About a week after Scott Riddle joined Minneapolis-based senior living provider Walker Methodist as CFO in April 2013, the CEO left the nonprofit.
“My joke is that it usually takes two weeks for people to get sick of me,” Riddle told Senior Housing News.
While he’s able to laugh about the situation now, at the time the organization was in a serious situation. When he assumed the CEO role in September 2013, Riddle had a turnaround on his hands.
Today, Riddle and his team have succeeded in putting Walker Methodist on firm footing, and the nonprofit is embarking on a growth push. Its current portfolio consists of 15 communities throughout Minnesota, offering a mix of care levels across the full continuum. Within two years, Walker Methodist could add another dozen communities, going from serving about 3,000 seniors each year to serving between 5,000 and 6,000.
Riddle is also continuing to draw on his background in other industries, including as an executive with Northwest Airlines, to position Walker Methodist for the future. The organization is one of 10 that is participating in a new Medicare Advantage plan launching in the Twin Cities, and investments in technology are also a top priority.
Gaining stability, then scale
Back in 2013, Walker Methodist was facing low occupancy due in part to startup communities that had a hard time gaining traction, but also because the organization did not have a stellar reputation in terms of services beyond health care, Riddle said. The financial difficulties had led to cutbacks in human resources, which was compounding the problems.
The solution was a return to basics.
“We started focusing on two things — this sounds really elementary — our customers and our employees,” Riddle said. “We really spent a lot of time going through customer service training, putting a focus on not only providing really good care — we had always provided excellent care — but doing more … how do we satisfy the customer? How do we know we’re doing what they want us to, not just what we have to do as far as a care model?”
Coming from the airline industry, Riddle was familiar with this situation.
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“An airline, you pay them to get your from Point A to Point B. If they do that without crashing the plane, they’ve hit that hurdle, but you might not fly them again if the airplane was dirty, if the flight crew was rude, or they’re 15 minutes late,” he said. “I know airlines are constantly trying to figure out how to do better.”
In addition to the new workforce training initiatives, Walker also hired a vice president of human resources and someone to focus on leadership and employee development. The goal here was to improve retention and develop leadership internally.
“It’s been highly, highly successful,” Riddle said of these seemingly basic steps.
Walker Methodist also sold an older independent living building located in a market where “competition has just gotten crazy,” he said.
Company-wide, the organization’s occupancy sits at around 95%. Excluding skilled nursing, that rises closer to 97%, Riddle noted. So, with this level of stability achieved, the time has come to gain scale.
To do so at the quick pace that Riddle is targeting, Walker Methodist has partnered with two developers, Silver Creek and Roers Companies. As for-profits, these developers have quicker access to ready capital than Walker Methodist, given the time it takes to build up cash reserves, Riddle noted. But both Silver Creek and Roers are aligned with Walker Methodist on values and mission, he emphasized.
Generally, Walker Methodist is helping in the development process and then taking over management of the communities, although it is considering taking a small equity stake in some of the projects.
Judicious site selection is a critical consideration in this growth push, given that oversupply is a concern in senior housing generally and in Minnesota in particular. Some areas around the Twin Cities “are definitely overbuilt,” Riddle said.
So, Walker Methodist and its development partners are looking at more rural locations. But while these might be more insulated from competition, they come with other challenges, such as the availability of staff.
“It’s hard,” Riddle said, of finding the right rural locations. “You’re not going to build a 150-unit to 200-unit building in a lot of these communities, but an 80-unit to 100-unit building is very doable.”
In terms of level of care, Walker Methodist — like many nonprofits — is planning to shift away from skilled nursing toward more private-pay senior housing as it grows. Currently, about 45% of the organization’s revenue comes from skilled nursing, and this should go down to about one-third of revenue by the time the portfolio expansion is achieved, Riddle said.
Walker Methodist is hardly alone among senior living nonprofits, which are trying to gain scale in a bid to remain competitive with for-profit competitors. But in targeting such a rapid timeframe, Walker Methodist may be an outlier — indeed, some nonprofit leaders have sounded the alarm that needed growth is not happening quickly enough and that providers will ultimately regret being overly cautious.
“I’m a firm believer in growing,” Riddle said. “If you stop growing, you start dying.”
Medicare Advantage and new technology
Walker Methodist is not only at an inflection point in terms of its scale. The organization is also breaking new ground in other areas, such as by joining a group of 10 nonprofit providers that will start to offer an exclusive Medicare Advantage special needs plan to residents this year.
Walker Methodist does not itself have an ownership stake in the plan but does have a gainshare agreement whereby it has financial incentives to provide effective, efficient care to beneficiaries.
In joining this effort, Walker Methodist is an early mover as Medicare Advantage begins to make inroads in senior living, and there are a variety of unknowns involved. However, Riddle believes that having an MA offering specifically tailored to the needs of residents will enhance their wellness and satisfaction, and that MA involvement will give senior living providers more of a voice at the table as the U.S. health care system evolves toward population health models.
“I think that’s one thing in our industry that needs to change, is we are pretty risk-averse,” he said. “There’s more risk sometimes in doing nothing than doing something … I’d rather be learning a ton going through the processes and having a say, then sitting back and waiting to see how this is all going to shake out.”
Technology is another area where Riddle wants to take bolder action. Walker Methodist has conducted a study on where it stands with technology today, with the goal of identifying where it needs to make meaningful investments in the coming years.
Senior living as a whole can do a better job of leveraging data to drive operations, improve the experience of the workforce, and be more communicative and transparent with consumers, Riddle believes.
Again, he draws a parallel with the airline industry. There are apps available that allow passengers to track their baggage, for example, whereas in the past customers had to simply trust in their carriers to get their luggage to the right destination, and then lacked information and transparency when issues arose.
“The person who’s going into a senior living community today, they’ve been flying the past 10 years … they can order things online today,” Riddle said. “They expect us to be up to speed with that, too.”
With Walker Methodist pursuing all these initiatives, Riddle is also focused on his own leadership. One priority for him is to more consistently encourage team members, noting that Walker Methodist actually has a “35 days of encouragement” program in which the goal is to encourage at least one person every day for 35 days.
“To me, that’s the kind of company people want to work for,” he said. “That’s the kind of boss people want to work with and for, so that’s what I’m trying to do.”