3 Solutions to Age-Old Senior Housing Problems

Senior living is rife with opportunities. Yet perhaps the biggest opportunity lies in solving some of the age-old challenges that have historically plagued the industry.

These challenges have persisted for years and represent bigger problems for senior living providers as a whole. They go beyond economic hurdles and housing market woes, and drill into the cash, care and culture of organizations.

And chances are, most providers are dealing with them right now.

Advertisement

They are: “cost creep” and rising expenses, lead generation and occupancy levels.

While these challenges have made lasting marks on the sector, there are unique ways of solving them, industry experts say. And in doing so, providers may be able to add hundreds of thousands of dollars to their bottom line.

“There are a lot of dollars at stake,” says Roy Barker, director of special projects at Moore Diversified Services, which specializes in operations analysis, marketing development and investment advisory services.

1. The Cost Creep Problem: Residents are being provided more care than they are being charged for.

Solution: Keep up on resident evaluations and make sure that residents are being charged for the amount of services they are using — tiered pricing.

“When we speak of ‘cost creep’ what we are generally speaking to are residents that need more time spent with them during each day that exceeds the amount correlated to the existing monthly service fee,” Barker says. “You need to be sure you stay on top of your care plan and make sure you’re capturing the revenue for all of the services you are providing.”

While cost creep may be increasing communities’ expenses, providers should also be sure to address generally rising expenses, which can put senior housing out of reach for many Americans.

To cut back on costs in order to keep senior living affordable, save $1 each day on resident expenses.

“We’re always looking to see how we can be more efficient on the expense side without having any effect on the care or services that are delivered,” Barker says.

Consider this: An 80-unit community has 90% occupancy, or 72 residents. Multiply those 72 residents times 365 days per year, which totals 26,280 resident days each year at the community. Saving $1 per day on each of these residents, then, could amount to more than $26,000 in savings.

“By saving a dollar a day, you can be looking at [saving] 1% to 2% of the actual operating cost per resident,” Barker says.

An additional $0.50 could amount to even more savings.

Saving $1.50 per resident at a 150-unit independent living community that is 92% occupied (135 residents) could potentially add nearly $75,000 to the bottom line.

Not only does this strategy save thousands in operating costs, but it also increases the community’s property value, Barker says.

“Assuming this would be at an 8.5% cap rate, that increases the property value by almost $900,000 dollars,” he says. “A lot of operators don’t think in terms of that; they think in terms of having more net operating income and margins. All that is great but there’s also this extra bonus.”

2. The Sales Problem: Untrained salespeople contribute to a transaction-based — not relationship-based — culture in which senior living providers are lead-rich but resident-poor.

Solution: Foster relationships with the leads that have already been generated, including the lower acuity prospects.

“We all know that the most urgent leads are typically the highest acuity where most of our sales counselors spend their time and then discount the importance of the ‘I’m not ready’ leads from moving in,” says Jayne Sallerson, chief operating officer of CRM startup Sherpa, and former executive at Emeritus Senior Living.

“We then drive up our expenses by finding more channels of generating ‘urgent’ leads, which ultimately will not grow occupancy if attrition continues to grow,” she adds.

A transactional sales approach has contributed to the formation of this type of culture in senior living. Historically, in skilled nursing, many of the big players used sales techniques from Procter & Gamble, which measured staff performance on metrics such as number of calls made, referrals received, etc., Sallerson said during a recent Caring.com webinar.

This sales approach then permeated the industry as companies began building senior living software that reinforced performance based on these metrics. But relationships, not metrics, are what tip the occupancy scales, Sallerson says.

“Do you need more leads? Yes, we always want those top leads, but the bottom line is we spend a lot of time fielding leads rather than focusing on the leads that we have today and building that relationship,” she said. “If you do that, that’s what makes you go from good to great — from five move-ins a month to seven a month.”

Better staff training is key to turning around this cycle, says Barker, who also specializes in employee turnover analysis and retention strategies.

Instead of hurrying the sales process and treating prospects as transactions, better trained employees would guide a lead through the process and would be better equipped to encourage that person to move in, Sallerson tells SHN.

“If you slow up your approach at the beginning of discovery it actually speeds up the sale for these lower acuity residents,” she says. “As an industry, we have an opportunity to really evaluate what is our current sales culture and training and does it reinforce the right sales behaviors for the right prospect.”

The importance of staff training was highlighted recently when the results of a mystery shop revealed failing marks for senior living salespeople. The shop, part of an annual program completed by students at George Mason University, showed that assisted living communities’ sales staff overwhelmingly fail to ask the right questions and provide the necessary information to prospects.

“Our biggest opportunity is to step back and challenge our own sales assumptions. The industry has been changing over the past 20 years but our sales approach hasn’t,” Sallerson says.

3. The Occupancy Problem: Despite an upward trend, the occupancy levels for senior housing remain in the high-80s and low-90s, so communities are missing some major profits.

Solution: Add just one more occupied unit.

The value of one additional resident move-in may be obvious, but Barker offers a different take on the age-old occupancy challenge.

“A typical assisted living facility would generally have about a 30% excess profit margin of revenue over expenses before debt service and mortgage,” he says. “If we are able to put one more person in your community, the margins will actually invert to approximately 70% profit.”

For example, at an assisted living community whose rent is $3,500 per month, capturing just one more resident could add nearly $30,000 to the bottom line. Breaking it down, $3,500 per month times 12 months equals $42,000 in yearly monthly service fees. Multiplying $42,000 by 70%  gets $29,400, or approximately $30,000.

Think about it this way: A 100-unit community has 90 residents. Prospective resident number 91 comes through the door and a salesperson converts the lead into a move-in. When that resident moves in, the community will have few additional expenses other than food, electricity and water.

The community won’t have to hire another executive director or businessperson. It won’t pay any more in taxes. Taking on one more resident isn’t going to significantly increase the community’s expense structure, Barker says.

“That’s why it’s so important to motivate the sales team. We want to have the higher occupancy level, but the dollars at stake are so much more important,” he says.

Written by Emily Study