Discovery Senior Living had a landmark year in 2019, hiring its first COO, making strides on an “experiential living” model, and striking major deals with real estate investment trusts Welltower (NYSE: WELL), HCP (NYSE: HCP) and NHI (NYSE: NHI).
Memory care has been another major focus, and the Bonita Springs, Florida-based provider recently announced that it is rolling out a new program — dubbed SHINE — across its portfolio. Discovery operates 56 communities, of which 36 include memory care. All but one of the memory care operations are part of larger, continuum-of-care communities, which is Discovery’s preferred approach.
This effort to create a new memory care program was a few years in the making and was driven by the need to upgrade the resident experience and gain differentiation in the marketplace.
“What we did is say, okay, what can we do differently than everybody else with our SHINE program, and how does that dovetail into increasing the overall resident and family member and team member experience inside our memory care community?” Discovery CEO Richard Hutchinson told Senior Housing News.
Creating SHINE entailed a significant upfront investment and the program not easy to implement in each community, but results at the first 10 test sites have been promising, with occupancy up, margin compression limited and net operating income (NOI) positive.
Business intelligence paves the way
When it came to revamping memory care, Hutchinson and other Discovery leaders believed that the principles of experiential living could apply.
Already, Discovery had been creating an experiential living approach for independent older adults, formed around buildings in walkable, mixed-use locations and offering a variety of services on an a-la-carte pricing model. The overarching idea is that Discovery can charge lower rents and residents can create a personalized lifestyle that blends amenities offered by the community with those that are available in the surrounding area.
Such a model was made possible only after Discovery formed a business intelligence unit three years ago, to capture and analyze data to drive more targeted operations and price structures.
That same business intelligence approach could be leveraged to bring more optionality to memory care, Hutchinson and other Discovery leaders reasoned.
The standard memory care model does not include much choice of optionality, he observed. A big challenge lies in the fact that memory care units often include people at various stages of cognitive decline, and programming tends to be watered-down so that every resident can participate. For instance, there often is a single activity offered at any given time — such as balloon volleyball — that is not engaging to people with milder dementia.
Of course, providing customization comes at a cost, so Discovery again relied on its business intelligence analytics to inform the changes and ensure that they made economic sense.
About two years ago, Discovery formed a committee of its own certified dementia practitioners, along with experts on memory care from industry associations. They spent a year designing SHINE, taking Discovery’s existing program and layering in more optionality across all elements, from programming to dining to technology to physical plant, drawing as much as possible from the latest evidence-based best practices.
Just this initial phase entailed costs of about $1.2 million, Hutchinson said. Discovery — of which Hutchinson is the majority owner — fronted that cost. As roll out took place across the initial 10 sites last year, the per-site cost for implementation solidified. Hutchinson places these costs in the range of about $60,000 to as high as $300,000, depending on the extent of physical plant changes.
SHINE also was in play during the discussions that led to Discovery’s large REIT deals over the past several months.
“I’m happy to say all our capital partners understand this program,” Hutchinson said. “They’re willing to invest what I think are nominal dollars on site, through the community’s P&L … and they’re willing to bet with us that what we’ve seen in beta with the initial sites and the economics that are there will drive ultimate value and — more importantly — they very much believe in and are aligned with us in our philosophy that the experience of the customer in this industry has to change.”
In terms of those initial results and economics, the business intelligence appears to have provided solid financial grounding for the program, and the company is outperforming expectations.
Hutchinson anticipated margin compression of about 400 basis points, and so far it’s been less than half that. Meanwhile, average occupancy on stabilized communities went up about 4%, so the 10 SHINE communities increased from an average occupancy of around 88% to the low-90% range. The added revenue is outpacing the margin compression, meaning NOI is positive.
And this is in a difficult operating climate for memory care and without any increase in rates.
“We didn’t want this program to be seen as just another way to increase pricing,” Hutchinson said. “We will adjust … on pricing as we get data back from the market that suggests the market sees a big value in this.”
A six-point model
As for what SHINE entails operationally, the program is organized around the following six pillars:
— Communication
— Team member training
— “My Story” personalized biography
— Immersive dining
— Design
— Activities
Experiential living, rooted in customization and optionality, permeates all six pillars. For instance, staff members sit down with incoming residents and/or family members to create a unique communication protocol, allowing for customization of frequency and method of communication. These methods include texts, emails, photo and video sharing, in-person visits, and other options.
Similarly, the “My Story” element involves a “monster, personalized survey” that is meant to from a basis for an individualized experience, from programming to dining and other aspects of lifestyle, Hutchinson said. This approach breaks from memory care practices that try to have all residents on the same sleep or dining schedule, no matter what their own personal habits built up over a lifetime.
Delivering a personalized experience means that caregivers and other associates have a more complex job, and therefore team member selection and advanced training are crucial pieces of the SHINE puzzle.
Potential team members go through a fairly extensive survey/interview process, Hutchinson said. Those who are selected go through a rigorous training process and receive a pay premium for being part of SHINE. In addition, staffing ratios for SHINE are higher than for the previous memory care model — but even with those higher ratios, the workers are being asked to work hard and excel.
Hutchinson — who has a military background — described the SHINE workers as the company’s “special ops unit.”
“We are seeing, in those 10 communities in that first year, turnover did reduce greatly,” he said. “You can say it’s because of the pay differential, but I don’t think so, I think it’s the camaraderie.”
On the physical plant side, there has been CapEx related to SHINE, although Discovery is somewhat limited in its ability to alter existing buildings. But a significant investment has been made in smart lighting, which has been shown to help in terms of cuing and mood elevation. Technology investments have also been made, including technology enabling residents go on personalized “trips” to locations that are meaningful to them. Discovery is using virtual reality tech more widely in independent living and assisted living, but is still testing it in memory care.
Not every component of SHINE has been successful. For example, Discovery scaled back on some elements because of physical plant constraints, and some medical-oriented programming also proved unworkable at the moment, Hutchinson said.
Some of these efforts were successful at some locations but not others. These elements were shelved because Hutchinson wants program uniformity.
“What I didn’t want to do is put out a really cool brochure and then only 70% was happening on site,” he said. “I wanted to deliver everything we say, no matter which SHINE memory care community you’re at.”
There will doubtless be other adjustments needed as SHINE rolls out across the entire portfolio. This will take some time, as Hutchinson estimates it takes about six months to fully implement the program. Cole Smith, a director with the company, oversees SHINE implementation and meets with a committee quarterly to review needed changes, whether to address elements that aren’t working or to integrate the latest best practices in the field.
Hutchinson is willing to take some risks financially and operationally — and endure some setbacks along the way — not only on SHINE but on the overall push toward more customization and experiential living, because he believes that this model is needed to meet the expectations of tomorrow’s consumer.
“I think a lot of people believe what we are saying and doing is the right answer for the future. I think a lot of folks are kind of in a wait and see mode,” he said. “We’re okay being on the forefront of it … getting the first mover advantage and paying a little dumb tax on the opposite side of the ledger.”
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