Artis Senior Living CEO Heeds Lesson from Marriott as Company Scales Up

As Artis Senior Living expands its portfolio, CEO Don Feltman keeps in mind a saying that he heard years ago from a titan of the hospitality industry.

“When I was at Marriott, I remember Bill Marriott Jr. saying his father’s definition of a pioneer was someone in a coonskin cap, face-down in a mud puddle, with an arrow in his back,” Feltman told Senior Housing News. “The point being, you want to be careful what you’re doing. You want to look and test.”

Feltman and his leadership team are keeping a close eye on the latest trends — from predictive analytics in hiring to Medicare Advantage opportunities — but they are not apt to be “pioneers,” preferring to keep tabs on other providers’ experiments before making investments and operational adjustments themselves.

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Still, Artis is not exactly dragging its feet. Founded six years ago with a focus on standalone memory care, the McLean, Virginia-based company today has 13 communities in operation, a handful of other green-lit developments, and more than 20 sites being explored or pursued for future construction. As the company gains scale, it is weighing which technologies to adopt, how to staff up, and how and when to add new services. For instance, its forthcoming Chicago community will be its first to offer both memory care and general assisted living.

As he faces these decisions, Feltman can draw on his industry experience. He began working for skilled nursing giant ManorCare while in college about 40 years ago, and went on to have stints at other providers, including working for Marriott when that company had a senior living arm. Artis is in some ways a return to Feltman’s roots, because the company is owned by the Bainums, the same family that founded ManorCare.

Being family-owned gives Artis the ability to execute quickly once it does decide on a course of action, and fosters a corporate culture that could be a competitive differentiator, Feltman said during a recent conversation with SHN at Artis’ corporate offices outside Washington, D.C.

SHN: Let’s start with staffing, because we hear all the time that this is the top challenge for providers today. As Artis expands, how are you attracting and retaining people, from caregivers to the corporate level?

Don Feltman: We’ve been able to recruit from people we know. It’s a small world, and some of those who’ve known us or the Bainum family … approached us. A lot of those folks that worked with the Bainum family in the past have good memories, and they understand that the focus is on customer satisfaction, serving our residents, families and associates.

Recruitment’s important, and we use a lot of different vehicles to recruit and assess potential candidates, put them through a screening process.

There’s a company out there that is called Arena. They’re helpful in a number of companies, in senior living and otherwise, to help screen the individual applicants, to see what’s suitable, because not everybody is suited for this business. When it comes to memory care, I believe it’s a special calling. Someone who can deal and thrive in that environment. … This company, we’re not quite to the size we need to be [to use Arena], but we intend to ultimately use their services as well, which can help us. Because while we’re concerned that we’re screening employees to be sure that we feel they’re suitable, we want to make sure that they have the capability also, that it’s a position that they’ll be glad they made the decision to come work for us.

Going forward, this is a local business, so you’ll see variance by marketplace. I think part of the key is compensation. But a key to a lot of our associates is treating them like individuals, with integrity and respect in terms of who they are, and showing appreciation. When I go into a residence, I like to go around and say hi and thank every associate individually … I’ve had a number of them say, we’re not used to that. If they come from a company that’s not a family-owned business, they say, we don’t see the CEO and the wife of the CEO coming out for events. So, those are small things, but they’re important, because we’re dealing in the world of human beings.

Long-term, we’ll see … Immigration is a hot topic. No matter how you slice it or what your opinion is, this country is built on immigrants. That’s a fact. By the same token, there’s a lot of immigration by people who have gone through the [legal] process, background checks, et cetera. The latest stat I think I saw was that in 2016 it was about 1.2 million coming in through the process that’s established … So, personally, I’m an advocate of, okay, if we’ve brought in 1.2 million through that process, if we have a need for more, why don’t we expand that process up to 2 million or whatever to help fill the needs that we have for employment here? I do think that if we hit a recession, that of course has a natural way to temper things. But I do see labor as an issue that’s not going to go away.

You brought up Arena, which does predictive analytics for hiring. What other technologies are you excited about or considering investing in?

As we become more scalable, more significant in size, we’re looking at different aspects of tech. Recently, we looked at an incident tracking system that we’re putting in place at one of our communities. If there’s an incident, a resident falls, it’s inserted in there, and that way it’s tracked, it can notify our senior operations team or insurance company, so that’s one program that we’re testing in a location. We’ve got some other things we’re looking at as well.

We don’t necessarily like to be a pioneer in a lot of things. We see okay, somebody’s moving ahead with another phase, what’s the outcome, what’s the potential, what are the alternatives? What’s the financial impact as well?

I remember, it’s been over 10 years now, one of the assisted living companies out there spent over $1 million upgrading their IT systems in 20-some buildings. It was a huge cost. And then it was hard to realize a benefit out of that, because the tech kept changing subsequently. So, I think a word of caution.

In terms of putting on the [virtual reality] goggles, I’m not sure when dealing with dementia residents … we’re watching, some folks are experimenting with that. If you can bring across the screen pictures from earlier in life, I’m not sure yet how much that can traumatize someone, particularly when they take [the goggles] off.

We’re looking at an EHR and anticipate that we at some point will move in that direction. There are a lot of alternatives out there, but we really haven’t decided which one we’re going with at this point.

Home care and hospice. Partners or competitors?

At our individual locations, if there’s adult day care nearby, we form a relationship. Same with hospice. Home health as well. I look at those as, we’re all part of the same service for seniors. There are different needs out there. Some folks can take care of mom or dad or spouse in the evening, but they need some day care. I had an aunt in California, for example, whose husband had dementia. She felt a responsibility … sickness and health, death do us part. I was very admiring but advised her to consider a day care program … She did that a couple days a week, and then a long weekend, and her quality of life improved dramatically.

Have you considered Artis adding hospice as a service line?

Not really. To be honest, to do that, you have to have a significant concentration in a geographic area to make it viable. Come back and ask me in 10 years, you might have a different story. We see a lot of good hospice operators out there that provide the service … At this point in time, quite honestly, it would be a distraction from our focus, and I’m not sure we could deliver the same quality as those we partner with … Until you can guarantee that you can provide as good or better services, it doesn’t serve the public well to venture. We focus on memory care, general assisted living.

We’ve been reporting on a growing trend of private duty home care companies training their workers specifically in dementia care, and offering this as a service. What do you make of this? 

In terms of the service, quite honestly, I think it’s wonderful that we have options for seniors today. It’s very traumatic. I lost my mother to dementia, my mother-in-law went through the hard walk. To me, the more options seniors have, as long as they’re quality and they’re really providing a good service, not just babysitting, I think that’s a wonderful thing.

The fact of the matter is, most seniors live in their home until some precipitating event. Most of our residents in our dementia communities come from home. We do get referrals from other assisted living communities, hospitals, et cetera, but by and large they come from home … In terms of home health care training some of their team members to deal with dementia care, for those families that like that, that’s fine. The one challenge you have, whether it’s a board and care home or sometimes in-home care, is the stimulation, the diversity of stimulation and activities, the socialization with other seniors, those things can be limited somewhat.

Affordability comes into the conversation here, too. Not that home care is cheap, but a memory care facility can be very expensive, as can senior living in general. 

When you’re dealing with memory care, I’m not a tax advisor and I encourage people to seek out their own counsel, but it’s my understanding that if you have a dedicated community to memory care, the whole environment, that becomes a tax-deductible expense, the whole thing. You have your limits, thresholds for medical deductions. If you’re talking general assisted living, the housing portion is not tax deductible but the care portion is. Again, subject to your own tax situation and the tax thresholds .. You have to look at your own situation as to whether that’s viable. That’s an option for some.

Certain states, for example New Jersey, [are taking action]. If you want to build an assisted living in New Jersey today, you have to get a certificate of need. One of the requirements is, three years after you open, 10% of your resident population has to be Medicaid. You get reimbursed by taxpayers of the state for that 10%. It’s a lot lower than what your costs are. So in New Jersey, what you see — compare New Jersey assisted living rates to North Philadelphia across the river, they tend to be higher. What’s happening is, the operators have to make their expenses and payroll, so if they’ve got 10% of their residents being reimbursed for well below operating costs per day, they’ve got to make it up somewhere.

Personally, when I was running the development group at ManorCare, we were looking at this very seriously, how to come up with a mid-range product. When I was with Marriott for 5 years, we looked at the same thing. There are consistent variables there. One is staffing. You don’t want to cut staffing, but it’s your biggest operating expense, by far. There’s a limit to what you can do on staffing and provide quality care. The physical plant, how much you pay for your dirt [is another variable]. We created a test community in the ManorCare days that was a cottage concept and [it brought] the construction costs down, brought land costs down, was a moderate priced product, but it was not the easiest thing to operate, necessarily. So the challenge is there, for that. Whether that really becomes a tremendously viable option remains to be seen.

To be really successful, to serve that mid-market, you’re going to have to be creative. I think it’s going to be tough in major metro areas where the cost of land is very high and construction costs are very high, without some time of incentive from a tax-credit standpoint. And there are programs out there, but to come to assisted living with a more moderate priced product, you have to in some ways be in a smaller market. Up here, Hagerstown, Maryland is a nice community, but salaries are lower, cost of living is lower, rates are lower. So, if you had somebody who is middle-income from one of the counties right here in D.C., who had a good steady income for retirement, that might not be a bad place. Sometimes you’ve got to move, and think about that too, depending on the affordability … But it’s a huge opportunity, and many of us are cognizant of it, tried to do something in the past, are open to doing something in the future to serve that population.

Another trend is the growth of managed care and potential Medicare Advantage opportunities. Are you in conversations with managed care payers, health systems?

Nobody’s crystal ball is totally clear. Back in the 90s, there was a movement toward “market management” because prospective payment was coming in under Medicare and you thought, okay, if we can integrate all these different levels we can control and capture [value]. Practice is different than theory.

There’s no question we’re looking toward cost containment, a huge senior population, looming liability under Medicare as well as Medicaid. How can we manage outcomes? Hospitals are under significant pressure so that there’s no readmission, and yet the pressure is to push people out, [sometimes] prematurely, and penalize when they come back in. They’re looking for partnerships in SNF/rehab, sometimes in the assisted living. I’m familiar with what Sunrise is trying to do. We’re watching … looking for what makes sense, what may or may not make sense, and generally speaking, it’s a local business, So, you have to have a certain concentration to make it a viable option, it’s hard to make an impact where you’ve got health systems that have multiple hospitals. You’ve got to control the market or a chunk of the market … When it comes to memory care, knowing that most of our residents come from home, those are factors that we’re assessing as well, how does that fit into the formula?

So, to be honest with you, we’re curious, we’re looking, certainly in our history with ManorCare, we’re very familiar with many components of Medicare. If we see a viable opportunity, [perhaps] to associate with someone else with a bigger concentration in marketplace, that could be an opportunity, it’s just premature for me to say whether in 5 years we’ll be participating and what that might look like.

But the market’s shifting and will continue to shift. There are all kinds of different ways to serve [the coming senior population] that we’re not even thinking about now. Just because of the sheer magnitude, several years out, when it really shows up, that will be interesting times.

This interview has been edited for length and clarity.

Written by Tim Mullaney

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