Kim Lody has been focused on leading an operational turnaround since taking the helm in January at Capital Senior Living (NYSE: CSU). She is aiming to get the company on a firm footing so that it can be nimble in the years ahead, as she anticipates that senior living will go through a major evolution.
“I think 10 years from now, this business will look completely different,” she told Senior Housing News during a recent interview at The Waterford at Pantego, one of Capital’s independent living communities in Dallas. The company’s total portfolio numbers around 130 communities.
Lody has been busy in her first weeks as CEO, putting new management systems and communications protocols in place, changing up the C-suite team and establishing the overall turnaround plan for the Dallas-based company. In doing so, she has tapped into her experience leading previous turnarounds.
Although the company’s most recent quarterly results were “deeply disappointing,” she believes that Capital Senior Living’s current business model is a good one and sustainable. Yet, she is monitoring shifts in the overall U.S. health care system and wants to be proactive in positioning the company. With a background in managed care and home care — including in creating the Gentiva brand — she brings varied experiences, knowledge and skill sets, should she decide that the time is right for Capital to seize new opportunities.
The following has been edited for length and clarity.
After business school at Wake Forest, you took a job in health care and have spent your whole career in the sector. Did you always want to go into health care?
No, I didn’t.
I was very fortunate in that one of my neighbors when I was in grad school was a physician. And he went out to Scripps Healthcare in San Diego, and came back and said, Kim, you have to go to California. It’s the most beautiful place on the planet, and you should go into health care because there’s a lot of need there. So, to appease him … I sent in some resumes, and wouldn’t you know it, I got a number of phone calls from systems there. That’s how I ended up in California, at a company called Health Net, a health plan.
What was your role at the health plan, and how did your career develop from there?
In the beginning, I was a financial planner … I was the second person in that financial planning department, so I really go to do so many different things that someone coming into that role might not normally get to do. As part of that experience, I had the opportunity to be part of a team that fended off a couple of hostile takeovers, so I got a lot of hands-on M&A experience right from the beginning there. And then we merged with another company.
I left and went to, at the time, Abbey Medical, which was a [medical equipment] company that was coming out of bankruptcy. And the person who hired me said, you don’t know anything about sales … but you do know a lot about managed care, and that’s where this whole industry is going. And so I became a national account sales manager there.
It was a really interesting time. It was a turnaround. We had this very dynamic leader out of the U.K., Tim Aitken. And it was a very fun, fast-paced, entrepreneurial [environment], and it was very cohesive at the same time, because everyone was working toward the same thing.
We did 80 acquisitions in a very short time period. When I joined, [revenues were about] $250 million, a year later we were half a billion, and then about two-and-a-half years later, about $1 billion in revenue. The point of all these acquisitions was really building that portfolio of services, so beyond durable medical equipment, we added in more service elements like home infusion therapy, home health, nursing home, hospice, et cetera.
That became our platform for selling to the health plans, because we could take everything outside of the hospital. We could care for people at home and rather than have it be disjointed, it was extremely coordinated.
Abbey eventually become a company called Apria, but you left there. Why?
Abbey and Homedco had just combined to become Apria, so the company was quite large at that time, and I tend to really thrive in a very dynamic environment, that is really action-oriented, very performance-focused, forward-looking. The culture was becoming a little less so.
So you joined Olsten Quality Care, a home care company, which eventually became Gentiva. You were head of strategic planning, and took over marketing, PR, communications. What was that chapter like?
That was a time when the Olsten health care business was part of a bigger Olsten business, which was temporary staffing. That was about a $5 billion company. And we were at the time about $800 million, sort of a smaller piece. And when I joined, we were going through some tremendous changes and some pretty significant times as an organization.
I was part of the team that turned that company around, and then Olsten was sold to Adecco, another temporary staffing company. They didn’t want the health care piece of it. So, we spun off and went public.
What was it like taking the company public?
I can remember schlepping around the streets of Manhattan with our CFO trying to get coverage for the stock on the day that we went public. As part of that, I had the opportunity to re-brand the company in a really short time period. Seven weeks. And that’s how we became Gentiva. We had over 400 locations at the time. So, seven weeks rebranding, and we went public, just like that.
That was a great experience. [We did] lots of mergers and acquisitions there, as well, we actually added a specialty pharmacy business.
And then from there, I felt like I had gotten a little too far away from the delivery of health care.
So from Gentiva, I went to a very small company, called Senior Home Care, which was a home health company in Florida. I was the chief operating officer there. That was a platform company, so we were private equity-owned, we more than doubled in about 18 months. [Revenue] was about $25 million when I went there, when I left we were at about $80 million.
Then I spent about 6 years doing consulting.
Then you did one more turnaround, with Danish medical device company GN Hearing, before joining Capital?
When I went to GN, I was president of one of their divisions in North America … That was also a bit of a chaotic scenario. A turnaround that resulted from a failed merger that had happened well before my arrival. So, when I came in as president … my responsibility was really to grow that business. We went from last place to being a leader in the market … and along the way, I also took over responsibility for a couple of other brands for GN. So, when I left there, I was the head of everything in North America.
Since 2014, I was on the board of Capital Senior Living, but it’s different being on the board versus being on the ground as the CEO. And I think, when you think about my entire background and all of the experiences that I’ve had from financial planning to sales to operations to marketing to strategy, really of that prepared me for this role.
Having that knowledge of the organization and the team and the history of the company I think really helped me to hit the ground running and just have the credibility with the team.
How do you describe your leadership style?
I would describe my leadership style as very collaborative and relatively hands-on. I love being out in the communities.
I think I’m a good listener. So, when I come out to visit, it’s more about me learning what’s happening in their world and how I can help them, than anything else. What do you need, what are the gaps, what can we do better?
And then, I’m also very action-oriented. So, if I’m here today with [the Pantego executive director], talking with her about some things she might need in this community, by the end of today, that will be in motion. It’s not going to take me a week or a month to pull it all together, and the team here knows that. I usually visit a community, I tend to drop in unannounced so they don’t know that I’m coming, and when I leave, I’m on the phone, calling whoever I need to talk to to say, hey, I’m having a situation, what do you think, what’s the action plan going forward?
What have you been focused on in your first months as CEO?
One is a focus on our systems, data and analytics. We’ve implemented a couple of new systems over the last year. Yardi and UltiPro and Kronos.
So, we completed those in November. The first few weeks of my tenure have been focused on, are we capturing everything, is everyone using the system as we want them to? Do we need additional training out there? And then making sure we’ve got good data coming through the systems and that we’re able to pull that data out and have some better transparency on the business and in more detail on the individual communities.
And, again, then cascading that out to the communities, because it does some good to have it in the corporate office in Dallas, but it does a lot more good if we’ve got it cascaded out.
So, that’s been a No. 1 focus.
The second one is really around people. Making sure I have the right folks on my team that I believe can execute on the plan that we’ve developed.
So, we did make a change in the COO. And helping the team be as collaborative as I am in coming together and talking about our challenges and opportunities, and taking action very quickly, with a sense of urgency behind all of that.
There are a couple other pieces on talent. One is just identifying gaps in the organization, and I identified that we needed some additional leadership in sales and marketing — what I call commercial excellence — so that we brought on the chief revenue officer. That’s really critical.
The market conditions for senior housing are difficult. They’re probably the most difficult they’ve been for a long time. There’s a lot of oversupply. It’s very competitive. I think the practices of the past, the approach of the past is probably a better word, is not the approach that we need to have now. It’s much more competitive, and then you add that to the fact that we have very low unemployment and people everywhere have lots of opportunities for employment, there’s wage pressure that comes from that. We need to be a strong employer, as well.
A lot of time over the last weeks has been focused on the people element.
You’ve got a lot of background in health care already, and familiarity with Capital Senior Living, so what would you say is your learning curve for this position?
I would say it’s not necessarily a learning curve in terms of the industry or skillset, but it’s a lot of new relationships. So, forging those relationships with lending partners, the REITs, all of those strategic business partners that have been part of the fabric of this organization and in the industry for a long time. I would say that’s something that I’m really focused on, making sure those [relationships] are strong as quickly as possible.
There’s often a culture change when a new leader comes in, and I think that can be exciting for some people, but it can also feel less exciting for some people, how do you approach that?
One of the first things that I’ve done is put into place what I would call a management system, which comes from understanding the systems and data and analytics, and then making sure the right people are sitting down and not just talking through. okay, here’s the numbers, here’s the data, but what are we going to do about it? What are the actions we’re going to take?
It’s funny, when I first started, I put this meeting in place. It’s called “the implementation meeting.” It’s on Tuesday mornings. Every Tuesday morning, the same group of people meet, the same agenda, and we’re going through that same stuff. In the first couple of weeks, everybody started calling it “the accountability meeting.” Which was great. To me, that said … perhaps there was a sense that there needed to be more accountability.
And at first it started as a joke. People would joke and say, “It’s time for the accountability meeting.” But now, it’s not a joke. It’s a pretty disciplined process in terms of the agenda and making sure that we also keep the minutes of that meeting and all the action items that come out of it and timelines.
It sounds super simple. It’s, what are we going to do, who’s responsible for it, when is it going to be done by? And the next meeting, the following week, starts with those action items. So, I think in terms of culture change, that has been different for the team.
My being in Dallas — having a CEO in Dallas full time for the team is different, because previously the CEO was in New York. And I’ve had a lot of people stop by and say, this is really great, because you’re here all the time.
The other thing I would say is a pretty big culture change is communication. I’m big on communication. I think if people don’t know where you’re going and how you intend to get there, then they sort of fill in the blanks for themselves because you haven’t told them.
My first week, I sent out a video to everyone. When I show up in properties, they know who I am, because they’ve seen the video. When we did the earnings announcement last week, we did a huge communication plan around that, which has not been the case in this company before. The earnings release went out, an internal memo went out with the same information, but not as detailed, with an internal slant to it. And then I held conference calls.
My team knew the results, but then the team the next level down went through the results, went through the same initiatives, and then we had our regional team on the phone, and then our executive directors on the phone. So, the whole way through the organization, making sure people understand what’s going on and where we intend to go and how we intend to get there.
It sounds like the data is obviously really important to you. What metrics in particular?
For me, we really have to understand what I would call leading indicators. In this business, that means leads, tours, deposits, as well as the macroeconomic data. And, we really did not have a consistent, disciplined way of looking at that, and looking at it proactively versus reactively.
I’m all about being proactive. Having the information, looking forward, and seeing where we’re going to go and how we’re going to get there, versus you’re here, and you’re looking backward and trying to make decisions based on data that’s maybe too old. So, really, shortening that time period. That’s what’s been behind those management systems.
And communication — because when you come in and start taking a look at things differently, you also need people to feel comfortable collaborating with you and saying, I know you want to get this, but maybe this is a different way to look at it. So, that’s been part of that culture shift, too, is making sure we have that really open, candid, collaborative dialogue going.
On the communication piece, you dubbed your turnaround strategy SING — for stabilize, invest, nurture and grow. I assume it was intentional, to come up with that sort of catchphrase to communicate the plan?
It was … [and it’s] been really well received … I’ve been surprised by how many analysts and investors said it back to me, with pretty much the same level of detail. That tells me it was right on message and presented in a way that people will remember it and take it forward.
And those categories will allow us to add other initiatives underneath them and shift the focus. Because right now, we’re mostly in the stabilize and invest area. And as we move forward and the momentum buildings, we move further along the word, toward nurture and grow.
It’s clear you’re focused on the fundamentals of the senior housing business, but what are you thinking over the longer term? You’ve got a deep home care and managed care background, would Capital Senior Living start a home care business? Develop more managed care partnerships?
For the immediate future, we’re definitely focused on the fundamentals of the business, and really improving the operating performance of the company.
However, the reimbursement system and the overall health care system are things that are part of some pretty big conversations on a regular basis across the United States, in D.C., among big insurers and big hospital systems. Everyone is looking for ways to provide better care and save money and have a great experience for the consumer. I think we are paying attention to that. Those things tend to change very slowly over time, but then once they catch momentum, you want to be part of that solution, you don’t want to just be learning about it at that point and trying, again, to react to the conditions.
I think 10 years from now, this business will look completely different. Just like it looks today so much different than it did 10 years ago. I think the reimbursement systems, the hospital systems, it’ll all be much more integrated in the future. That’s all in the consumers’ best interest, because people want to stay at home as long as possible and age in place. And the definition of home is where they call home. So, it could be here in our senior communities.
Today, we provide services directly in some of our communities for assisted living and for memory care, and we also — in those communities as well as independent living communities — we partner with outside parties who can come in and provide services to residents.
I don’t see us going in the direction, today anyway, of starting additional ancillary companies, but as the landscape changes, you know, that can change too.
Medicare Advantage may start to reimburse more directly in assisted living. And some senior living providers have launched their own plans. Capital has a large resident population that could conceivably become members of an in-house MA plan. Any discussion of that, or thoughts on the scope of the MA opportunity for senior living?
I think it’s very early. I think we have to have the conversations about it, keep an eye on it, think about it. How would it fit into our business and the overall industry? But it’s just so early to determine a specific course of action.
And, I don’t want to be distracted by that. I’m really focusing our organization on the fundamentals of the business, and improving our own operating performance, so that when and if those opportunities start to take hold and we see them develop, we’ll be in a position to be a part of those.
There are relatively few publicly traded senior living operators, and I think that puts the public companies under a microscope.
Yes.
So with that as the context, do you think it makes sense for a senior living company to be publicly traded? Did that give you pause, knowing that you were going to have to run the business on a quarterly earnings schedule?
I actually look forward to that. We have a lot of strong relationships with our shareholders, and I really welcome the opportunity to talk to them on a regular basis. That didn’t give me pause at all. On the call last week, we also announced that we’re no longer going to provide guidance. I think that when you’re a public company and you get into that guidance cycle, you start to think about that maybe a little too much, versus changing that conversation to one that’s talking about the value drivers over the long term.
That’s what was behind us saying, we’re not going to provide specific guidance anymore. Of course, we’re still going to have appropriate and open conversations with our shareholders and analysts and so on.
And, you know, on the macroeconomic conditions, that also didn’t scare me. That’s a question I’ve gotten a lot. You look at some of the issues in the industry and that might scare some people away, but my mindset is, those are the same conditions we’re all playing in. It’s a pretty level playing field. It may not be a field that we like, but that will change over time. And if we can execute well in these conditions, then I’m very optimistic about the future.
Is this an accurate description of Capital Senior Living: It primarily serves more tertiary and secondary markets not in the major gateway cities, and provides — not exactly a mid-market product — but not a luxury product. And the portfolio consists of independent living, assisted living, with a little bit of memory care, and is not venturing into active adult.
Yes, that’s accurate.
Do you think that basic model is sustainable going forward?
I do. We’ve seen a shift in the overall industry and also in our portfolio [toward] assisted living and more memory care, although memory care is still a small portion overall. But I think we’ll continue to see some of that shift, and the thing I like about our model is I think it’s very manageable. I think it’s a great model for residents to come to independent living and then have the option for assisted living and memory care as they progress, and we want to be there, whether it’s in the same building — a lot of times it is — or a sister community down the street.
But I think that’s the right model. We also own most of our communities. We own 84 of them and we prefer that model. We like being an owner-operator, because then we’re really in control of not only the four walls, which are important, but what I think is much more important is what’s going on inside the four walls. When you have that whole piece, I think that’s a competitive advantage.
Capital has faced some pressure to sell off real estate. There were also rumors swirling before you were CEO that Capital was considering a private equity deal or a real estate play of some sort. Is it fair to say you’re really focused on an operational turnaround and not on those other options?
I can’t comment on market speculation. What I can say is, our No. 1 priority is around improving the operating performance of the company. That’s where our focus and attention and resources are.
Now all three of the publicly traded senior living companies have women CEOs. Any comment on that?
I think that’s fantastic.
I’m not a person that really focuses on gender. I think it’s the best person for the job no matter what. I do think that it’s nice to see, because so many of our employees are women, so many of our residents are women, the decision-maker in general for the family unit is a woman. I do think that gender piece brings value to the position and to the business overall. It will have a cultural kind of impact. At the same time, I think it’s all about being the best CEO possible.
I want to circle back to the new chief revenue officer. Are there any other hires you want to make on the executive team, and where are you on finding a new COO?
I’m constantly evaluating the leadership team. I think we’ve got a strong team, but as the business changes, and needs change, it’s my job to make sure the skill set we have in that senior leadership team is the right skill set.
I brought on Mike Fryar as chief revenue officer because I do think we have a tremendous opportunity in the area I call commercial excellence. That’s really everything that touches the customer. The resident and their family. The initial touchpoint with our website, all the way through the experience that they’re having in the community. That’s a pretty big job. It’s something I think is going to be needed more and more, and core to senior living and certainly to our business going forward.
I’ve known Mike for about five years, worked with him at a previous company. While the products are very different — hearing aids and senior living — the journey of the consumer and their family is nearly identical.
The consumer generally finds compensating strategies to maintain the status quo, even when they know that maybe that’s not the best thing. It’s usually an event-driven kind of decision to make a change, and it takes a while then to get used to the idea and acclimate. And then generally people say, gosh, I wish I would have done that a long time ago. And the way you reach those people, the consumer and their family and interact with them, that is identical. It’s almost exactly the same.
[Mike] will be in Dallas half of the time and in one of our communities in Minneapolis the other half of the time. I felt really strongly about that, because what better way to understand the resident experience and all things commercial excellence than by being part of it on a regular basis, day in and day out.
In terms of not executing on the sales/marketing side before, what were the issues?
I’m Monday-morning quarterbacking here.
I believe there was inconsistency in the message and in the expectation coming from Dallas to the communities. And, from what I can tell … [the message] was inconsistent, and then it would change quite a bit. A company can’t operate that way. It takes a long time to make a shift when you’ve got 129 communities, 7,500 employees* you want to go in a certain direction. You’ve got to be pretty certain of that direction of that direction before you start communicating.
That’s one of the key reasons behind the systems, the data, the analytics and the communication. Making sure we’re all working from the same book, the same set of information, and that we’re communicating, everyone understands the plan and how we’re going to achieve the plan.
So you’ve got a big job in front of you — not only as CEO but now you’re also the acting COO. What do you do to maintain work life balance?
First of all, I love it. I should say that we’re actively recruiting for a COO. But I’m loving stepping into that role, because it’s giving me even more opportunity to spend some time with the operations team.
I love what I do, I really do. This is fun to me, this is the balance, being out in the community and getting energy from that. When I’m not working, I love to be outside with my husband and my dog, whether that’s hiking or walking or biking or whatever it may be. That’s how I rejuvenate.
Editor’s note: An earlier version of this article stated that Capital Senior Living employs 500 people. It has been updated to reflect that the company employs about 7,500 people. SHN regrets the error.
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