Heading into 2020, many senior living providers are focused on making investments to upgrade the resident experience, to stand out in a competitive landscape and appeal to future consumers.
For Kim Lody, CEO of Capital Senior Living (NYSE: CSU), one potential area of change relates to resident choices. The baby boomers will bring with them a slew of new lifestyle preferences, necessitating more varied offerings from providers who want to stand out in the increasingly crowded senior living landscape.
“With the dynamic competitive environment nationwide, the residence experience will become more of a differentiator than ever before,” Lody said.
Aegis Living President Kris Engskov also is focused on the resident experience, and is excited at what senior living can deliver in 2020 and over the next decade as baby boomers age.
“We’re going to surprise them in a big way,” he said, referring to the boomers.
But senior living stakeholders also need to be wary of how private equity’s increasing involvement in the sector could stymie efforts to make investments for long-term success, according to Lynne Katzmann, Founder and CEO of Juniper Communities.
“If we want to preserve and grow this market and provide a good place for investment, think down the road and decide, do we want to talk about this publicly and engage in a discussion with all of our stakeholders — including PE and other capital sources — to figure out creative solutions?” she said.
To learn more about how other industry executives are feeling about change in 2020, Senior Housing News connected with a handful of large or notable industry players. What follows is the second part of a two-part series sharing those responses. Check out part one here.
Kim Lody, CEO of Capital Senior Living:
I’m excited to see evolvement of contemporary choices in resident engagement. With the dynamic competitive environment nationwide, the residence experience will become more of a differentiator than ever before.
I expect to see operators create interesting — perhaps even surprising — programs for resident engagement. These experiences will become more current, from brewing beer or making wine to competing in online video games. In addition, while technology will play an increasingly important role in the provision of care to residents, it will not replace human interaction and person-to-person care.
I’m also looking forward to the role senior housing will play in the provision of services specifically designed to reduce falls, prevent hospitalizations and address chronic conditions — i.e., diabetes and social conditions such as depression and isolation. Collaboration with health insurance plans and medical professionals to deliver tangible, documented benefits across these areas will become an increasingly important driver in the selection of senior housing residences.
The issue most concerning to me is the difficulty in finding high-quality, engaged people who have the passion, patience and interest in caring for senior adults. The senior housing industry needs to do a better job of finding ways to attract talented people to the sector. We must showcase the personal, professional and financial rewards of being part of this industry. This includes realizing a sense of purpose and satisfaction in caring for others, the opportunity to explore varied and personalized career paths and engaging in ongoing employer-sponsored learning to gain additional knowledge, experience and expertise.
Chris Winkle, CEO of Sunrise Senior Living:
Our mission at Sunrise is to champion quality of life for all seniors. Remaining true to that mission in the future will require us to find ways to serve a rapidly expanding population of seniors – both within and outside of our communities.
One way we’re doing this is through new development, and we’re also looking to innovate and potentially bring new products to market that leverage our more than 35 years of experience serving seniors.
We’re spending time learning more about consumers’ needs and desires both today and tomorrow and will use that research and data to continue to introduce new products as well as improve the core Sunrise assisted living and memory care community that seniors and their families enjoy today.
Kris Engskov, President of Aegis Living:
I’m concerned about how we can find the very best frontline folks, particularly for care manager positions. I think it requires all of us to be really entrepreneurial and be open to new ideas. Paying for things like certification or education — benefits are going to have to be much, much more creative and leverageable. That’s on top of a strong base pay rate.
And I’m concerned about how fast we need to reposition in the industry to pick up the increasing number of those who are interested in great benefits and pay but also view mission as a big part of their career choice. I don’t think we’ve done a great job of highlighting — particularly with millennials — how fulfilling, how changemaking the opportunity to take care of this [aging] generation can be. I think we’ve got a giant opportunity to reposition our industry and this business to find those changemakers who have not yet tuned in to what’s getting ready to happen.
The last thing I’m a little worried about is how some communities — towns and cities — are (at times) slow to entitle senior living. They don’t seem to really understand the benefits senior living brings, aside from the fact that they’re in many instances undersupplied for what’s coming. I think we can do a better job of showing municipalities how good we are for the community and all the benefits we provide as developers, employers, community members, philanthropists, et cetera.
As for biggest priorities for us in the next 12 months, we’re working on having a much, much more creative benefits plan to meet short-term and long-term needs, and building out career opportunities, making team development paramount. Within two or three years, I hope to recruit 90% of everybody for needed positions (for promotions) from inside this business.
And we’re going to make some big steps forward into integrated care this year, and also take a hard look at stepping up our dementia and Alzheimer’s memory care program, including through some key partnerships.
I’m excited about senior living as an industry becoming much, much more a part of the health care continuum — being a much bigger player in helping our residents with all aspects of their health, not just housing or health as it relates to ADLs, but getting a lot more progress on truly integrated care. And I’m excited about unique collaborations and partnerships to achieve and support that care.
I keep hearing about all this great technology that will keep me in my house longer. That’s great, but I haven’t yet seen anything that I think is so revolutionary that I’m worried about it disrupting what we do when we’re at our very best. I’m excited about the boomers, particularly showing them that we can do things they never imagined with technology, in the personalization of care, in creating community, creating experience, all the things that are really important to them. We’re going to surprise them in a big way.
Charlie Trefzger, Founder, President and CEO of Affinity Living Group:
Of course, we work hard to ensure that our residents are served by competent, caring and compassionate staff, feel at home, and are getting the quality of health care and attention we would want for our own parents. A stereotypical resident of an Affinity Living Group community is an 85-year old former school teacher who retired 20 years ago, lost her spouse 10 years ago, has few assets and no savings, and is no longer able to live safely at home alone. She is part of the “middle market” that we serve and she is on the leading edge of the baby-boomer surge that we are starting to see in all our communities.
As we look forward to 2020, our efforts are focused on maintaining affordability, while pursuing any idea (especially technological innovations) that serve, ultimately, to enrich quality of life and to meet the health care needs of all our residents. To this end, we are also working to improve our operating efficiencies, ensure empowerment at the community level, and provide even more personalized care for our residents. We’re renewing our commitment to partner with medical directors on site to combat overuse of antibiotics and other medications as well as collaborating with hospitals, managed care organizations, and ACOs to reduce avoidable readmissions and unplanned hospitalization, thus reducing the total cost of care.
Like many of my peers, I worry about finding, training and retaining qualified staff to care for our residents. We go to great lengths to try to identify those qualities in people — staff who have “heart” — but we are all competing against many economic, social and cultural factors that inherently limit the pool of potential candidates who have the drive to serve. This is our biggest challenge as we look to the future.
Lynne Katzmann, Founder and CEO of Juniper Communities:
The big question on my mind is: What’s the best way to secure a strong future for our industry, and what type of capital best supports that?
There’s an enormous amount of capital coming into the industry, including an increasing amount of private equity, and that is a good thing. I’m thrilled that private equity folks see our industry as one that has growth potential.
I note, though, that most PE funds are structured with about a five-year time horizon. They raise a lot of money and lever it to generate IRRs (one of their primary measures of success). IRRs are based on two things: money and time. You need the money but time is critical: If you double your money in 10 years, it’s worth less than doubling it in two.
Our industry is in a state of flux — of great change. We need to be prepared for the future and that preparation means a variety of investments. Most of those investments require the same two ingredients: money and time. Unfortunately, in this case, time is rarely on our side. Aligning capital with changing operating strategies when the primary focus of capital is rapid generation of cash flow to pay debt service and increase net operating income to generate a sale price quickly in order to boost IRR, may be difficult. In other words, the way to short-term gains is to push rate, occupancy and reduction in expenses. Investments in the future often have high costs — both time and money.
Take technology. I firmly believe that data is the new currency that’s going to drive profits in our industry, meaning you need to invest in related tech infrastructure. That costs a fair amount of money, the return on which typically doesn’t come in a year or two. That’s one tangible example. We’re also seeing hesitation with investments related to large-scale renovations and re-orienting for the new consumer. Management companies don’t have capital for these investments, or security that they’ll be the operator after the sale of the community to justify their investment of time or money. Conflicting goals need to be aligned.
Alignment is possible — and needed. There are numerous ways that deals could be structured differently to accommodate longer time horizons. You can think short-term, but if we want to preserve and grow this market and provide a good place for investment, think down the road and decide, do we want to talk about this publicly and engage in a discussion with all of our stakeholders — including PE and other capital sources — to figure out creative solutions?
Also on my mind going into 2020: The Amazon-ification of health care in America! I think Amazon, Apple and Google are making strong plays in health care and senior care specifically. We need to understand where they’re going and if we can partner with them. Keep your eye on PillPack and Haven.
Another big tech-related issue is interoperability, or the sharing of health information. I’m not sure that enterprise systems like Epic or Cerner will be the big winners; interoperability could come through personal health records through the likes of Amazon or Google. In other words, it could be access that individuals give to providers.
Finally, the workforce issue. We’ve got to think big. How are we going to find a new group of people to work in our communities? I’ve been doing a lot of thinking about attracting older adults into the workforce. Companies like Honor are really interesting because they have technology that allows people to choose shifts. I think figuring out how to use gig work to deal with workforce issues is interesting, and needs to be looked at in 2020.
Jerry Finis, CEO of Pathway to Living:
2020 will be a year where community staffing will continue to be a real issue. While many are concerned with higher wage pressure of direct care staff, the real issue in many markets is the actual availability of care staff. Even more pressing is the industry’s ability to attract and retain top quality management staff. The executive director is the most crucial position and needs to be staffed by seasoned leaders in order for a community to be successful. Those leaders are often cultivated from within our organization so we are always focused on professional growth. We empower staff to make independent decisions, recognize high-performers and promote from within whenever possible.
The industry is finally beginning to address how to design and bring to market new housing choices that can make seniors housing a widely acceptable residential option and a meaningful lifestyle choice. Our deep understanding of the overall market allows us to expand our base of prospective customers. These new housing choices are simultaneously addressing lifestyle and affordability issues in order to broaden the appeal of senior housing communities. We expect branded communities that appeal to seniors across a variety of socioeconomic demographics to be attractive to older adults seeking housing options tailored to their lifestyles.
Randy Bury, President of Evangelical Lutheran Good Samaritan Society:
Emerging out of the trough
Market demand for senior housing will experience a significant uptick beginning in 2020 as the initial wave of baby boomers seeks a variety of amenities as they transition from home ownership to senior housing communities. The greatly anticipated influx of aging Americans — sometimes referred to as the “silver stimulus” — filling senior housing communities will bring with it a paradigm shift in service expectations our industry may not fully comprehend or is prepared to embrace. Additionally, many of these new senior care customers are not prepared when it comes time to transition to long-term care services. We have an obligation to help educate this generation about financial obligations of the next levels of care beyond living independently, or risk further burdening the LTSS system in this country.
Catering to the middle market
There has been a significant focus in metro markets to build high quality senior housing communities, to the point of oversaturation in many market regions. The middle market will emerge with a high demand for affordable housing, requiring developers to rethink planned communities accessible at a lower price point without compromising on the quality of services provided. As the traditional housing market continues to gain strength, this aging demographic will cash out of their existing property and be at our doorstep expecting an affordable product.
Executive talent succession planning
We are seeing high-caliber, executive-level nursing talent reaching the twilight of their careers. While this is not specifically unique to nursing, this inevitably reshapes how care is delivered throughout the country. It is no secret that rural America is changing, therefore the way we provide care must continue to evolve as well. Millennials will push the boundaries with technology and wrestle with the complexities of delivering high quality care in both rural and urban markets. Personally, I believe our integrated health system is uniquely positioned to manage this change and leave our next generation of leaders with an incredible opportunity to improve the human condition.
Steve Kastner, President and CEO of Trinity Health Senior Communities:
2020 will be an interesting year, one that will continue to bring change to our country, our industry and our individual organizations.
Providers will need to focus more on relationship and leadership development to strengthen their teams. The need to integrate care and the means to create value will bring additional pressures on our individual organizations.
The U.S. health care system will continue to shift more toward population health models, and large health systems and payers consequently will continue to view senior housing and care settings as valuable locations where interventions can reach large numbers of at-risk patients and beneficiaries.
I believe we will continue to see a boom in the active adult sector, with investor interest soaring to increasing new levels. The overall middle income market is desperately looking for suitors that are able to address this growing need. At Trinity, we feel well positioned to address this growing need as a result of our vertical integration opportunities and our member health initiatives that we are developing to address the wrap around services to assist residents to age in place. By offering a more comprehensive, coordinated approach to residents’ health care, the non-profits can compete against the private-equity active adult products that are being built, which may have flashy amenities but lack the built-in care expertise.
Organizations must continue to invest time, capital and dollars in quality, service hospitality, technology and most importantly, the labor force. The organizations that thrive will be the ones that continue to make their mission the center of all they do.
Sara McVey, President and CEO of Sequoia Living:
Growth is a key theme, though not so much getting bigger, but getting better. Growing the capacity of people to look at what they do and figure out how they can do it better is an enabling growth strategy. The best vision and mission in the world will not advance if we don’t have the right people doing the right things in ways that are slightly better than yesterday. As leaders, we can only move as fast as our human capital will allow. It’s good to have money and capital but its people that strengthen or weaken an organization through the day-to-day decisions and actions they take.
Cost creep and an aversion to eating sacred cows is following us into 2020. The good news is, I am a meat-eater and up for the challenge. We can’t keep adding new services, programs, and locations hoping they will distract us from the fact that the core operations need to be run more effectively and efficiently. Continuing to put the costs on the backs of residents is not strategic, it’s lazy. Balance sheets should be a source of pride and budgets should not be seen as a suggestion. I am a big believer that the best organizations have a not-for-profit heart and a for-profit head.