Covenant Living CFO: Big Changes Needed to Prepare for the Future

Covenant Living CFO Jody Holt came to senior living just two years ago, but she hit the ground running, ushering in large-scale changes to position the nonprofit provider for the future.

Those changes have included centralizing Covenant’s finance function — which involved making difficult job cuts — as well as shifting to a new fiscal year calendar, pursuing potential affiliations, securing capital for renovations and navigating a company-wide rebrand

The overall goal is to make Covenant Living more efficient and technologically advanced, to succeed as senior housing and care becomes more competitive and complex, Holt said during an interview for Senior Housing News’ “Bottom Line” series of CFO interviews.


Skokie, Illinois-based Covenant Living owns and operates 16 communities in 9 states, including 12 entrance-fee continuing care retirement communities (CCRCs). The organization, previously known as Covenant Retirement Communities, also offers in-home care and hospice through CovenantCare at Home. 

You began as Covenant Living CFO in June 2017. Why did the opportunity appeal to you?

I’ve been part of the Covenant Church for about 25 years, so was familiar with Covenant Retirement Communities. I served on the Board of Directors from 2012 until joining the organization in 2017. My predecessor chief financial officer was resigning. During that time, CEO Terri [Cunliffe], asked me, “Would you consider applying for the job? Let’s have a conversation.”

I’d always been in the for-profit world with a lot of technology companies. I had come to a season in my professional career feeling like, “I want to do something more, more than just the numbers.” To take my professional background with a personal, missional component and marry those two things was really attractive to me.


What have been your top priorities as CFO?

Our strategic plan is growth, optimization of the business, as well as service as a distinction. Those three things were introduced at the board level.

One aspect of that was moving to a financial shared services model. Before I joined the organization, the concept had been put out there of moving the organization from this disparate finance function, [with] teams on each campus, and bringing it all to our central office. I knew that was going to be one of my first responsibilities. The horse had already left the barn: We’re going to move to financial shared services, hoping to get better, tighter general ledger close and save the organization some money under that optimization strategy.

I joined in June, and there were already some workings of the financial shared services model. I said, give me 60 days to learn the company and spend time visiting all our campuses, listening to residents, listening to the staff at the campuses, and getting a better understanding of what was happening here in the central office.

[After] that, we started the initiative to move all those processes around the organization here to the central office, which meant the elimination of roles around the campus. Not the first thing you want to do as a new leader.

I tried to lay the roadmap so people could see where we were going … There was care for those positions that were eliminated with things like severance and stay bonuses. Many of those [people], were able to shift to a different position in this new model.

[We] did a bunch of hiring here at the central office to build the team. Over about a year, year-and-a-half, we got the new structure in place.

Now, we’re in what I’d call financial shared services phase two. Everyone’s in the house now, and now we need to fix all those processes and procedures, leveraging technology so that we can be more efficient and effective and be a value-add finance team to the organization, not just processing bills and paying vendors.

That’s a big change.

Yeah. That started in mid-2017, and [we] brought the last campus on in September, October of 2018. At that time, we were in the middle of a bond financing. We went to the market and raised $106 million to deliver on another part of our strategic plan: better services with better facilities at some of our existing campuses, as well as looking for an eye to the future of acquisitions. We closed [the bond financing] in November of 2018.

At the same time, we had a bunch of other big initiatives in front of us. We had kicked off rebranding [to Covenant Living] … That impacts the finance team as well. All the changes that happen with systems and informing residents they’ll make their bill out to a new name, and vendors that need to be informed. We started on the rebranding initiative in the fall of 2018, as well as a fiscal year-end change.

Covenant had a January 31 year-end. We are moving to a September 30 year-end for a few different reasons. One, to have an optically better sales cycle. We’d finish the year on a hard note in the middle of January, start the year on a hard month, February. We have a lot of campuses in winter states, [where] folks don’t move in and out as readily.

The government ends at the end of September. We have a lot of [government] contracts, between Medicare and Medicaid … We’re in the middle of all that, and our new fiscal year will begin October 1, 2019.

Can you elaborate on why you’re shifting to the financial shared services model?

We need to be prepared for in the future. We need to streamline processes and procedures, leveraging technology to be able to do things more automatic.

I think that’s harder to implement if you have little teams at, in our case, 15, 16, 17 locations. To do the training, to equip people, to check the system.

I learned, a few months ago, there’s now this whole parking lot analysis we have to do under our Form 990. We have to figure out how many parking spaces around our organization are for our employees or for our staff, or designated parking spaces, to compute unrelated business income for our organization. It’s a compliance issue. I think that would be harder to do around the whole organization, and we can manage  it a little better here in the central office. That’s just a tiny example of something I’m talking about. All these other little compliance things that come at us, I think it’s easier for centralized to manage that, and puts us in a position to more readily adopt technology.

Right now, today, our software applications — I believe we probably use them only to 40% or 50% of their capacity. Let’s take the technologies we have in place, the software, and make sure we’re leveraging them. [Make sure] we have the updates to all of them, we’re using all the functionalities of them, we’re able to integrate them.

Let’s do that right now, but let’s be looking 18 months, 24 months out. With other technology, will we get to what they call real-time payments, which is kind of a payment technology concept? We still do paper invoices with all our residents. Seems kind of antiquated. We have to be considerate of our constituents, and they still want a paper bill, invoice, but we’ve got to be looking ahead.

I do think with the financial shared services model, it’ll allow us to play with some of this technology, look at it, and be in a position to put that roadmap in place and adopt it 18 months to 24 months from now.

I assume someone at the community level is responsible for putting data into the system that then comes to the corporate office?

We have, at every campus, what we call either a Business Office Manager or a Business Office Specialist. They have an office on the campus and they meet with residents about their bills. Because we still do paper bills, they generate all those charges and deliver them and put them in mailboxes. As well as, a lot of residents still pay by check.

We have that position at each of our campuses, and I think that was helpful in the transition, because that really matters to residents. They like that personal touch.

Have you invested significantly in software or other tech since you’ve come onboard?

That was my goal, [but] no. Right now, we’re trying to leverage the software we have.

One software we use is Vision, our billing software as well as our clinical software, and that’s a huge shift, to make a change with something like that. Let’s work with what it is, and let’s make sure we’re using it to its full capacity. We’re looking at software that I’d call automated account reconciliation software, which is pretty elementary these days. I’d like to get that in place pretty soon. 

It’s now common to hear that senior living organizations are trying to be “data-driven.” What does that mean to you?

There’s tons of information and data out there. I think we need to take that data and put it into dashboards, [and] develop metrics that really measure the business. We have done a lot of that in the last 6 to 12 months partnering with our CIO and our IT Department. They’ve done a really nice job.

Our team, we have a bunch of all the traditional financial ratios that a chief financial officer would look at. We’re looking at those every month, but it’s really getting it all the way down to make sure a department leader at a campus understands a ratio that would matter to them.

We have a reporting package and some other tools that help them to see the information in kind of a dashboard format so that they can make decisions out in the field. We are investing in what I call our financial planning and analysis team to help not just accumulate data, but to help analyze that data for our leaders so they can make better business decisions.

What’s a metric or a ratio that is helpful to a leader at the community level?

For example, we’re closely paying attention to accounts receivable. We would look at a “day sales outstanding report” or “accounts receivable greater than 60 days” report. Making sure they’re looking at those numbers every month to make sure they’re tracking their receivables and don’t let them get out of hand, and that we’re collecting for what we billed for. Maybe we change it to a cash conversion metric, where we see, we send a bill and how many days does it take to get paid?

We’ve been reporting on CCRC pricing potentially moving away from bundled services toward more a la carte pricing, or away from entrance fees toward rental models. Thoughts?

We know many more people are going to need services. We don’t believe that the entrance fee model is going away, but we also want to be equipped to offer alternatives to prospective residents. We’re looking at a bunch of different things. Right now, we spend a lot of time looking at different acquisitions and affiliations, and some of those are rental models. Some of those are more affordable rental models.

I think that’s partly driven by our mission to be able to provide more services to seniors than our current footprint.

Can you talk more about serving the middle-market consumer? That’s a big potential opportunity but hard to accomplish.

We’re talking to different partners out there that can help us understand the affordable market and how we can leverage our balance sheet to be able to be in a position to do those types of arrangements. As well as, one of our open job positions right now is a VP of Fund Development. We think it’s important to get out and tap into our communities, our constituents and their family and friends to build our development fund so that we can provide more services that way as well, under benevolent care.

Given that Covenant operates skilled nursing in CCRCs, you’ve also got to be preparing for Medicare’s new patient-driven payment model (PDPM)?

PDPM is another huge project on our list.

Fortunately, we have a project management office here in Covenant Living. We have project leadership on it and everyone’s been engaged. We’ve done financial analysis to see how it would potentially impact our different campuses. We have a couple campuses it’ll probably impact it in a negative way and others that will be probably more positive, financially, so [we’re] paying close attention to that.

I’m concerned about the software and it being able to do what it needs to do come October 1st. We’re working with our vendor. It’s a tight timeline. I think we have the right staff in our organization, paying attention to the clinical side as well as the financial impact side.

Where are you seeing balance sheet pressure? Labor expense seems the big concern at the moment.

Right. Yes. The labor markets continue to be a challenge. We’re certainly seeing it in our frontline staff, with the attraction of Amazon or Starbucks. I heard recently [that] someone who works at Starbucks can get childcare for $5 or $10 a day or something. Elder care subsidies, too. So, it’s really hard to compete against.

We are trying to tackle it on two fronts. One with dollars, and one with employee engagement. We’re investing in kind of mid-level manager training so that they can be better managers of people, and keep employees engaged and feel part of the community. We’ve put in some cost of living adjustments for some of our staff.

Are you anticipating a particular percentage increase in terms of labor costs this year?

I don’t know how much I want to disclose necessarily, but we’re using the fiscal year-end change to align the whole organization on merit timing. We went to our residents and said, “We’re moving to a new fiscal year, and in this new fiscal year we have the ability to make the staff the main event.” What we mean by that is, like I said, aligning the merit timing and also put in place and plan for the next two years’ cost of living adjustments, in the spring of ’19 and then again in the spring of ’20.

Our residents were super responsive. We said, “We don’t want to take it on the backs of you residents, but we need for it to come from somewhere,” so we did some [rate] increases, with the idea that will go right into those frontline staff pockets.

That reminds me, in her Leadership Series interview, Terri said, “I think in 2008, with the economic debacle, the trust of corporations went down a lot, so I think now, residents are more interested in hearing more and knowing more, and more conscious about the financials.”

I believe, as a finance leader, in transparency. We’re here as executives trying to run the organization to, as best we can, manage the residents and deliver services to the residents and take care of our staff as well as we can. The decisions are hard.

I think when we take the time to proactively engage with our residents and our staff and leadership, for them to understand why we’re making this decision, it goes a long way.

Nonprofit affiliations are happening at a rapid pace, and that’s a goal of Covenant Living as well?

We have a team here, a handful of executives that spend time looking at all sorts of affiliations and acquisitions. I probably get an email every other week from some organization that is interested in having a conversation. I like to say, “You have to look at a lot before you find the right one.”

Sometimes, an organization might make sense financially, but they don’t make sense missionally. Or the opposite. Trying to marry those two things is a little different than my prior life where we made decisions just about the financial impact.

We don’t want to do an affiliation or an acquisition that’s going to drag the organization down.

Are there affiliation goals such as entering new markets or adding new service lines?

It’s a few things, I’d say. We want to be in every part of the country [that] aligns with the Covenant Church, our different regions. I think our footprint goes from Southern California to Connecticut. We’re up in Seattle, Mercer Island, and down in the corner of Florida. We have a very wide footprint, and that’s a struggle sometimes. There’s also the benefit of that, that we’re not geographically concentrated, and if a [natural disaster] comes through, not all our communities are affected.

We do have a goal of looking at affordable housing, and to broaden our services. At the same time, we need to continue to strengthen the balance sheet, so looking at acquisitions and affiliations that will help to strengthen the balance sheet to put us in a situation that enables us to make more, I’ll say riskier decisions, so that we could offer additional services, but focused on senior living.

We’re always open to listening and hearing about other opportunities that can deliver services to seniors. We have a whole CovenantCare at Home [business] that delivers home health and hospice services. There might be some other opportunities there. Nine months ago, we partnered with SAIDO. It’s our program that engages with those with memory care issues. There might be more opportunities with things like that.

What do you think about the availability of capital right now, and are there projects in the works?

We have probably a five-year plan of other projects that we’d like to do on our existing campuses. We work with some of our investment bankers to look at debt capacity and see what can the organization afford. As well, [we consider] what are some of the promises we’ve made to residents? I expect another bond financing likely in the next 12 to 18 months.

We’ve seen some nonprofits partner to launch their own Medicare Advantage plans. Others have had I-SNPs for a while. Is that in the conversation?

We’ve looked at it. I can’t speak beautifully about it, but some of my colleagues can. We’ve done some meetings with folks to look under the covers and see, “Is this something that could work for us?” We have done some very high level analysis and haven’t made any decisions there, though.

Would you highlight any useful skills you’ve brought to the Covenant position given your past experiences?

The first 10 years [of my career], I was a CPA with a big four accounting firm, Pricewaterhouse, now PwC. Spent time auditing all sorts of companies. I had a lot of technology companies, I had professional sports teams, I had a pasta company. I had some big huge, huge government contractors, some Fortune 500 companies. That experience really exposed you to all different types of industries.

The next 10 years of my career was raising my family and doing a lot of consulting work. I had the flexibility to raise three boys and then be able to see a whole bunch of other different businesses, from a small mom and pop beauty shop to again, Fortune 500 companies. I had a lot of very different experiences in that 10-year period, as well as a couple of years living overseas in Portugal.

The last 10 years have really been in that chief financial officer role, mostly with technology companies. The company I came from was a technology company in the hospitality sector, so it relates a little bit to senior living. We were in 3,000 hotels around the country, and so I think some of those experiences help. I also have a real estate background, just a personal interest. We’ve got a lot of real estate here, so it is interesting … I was originally an architect major in college.

My faith is a big part of who I am. To be at this stage in my life, to be able to take that professional background and use it in a faith organization is really exciting for me. I’m still learning. There’s a lot to learn in senior living. We have a great team. I really feel like they’re part of my family. We help build each other up. We have an Associate Vice President, our Controller, who’s been here for 10 years. She was really a great partner in helping me to learn Covenant Living, learn senior living. Those things made a big difference for me.

Mission versus margin is a big conversation in senior living. What is an appropriate margin? As CFO, are you fighting for margin while other people are fighting for mission?

It’s always a healthy dialogue with our executive team. Obviously, in my role, I kind of have to push the margin. I have to make sure, “no margin, no mission,” “cash is king,” all those kinds of things. It’s tough. We have to be watching every nickel and penny around here to make sure we have the margin.

Occupancy’s strong, and we have a good leader that’s helping to drive the occupancy. The payer mix is getting more and more challenging with Medicaid rates coming down around the country, hen some states take forever to pay you, like Illinois. I tend to believe that if we take care of our people — and that’s our residents and our staff — the profits will follow.

We’re not looking for this huge margin. We’re not trying to be hoarding cash and dropping our services to our residents. We’re trying to get the right balance, to keep enough margin in the business that we can withstand when a recession hits us.

I think, as an organization, when we start our meetings thinking about mission, we finish well.