Benchmark launched its middle-market Branches brand four years ago, and the company has made progress on making senior living more affordable. But there is something that stands in the way of bringing those costs down further: labor.
“We can tinker around the edges with dining or with non-labor expenses, but at the same time, we have this counter force pushing against it, which is increasing labor costs,” Benchmark CEO Tom Grape told Senior Housing News. “It’s a little bit hard to make too much progress reducing costs at the [same] time we have increased pressure on labor.”
That is the challenge for not only Waltham, Massachusetts-based Benchmark, but also for the larger senior living industry as operators work to develop a scalable product that is affordable for middle-income older adults.
Many older adults need care services, and senior living providers need workers to staff their communities and provide those services. And as long as labor makes up a significant portion of a senior living community’s budget, making a true middle-market model work will be a tough nut to crack.
Despite those challenges, Grape and Benchmark are pushing on with their middle-market plans even as they are shifting their focus in other areas. For instance, the company is pressing pause on its plans to build a portfolio of urban-focused communities.
“We’re looking at doing more Branches, but we’re also still looking at other ways to bring the rates even a little bit lower,” Grape said.
Benchmark CEO Tom Grape, for Aging Media Network Benchmark CEO Tom Grape, for Aging Media NetworkMeeting the middle
Benchmark’s Branches model aims to hit rates that are about 20% lower than its more traditional senior living communities. To achieve that, the communities are smaller in size and offer “companion units” where residents share bathrooms and entryways.
At the same time, Branches communities are designed to offer many of the same amenities of a larger Benchmark community. For example, Benchmark’s Branches community in Marlborough, Massachusetts, has a beauty and barber shop, garden and patio, fitness center, community pub and a library with computers for internet, social media and email classes.
And with assisted living and memory care rates starting at just under $3,000, the model is relatively affordable when compared to the median cost for a one-bedroom unit in a private-pay assisted living community, which is $4,300 per month.
Grape believes that the operator can drive those rates even lower, but how is still an open question.
“We’re continuing to try and figure out how we can find a way to bring costs down materially — not just 5% more — but really, materially more,” Grape said.
There is a sizable opportunity for Benchmark or any other senior living provider to make senior living rates more affordable. Projections indicate there will be 14.4 million middle-income older adults in the U.S. by 2029, 54% of whom will lack the financial resources to pay for senior living at current average market rates, according to a 2019 study from the National Investment Center for Seniors Housing & Care (NIC), NORC at the University of Chicago, Harvard Medical School and the University of Maryland School of Medicine. And Covid-19 has only accelerated that trend.
Grape is aware of that opportunity, and the company is actively working on ways to meet the middle-market need.
“We’re planning to do more, but we’re trying to … find a way to bring [rates] down another real notch,” he said. “We haven’t quite cracked that nut yet.”
Growth plans, Covid recovery
Outside of its plans in the middle-market space, Benchmark is actively growing its senior housing portfolio. All the while, the operator is working to regain occupancy lost during the pandemic.
Occupancy at Benchmark’s 63 owned and operated communities lies somewhere between 80% and 90%, according to Grape, and the company is working to grow that number in the months ahead. But he added that Benchmark has seen five straight months of record-breaking occupancy growth thanks in part to the credibility that the company earned in stopping the spread of Covid-19 at its communities.
The operator conducted two market research studies over the summer, according to Grape. One found that 87% of current residents and their families have improved their view of Benchmark since the pandemic started, and another found that 77% of Benchmark’s associates felt that the company was living its mission of taking care of older adults.
The company also previously formed a coronavirus advisory council of medical and public health experts, including a former U.S. surgeon general and a former secretary of the U.S. Department of Veterans Affairs.
“We did a lot of things that I think, in retrospect, built us a lot of credibility,” Grape said. “So that has been something that is paying dividends.”
Benchmark also has a growing continuing care retirement community (CCRC) business line. Today, the company manages four CCRCs — two in Massachusetts and two in Connecticut. Occupancy for the company’s CCRC segment currently stands at about 90%.
“We had gotten into each of those sort of opportunistically, and we like the business, so we’d look for more,” Grape said. “But we’re not looking to develop CCRCs.”
Benchmark also has stepped back from its pre-Covid plans to grow through its Benchmark Wellness Management initiative, focused on wellness-focused urban projects. Denise McQuaide, the president and COO of Benchmark Wellness Management, left the company in April 2021.
“With the dramatic increase in construction costs — and this was even pre-Covid — we found that the urban opportunities we are pursuing are difficult,” Grape said.
In terms of development that is underway, Benchmark has one project under construction and six more in its pipeline. The company is also actively seeking acquisition opportunities.
Benchmark is also focused on its business intelligence operations, which have grown over the past decade and now feed the operator plenty of data on its customers — data that Grape believes will help inform how the company grows in the future and caters to specific kinds of residents.
“We’re going to start to see a lot more market segments differentiated than we have today,” he said. “As an industry matures, that’s sort of what happens; you start to see new market segments appear, even within a category like IL or AL or active adult.”
Outside of growth, Benchmark is also tackling a handful of strategic initiatives, including efforts to overhaul compensation for workers and give them more flexible schedules. The operator is also rolling out several IT changes, such as payroll scheduling upgrades. And, Benchmark is actively bolstering its partnerships with health care providers, such as McLean Hospital, a psychiatric hospital in Massachusetts.
“We have a number of active [partnerships] now, and I think that’s going to be more and more of a fact of life going forward,” Grape said. “That is going to be an area of a lot of innovation, a lot of creativity — it’s going to be a really exciting front for the coming year.”
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