Urban Nonprofit Chicago Methodist Leverages JVs to Succeed in Tough Market

Chicago Methodist Senior Services (CMSS) knows a thing or two about forming partnerships that improve its operations and boost its local reputation.

The senior housing and care nonprofit is based in the Chicago neighborhood of Andersonville, with five senior housing properties and an office in and around the area. As a smaller, multi-site organization, CMSS has found success in linking up with local industry stakeholders in order to thrive in a competitive market for senior living services.

Those partnerships have included founding with 11 other non-profit senior living providers a therapy, rehab and pharmacy services company called Symbria; a similar venture that provides IT services called Parasol Alliance; and an accounts receivable cooperative the organization hopes to grow in the coming months and years.

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Senior Housing News caught up with Bill Lowe, president and CEO of CMSS, to learn why the organization sees such partnerships as key to its survival and how other smaller single- or multi-site senior housing providers can thrive in the face of for-profit competition.

SHN: Tell me about some of the different joint ventures and partnerships CMSS has going on, such as Symbria and Parasol Alliance.

I think it all falls under the category of leveraging economies of scale in every way that we can. While we’re robust, we’re a very small organization in terms of the competitive forces out there, particularly on the for-profit side. So, we look for every advantage we can get.

The most successful was the Symbria venture, where we ended up being a national provider of contract rehab services. Like a lot of things we tried, just taking the step down that path didn’t mean we ended up exactly we thought we were going. But sometimes, like that one, it ends up in a far, far better result than we ever imagined.

With Parasol, we needed strong IT leadership and it’s expensive. We wouldn’t be able to retain the best talent, so we hired the best talent to be [Parasol’s] CEO; and there [are] three nonprofits in Wisconsin and one in Illinois that, along with us, own and operate it. Parasol is a for-profit entity that is in the purpose of making money and providing services to us. The money that’s made gets distributed back to the nonprofits. It’s in its fourth year of existence, and we are profitable.

In a similar vein, though not exactly the same, we’ve founded an accounts receivable cooperative. Before that, we would train staff to be very good at what they do, and then they become attractive to the for-profit communities or larger chains. We’re happy for them when they leave and get these great job offers, but eventually we get frustrated.

So, in the last iteration of that, we recruited the last person who just left us and paid her exactly what she was hired away for to bring her back. And then we hired another similar person to her, and then started to partner with other nonprofits to be a cooperative.

We are looking to have three, four or five nonprofits who share resources of an accounts receivable. As you might imagine, it’s a difficult science. There’s no college degree you can get for accounts receivable for hospitals or even skilled nursing facilities. So, we need to train and perfect that talent. We want to retain it. We want to create opportunities for the frontline staff that we have in the receivable area so they can get promoted to the corporate side of that cooperative.

Once we get four or five owners, we want to see if we want to maintain the cooperative or maybe turn it into another business line that we could market to other primarily non-profit organizations.

So, we always have our ear to the rail. We’re a tiny organization. Nationally and locally in the nonprofit world, I’m sort of thought of — as is CMSS — as a catalyst for a lot of these joint venture ideas. It’s gratifying to be in that position and I’m hoping to prosthelytize other CEOs into thinking more broadly.

There are forces in the nonprofit sector that actually work against risk-taking for CEOs like myself, and they have to do with the very nature of a nonprofit. So, in some cases, it’s safer for someone in my role to not take a lot of risks on behalf of their organizations because the rewards are finite and the penalties are such that they could lose the trust of their board.

What are some of those forces that make risk-taking harder for senior living nonprofits?

It starts with the CEO and extends to the voluntary board of directors, who have fiduciary responsibilities.

CEOs need to earn political capital and trust from the board, who is their boss. But the board members, too, are incentivized to play it safe, because nobody wants to be on a board when things go south for an organization.

It’s sort of a double whammy. Certainly, a younger CEO is less inclined to be entrepreneurial. But there are many CEOs at the end of their career who have never been super entrepreneurial and don’t have the appetite for it. And even if they did, they hope their board is tolerant and encouraging, like our board, which is not typical.

And you mentioned for-profit providers headhunting your top talent as another pressure. How do you prevent that? Can you prevent it?

There really isn’t a way you can prevent it, other than things like forming a cooperative, where you can create a career ladder.

The problem in a small organization is that you don’t necessarily have a career ladder. In my case, I was with the organization for 13 years and probably felt, halfway through, that I was ready to be CEO. But I was patient and had a great boss who gave me a lot of rope and a lot of authority.

I assume for small senior living organizations, especially those located in urban areas such as CMSS, it’s important to engage many different local stakeholders on the neighborhood level. I know CMSS has all kinds of local partners, and not just on the operations side. Why is that important?

I really believe that, for a nonprofit, we should have a mission and a purpose. And that’s important as for-profit competitors are squeezing our territories.

When I started here, there wasn’t a lot of for-profit activity going on. And when it was, it was sort of static. The competitors that were in the skilled nursing space, in particular, were sort of public-aid facilities that weren’t operated with any bells or whistles or frills. Then the idea caught hold that 10,000 people turn 65 every day in America, and it convinced a lot of entrepreneurs to get into the space.

Ultimately, we want to be a resource for people. That can be as an educational resource, which we do a lot of. It can also be as a resource of services.

If someone calls us with a need and it’s not something we provide or we’re full in that element of our programming, we will always have a well-researched list of others that we can refer people to. And it comes back to you. Those people might come back a couple years later and remember our conversation when we do have a need we can fill at that point in time.

There are many tremendous organizations that support the community. In some cases, we’re bigger than them and have deeper pockets, and we can support them with manpower as well as sometimes philanthropically.

[Mather LifeWays’] Mather Edgewater does a nice job. In Edgewater, they have a monthly luncheon, and for years we have helped financially support that luncheon. But we also send our employees there to help serve meals and answer questions about our various programs. So, we sort of integrate there.

Then there’s The Admiral up the street, a longtime nonprofit that rebuilt their entire campus into sort of a high-end, terrific place. They’re aligned with Kendal [Corp.], which is one of the greatest non-profit organizations in our field. They’re hopefully going to join our accounts receivable cooperative.

There are a lot of different nonprofits that come and support us, like Musicians on Call, which is based in Nashville, but they’re in several cities now. It’s a strolling musician concept where they come in once a week.

We’re also doing some research with Songs By Heart, another local nonprofit organization that’s spending time supporting our population with very sophisticated programming. There’s a research project that’s going on now.

And we have Bringing Art to Life, which was founded by two neurologists. These days, we’ve been training high school students and they spend six or seven weeks with residents and they do art projects together. There’s an emotionally satisfying capstone event where the students present their artwork to the residents they’re working with and their families.

The courtyard of Hartwell Place, a CMSS community in Chicago

Am I right in assuming that most of your referrals on the senior housing side are word-of-mouth?

That’s true, and that’s a luxury we had when I started. As a matter of fact, we didn’t have marketing when I started in 1989. We had enough walk-up traffic to stay full, which is fascinating.

A lot of our competitors, particularly on the for-profit side, their strategy would be to have their compensated medical director be the biggest admitter at a hospital, and they would leverage that relationship.

But what we did is, we inherited a really excellent academic-style medical director from Northwestern University. He’s been with the organization longer than me, 35 years. We’ve had the good fortune of having good leadership without an axe to grind financially. He hardly has any patients. Today, he may have one or two. So, he’s not making his living off of the referral side, he’s making his living off of the teaching side. The training of our nurses, the support and cajoling of the other physicians.

Our strategy is to try to find the best or up-and-coming physician at a local hospital like Swedish Covenant [in Chicago], and just have them be part of our medical staff. That way, we have talented physicians who have enough reason to come to our facility because they might see eight to 10 patients, and we don’t have to worry about compliance issues.

Any advice for other single-site or smaller urban nonprofit senior housing providers out there?

Certainly they should consider joint ventures that are tangential to their business. We recently got into the home health business, which is a really crowded space. But we have some nonprofit partners in the field that we think will help us be successful.

Second is to reach out for volunteers in your community. We’ve become more robust in that area.

And then also to have the tenacity and patience to go the slow and steady way. All of this can come back to be what I would call side-door marketing. But if you’re not committed to it, you can’t just slap it up on your website and assume people will believe that. The real appeal is when you touch human lives and when people see that you’re a generous organization, a compassionate organization, and interested in affecting people.

What happens is, eventually without even realizing it, you get this stew that’s wonderful. We’re sort of a perfect microcosm of society.

We recently inherited a nonprofit that was failing because the state was slow to paying it out, West Suburban Senior Services in Bellwood, Illinois. One of the things we inherited there is a SAGE group. SAGE is an LGBT support group. In our field, it’s going to provide us training for staff. One of the things we plan to be more overt about is our embrace of the LGBT community. We’re committing that before the end of this year, we’ll have all of our employees go through the SAGE training program.

My objective, as we get openings on the board, is to be both very local and also to have representation from the community. So, I want to have more LGBT representation on the board, more minorities.

I think you have to take a long view. Sometimes that’s hard, especially in hard times. Wesley Place, right now, is struggling a little bit with census and with economic losses. But the one thing I’ve kept off the table from any reductions in workforce is our music programming coordinator and our arts programming coordinator. That’s really what makes us a nonprofit, those extra touches.

So, we just try to be as lean and efficient as we can across the board but make sure we make room economically for the programs that make us unique.

Wesley Place is a skilled nursing facility, so I’m assuming your challenges there are probably felt by other SNFs in the area, too?

It’s definitely a troubled industry. There are a lot of forces at play. There’s an age wave coming. I was born in the year when most babies were ever born in America, 1956. Smack in the middle of the baby boom.

And so, 20 years from now, that will be a time when the demand will be there that people wish was there today. It’s almost like survive to thrive. I like to say any old fool will thrive in our business in 20 years, it’s surviving the next 20 that will separate the wheat from the chaff, so to speak, both in the for- and non-profit sectors.

How are things on the senior living side?

It’s very strong. But that’s also probably the most threatened area because of competition. There’s a new Belmont Village opening in Lincoln Park. There is an Artis community near us that has over 100 accommodations and it’s playing in the memory care and assisted living space.

Both of those are well-capitalized for-profit organizations and they’re going to spend a lot of money to fill up their properties. Our marketers went to the open house at Artis and came back sort of depressed. The first reaction was, oh my god, they have a real movie theater and all these elegant surroundings.

They’re also going to undercut pricing, although I’m not sure they can undercut us. They’ll be fighting on price to fill up, and then they’ll raise prices once residents are in. It’s possible that not both of them will make it, but while they’re trying to make it, they will do damage to us and others.

How do you compete with that?

When I think of it in the sense of a boutique hotel, that’s sort of what we deliver. It’s a unique experience. I like old architecture, and our buildings are interesting in that sense. If people are looking for the shiniest new, we wouldn’t be their choice. But I think our buildings have the culture that we have. They’re interesting, they’re solid and they’re historic.

But we could go bankrupt just like any other business. So, that calls for good governance, good management of resources and that slow-and-steady belief that by being generous with everything in the community, you will become known as a place to get help when you need it.

There’s a place for everybody. There’s more than enough choices for people who need services. What we need to continue to be better at is making sure that, when people have a need in the community, they know we exist.

This interview was edited for length and clarity.

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