Demographics as Commerce: The Aging-in-Place Revolution

Ryan Daniels, William Blair's group head of the healthcare technology and services research sector, explores how America’s rapidly growing senior population is reshaping healthcare, technology, and everyday services through the powerful trend of aging in place.

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Podcast Transcript

00:21
Chris T
Hi everybody. Welcome back to William Blair Thinking Presents. Today is Friday, May 30th and we are once again joined by William Blair’s group head of healthcare technology and services research sector, Ryan Daniels. Ryan, thanks for joining.

00:34
Ryan D
Thanks for having me. Really appreciate it.

00:37
Chris T
So, Ryan and his team just released their latest healthcare mosaic report. Which, as a reminder, is a quarterly deep dive into a major theme shaping the health care landscape. And then this latest report, which is titled ‘Demographics as Commerce. Massive Aging in Place Opportunity in the US, ‘explores the sweeping implications of America's aging population not just for health care, but for a wide range of industries and services.

And covers a lot of ground. It includes the demographic surge of Americans aged 75 and older and its economic implications, the growing preference among seniors to age in place and the services required to support that, the role payers and policy in enabling the shift and then the emerging ecosystem of technology, service and care delivery platforms that are, you know, rising to meet the demand.

So, Ryan, as I said, always great to have you on the show. Before we get into the details,, how would you describe the core, message of this report? And, you know, why did you choose to focus on aging in place this quarter?

01:40
Ryan D
Yeah. Chris, first, thanks again for having me on the show. I always enjoy doing these with you and you gave a great introduction there, highlighting a lot of the key data points that we cover. So just as a reminder for the audience, we do one of these deep dive industry reports each quarter. This is now our 37th in the series.

And for each of these, our intention is to really ID a key megatrend and one that appears to be gaining momentum in our sector, and then we do a thorough analysis of why that is the case. So what are the key near and long term drivers of the trend? What industries and specific companies could benefit from the trend? What's the addressable market, among a variety of other topics.

So for this report, we started to see more and more data regarding the intersection of both payer and patient support desire to support aging in place. And I'm sure we'll get into this much more in our conversation. But the quick punchline is that almost every senior wants to stay in their home and in their community, regardless of their physical condition or overall health profile.

And then if you look at payers like the government or larger commercial managed care or long-term care insurers, they realize the overall health care cost of this solution is markedly lower than institutional care. So both parties here, as well as innovators across myriad different industries, have really started to create solutions to enable this to occur. And, you know, quite frankly, Chris, some of this wouldn't have even been possible as recently as 10 or 15 years ago.

But with technology innovations around home monitoring for patients and the rise of on demand services for things like home medication delivery or medical transports, it's truly a reality today. And, you know, we can only imagine with AI and advancements in robotics, what this could look like in the future. In fact, the very near future. So all of this, along with growing government and regulatory support, made it seem like the right time to call out an inflection point in the space.

So, you know, to answer your question, that's why we we really decided to focus on it for our quarterly report this quarter.

03:42
Chris T
Got it. One of the stats that caught my attention in the report is that by 2030, the 75 plus population will grow by nearly 50% and their spending could account for over 10% of the U.S GDP. That's a, you know, a huge shift. Can you walk us through maybe that demographic trends driving this? And then you know why it matters for investors?

04:01
Ryan D
Yeah that's a great place to start. It's a great question I appreciate that. You know it's kind of funny. As a health care analyst, I've been covering health care stocks for more than 20 years. And I think the aging U.S. population was probably an investment thesis I used when I started. However, it's really just starting to manifest now.

So a couple data points each day in the United States, about 11,200 Americans turn age 65. And last year, so 2024, a record 4.1 million Americans hit the age 65 mark. And as you said, by 2030, about 75 million baby boomers will be over age 65. On top of that, the cohort of Americans over age 75, so truly this aging in place population will increase by about 46%, from about 24 million today to 35 million by 2030. And that's a 4% compound annual growth rate or kegger. And while that might not seem high, the overall U.S. population is growing at a rate of less than 1% on a compound annual basis. So it's actually a huge demographic mix shift towards this older population. And what that means is that the US will move from having only about 13% of its population over age 65 as recently as 2010, to nearly 21% by 2030.

So again, a huge demographic shift. And then this trend has a long tail to it as well, because this over 65 population won't peak until about 2060, when this population cohort should account for about 26% of all Americans. So again, this is a huge and long lasting demographic trend here in the US. It's really just getting started, especially on an accelerated basis.

And then lastly, you know, as you mentioned, and this is key, these individuals have a ton of purchasing power. They own their homes. They have a lot of discretionary income. They spend about $4 trillion by our estimate, per annum in 2030. So this is a huge group to target. And they consume markedly higher portions of health care spending than their peers, as you can imagine.

So from a health care perspective now spending on this segment can likely double over the next decade, making it a huge market opportunity for a wide variety of industries, both inside and outside of the health care marketplace. So any time you have this powerful, lasting demographic trend in this huge total addressable market, that's something that's absolutely going to attract innovators and incumbents alike, to the market.

06:31
Chris T
Right. Yeah. The report also highlights that nearly 90% of seniors want to stay in their homes as they age. But of course, that's not always easy. What are the biggest challenges to aging in place? What kinds ofservices or technologies are emerging to support this preference?

06:48
Ryan D
Yeah, that's really a key part of the report. You're right. Everyone wants to stay in their home. But due to physical limitations or health conditions, it may not be possible or safe. And that's really where we see this entire ecosystem of solutions starting to arise to enable this and kind of a safe and frictionless basis. So one area, just as an example, could be something as simple as home modifications, meaning can you add a wheelchair ramp or stair lifts or items like handrails for an individual with mobility issues?

And then maybe that individual needs items to be delivered to support health and wellness, which could range from your medication delivery and pill dispensing all the way to things like healthy prepared meals. And then when care is needed, can the patient access home health aides to come to their house and assist with activities of daily living or home health nurses for care needs?

And yeah, maybe a patient can even be supplied with remote monitoring devices to identify changes in medical conditions that warrant preventive care or medication changes, and then receive a telehealth visit with a provider directly in their home to make these adjustments. So a lot of the care, you know, can be either delivered or provided directly at home.

And then if they need to visit, a doctor or a physician for care to get diagnostics, can we get, on demand transport to come pick that patient up? Then there are the, you know, truly innovative tech offerings which provide solutions like ambient monitoring. And what that is, in effect, is like an electronic guardian angel, if you will, watching over the person.

For example, a home monitoring solution that could identify if a patient falls in their home and then it could automatically alert 911. Or maybe there's a caregiver on record. Yeah. So it would sense that fall. It would detect that the patient's not getting up and make that call. So it could be, you know, the eldest daughter who lives nearby. It could be a neighbor. If they don't respond, it would then go to 911 in a could prevent a patient who's potentially injured, and would sit there for a long time and maybe dehydrate and get much worse. They could find that much quicker.

And then, you know, on an even more advanced basis. Let's continue with this. There are solutions today that can literally monitor a person's gait. So kind of how they're walking and how they're moving to see if they're developing MSK or musculoskeletal issues, that could lead to a fall. Yeah. So there's even solutions that can monitor, you know, things like that or the number of trips a patient's taking to a washroom. And if that's irregular, you could see if a person's actually going to the kitchen and taking their pills, all of which can then leverage AI and predictive analytics to intervene, before medical events occur. So, you know, it seems a bit sci fi in isolation, but you can literally imagine a scenario in the very near future where a patient's gait makes it appear like they're having some knee issues.

And then that could trigger a telehealth call over Alexa with a physical therapist, and then they could talk and the PT could say, okay, I'm going to prescribe you with a digital fall prevention program of exercises. You're going to download an app and just do these on your cell phone. And then that could trigger an insurance company.

They could say, hey, we're going to send some non-slip socks to your house. And work with a home modification company to get some rails installed in the bathroom. So again, there's there's all these things that can work together. And this could prevent a fall altogether. And it may seem like a really basic example. The value chain here in motion. But you know falls for seniors are huge cost driver. There's about 21 million medical visits, literally 21 million visits every year from falls with about $50 billion in cost. And falls in the home are 18,000 deaths every year. So that's just one really simple example of how, you know, technology combined with other care delivery can help aging in place.

And it really shows how one simple potential risk can drive the need for myriad different solutions that need to work together to address this issue. So it's again, really fascinating market.

10:45
Chris T
Sure is. So you also talk about payers, especially Medicare Advantage, Medicaid and how they're increasingly supportive of aging in place models. What's driving that shift and how are reimbursement models evolve in this part it.

10:58
Ryan D
Yeah for the payers. And I would actually add long term care insurance companies to that as well. It's about attracting and maintaining members and then lowering their cost of care and improving outcomes. And you know it's a financial ROI for them for some of these solutions. So as I just mentioned, think of something as simple as a fall costing 50 billion a year.

Then multiply that across an entire variety of conditions and medical issues. And you can see how expensive this population be if it's not managed properly. So the key punchline here, though, is that it's estimated that the average spending on a beneficiary at a long term care facility is about four act higher than a patient living at home.

And we have this in our report. But there's studies that show the average Medicare savings is about $1,600 a month for a patient that age is in place when compared to a control group of similar patients at nursing homes. So it's simply cheaper to keep patients in their home. So payers are actually starting to realize that they can invest in solutions to help members age in place, which actually drive an ROI.

And you know, if you think about this, if you can, I'll go back to the fall example. If you can help them avoid a fall that could avoid an ED visit, maybe a broken hip, maybe the need for acute rehab after that, and then a patient who's more frail thereafter and doesn't feel comfortable being at home so needs to move into long term care.

So it's not just the cost of the fall itself, but all these downstream costs that come with that. And from a health outcomes, clearly the preventive care scenario with something like fall prevention is much better for the patient's health and wellness than the alternative. Now, if we think of the various payers you mentioned, you know, Medicare Advantage plans have been huge here, and they have the right to offer a lot of incremental benefits above and beyond what traditional Medicare does.

So, for example, a lot of MA plans or Medicare Advantage, which we call MA, they offer home modification solutions, they offer remote monitoring. They do healthy meal delivery either for chronically ill, you know, maybe heart or, diabetics or patients who are recently discharged from the hospital and can't make their own meals. They do medical transportation. And today, about half of all the seniors, actually a little more than half, are in these MA plans.

So that's a big driver to access to these solutions. And again, it's pretty broad among the senior population. And then number two, even within traditional Medicare, which we refer to as fee for service Medicare, we're starting to see more support for solutions that are offered, say for aging in place. So an example there is that there are now reimbursement codes that actually allow providers to get paid for remote monitoring and consultations, and there's payments to install these devices in seniors homes.

And there's approval for telehealth solutions in virtual care for things like medical visits or behavioral health issues that are reimbursed. And all of that fosters aging in place, because if there's no payment structure for that, you know, doctors aren't going to get paid to do remote monitoring. It's not going to happen. If there's no payment for telehealth, there's no market for it. But the fact that that is also now paid for is driving use of those services. And again, that helps aging in place.

And then for Medicaid, it's actually really different. And the big driver there is something called ILOS which stands for in lieu of services. And in a nutshell, what that is is where a state allows a payment for a nontraditional Medicaid benefit, even a non medical benefit like meals, with the thesis being that the provision of that benefit can lower the long term medical cost.

And that really offers a ton of flexibility for states for managed Medicaid plans to use a whole host of services allow for aging in place. Again, it could be transport or meal delivery, home modifications, as long as they believe that that's going to lower the long term cost of medical care. So that flexibility is really driving a lot in that market.

And then final point I'll make and we detail this in the report, but it's probably too nuanced for today's conversation. But there's this entire movement of risk from payers to providers. So things like accountable care organizations or shared savings models, things we refer to as value based care. And that's also pushing the trend forward as it changes the incentives for delivering care on a more cost effective basis in the patient's home.

So again, kind of circling back to conclude here where we started. We're always looking for an intersection of kind of demand and payer and regulatory support. You're starting to see it for all these reasons. So it's all coming together at the right time.

15:37
Chris T
So let's talk about the ecosystem that's forming around this trend. You mentioned everything from smart home tech and remote monitoring to meal delivery. You know, transportation, even pest control, which I found surprising. What are some of the most innovative or surprising solutions you came across?

15:52
Ryan D
Yeah, I'm glad you mentioned that is it is a lot broader than medical care and home modifications. You know, really think of it as anything that could impact a senior at home. So pest control, lawn maintenance, snow removal it really is an entire ecosystem that is so broad and spans a huge portion of the economy. And frankly, that's why we call our report ‘Demographics is Commerce,’ because it really is a broader commerce trend that's going to be impacted by this demographic shift.

And, you know, we even included Tim Mulrooney within our analysis. He's our global services group head. And, you know, he's done similar work for a number of his companies that he covers. It can support this trend in global services like pest control and lawn maintenance. So there's some kind of basic non healthcare services.

And then as for the true innovation, that's also so broad. You know some of the novel solutions are clearly around the ambient living technologies I discussed. But longer term you know there's even visions of robots in the home to help assist with patients and activities of daily living, you know, which could be a truly fascinating development as it relates to care delivery and even companionship for these seniors.

And there's also some really, really interesting innovation and aging in place service platforms that are springing up to help make the entire process possible and frictionless, both for payers and their families and for the payers.

17:11
Ryan D
And you know that that's something that's probably a little bit unique. So let me give you an example. If you're a payer and you have an individual patient that you're covering discharged from a hospital to their home, and you determine that they need to get maybe healthy meals because they can't cook for themselves and they have a medical condition where you don't want them, you know, eating canned food because it has salt and they can have a cardiac condition.

They also are a little bit frail because they fell. So you need some home modifications and they might need pest control. In the summer. So how do you do that at scale? You know, there's no vendor that you can call up and say, hey, do all this for me. So there are now these platform as a service companies emerging that really vet local providers. They credential them, they source the services. And then on ongoing basis, they're constantly scoring all these vendors. So they work with the payer really as an a liaison, if you will, to coordinate services to ensure delivery, collect payments and disperse them. And then they are constantly expanding, curating their networks to have the best, most reliable providers in that network.

So with this, if you're a large managed care company, you know you simply need to send a patient referral and what their benefits are to the platform. And they coordinated all seamlessly. And I think that's really a huge growth opportunity.

And then longer term you could even see, you know, caregivers, we always, say it's the oldest daughter, you know, mom or dad, when they're alone usually ends up moving near the closest daughter, so that individual or the children could even pay directly for a subscription to this.

So think of a monthly subscription service you're paying to one of these platform providers. That includes healthy meals and past in-home maintenance for a single fee. And then you can add on on demand services on an ad hoc basis for non-recurring things like if you need a medical transport, you contact that provider and they arrange that and it becomes part of your monthly bill too.

So again, a huge need and really huge total addressable market there.

19:03
Chris T
Let's talk about the importance of behavioral health and social connection. You know you touched on this a bit in the report. And I do think it's something, you know, that that has come up in media a lot lately, especially for seniors living alone. What are some of the solutions being developed to address social isolation?

19:20
Ryan D
Yeah, that's a really huge and I would argue, somewhat hidden but critically important need for seniors. And it's really starting to get a lot of attention. And the issue here is that social isolation is actually a huge health risk, believe it or not. There are some studies we highlight in the report that indicate that isolated seniors cost Medicare about $6.7 billion more in health care versus individuals that are not isolated.

And there was a really interesting study from a large managed care companies that we highlight. And it suggested that social isolation and loneliness, believe it or not, it's as dangerous to your health as smoking 15 cigarettes a day. So it just shows you. Yeah, it's it's kind of crazy to think about, but, you know, you'd rather have that than smoking.

So this is a huge issue. And there are some physical forms of addressing this, like home health aides or home health care nurses that come in and help with activities of daily living. But there's also some innovative solutions here. So there's a really interesting start up, that we've known for quite a while. And this company came in and we do profile them the report, they actually hire local college students.

And these college students go to members homes once or twice a week to talk to the senior, maybe play a board game with them. Yeah, they help them with basic chores, take out garbage, maybe some light housekeeping and they make some supplemental income. The paper ensures that someone's checking in on these, you know, individuals that don't have another caregiver there.

And this single organization now serves already about 2.5 million seniors across the United States. So they've done a great job kind of growing this. And then, you know, from a technology basis, you have things like the prevalence of Alexa. So Alexa is already in 25% of all U.S. homes. And a service like this can, you know, frankly, interact with a patient.

And if you add in all the home smart devices and speakers, it's probably 35, 40% of the population has one today. So, you know, there's some fascinating programs that are leveraging that infrastructure to provide services over it. I saw them we reference this in the report, an example of a program in New York City where seniors were offered, artificial intelligence based kind of companion robot.

And it was a small system that, you know, have a little screen, but it did daily automated check ins using voice commands and, on screen interactions. And while it seems a bit odd on the surface, 93% of users said it reduced their loneliness. In talking to this robot. 95%, agreed it increased their wellness, and the average user talked to the robot, or interacted with it around 30 times a day.

So, you know, you can imagine with more AI evolution in the future, a ton of this can be automated to to really have a truly personalized kind of companion experience. And we think it's going to be a fascinating solution to watch as addressed, as I think it's going to be a huge trend.

22:12
Chris T
Yeah, it sounds like it. Finally, the report outlines a lot of private market activity, you know, funding rounds, M&A, new entrants. What does the investment landscape look like for aging in place solutions.

22:24
Ryan D
Yeah I would say that circles right back to where we started. It's just a massive near-term opportunity is, you know, 20% of the population is going to be a target for this market, and it creates an ecosystem literally in the trillions of dollars over the coming years. So anytime investors see a TAM or a total addressable market, combined with growing payer and regulatory support forward and technology solutions that can enable it occurring, it drives a ton of investment.

So again, I won't go into a ton of detail here other than to note that we outlined all this in a variety of companies that have captured funding to grow organically and begin acquiring the space to create this ecosystem of solutions in a report. And, you know, I think the one thing I would highlight with the report is we actually break out each subsection of the ecosystem that we see is emerging.

So a lot of details there. We have, you know, transportation, home modification, home health, food as medicine, ambient monitoring, companionship. And then for each of those sections, we highlight the value of the trend, how it enables aging in place, and then the funding and leading providers in the public and private markets that are targeting that specific area or acting as a platform provider for aging in place.

So again, if listeners have, interest in the space, it's definitely worth taking a look at the full report. So I'll leave it there.

23:41
Chris T
Great. All right. Well, it's about time we have for today. For those interested in reading the full report, reach out to us at William blair.com/contact-us. Ryan, thanks again for joining us.

23:53
Ryan D
Yeah, really appreciate it. Look forward to, hopefully hosting another one with you when we complete our third quarter mosaic report.

23:59
Chris T
Absolutely.

24:00
Ryan D
All right. Cheers, Chris. Thanks, everyone.