“In 2022, this will continue to be the key priority for industry leaders: how do we continue to grow and evolve our business lines, which are strategic imperatives, in the face of day-to-day operational issues related to staffing? We need to be nimble enough to react quickly to all the changes coming at us with the global pandemic and economic issues without slipping into a reactive mode.”
The words of Asbury Communities CEO Doug Leidig describe a balancing act that many senior living companies are going through right now.
On the one hand, senior living companies have to grapple with an operational environment that is more challenging than at any time in recent history, including unprecedented staffing challenges. On the other hand, operators must stay innovative enough to meet the rapidly changing wants and needs of their customers.
Leidig is not alone in warning about being too reactive to challenges, with other senior living CEOs also emphasizing the need to be bold and create new models for the future. As Discovery CEO Richard Hutchinson puts it, the senior living industry is on the “precipice” or “immense opportunity” — for those organizations that are aware of them and able to seize them.
To learn more about how senior living executives are feeling heading into the new year, Senior Housing News connected with a handful of industry leaders. What follows is the second part of a two-part series sharing those responses:
Katie Potter, President and CEO, Five Star Senior Living:
The pandemic served as an accelerant for the changing perception of the senior living industry.
Looking to 2022, we are very conscious that our industry is at an inflection point and our customers want to stay home longer.
Broadly speaking, there are two kinds of customers: those who are looking for senior living and those who are committed to staying home for as long as possible. We provide services for both, meeting our customers where they are and allowing them to set the pace of how they engage with us.
One size certainly does not fit all, and that is truer today than it has ever been. Seniors are looking for programs and services that are tailored to their individual needs, and that is what we are focused on at Five Star. With choice-based and financially flexible options, our customers craft their own desired lifestyle, even before they are ready to move into a community.
Our Ageility fitness and rehab programs have been instrumental in helping many aging Americans combat deconditioning as a result of Covid, and they are great examples of how we meet the unique needs of each of our customers. Ageility is offered as a set of a la carte outpatient services, and features a team of licensed healthcare professionals who offer occupational therapy, speech language pathology, and physical therapy. We are proud to offer a wide range of programs, from pain management to sports medicine to safety awareness.
Another important differentiator for Five Star is our focus on fostering a sense of belonging and community. We are proactive in getting to know each of our customers on a personal level – to build a relationship and connection. This also helps us learn how we can best provide for them moving forward.
We have collaborations and partnerships that enhance our core service offerings so we can continue delivering exceptional service for our residents. For example, we recently announced a collaboration with Compass Group for experiential dining across our portfolio, and are also actively pursuing clinical partnerships, including with DispatchHealth, so that our customers can access excellence across the continuum of care from the comfort of their own homes. Finally, we are committed to further capital improvements across our portfolio that will refresh our living spaces and experiences.
Just as the customer is changing, our workforce is changing, and that is another priority for us in 2022. Our industry continues to experience labor pressure, and it is essential that all senior living providers attract and retain talent. 2022 will see us renew our commitment to our mission to enrich and inspire the lives of our team members, not just our customers.
We’re also investing in a shared services infrastructure, as well as community leadership development and support frameworks that will allow our front line team members to focus on what they do best: connecting with and caring for our residents. Our customers choose to stay in our communities because of the team members they engage with and depend on each and every day. Ultimately, whether they are coming in for a personal training session, moving in for a respite stay, or making their “forever home” with us – it is our team members that will keep them coming back for more.
Richard Hutchinson, Co-Founder and CEO, Discovery Senior Living:
At this time of year, I am typically very reflective on the past year and immersed in planning our strategic direction for the next year. This year, there are far more variables in play when setting the course for next year than at any time in recent memory, even more so than at the end of 2020.
This is primarily due to the recovery that has taken place and continues, and the inclusion of several other macro and micro factors that are creating less certainty on the environment we will be operating in.
The 2021 good news first; the industry’s customers have spoken, and they clearly desire our product for both the quality of care we provide and the socially heavy experience we offer them within our communities. On a same-store basis we “re-occupied” our buildings to pre-pandemic levels in July of this year. In November we hit our pre-pandemic net operating income for the same-portfolio of communities. The difference in the two dates represents an additional 380 basis points in occupancy beyond our pre-pandemic levels to achieve the same net operating income results.
This is a revealing statistic; however, our data suggests much of this delta is temporary in nature and we believe some of it is a timing issue. The temporary disruption is heavily weighted toward the current aggressive re-occupancy climate that is driving the customer acquisition costs higher than in recent memory, and therefore driving down the year-one net revenue per customer. Same-store, the positive occupancy expansion continues. This will begin to abate. In fact, numerous of our communities have reached 90%+ in occupancy, thereby allowing us to commence our formal tapering of incentives and other customer acquisition costs (such as removal of certain very expensive lead generation sources) to a more normalized multiple of both initial and life cycle revenue.
The other timing-related component, in my opinion, is the amount of time it will take to pass along the spike in expenses to our customers. The spike in expenses really comes in two pieces. The first is the transitory nature of some operating cost increases (such as those cost increases due to supply chain disruption, etc.) and then some are permanent such as our costs of labor that will need to truly be “passed along” to our customers to mitigate or remove any structural long term margin erosion. We at Discovery are passing these costs along to our customers in increments until we better understand which expenses and how much of those expenses are transitory versus truly structural inflationary increases.
As we head into 2022, we are bullish about both the next year as well as both the mid- and longer-term prospects of our industry. I believe the industry has a few more variables this year than in years past to contend with that could have a meaningful impact on our business and the industry. These factors include the risk of over- or under-management of the current inflationary environment and those policy impacts on our customers’ ability to execute against their demand for our product.
The housing market has long played a key role in our customer’s ability to afford our product, and if the market cools to a point where selling a home becomes significantly more difficult, then that will certainly impact our velocity of leasing — especially in the current hot independent living community marketplace.
Continued Covid disruption leading to various business-stifling prohibitions on moving customers into our communities and the current managerial burn-out being seen in the industry will continue to be contended with, and could play a factor in meeting our plan in the next year.
The continued focus on home-based delivery of care on one end and the continued incursion of multi-family into our more active product space will also be factors that have not been on our radar so prominently, that we will now have to be thoughtful about.
Given the industry’s performance and Discovery’s performance in the past 24 months — and frankly, throughout the country’s highs and lows over the past few decades — I am certain we will navigate these challenges as well as others that will come up during the year and beyond. Those companies that not only survived but grew and evolved during the pandemic are now very well positioned for the immense opportunities that we are on the precipice of.
For example, Discovery, along with many other companies in the industry, utilized the pandemic to further evolve our data capture and analytically based operating philosophies/systems, we reviewed and redefined how we wanted to manage our businesses. I believe senior housing has several businesses happening simultaneously and need to be managed differently than in the past “one-method” management approach.
In 2021, we re-examined who our customers are to include our valued team members; added tremendous talent from inside and outside of the industry for fresh perspectives/energy; made significant progress on the development and roll out of our experiential operating programs; and developed a brand new product that will commence construction next year.
As companies think about their business, I hope they see what I see: Opportunities for consolidation and creating better alignment between owners and operators, compelling increasing demographics in the face of limited new supply, a customer that is accepting of pricing increases for quality experiences and tremendous care, an industry that is ripe for disruptive technologies and processes that will allow us to penetrate age- and income-qualified customers at a higher than historical rate as well as generate new revenue streams. And, a very diverse investment platform that allows for numerous yields, total return, varying hold periods and other investment strategies from global capital providers.
2021 was a turning point for us, and the hard-fought battles will provide us further experience and strength necessary for navigating the upcoming challenges, which admittedly will be plentiful in the short term. 2022 should cement our progress and allow us to gain clarity into the tactics necessary to be implemented to achieve more stable and appropriate longer-term operating margins, both at the community level and within our operating platforms. This will be the year that significantly commences the “inflection point” that I believe our industry has been working toward.
Greg Roderick, CEO and President, Frontier Management:
My executive forecast is that occupancy should continue to rise in 2022.
I don’t see a double-digit percentage jump, month over month, but I do see a steady increase across all senior housing lines. And we’re witnessing lead traffic continuing to build, we’re seeing that all of us in the senior housing space are really focusing on good marketing techniques, improving our services and elevating our service delivery. These are the things that are going to elevate and increase occupancy.
We’re getting more refined as a profession and as a business. Obviously, the pandemic created a great number of vacancies in our space, but we are seeing them fill largely due to the fact that the aging population is growing. But more importantly, and probably more to the business, we’re just getting better as a group in terms of our closing techniques, in addition to our ability to deliver a far more attractive product.
Charlie Trefzger, President and CEO, ALG Senior:
What I see coming at us in 2022 is increased demand for our services. We’re starting to see that now. I also see increased expectations of the people who are going to be our prospective residents, and the increased expectations of their family members.
We, as an industry, are looking at an unprecedented time with respect to availability of units. Never in the history of our industry have we seen so many units available at the same time, and there’s going to be incredible pressure on all of us to gain census by doing things exceptionally and much differently than we’ve done in the past, better than we have ever had to do it in the past.
What we’re doing to get ready for that is quite a few initiatives, both around the physical plant of our communities as well as the staffing of our communities. And we have to remember that we’re doing all this while, at the same time, still fighting a pandemic.
We have two fundamental areas that we’re focused on: the condition of our communities, and the capabilities and competencies of our staff.
We are focused highly on the training of our staff. Core training is something that we are doing all the time now. We’re doing it both electronically and in-person. Number two, we are trying to give our staff the tools that will make them more efficient at their jobs. The efficiencies that we have to begin incorporating into our businesses is essential when we’re dealing with staff shortages and escalating costs related to staffing.
On the real estate side, we are spending millions of dollars on improving the appearance and condition of our communities. What sold well before Covid isn’t necessarily what’s going to sell well after Covid, so we’re converting units to greater sizes, as we expect people that want larger units. You are going to have to do that not only because of the expectation of our consumers, but also because it’s very competitive out there.
Another thing I see coming for us as providers of health care is being more capable of coordinating the care of our residents. Increasingly, that’s becoming the expectation of the families, and the expectation of the regulators. And we all have to become very focused on that, and very good at it. We are hyper-focused on how we can do a better job coordinating the care of our residents, keeping them well, and increasing our length of stay.
While care coordination is a developing area of our industry, it’s developing extraordinarily fast. Just this week, I’ve been in multiple conversations with companies talking about how they do care coordination.
The world is going to change very quickly with regard to technology. We all better learn how to adapt to it very quickly. I’m very focused on sensor technology right now, trying to utilize both building sensors and resident sensors in a way that will allow us to know what’s going on remotely. But remote monitoring, in either case, is not the end-all answer. It provides us data that we can react to, and do the things necessary to address the issues. They allow us to become predictive, and preventative. And that’s what we’re, really as an industry, going to need to become.
Doug Leidig, President and CEO, Asbury Communities:
When our leadership team mapped out key priorities after I became CEO, we prioritized these areas: adapting our CCRC product to economic challenges and consumer expectations; diversifying our business lines and revenue streams; growing faster; and last but not least, fully leveraging data and technology.
What we’ve accomplished in these areas in the past two years is remarkable, especially when you throw a pandemic into the mix and the low infection results we have achieved:
— We finalized our affiliation with Albright Care Services in early 2020 and acquired a new rental and personal care community, Chandler Estate, in 2021.
— ThriveWell Tech was chosen as one of six test-bed partners for the AARP AgeTech Collaborative and was ranked in the top 7% of 2021 MSP Channel Futures 501.
— We expanded Albright Pharmacy Services from two to six of our CCRCs.
— We launched a rehab services management partnership with Flagship Rehabilitation.
In December we finalized a Strategic Blueprint for Asbury, which maps out where we will be by 2024:
— CCRCs that are well-being destinations – repositioning our business model, designing a well-being resident model, and addressing infrastructure are key priorities
— a diversified aging services organization
— a leader in health care technology solutions
— a high-performing organization with diverse ideas and people and a focus on associate and customer wellness that fosters innovation
As proud as I am of how much we’ve done, we still need to do more and faster.
I certainly didn’t anticipate that staffing issues would become the critical priority they have – and this impacts our strategic planning, not just operations. We made some serious investments in addressing workforce in 2021 – investing nearly $500,000 in market wage adjustments on top of living wages and creating a centralized, 5-person recruiting team.
In 2022, this will continue to be the key priority for industry leaders: how do we continue to grow and evolve our business lines, which are strategic imperatives, in the face of day-to-day operational issues related to staffing? We need to be nimble enough to react quickly to all the changes coming at us with the global pandemic and economic issues without slipping into a reactive mode.
Workforce is a significant pressure point on capital expenditures, but there are others. Infrastructure is a major issue for many of us, investing in IT, new innovation and dynamic resident programming. We must figure out how to address these issues faster and bigger – Asbury and the industry as a whole.
I’d also like to see us fighting harder to get a seat at the table with regulators so they understand the value we bring – our infection-control expertise is just one area – and the challenges we face.
From a CCRC standpoint, we are still feeling the effects of COVID-19. It continues to impact our lifestyle and services, and some of the changes we’ve made in the name of safety are going to remain for some time as we see how the vaccines and variants play out.
But we are seeing a strong uptick in occupancy in the latter half of this year, and if the housing market holds in 2022 and no major changes come with COVID, we feel optimistic.
Something else that gives me optimism as we move into 2022 is our success in infection prevention and control. We had great clinical teams before COVID began and now they are complete rock stars.
We’ve conducted close to 122,000 tests since the start of the pandemic to the end of November and our positive rate is 0.73% compared to a national rate of 7.6%. We have made our communities safe, supportive places to live and receive services through a brand-new, unprecedented public health challenge.
That’s a story our entire industry needs to continue telling in 2022 because I think the media’s early coverage of nursing home outbreaks continues to color the public’s perceptions of CCRCs to a degree.
Dwayne Clark, Founder and CEO, Aegis Living:
Companies often share their victories, but they don’t share their challenges.
One of the pivots that we have to make as an industry is be very transparent and honest about the challenge we face, whether that’s in staffing, whether it’s supply chain issues, whether it’s that occupancy has been low and we’re trying to get it up. You have to be transparent about that, because that’s the only way you win consumer confidence back. So I think that’s incredibly important to do with your consumers. We fell from 93% to 81.5% in our occupancy, and we’re now back to 88%. I think that’s symbolic of how much consumer confidence we had pre-Covid.
I don’t think it’s any secret that the big thing that everybody is facing is staffing. In my 36 years in the industry, I have never seen anything like it. The issue is about how creative we can be with people. People want different things than they did even 18 months ago, and that’s a big pivot for our industry. Aegis has started its own staffing agency. That’s one of the ways that we’re pivoting.
Occupancy is obviously a big issue, and what we have seen in the last four months is like the light switch flipped on, especially in the last two weeks. December is normally slow, and during Thanksgiving, Christmas, people slow down. We had a 1% surge in census, just last week. That is gigantic. We just opened two buildings in the last six months. And the traffic is insane. The tours are insane. With inflation, people are making no qualms about paying additional community fees. There is a dire need.
For 18 months, banks were not lending money to build the product, and this is going to grow even more and multiply. The products that should have been funded 18 months ago that are due to start coming out of the construction cycle in the next three or four months — it’s not happening. There are very few projects that are going to be coming out of the ground in 2022.
Chris Belford, CEO, Sinceri Senior Living:
2022 is going to continue to be a year of recovery, similar to what we saw in 2021.
We firmly believe that we’re going to continue to see increased occupancy rate growth in the industry as well as within Sinceri Senior Living. We believe that transactionally, there are going to be some more opportunities where we’ll look at more assets that are going on to the market for acquisition and possible management fee abilities.
The two more challenging aspects of where we’re at is a continuation of what we saw in 2020 and 2021, which are staffing issues. We’re just not getting enough staff to come to work. Solving the issue of staffing is going to be a major issue for us.
I think we’re looking forward to some growth in 2022. You’ll certainly see Sinceri continue to grow. We’re at 84 communities as of today, and we’ll be growing more than that in the future.
Sean Kelly, President and CEO, Kendal Corp.:
We’ve developed some incredible chops as a sector that will enable us to continue to confront the things like the pandemic that will probably never leave us.
We’re going to start behaving a little bit differently when it comes to new viruses and new variants that are going to continue to come down the pike. And we have a set of services and programs, and means and methods, that I think we as a long-term care sector have gotten particularly good at putting to work. They aren’t perfect, but we’ve gotten particularly good at it in such a way that people who come to our communities and avail themselves of our programs can be exemplars for how life can be lived, even in the case of a pandemic.
We have to get beyond the hand-wringing when it comes to the staffing crisis, and we have to stop being only reactive. We have to think about a revision to our model and an approach that strips away or strips down some of the old assumptions; and recast a new business model, so that we can have a sector that addresses the issue of prestige, professionalization, purpose and pay.
Until we do that, we’re going to continue to respond by offering incentives for people to come work with us referral bonuses, and we’re going to pay more and more for agency work and temporary workers and overtime, which has implications up and down the line in terms of quality and cost.
The ability to think about a new model is before us in 2022. In 2021, and certainly in 2020, we were rightly, entirely focused on the day-to-day. We have an obligation and an ability to get our head back up above the water, and see out to the horizon and beyond.
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