Prior to 2014, there were only a few thousand adult day centers operating throughout the United States. Today, there are likely over 10,000 centers in existence, each one trying to make a lasting mark in an extremely fragmented industry.
Founded in 1991, Tennessee-based Centennial Adultcare Center is among that group. The medical-model adult day provider is led by CEO William Zagorski, who says big things are in store for the space in months and years to come.
Home Health Care News recently caught up with Zagorski during the latest installment of its podcast, Disrupt.
Among topics of conversation, the CEO outlined industry challenges and explained how at-home care providers will play a critical role in adult day’s future. Zagorski — a member of the National Adult Day Services Association’s board of directors — also discussed how the adult day model is becoming increasingly for-profit.
HHCN: Can you tell me a little bit about your company? What does American Senior Care Centers do?
Zagorski: American Senior Care Centers is our corporate name. We operate as Centennial Adultcare Center. We have three medical-model adult day health care facilities in the central Tennessee area. We also operate non-medical in-home care services and transportation services, all of which are under our Centennial Adultcare Center brand.
But that medical model of adult day is our primary focus. We serve Individuals 18 and over — of all acuity ranges. That means all diagnoses, all physical and cognitive conditions. There are very few individuals who we have not been able to help over the years.
We’re the largest comprehensive, medical-model adult day health care facility in Tennessee.
It’s not often we’ve had adult day providers on Disrupt. I think you’re actually the first, so congratulations on that!
Happy to be the first! Adult day health care is certainly a newer, lesser-known part of the continuum of care, so I’m happy to talk about it.
How did you first get into the space and, ultimately, into the CEO role?
It’s a long story that takes lots of meandering paths.
My parents started our company back in 1991. One of the main inspiring factors was a grandmother who had been diagnosed with Alzheimer’s, who then moved from Chicago to Nashville to live with us.
She attended a social-model adult day program in Nashville for a number of years. But as soon as her acuity rose to where she could no longer attend the social programs, there was nowhere for her to go. So we set up shop as the first medical-model adult day health care provider in Tennessee. We were one of the only providers able to assist individuals with advanced dementia, you know, progressing to the point of wandering, incontinence and other issues.
That’s the genesis of our company. I was younger when that company opened and did not plan on staying in Tennessee. My personal history is mired in scientific research; I spent a number of years in cancer research, then in molecular genetics as my primary academic research through the late 90s and early 2000s.
I came back to our company in 2011. We’ve increased our daily attendance by double since. I opened our second location in 2015. And then our third location in late 2017.
Our in-home care agency has been in progress for a number of years as well, though there’s been some growth and retraction.
We talk all the time on HHCN about how the home care and home health industries are booming. What’s going on in the adult day center space on a macro level?
Adult day mirrors the same growth trends that we’re seeing in home health and home care. The driving factor is individuals want to remain living at home.
Historically, adult day has existed throughout the United States for decades. It took off in the late 70s and 80s, mostly on the East Coast and West Coast. It has been a little bit slower to grow through the Midwest — and even slower in the South.
But it continues to grow overall, ramping up over the past five years. In fact, today, there are probably close to 10,000 adult day centers in the U.S., which is up almost 50% from 2014.
One of the factors inhibiting growth is the fact there’s no federal model or federal definition of what adult day care is. It’s regulated differently from state to state, with some states being more permissive for social-model or medical-model services.
As of 2016, slightly over 50% of the adult day centers throughout the country are in the for-profit space as opposed to the nonprofit world. That’s been a big switch compared to the past.
There has also been a divergence between the social model of adult day services and the medical model. There has been a social stigma around this industry, so we try to be consistent with terms for what different players are doing. The common nomenclature is to use “adult day services” for the social model, then “adult day health care” for the medical model.
What are some other headwinds in the space? You mentioned a lack of a federal model, which seems like it could be difficult in terms of stability.
Yeah. Very much so. I mean, the different regulation from state to state is so significant. Just look at the state-to-state variation on licensure and certification. There are a dozen or so states that still have no type of licensure status. There’s still a few where it’s like the Wild West. Of course, there are also Medicaid issues. There are lower reimbursement states or the Medicaid-prohibitive states, usually in the Deep South or in lower-income, lower-population areas in the North.
And when it comes to access to care, since adult day is a lesser-known model and varies from place to place, nobody really knows what adult day really is. They don’t know whether it’s adult day services or adult day health care, whether adult day is part of the continuum of care or separate.
There’s a lot of confusion and lack of knowledge.
Can this be a profitable space for operators?
It certainly can be a profitable space. And I think that’s really reflected by the for-profit side of the industry doubling in recent years. But it’s hard to define what the margins are because reimbursement models differ so much. And there’s a lot of providers that only operate in a Medicaid space. There’s some providers that only operate in a private-pay space. Some people work with the VA.
We’ve been a for-profit company for the better part of 30 years, and it’s been profitable over that time for sure, but it varies. The fact is that you’re in a conglomerate setting where your staffing levels are slightly lower, so you’re able to do things that are slightly lower in terms of expense rate.
It’s difficult to answer on the margins. A ballpark answer, you know, they’re somewhere, probably between 1% and 40%.
What competitive advantages do adult day centers have over home health or home care agencies?
We’re able to staff at a slightly lower level than the one-on-one care that’s needed for home care.
In the adult day setting, most states are in the six-to-one or eight-to-one suggested or mandatory ratios. Most organizations run in the four-to-one or six-to-one ratios. Another advantage is service availability, being able to provide services without interruption. Centers can be staffed with three to six employees at any given time.
Cost is certainly a competitive advantage. The average cost of adult day is $72 a day — and that’s usually for six to 10 hours of care. In Tennessee, most of the companies we work with are open for eight to 11 hours per day. Some of them are even open on weekends. So being able to provide services for 10 hours at $72 a day is certainly a competitive advantage.
Medical oversight in the adult day health care industry is continuing to progress, and most centers have registered nurses on staff … to provide ongoing medical oversight as well as medication assistance and management of vitals.
Many centers are truly interdisciplinary, with masters-level social workers, registered dietitians, RNs, LPNs, recreational therapists. Many programs bring in pet therapist, music therapist, art therapist … so the ability to provide comprehensive therapeutic services in a conglomerate setting provide some unique advantages and a social situation. Not to mention the social determinants of health we’re avoiding — avoiding geriatric depression and combating loneliness.
Why is it important for adult day centers and home-based care providers to work together?
Adult day health care is great, but it can’t do it all. Centers can’t be open all the time. They can’t do everything. It is essential for individual providers or larger companies to be able to associate with home-based care providers and wraparound services, including transportation.
If you take in-home services, transportation services, adult day health care and everything else, you put it all together, it’s still so much less expensive than most assisted living or skilled nursing facilities.
What’s the M&A and investment landscape like in the adult day space?
I think there’s significant, increasing interest. But from an M&A standpoint, adult day does have those real challenges I talked about. Additionally, the largest provider of adult day services has about 112 locations throughout the U.S. — and that’s less than 1% of market share. So that fragmentation is a downside for those looking for a large investment opportunity. Still, that means the industry is ripe for consolidation.
Many adult day centers throughout the United States are still in the first round of ownership and are privately owned — probably family-owned. Many of us are aging and looking for exits.
What’s next for you and your company in terms of future plans and growth? Any plans to move outside of Tennessee?
There are lots of plans. We’ve grown slowly over time and have opened two additional centers in the last four years. We plan to continue growing when opportunities present themselves. There’s room for expansion in Tennessee. There’s only about 40 providers throughout the entire state, and there’s room for about double that.
I’ve also had the pleasure of working as the president of the Tennessee Association of Adult Day Services, as well as working with the National Adult Day Services Association, where we have pretty significant policy efforts.