Senior Living Providers Seek Cost Control as Supply Chain Issues Keep Inflicting Pain

Supply chain issues are still causing significant pain in the senior living industry, and while many executives believe those challenges will improve in the first half of 2023, others see relief further down the road.

In the meantime, operators are taking action to improve their strategies by increasing the number of suppliers they use, adding local suppliers and in some cases changing suppliers. They are also implementing new technology and adding new roles focused on material management.

A newly released Senior Housing News survey, conducted with Amazon Business, sheds new light on the difficulties operators are facing, as well as what they expect to see ahead.

The survey, conducted in the third quarter of 2022, collected responses from 46 senior living professionals, 39 of whom said they are C-suite executives.

Wyman Hamilton, president and CEO of Atlas Senior Living, is a leader of one such operator. He noted that the company is still waiting for appliances it ordered last May, with an expected delivery date next month.

Even so, Hamilton said supply chain woes were at their worst in 2021. And he added they seem to have abated somewhat in the last six to eight months.

“Part of that is because there are fewer [developers] building; but, part of that is people have learned to work within this new system,” Hamilton told Senior Housing News.

Supply chain optimism and pessimism

Senior living supply chains have been impacted by a wide variety of forces, including rising U.S. interest rates, geopolitical events such as the Russian invasion of Ukraine and natural disasters like hurricanes, ice storms and floods — not to mention a pandemic that is still infecting people across the globe.

On the whole, senior living leaders are still feeling the sting of supply chain woes, as hopeful of quick relief as they are. Respondents to the Senior Housing News/Amazon Business survey rated supply chain challenges a seven out of 10 on the pain scale.

The biggest disruptions, according to 70% of the respondents, have occurred in maintenance, repair and operating supplies. More than a quarter (26%) said medical supplies have seen the greatest amount of disruption, while another 24% said the same about both sanitation and cleaning supplies and about personal protective equipment (PPE).

But as for when supply chains might improve, the respondents were more optimistic. Almost half of the leaders who answered the survey said they expect supply chain improvement in the first half of 2023.

Others were not as hopeful. About 28% said they expect supply chains to improve in the second half of this year, while another 24% said they expect that outcome in 2024 or beyond.

Top supply chain challenges included gathering and comparing the non-pricing components among different supplies and products (39%), getting the best prices (37%), reducing administrative burden or repetitive tasks (30%) and quickly changing suppliers in response to a disruption (25%).

In response to challenges over the last 12 months, 59% said they increased the number of suppliers they use, and 57% reported that the suppliers they added were local businesses.

Almost half of the respondents, 48%, believe their company has a “very good” or “good” ability to source products from small, diverse or local businesses.

While 60% of those surveyed believe that their company has a “very good” or “good” ability to switch suppliers in the event of a disruption, 26% believe their response is average, with 7% saying they have a “poor” ability to switch suppliers.

Diversity or sustainability were not requirements when purchasing supplies, with only 17% and 24%, respectively, reporting their companies required either.

Supply chain ‘excuses’ running out

While many operators — like Atlas — are optimistic about the future of their supply chains, how the industry gets to greater stability is still an open question. Although operators may have time and resources to wait out the lingering problems, residents and their families may not.

For instance, The Springs Living CEO Fee Stubblefield at the beginning of this year predicted that “customers will not put up with Covid and supply chain excuses.”

But there are indications improvement is at hand.

“Supply chain is getting better, we are seeing better materials and FFE delivery and labor for our upcoming projects in 2023,” Treplus Communities CEO Jane Arthur Roslovic said in her year-ahead outlook.

Likewise, vendors for Health Dimensions Group (HDG) are predicting lower costs for 2023, although the Minneapolis-based company — which operates communities and has a consulting arm — has also taken steps to improve purchasing and inventory management practices, Director of Financial Planning and Analysis Stephanie Schmidt told SHN.

HDG has implemented automated purchasing software to help communities keep on track from a budgetary perspective, Schmidt said, adding that better inventory control also can help with supply-related costs.

And the costs are real, with HDG budgeting a 4.5% increase in supply costs for 2023.

Carespring, which operates senior living and skilled nursing facilities in Ohio and Northern Kentucky, also has seen costs rise and is taking steps to control spending. The provider brought on a materials management leader, CEO Chris Chirumbolo told SHN.

Having someone in that role has helped the provider procure the right amount of supplies at the right time, identify where waste was occurring, and find cost-saving solutions such as identifying when it’s more economical to buy rather than rent items or equipment.

“We have a person who’s looking at all those large buckets of our spend, to try to figure out a way to to continue to do what we do, but do it in an efficient way,” Chirumbolo said.

And like other leaders, he is optimistic that supply chain pressures will ease in 2023, although not until later in the year.

“I think some of these cost centers should go down, because it seems like some of the bottlenecks in the supply chain will improve,” he said.

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