Since closing on their affiliation to start 2019, the Evangelical Lutheran Good Samaritan Society and Sanford Health have pursued a three-part strategy to realize the benefits of combining and achieve long-term success.
Under financial pressure, the Good Samaritan Society laid off 100 people at its Sioux Falls, South Dakota national campus in 2017. Thanks to synergies and other benefits of the Sanford affiliation, the Society has a path to be in a position of strength as demand for senior housing and care ramps up in the coming years, President Randy Bury told Senior Housing News.
Bury took on the president role as Sanford and the Society affiliated, taking the helm of a large senior living and care organization after a long career on the acute care side.
After starting as a hospital intern while in college, Bury rose through the ranks and most recently was chief administration officer at Sanford, which has more than 44 hospitals and 28,000 employees. Good Samaritan has a network of about 200 post-acute, senior living, home health and hospice locations. The portfolio included about 7,000 total independent living and assisted living beds in 2018, and about 10,000 skilled nursing beds. The combined organization — based in Sioux Falls — has a footprint across 26 states.
While working through the affiliation agreement with Good Samaritan, Bury became interested in that company and the senior housing and care industry.
“I spent 38 years on the acute care setting and pretty much did everything I could in that space,” he said. “To be able to start over at this point in my career and learn a whole new industry and meet a whole new group of professionals, it was perfect timing.”
Good Samaritan CEO David Horazdovsky retained that title and currently is focused on big-picture strategy for the organization — such as future affiliations or acquisitions — while Bury is focused on operations. As such, he is playing a key role in working through the integration of two large organizations, with Sanford posting annual revenue of about $4 billion and the Society posting annual revenue of about $1 billion.
Bury is seeking to put Good Samaritan on stronger financial footing while also being a pacesetter for the industry at large, as more health systems start to align with senior housing and care organizations.
Financial improvement efforts
In the last several years, the Society has been under duress due to flat revenues and rising operational expenses, and financial improvement is the first leg of the three-part strategic plan guiding the combined company.
There are a variety of ways to achieve this goal now that the two organizations have affiliated, Bury said. Supply chain might be the most obvious. Just by putting its food purchases together with Sanford, the Good Samaritan Society will log a $4 million savings this year, he said.
Staffing is another crucial focus area. Like other senior living companies, the Society faces recruitment and retention challenges linked to tight labor markets, rising wages, and a shortage of caregivers. Good Samaritan has relied too much on agency staffing to fill in gaps, and addressing this issue is a top priority for Bury.
“I’ve told our leadership team, we can’t be successful until we get that utilization controlled more than today, because it’s so expensive,” he said.
From his time on the acute care side, he learned that simply throwing money at the problem will not solve it. Rather, the company must carefully analyze the agency spend in each market, then diagnose and address the specific factors at play. In some places, it’s a leadership issue, in other markets it might turn out that pay rates do need to be increased.
To this end, Sanford has an entire team dedicated to compensation analysis.
“Sanford has more resources and a deeper bench with recruitment [and] retention strategies and staffing in general,” Bury said. “We’re bringing all of that to the table to analyze what are the causes of agency staffing and what are solutions.”
Good Samaritan is not immune to other challenges besetting the industry, namely challenging reimbursement rates for Medicare and Medicaid, and occupancy pressures linked to new supply that has hit certain markets. With the boomers aging, consumer demand is coming, but in the meantime, the pressure is on to run efficient operations while advocating for sustainable reimbursement, Bury said.
“We have to control our costs, we have to be wonderful stewards of our resources, and get paid our fair share as well,” he said.
The secret sauce
The second strategic focus area is the model of care. Bury describes this the “secret sauce” of the affiliation, and it also carries financial implications.
By offering a complete complement of health services, from maternity care in hospitals all the way through hospice, the combined organization can serve people through the entire lifespan. To do so effectively, care transitions in particular need to be well-timed and as seamless as possible. If this can be achieved, patient satisfaction and outcomes should improve, while costs to the health system overall should come down.
“When we talk about model of care, it’s how do we handle those transitions? How do we do that better than anybody?” Bury said.
Aligning financial incentives and operational capabilities is a must, and there have been some success stories so far, he added. Around Bismark, North Dakota, some medically complex patients have been discharged more speedily and successfully to post-acute settings.
“By getting everyone in the room, we can break down barriers that are difficult to break down if you’re not part of the same company,” Bury said. “We’ve been able to facilitate transfers we wouldn’t in the past.”
On the senior living side, he anticipates the Sanford affiliation will lead to more robust wellness programs to maintain resident health and prevent costly episodes of care.
Having access to a full range of acute care also should benefit Good Samaritan’s Medicare Advantage Institutional Special Needs Plan (I-SNP), which was launched nearly three years ago. Currently offered in three states, the plan has enrollment of about 1,000 members. Most of these beneficiaries are skilled nursing residents, but Bury anticipates expansion into senior living, given the new flexibilities that MA plans have to cover certain services in those settings.
In light of those new benefits, available for the first time this year, more senior living providers are launching their own plans or exploring options for doing so. However, it’s a costly and challenging proposition to do so, particularly in the early stages, as enrollment ramps up and true costs are determined.
Such was Good Samaritan’s experience, but recent results have been “much stronger,” and the Sanford affiliation should make a positive impact, Bury said.
“We firmly are convinced [the plan] has a future, and I couldn’t be happier that the Society had the foresight to get into this a couple years ago,” he said. “Now, when we have a board meeting with the I-SNP program, we’ve got acute care experts in the room and long-term care experts in the room. I’m totally optimistic.”
While they are all in early stages, with few tangible results so far, similar care models are being pursued by other health systems and senior living providers that have recently combined or formed partnerships.
For instance, Toledo, Ohio-based health system ProMedica acquired the large portfolio of HCR ManorCare skilled nursing facilities and senior living communities, in a joint venture with Welltower (NYSE: WELL). ProMedica believes that it can leverage the senior living and care portfolio to better manage population health, including for beneficiaries enrolled in its Medicare Advantage plan.
Good Samaritan and Sanford overall remain dedicated to growth, which is the third leg of the strategic plan. That said, some portfolio right-sizing took place as a result of the affiliation. In total, 17 senior living and care locations were divested.
“We have no more on the docket,” Bury said. “My whole goal is, I’m part of a growth company.”
Several projects that were already underway during the affiliation have recently opened or are about open, including an assisted living and memory care center in DeLand, Florida; another in Windsor, Colorado; and the addition of skilled nursing beds in Denton, Texas, and assisted living beds in Rapid City, South Dakota.
Growth through further affiliation or acquisition is also on the table, as Sanford has historically pursued an opportunistic strategy. Following the affiliation, the Good Samaritan Society now has greater financial depth and access to capital than it did as a standalone, enabling it to move quickly if attractive opportunities present themselves, Bury said.
In light of that opportunistic mindset, the organization is not limiting its growth to particular geographies or levels of care. However, having full-continuum campuses is a goal, so adding on services at existing locations is an attractive option.
“Part of the benefit … with the combination with Sanford is the one-stop shop,” Bury said. “The comprehensive nature of being that kind of company is a market [differentiator] for us.”
As the Evangelical Lutheran Good Samaritan Society gains scale, it will also upgrade its offerings to meet the rising expectations of the boomer demographic — and raise awareness of contemporary senior living among potential consumers.
Even with his health care background, Bury had some misconceptions about today’s senior living communities, and he thinks that these misperceptions are especially ingrained among the rural populations that the Society seeks to serve in some of its key markets.
Now, Bury and other members of his leadership team are regularly presenting to Sanford physicians and others within the health system, to ensure that they understand what the Society brings to the table for patients who may need housing or care.
Overall, while the work of integration is ongoing and lessons are learned “every day,” Bury believes that the affiliation is already beginning to pay off.
“We’ve swung the pendulum in our favor through the combination,” he said. “I would say that the future for this company is extremely bright, and I’m glad to be part of it.”