CEO Fresh Take: Improving the Bottom Line with ‘Gatorade Philosophy’

How do you turn around a senior living company facing nearly $3 million in net operating losses, with one of its CCRCs still recovering from a high-profile bankruptcy?

Virginia Baptist Homes’ new president and CEO, Jonathan R. Cook, has helped right the ship by putting forward concrete goals and focusing on the block-and-tackle changes needed to achieve them.

Cook, who previously was an executive director and regional director of operations management with Life Care Services, recently sat down with Senior Housing News to reflect on his first year at the helm of VBH. The nonprofit operates four continuing care retirement communities (CCRCs) in Virginia, with about 1,200 residents.

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Cook talked through the strategy that has led to improved financial performance and shared some of the company’s plans for the future. He also explained his “Gatorade” philosophy and how that relates to the ongoing success of CCRCs in general and the senior care industry as a whole.

JC headshot
Jonathan R. Cook

SHN: You started as CEO and president of VBH last December. The company had been having a hard time, financially. In choosing you, was the board was looking for something different?

JC: I was the first [CEO] who was not a pastor. That was a strategic decision on their part. We needed to bring a better balance of mission and margin. We’ve been more mission driven and want to bring that back to an even keel.

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SHN: And have you seen any success yet in terms of margin?

JC: Talking NOI [net operating income], last year we were at negative $2,869,000, now we’re at negative $245,000, for a $2.6 million difference.

SHN: That’s a big change, how have you gone about it?

JC: The biggest thing has been changing the culture of the organization. The Baptist ethos is paternalistic. We want to empower our staff more, empower resident choice.

SHN: Empowering resident choice. What does that look like?

JC: We’re adding beer and wine licenses, so that’s a shock to the system. But more broadly, we’re repositioning two of our campuses. We’re talking over $100 million. At Culpepper, it’s updating a 1951 building, our ancestral home. And the other repositioning is our Lakewood campus. We’re adding more lifestyle amenities and choices, with multiple dining venues, ratcheting up our hospitality, wellness programs. We’ve got to embrace those things, got to look for ways to innovate. If we fail, we fail. We’re not going to be investing millions and failing, but within reason, we want to empower people.

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SHN: What are some examples of innovative options for residents?

JC: I think we can move toward strategic IT initiatives around lifestyle. They can order room service in their rooms using their iPad, or log onto the in-room TV to watch the town hall or participate in wellness programs.

We have EMR [electronic medical records] in all four properties. But one of the things with me coming in to Baptist Homes is that we were behind the curve on technology. Our IT initiatives have been more geared toward the clinical. The next step is to augment the lifestyle components of our independent living.

SHN: And the staff empowerment piece?

JC: Virginia Baptist Homes has always had superior people, whether it’s executive directors or frontline caregivers. But at one of our first meetings, we had a comment along the lines of, “We’ve always done it that way.” That should be removed from our vocabulary. I think that’s been a tremendous help.

After the first 120 days, one of our EDs said, “What do you want, 10% margin, 15%?” The answer is no, we have to run an efficient building, but you have to tell us what that means without jeopardizing care. That was one of the key goals we set at the beginning of the year, as part of trying to remove excuses and roadblocks. We’re looking for more creative solutions.

SHN: What were the other goals?

JC: Keeping 90% occupancy across system, having a 25% improvement over last year’s results, meeting our budget. And we launched an initiative to do a performance improvement project at each campus.

SHN: Are you meeting these objectives?

JC: We’re blowing them all away.

It’s about driving the occupancy and asking the right questions—“Why are we doing it that way?”

One of the things things we did, first and foremost, was take a different look at how we measure our operations. We put some dashboards in place to benchmark our results. That’s helped tremendously in giving us a target. Taking that same benchmarking tool, it shows revenue over expenses were negative $2.3 million in 2014. We’re taking that now to negative $900,000.

Our community in Roanoke went through a significant bankruptcy restructuring and is coming out doing well financially, we just restructured that debt in July. That was a high-profile bankruptcy, and Q2 2015 cash on hand at Roanoke was 270 days.

SHN: How do you plan to keep the momentum going? What’s in store for 2016?

JC: In terms of top priorities, we need to solidify the campuses with the repositioning. How to create more transparency? Operationally, I think it’s more block and tackling and implementing programs around dining choices and options, wellness programs. We’ve got a skeleton of a program, and need to add a lot of meat to the bones, need to be more deliberate in how we deliver those programs.

From a corporate entity, our branding and strategic affiliations, partnerships, and relationships that can help offset costs to our residents.

We’re going to look to affiliate or partner. I’ve visited a few other providers. We could take on their billing component and offset some of their fixed costs. We’ve got expertise with Medicare and Medicaid, and they may not want to fool around with it. So, we can offset some of our corporate overhead.

SHN: We’ve heard it’s becoming more important than ever for CCRCs to branch out beyond their walls to reach the community. Do you agree?

JC: I’m a firm believer it’s something we’re going to have to do—80% of seniors aren’t to run to a retirement community. If there’s a way we can tap [those consumers] with the name and brand recognition we have in our market, I think there’s a general trust they have with the nonprofit provider. And to offer programs in the home, we can offset costs for our current residents.

SHN: Is there a plan yet for how to get into home health? Build versus buy?

JC: Not yet. It might be different in each market. We’re in four distinct markets. We will be getting into it, but not sure yet what it looks like.

SHN: In terms of branding, will you be replacing “CCRC” with “Life Plan Community”?

JC: We’re batting that around internally. All indications point to yes, from a standpoint that we ourselves are going through a name change. We should be approving a new name and logo at the next board meeting.

SHN: There’s a lot going on at VBH, but let’s zoom out and take a big-picture view of the industry. What are the major themes or opportunities you’re seeing?

JC: It’s what I call my Gatorade philosophy. As a kid, there was nothing I liked more than getting Gatorade after baseball practice. But the choices were only red, orange, lemon-lime. Now, there’s 50 choices of Gatorade. We’ve got to offer different choices and options. We know the next generation is going to demand it. Boomer choice is going to be paramount.

SHN: So that gets back to resident empowerment. What else?

JC: The affordability factor is going to be a piece. We have to offer not just the higher-end product, but have the Honda Accord as well. You can’t just offer the Lexus.

SHN: How to provide more options yet keep rents low?

JC: Obviously, as a not-for-profit, it’s a lot of fundraising. That’s how we can alleviate some of that burden. And utilizing technology. I think we can be smarter and more efficient. Structure affiliations, leverage your partner relationships, experiment with new contract types.

That’s the challenge.

Written by Tim Mullaney

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