ATLANTA — Even before the pandemic struck the United States in early 2020, rising labor costs were putting downward pressure on margins for seniors housing owners and operators. The public health and economic crises stemming from COVID-19 have only amplified the problem, say seniors housing professionals.
In an industry where renters overwhelmingly belong to one of the most COVID-19-susceptible demographics, seniors housing operators are now wrestling with the question of whether to require staffers to get vaccinated. At the same time, they are battling widespread wage increases brought on by a labor shortage compounded by the steady flow of federal unemployment benefits.
The net result is that both third-party operators and owner-operators of seniors housing properties — from independent living to skilled nursing — are seeing their costs rise. Simultaneously, these groups are also struggling to recoup occupancies and revenues lost to COVID-19. And while labor is not the only operating expense on the rise within the seniors housing space, it’s a unique line item in the sense that it has dual external forces acting upon it.
This realization was not lost on a “power panel” of executives who own and operate seniors housing properties and who spoke at the InterFace Seniors Housing Southeast conference on Wednesday, Aug. 18. Held at the Westin Hotel in Atlanta’s Buckhead area and hosted by the InterFace Conference Group and Seniors Housing Business, the eighth annual event drew more than 250 registrants.
To Vax or Not to Vax
The panel first addressed the issue of requiring vaccine mandates among staffers who regularly interact with residents, especially as the highly contagious Delta variant of the coronavirus continues to spread across the country.
Moderator Steve Gilleland, chief development officer at Senior Living Investment Brokerage (SLIB), kicked off the discussion by noting that Georgia-based PruittHealth, one of the largest skilled nursing operators in the country, had recently instituted a policy requiring all employees to be vaccinated.
Judd Harper, president of third-party operating firm The Arbor Co. and a panelist, said that in mid-March his firm informed all employees that they needed to be vaccinated by June 30, religious and medical exemptions notwithstanding. The company reached a 90 percent vaccination rate by the deadline but lost some team members in the process.
“We ended up losing about 60 employees out of a total of about 3,500 that refused to get the vaccine,” said Harper. “But that was a relatively small number for what we felt like was a huge impact on our business and the welfare of our residents, their families and the other staff members.”
Harper, who’d previously stated that his Atlanta-based firm operates about 40 properties across multiple states, added that all new employees are required to be vaccinated or to commit to getting the first shot within 30 days of getting hired. He also stated that overwhelmingly, the ownership groups that Arbor contracts with supported that pro-vaccination policy.
Doug Schiffer, president and COO of St. Louis-based owner-operator Allegro Senior Living, took a more muted stance on the issue. Schiffer stated that his firm is still debating whether to introduce a vaccine mandate for employees at its 40-plus communities. Schiffer, like Harper before him, also said that a resident vaccine requirement was unnecessary since the vast majority of residents got inoculated as quickly as they could.
“Our resident base has a vaccination rate of 98 or 99 percent,” he said. “And we’ve found that that’s because we’re dealing with a generation of people that was very used to vaccines being godsends. They lived through polio, mumps and measles, plus other afflictions that vaccines put an end to. So, there aren’t really any anti-vaxxers in our resident population.”
Schiffer also said that while he would not be surprised if Allegro did ultimately implement some sort of staff vaccination requirement, those who refused would likely not be automatically terminated. Instead, he said, they might be subjected to more frequent testing or a revised workplace routine that reduced contact with residents.
Jesse Marinko, CEO and founder of Phoenix Senior Living, was the last panelist to weigh in on the subject. Marinko said that across his firm’s portfolio, the staff and resident vaccination rates are about 70 and 95 percent, respectively. He conceded that while Phoenix has been more focused on educating staffers who are reluctant to get jabbed, a shift to a mandate might ultimately be unavoidable.
“It’s an ever-changing environment and a hard job for all of us to predict the right path of the future,” Marinko said while also confiding that his own senior-aged parents had become infected despite being fully vaccinated. “We have to take the facts we have today, know our company culture and our resident population, make sure we’re really listening to what our residents and families and staff are saying and try to be responsive. But we’re still very much in the education process of this pandemic.”
Wages Rise, Shortages Remain
Without question, the pandemic has dealt the seniors housing business some rough blows.
The general vulnerability of elderly people to COVID-19 ensured that leasing activity would decline sharply at virtually all communities in 2020, regardless of location or property subtype. Meanwhile, the country has entered a period of inflation, with the U.S. Consumer Price index posting 5.4 percent year-over-year increases between both June and July of this year and last year. Those figures represent 13-year highs and indicate that higher wages are required to cover higher costs of living in the seniors housing space and beyond.
Seniors housing owners and operators have been able to offset some of the revenue losses by raising rental rates on existing customers, who panelists said are more understanding of the larger inflationary forces at work and accepting of these rate hikes.
To that end, owners are finding it easier to bolster their revenues through renewals with existing customers rather than through executing new leases with first-time residents. Still, heftier renewal rates generally aren’t enough to overcome the rise in expenses.
“No matter how much you’re able to raise revenue, the expense piece of the equation is still coming right behind it,” said Schiffer. “Those two are not moving at the same pace. The weighted average increase between new and existing leases versus the increase in expenses — that’s where we have the biggest issue that’s hurting our margins.”
The industry’s labor situation might have benefitted from the temporary windfall of the mass exodus of workers from shuttered retailers and restaurants. But the federal government’s ancillary unemployment benefits have kept some of these workers on the sidelines, some panelists contended.
“We’re at the mercy of the larger economy, and it’s an extraordinary effort just to convince people to come to work,” said Marinko. “Our wage rates are up, and yet every one of our properties is still short-staffed, no matter where it is in the country. But the scary part is that we may not have even hit a level of wages that will convince workers to stop collecting stimulus money, come out of their house and return to work.”
Marinko added some anecdotal evidence, noting that he’d recently driven past a Burger King that had a sign offering $750 signing bonuses to new employees. “That’s just where we are right now,” he said in regard to the larger labor crunch occurring throughout the country that is trickling down to the seniors housing space.
The panelists then shared their thoughts on how to best recruit and retain talent in the current environment. Opinions and initiatives differed across the board, but the general consensus was that significantly more resources must be dedicated to sourcing talent outside the local community. However, all panelists agreed that the biggest threat from the labor shortage is the potential inability to provide residents with top-quality care.
In addition, the panelists concurred that the owners and operators who are most successful in curbing their labor challenges are those who get to know their employees and make them feel comfortable in their work environments.
— Taylor Williams
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