CEO Fresh Take: How ACTS Invests Big in Both People, Property

ACTS Retirement-Life Communities is in the midst of a $300 million project to revamp its CCRCs—but the company’s strongest investments might be in a different area.

While he acknowledges how important the facility upgrades are, ACTS CEO J. Mark Vanderbeck speaks especially forcefully about the nonprofit provider’s commitment to its workers. Cultivating satisfaction and longevity at every level of the org chart not only saves on recruitment and retraining, but is a key ingredient in having access to credit at the lowest costs, he says. Not to mention the benefits for morale and resident care.

Given the focus that ACTS, based in the Philadelphia area, has on keeping the best people on the team, it stands to reason that the company promotes from within. When Vanderbeck took the CEO title in August 2014, it was after a 17-year career with the provider, which has a portfolio of 21 continuing care retirement communities (CCRCs) and is the nation’s largest not-for-profit owner, operator and developer of these types of properties.

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Mark Vanderbeck
Mark Vanderbeck

Still, Vanderbeck brought a decidedly fresh perspective to the C-Suite, with an even more intense focus to the company’s people-power; he put into effect a leadership reorganization that saw half a dozen people shift into new positions.

As Vanderbeck transitions from his first year in the CEO’s chair to the second, he sat down with Senior Housing News to share more details about the start of his tenure and where he plans to lead ACTS next.

This is the latest installment of CEO Fresh Take, a series of conversations with nonprofit CEOs who are taking the reins as signs point to more urgency around scaling up and competing with a booming for-profit sector.

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SHN: This year, ACTS announced its three-year, $300 million plan to upgrade its CCRCs. Was that your top priority when you took the helm?

MV: In that transition, we had a realization that there were a number of people in the senior leadership that were ready for the next opportunity. We put together a leadership transition, and of those seventeen or eighteen positions, half a dozen involved a step up to a new position or taking the next promotion within their direct line they’d been involved in. That was number one from a standpoint of getting that structure in place and going forward with it. You look at those eighteen individuals and you’re approaching almost 400 years of service to ACTS, so we have a real asset to draw from. We’re blessed by longevity as well as the quality of the staff.

One way you get ratings from Fitch and S&P, beyond the financial review they do, they always comment on the quality and longevity of the staff. So that was number one in my process.

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SHN: You’ve got a BBB+ rating from Standard & Poor’s and an A- rating from Fitch, so you’re doing something right. What does your turnover rate look like specifically?

MV: There’s a number that’s thrown out there all the time. In a presentation I recently made, there was an introduction by one of the reps from [investment bank] Ziegler, and the stats they had was the average turnover right now is about 34%. Ours is about 12%, so we are significantly lower compared to the industry rate.

SHN: How do you achieve that?

MV:  At Ziegler’s conference, I spoke about a systems approach to workforce development. The other [presenting] company was from a traditional standpoint of leadership development for their managerial people and top people. But 10-plus years ago, we set this up and decided to take another approach. Simply, to touch as many people with training and development as we could, and help the hourly workers enhance their skills, be eligible for future promotions, and ultimately have a better quality of life.

To give an approximate number, on an annual basis in excess of 2,000 people go through some level of training, certification or education, including through [our formal education program] ACTS Corporate University. I think that’s one of the major reasons for our retention numbers. The other thing that is somewhat unique in the industry, our retention numbers are actually better on the nursing side than overall. I think there are a number of reasons, but a lot of it is simply treat people fairly, and the culture of ACTS is a family kind of environment. We try to do a lot of special programs. There are service awards, we do holiday events, honor different departments in Nurses’ Week or Nursing Home Week.

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SHN: I imagine the cost savings from avoiding turnover are substantial.

MV: The other stat [Ziegler] threw out there, and I’m sure it’s accurate, was that every time you have to go through orientation or training that’s at a cost of $4,500. You think of an organization our size, with the numbers we do, the monies you can save and invest in your employees.

SHN: So that savings is what’s funding the staff initiatives, the special programs? 

MV: In the budget process, we make sure we have what is called employee relations money, money for the community to use for employee purposes. These things come together and build real, positive relationships.

Everyone talks about expense, but there are certain expenses that are an investment in your people. When everyone had their challenges in the housing crisis, like a lot of organizations, we put a plan together to have some expense control. I can tell you—at that time I oversaw 21 communities as executive vice president of operations—so may people said, we understand there may be steps taken, but don’t touch ACTS Corporate University.

I think we’ve tried to have a culture of investing in our people. Through the ACTS University or programs on the outside, or a number of us who went to the national LeadingAge conference, all those things deal with the investment side of the operations. Candidly, if the employees are happy, they’ll recommend friends of theirs and you’ll start to have a workforce committed to the organization, the mission, the ministry. I think it creates a positive viewpoint of the organization.

SHN: Returning to the leadership transition you spearheaded, were there new hires or positions created?

MV: We established a position, in that a major part of what one of our vice presidents does now is try to create relationships in all the states and federally. I think that’s really important.

SHN: You’re talking about with legislators, regulators?

MV: You need to find the time to create relationships and connections with those legislators, to your communities, not just when they’re running for office, but for having a regular process. We want to be their health care resource. If there’s something that comes up in that world, the call will be from them to us. And that takes a lot of work.

It’s always tough to predict where things are going from a federal legislation standpoint, and there’s a lot of scrutiny as it is.

SHN: Turning to that CCRC update initiative, can you talk through what that has dealt with so far?

MV: Rather than focus on affiliations with new communities, we turned the corner for a repositioning to look at some of those older communities from an enhanced capital investment standpoint. That’s taken a couple directions. Primarily it’s dealt with a valuation of the independent living units. In some cases, those were overbuilt. But what it allowed us to do was transfer individuals to other parts of the community but then construct our OakBridge Terrace and WillowBrooke Court—our AL centers and SNF. And as is the trend, there have been two areas of emphasis: very much person-centered care and privacy. Creating a lot more private room situations. When these communities were built in the 70s and 80s, you got semi-private accommodations. What’s happening in the CCRC world is what’s happening in hospitals. When you renovate, you go toward private rooms.

SHN: To put some dollar figures on that, you’re talking about a $10 million renovation to a skilled nursing center, WillowBrooke Court, and $40 million campus enhancements at a different CCRC, including opening the new OakBridge assisted living residence. Can you discuss this capital allocation and what projects are next?

MV: We just went through our budget process, and it’s one of things that always makes me think about this, that the ratings agencies always state that we’re consistent in capital investment in our facilities. It’s not, all of a sudden we have to catch up.

For example, next year we’re going to have routine capital investment of almost $70 million that does not cover special financings for the repositionings. It’s a major element as we look at the repositionings over the next three years, we’re looking at approximately $300 million because of what we needed to do. We have to put $50 million or thereabouts in some Florida communities, and are in process right now in one of our major Pennsylvania communities, and some we affiliated with four years ago. It’s an ongoing process.

SHN: Looking at some larger industry trends, one is rebranding CCRCs as Life Plan Communities. Will ACTS adopt this term?

MV: It’s almost too early to say. Marketing companies that we work with were involved in that process, and we want to have some more discussion with them. It’s interesting, when we market and go through sales efforts, it’s not like we have an ad or poster for a CCRC. You basically talk about the amenities, the quality of life, the security and financial viability of the organization. You don’t necessarily get into the nomenclature.

SHN: Other big-picture trends informing ACTS’ strategy right now?

MV: Industry-wide, you’re going to see more and more people try to create some level of partnerships between organizations. Sometimes what you read about or hear about is ACOs coming out of the health care reform legislation. But there’s more to it than that. I think there are smaller organizations that are hurting coming out of 2008-2012, and they’re looking to be part of a larger organization. But even if it’s not an affiliation, there are opportunities, I’d say, from a partnership standpoint. And depending on the scale of the organization and, candidly, the objectives or priorities, more people looking to expand into home- and community-based services. It may take the form of adult day care, hospice, or home care outside your four walls. I think that’s certainly an area that we are looking to explore.

SHN: But did you mention that you’re backing off affiliations now, as you focus on repositioning current properties?

MV: It isn’t necessarily that we would have affiliation opportunities on hold. It is that we’ve committed fundings internally to the repositioning, but at the same time, we’re pretty active in seeking opportunities on the affiliation side.

What we’ve found, in the last 10-12 years, is that’s where our growth has been. Both financially and from a timing standpoint, you can make those things happen a lot faster than a new development standpoint. Still, in addition to repositioning, we have a community in Matthews, North Carolina, and we got the opportunity to purchase 47 acres next to it. So we’re creating a new structure, which will add to that community, but it has almost been approached as new development. So we have all those things in our portfolio. New development, affiliation, as well as repositioning.

Another thing, we think one of our strong skill sets is the ability to internally manage operations. We’re looking to have more of an internal therapy program, moving from a contract program to more of an ACTS-managed program. That’s a phased effort over the next two to three years, and implementing nurse practitioner systems in our communities.

SHN: What’s the benefit of moving away from contracted therapy?

MV: At a not for profit, we’ve got the ability to have more hands-on, one-on-one service. From a contract standpoint, what happens, and they realize this, is if they can have two, three or four people doing the same group exercise and charge that accordingly, that’s better from their bottom-line standpoint. It’s more a philosophy that we can have a stronger connection with the resident, and residents, candidly, respond better to an ACTS program than contract. That’s not to say the contract people aren’t good at what they do. It’s more of a philosophy difference.

SHN: Speaking of philosophy, that’s one constant for nonprofits: balancing margin and mission. What’s your approach?

MV: We talk oftentimes about the fact that we’re simultaneously a business and ministry. I think you can do both. But it’s interesting, even though there’s certain financial objectives you have, in developing the budget for 2016, the dominant discussions were knowing that the residents were still in a relatively flat investment period and there was no Social Security increase. That was probably the driving factor as we looked at everything we could do to assist them. There are years when the environment’s different.

Remember when you’d see the picture of the lady of Justice with a scale on each side? I think about that, about the balance. We need to be fair and competitive with our workforce. We need to try to keep our resident fees as low as we think is appropriate, and then ultimately make sure that this is a financially viable organization. I always have that picture in my mind that those are the things you have to balance. I think we’ve been pretty successful. To me, that’s where the margin and mission come into play.

Written by Tim Mullaney

Read previous CEO Fresh Take interviews:

Improving the Bottom Line with ‘Gatorade Philosophy’

Why CCRCs Need to Turn Competitors Into Allies

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