the time it was called a “living center with assistance,” Wilson said.

It took time to win over all the skeptics. Mary Amick remembers taking the first tour of Park Place when she was working for the Oregon Health Care Association, a trade group representing long-term care facilities.

“At that time, I was thinking, this is never going to work,” said Amick, an assistant professor at Concordia University in Portland. “We were thinking in the medical model that safety was the key component, and we knew what was best for the resident, and they couldn’t be left to their own devices to make decisions about their own lives. It was hard to get past that barrier. I remember the heated discussions about whether people were going to die or be injured.”

Amick later held executive posts at Prestige Care and Marquis Cos., two senior living developers, and gave talks to industry representatives around the country.

“There wasn’t one state I went into that they didn’t ask what was happening in Oregon, because this set a precedent for us being visionaries,” Amick said.

Wilson next pushed Oregon to become the first state to do Medicaid assisted living. “As soon as we opened Park Place, I started talking about, ‘This can work for poor people,’” she said.

After Wilson and DeShane opened the 127-unit Regency Park near St. Vincent Medical Center in 1986, they asked the state to fund a pilot project to show assisted living could provide the same or better outcomes than licensed nursing homes for less money. Oregon agreed to a one-year demonstration with 20 Medicaid clients, who were covered at a fixed rate. The task was made easier by the fact that, unlike nursing homes, assisted living wasn’t required to employ a medical director or have a registered nurse available 24 hours a day.

The demonstration was a success. The state's flat negotiated fee adequately covered the cost of care for the mix of clients chosen for the demonstration, and their health conditions remained stable. Meanwhile, activities of daily living and functioning improved for the majority of clients. Their measures of depression, cognition and life satisfaction improved, Wilson wrote.

“In terms of developing the concept of assisted living and presenting it to many, many folks not only in the Northwest, but the heartland, she was the pioneer,” said Robert Kramer, who founded the National Investment Center for Seniors Housing & Care.

Bigger things

With those early successes under her belt, Wilson embarked on a new adventure. In June 1988, she founded a for-profit company called Concepts in Community Living so she could pursue more modest projects for Medicaid in rural areas and at the lower end of the private market, where there's a bigger need.

“Developers are generally not interested in small projects in small communities — the bigger, the better,” Wilson said. “Here’s the truth of the matter. The margins are thinner, there’s less room for error. You have to really be very competent in your management skills and exercise firm control. You can’t be an absentee operator.”

Concepts in Community Living opened Rackleff Place in Canby in 1989 and remains profitable today, she said. The company owns and manages 25 small properties, ranging in size from 25 to 50 units, in Washington, Oregon and California. Some are managed for other owners, some funded through public agencies, some with private equity. DeShane, who is a demographer, conducted all the market studies for the projects and serves as Concepts’ president.

Wilson also helped start an assisted living company in Kansas, then formed another company, Assisted Living Concepts, to roll out the model nationally. The company went public in 1994 in a $18.5 million initial public offering, focusing on states where Medicaid paid for assisted living. In two years, it had more than 50 licensed buildings in six states and more under construction, mostly single-story projects in underserved markets. By 2000, it had 183 residences in 18 states and more than 3,000 employees.

But the company also weathered its share of troubles. A competitor agreed to acquire it for $242 million in 1998 to create one of the largest assisted-living providers in the U.S. The deal fell through after auditors questioned Assisted Living Concepts' accounting methods, according to Reference for Business. The company’s stock plunged and a shareholder class-action suit followed.

In 1998, investigators temporarily banned new residents from two of the company's homes in Oregon after discovering instances of substandard care, and a Vancouver, Wash., building came under state monitoring. The company settled the litigation in 2000 for $30 million, and Wilson stepped down as CEO.

From her vantage point 18 years later, Wilson says that while some of the claims were true, others weren't. And she regrets letting outside advisors handle the company's accounting and investment strategy.

“I knew the care side of it, and I really didn’t know that side of the business,” she said. “I would have used more local advisors.”

In 2014, Assisted Living Concepts was acquired by the private equity firm TPG and rebranded as Enlivant.

More growing pains

Wilson's model not only took off in Oregon, but it spread independently on the east coast, where Paul and Terry Klasssen founded what became the large publicly traded Sunrise Senior Living. Wall Street and health care Real Estate Investment Trusts jumped into the fray in the 1990s. The term "assisted living" became ubiquitous: “suddenly, assisted living was a redecorated wing of a nursing facility or a 16-bed boarding home looking to attract private-pay clients,” Wilson recalled.

“It began with a lot of regional activity and, all of a sudden, bigger players were interested,” she said.

But many new entrants, seeking to get in on the frenzy, didn’t pay close attention to the physical setting or ideals of the early models, and by the turn of the new century, “assisted living’s charmed existence abruptly ended,” Wilson wrote in The Gerontologist. She served on a committee of the Institute of Medicine that couldn’t agree how to define and measure quality.

After a critical Government Accountability Office report in 1999, stories appeared in the national media highlighting stories of individuals “who had been miserably failed by assisted living as victims of high prices and poor quality care,” Wilson said. The Senate Committee on Aging challenged the industry to develop uniform quality standards. The very notion of autonomy in the frail elderly was called into question.

Many providers lost their appetite for innovation, Wilson said. Fearing for their survival, they stuck to the basics and focused on improving financial performance and avoiding regulatory trouble. “By the new century, assisted living suffered from a crisis of confidence," Wilson wrote.

Troubles persist today. Earlier this year, the GAO issued a report saying the federal government lacks basic information about the quality of assisted living provided to Medicaid recipients. States spend $10 billion a year on the services, but more than half were unable to produce information on cases involving abuse, neglect, exploitation or unexplained death.

Assisted living broadened its reach in the past decade to take in a frailer population than originally envisioned, creating more challenges, especially around staffing levels and containing costs. More assisted living communities have added dementia units in response to the need, but many patients in their general populations have greater needs than before.

“Folks that used to be in skilled nursing are in assisted living, and you see higher acuity levels, in terms of activities of daily living and multiple chronic conditions,” said Kramer of the National Investment Center for Seniors Housing & Care. “There are also high-need individuals who are one fall or infection away from being high-need, high-cost individuals. As acuity level has risen in assisted living, it has made her original model harder to pencil out because your care costs have gone up.”

The next evolution

Today, Wilson is most focused on addressing the issue of older adults who lack financial security.

“She foreshadowed an issue the industry and nation are going to be faced with even more in next 10 years: How are we going to meet the needs of middle income, middle market Americans who are worth too much for safety net programs but can’t afford, at least not for long, most of today’s private sector options?” Kramer said.

Even a unit in the Canby building runs around $3,000 a month, beyond the means of many seniors. The fastest growing homeless group in Portland is older women.

“I’m concerned about all older people, but especially those with restricted access financially or geographically,” Wilson said.

Then there’s the question of supply, which clearly needs to grow based on population projections. The percentage of Oregonians 65 and older will increase by 138 percent by 2050, according to a brief from the Jessie F. Richardson Foundation, which is focused on issues around housing and services for the very low income adults in the U.S. and Central America. They will also compose a larger percentage of the overall population: 21 percent by 2030, up from 14 percent in 2010.

The foundation — of which Wilson serves as president — is toying with some new models. Her goal is to provide an assisted living apartment for $600 a month using the sharing economy. One way it could work is if a young family who was having trouble making ends meet moved in with an older person in a large home.

“To the extent assisted living can be better, I want it to be better,” she said. “It can’t rest on its laurels. It needs to keep working on improving because the customers are changing. It needs to look at what are the missing pieces and be open to expanding its possibilities.”

This might include expanded respite care, hospice care and daycare. It means rethinking family configurations to accommodate transgender couples or an adult and their disabled child. It means considering how to use robotics, maybe using drones to deliver prescriptions, lab samples and groceries. It could mean 3D-printed houses.

“We have some heavy lifting to do to be ready for the next wave of older adults,” Wilson said. “We have to think about different ways to do things. Otherwise, it’s not a very pretty picture.”