The Springs Living CEO: Expenses Up $400K, But Cost of Covid-19 Failure ‘Incalculable’

For The Springs Living Founder and CEO Fee Stubblefield, dealing with Covid-19 has felt a little like piloting a commercial jet.

“We were cruising along at 30,000 feet, and guess what, the air got contaminated and we had to shut off the engines,” Stubblefield said during a recent appearance on SHN’s Transform podcast series. “At some point, you have to get the engine turned back on, and you have to get revenue coming back in.”

What Stubblefield means is that Covid-19 has disrupted many providers’ engines — their move-ins and occupancy rates — and that has sent them into a gradual downward glide as expenses outweigh revenues. Like many other senior living providers, The Springs Living has faced sizable unexpected costs for personal protective equipment (PPE), testing kits and labor. These elevated costs are not sustainable in the long term but Stubblefield points out that they are well worth it, especially to prevent even more catastrophic costs related to Covid-19 outbreaks.

The provider has launched several campaigns aimed at stopping the spread of the virus, including “Stop the Drop,” a mask-wearing effort; and “Save Lives, Shop Here,” a community-based general store for employees. And it seems as though those efforts are working: To date, only one of the McMinnville, Oregon-based provider’s residents and just four of its employees have tested positive for Covid-19, and all have since recovered from the disease.

Barring a major outbreak at one of its 17 communities in Oregon and Montana, The Springs Living expects to spend about $500,000 to mitigate Covid-19. So far, the company has spent about $400,000 of that total. But that is money the company must spend now if it wants to maintain its quality of service in the long-term.

“You have to pay the employees, you have to buy the food, you have to deliver care,” Stubblefield said. “We have to do those things, and we cannot let our quality slip.”

Highlights of Stubblefield’s podcast interview are below, edited for length and clarity. Subscribe to Transform via Apple Podcasts, SoundCloud or Google Play.

On what The Springs Living has seen with regard to rising expenses:

We figured we’d spend somewhere between $500,000 and $700,000, if I remember correctly. And so far, we have spent about $400,000. Most of that is securing PPE. [In Oregon], some of that is also being reimbursed by workers’ comp. Our current projection is, if we can hold off and not have a major outbreak, we’ll probably spend around $500,000 for our 17 communities.

On how supporting the provider’s workforce helped it deal with the pandemic:

We started paying our employees to stay home. We took the position that if you’re sick or you feel like you’re going to get sick, stay home. There was some concern about that. Would it be abused? Would it cause an undue expense? But I would credit that program right there — paying our staff to stay home and trusting them — as probably the number one reason why we have the numbers we have right now.

We heard some numbers up to potentially a million dollars if you get an outbreak in a community. We haven’t had any [major] outbreaks in our communities, so we save a lot of money. And I can tell you that our overtime cost for extra paid time off is very minimal.

We also set up stores for basic things that they would need, so they wouldn’t have to go in the community. Now, this was above and beyond the PPE that we provided them from day one. We wanted our staff to feel like they could protect themselves and their family. So, we provided toilet paper and all those hard-to-get things early on. This was kind of a formal store, and it worked really great.

The other thing that I think has been very valuable is what we call our “Hero Meals.” We just decided that our employees, number one, needed to limit their exposure to the general community. Number two, we felt that they’re the front lines, they’re the heroes here. They’re showing up every single day, and they deserve to be recognized and rewarded for that.

Everybody’s concerned about Covid-19. There’s limited access to supplies, there’s limited access to places you can get dinner. You’ve put in a shift, maybe a double shift, and you’ve got to go home and feed your family. That’s a hard thing to do. And our staff love our residents. The last thing they want to do is live with the guilt that they got infected and then infected a resident. So, we just decided that we would start feeding our employees’ families.

With that program, we did a napkin approach on what it would cost. And we decided that it doesn’t matter. We’re going to do this because it’s way cheaper than having an outbreak in a building. And more importantly, it’s the right thing to do for the heroes that are keeping our residents safe.

On support from The Springs Living’s financial partners:

The amazing thing about this crisis is it’s really brought a lot of people together, such as our partners and our investors. We have a handful of investors that are friends and family. And then we work with one private equity group, Harrison Street, and we’re a joint venture partner with Ventas. And they’ve been great.

We have not had people hounding us on what the bottom line is going to be. It’s been about what we need to do to save residents and save lives. Ventas has a program where they’re allowing lease deferrals. Everything helps here. Harrison Street’s been a great supporter. We’ve reduced all of our distributions and stopped them to accumulate cash. That’s due to not knowing what this [pandemic] was going to be on the financial side of things. And we haven’t had any pushback.

The formula is really simple. We have to fight this and win this, and then we can start worrying about the financing. We have to prove that our profession is a safe place for seniors, that we’re relevant for older adults, that our communities are the very best place. The cost of failing at that is incalculable. So all the other things, the cost of the PPE, the Hero Meals, all those things are a drop in the bucket.

But there are some concerns about that. It’s kind of like you’re an airplane. One of the metaphors we use is, we’re cruising along at 30,000 feet. And guess what, the air got contaminated and we had to shut off the engines. Well, at some point, gravity still is the reality. And at some point, you have to get the engine turned back on, and you have to get revenue coming back in, because you can’t fly forever without revenue. You have to pay the employees, you have to buy the food, you have to deliver care. We have to do those things, and we cannot let our quality slip.

When we get down the road, at the end of the second quarter, we’ll be able to evaluate covenants. But our lenders are another group that have just been great. We have a lot of lenders we’ve worked with, BBVA, KeyBanc and others, who told us, really, don’t even worry about your covenants. Now, we’re still worried about our covenants, and we’re still working hard at not breaking any covenants. But the reality is that, right now, none of that matters compared to keeping buildings clean and safe and saving lives.

On whether the industry needs to test every resident and employee for Covid-19:

If we’re using proper protocols, like our Stop the Drop program, I don’t think it’s necessary to test everybody. I think testing is important if you have a flare-up. Covid-19 is like dry lightning in an August thunderstorm. It hits, and if you can get on it and get that fire out quickly, it’s not going to spread. And I think that’s where testing really comes in.

The testing can help. But the key is the staff, the operations and especially the team that is at the community level. So, we’re not advocates of testing everybody in a building, because we think it’s a one time shot, and it’s extremely expensive. It should be more used as a targeted response to an outbreak or symptoms.

I think the future is really about being able to do a snapshot and certify that a [senior living] environment is Covid-free. We’re working with a lab in Portland, they have a certification … to do surface testing. You can swab a surface, like in an elevator, and you can tell if there’s any Covid-19 on that surface. And pretty quickly. [The lab] is also prototyping … being able to test air quality. So, technology, innovation, the American spirit, it’s going to help us beat this virus and the ones coming after it.

On what comes next after Covid-19:

The future is going to be a greater appreciation for the organizations that invest in culture, that invest in systems, that invest in their front line.

I think we’re going to see more resources, more appreciation, more opportunity. We’re definitely going to see more technology, more investment. And I think we’re going to … really recognize the value of the operations. This is not real estate. Real estate is just a component of it. But these are complex operating companies. And to do that well, you have to have the resources and you have to invest in those resources.

I see a bright future for senior housing and care. We are relevant. We’re here to stay. And we can solve this, but we need the support. We don’t need a lot of extra regulations. We need to be able to innovate and invest.

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