Phoenix Senior Living is in the midst of adding 23 communities owned by Diversified Healthcare Trust (Nasdaq: DHC) — an expansion that will make the Alpharetta, Georgia-based company one of the largest senior living providers in the Southeast.

Taking on so many communities at once is possible because from its founding in 2014, the company was “built to be scaled,” CEO Jesse Marinko told Senior Housing News, in an interview this week at the Argentum conference in Phoenix, Arizona.

As its footprint grows, Phoenix is pursuing what Marinko calls an “entrepreneurial support model.” The goal is to empower every community to operate like a small business.

Phoenix also is pursuing growth through development projects, creating a multi-brand portfolio. The latest brand, The Hammocks, is trying to strike a new balance between amenity space and living units.

Marinko also is seeing new opportunities to partner with health care systems, thanks in large part to the role that Phoenix played in the Atlanta market during the pandemic.

Combining 2 models of senior living

Since the spring of this year, Diversified has been trying to transition 108 communities from Five Star Senior Living (Nasdaq: FVE) to regional operators. As part of that process, asset managers from Diversified approached Phoenix.

After “a few months of chatting” with Diversified, Phoenix’s leadership pursued “strategic additions” that would give the company a presence in new states, Marinko said. Those states are North Carolina, Kentucky, Missouri and Arkansas.

The communities are transitioning to Phoenix in tranches. When the process concludes — likely by the end of this month — Phoenix’s total portfolio will number 57 communities.

While a few of the transitioning communities are 100-plus units with a continuum of care, the majority are around 60 units, located in secondary and tertiary markets. All are under a third-party management structure, with Diversified maintaining ownership.

One of the first priorities is bringing all the buildings up to commercial network grade standards for Internet connectivity, which is necessary for the technological infrastructure of Phoenix’s operations.

“The good news is our company, from day one, was built with scalability in mind,” Marinko said. “We really wanted to make sure that as we grew and progressed as a company, we had the infrastructure in place to be able to scale.”

Phoenix also has been adding to its team to support the growth, including new business intelligence positions, expansion of the clinical arm to bolster quality control and assurance, and creating an in-house team to handle every aspect of digital marketing.

In the last two years, Phoenix has shifted away from the traditional “tripod” model of organization, in which there is a head of sales, head of clinical, and head of operations, with teams built out beneath them. 

“We’ve really flipped that model and truly gone into more of a small business, entrepreneurial support model, where our regional directors of ops support five to seven properties,” Marinko said.

Those regional directors support clinical, sales and other business functions.

There are also experts in the various facets of the business at the corporate level, and they are deployed to provide support on an as-needed basis. But the goal is to have few layers between the communities and corporate leadership, and to give communities autonomy to operate in whatever way is most effective for the local market.

“We are anti-cookie cutter,” Marinko said. “What happens in Paducah, Kentucky is totally different than what happens in Birmingham, Alabama. And so you need to know and let those local flavors of the market still occur.”

Marinko naturally has some concern about being caught up in the cycle of growing, only to turn around and shed properties as the portfolio proves to be unwieldy.

But, Phoenix is “not afraid of reps” when it comes to making mistakes and then iterating to correct them, he said. And he believes that Phoenix — and other providers — are learning from other operators’ past experiences, and can blend a local focus with enterprise-wide data and support.

“We’re taking lessons learned from large-scale operators who have had to shed, and we’re taking lessons learned from regional operators who have proven to be successful,” he said. “I think I’m trying to marry the two models.”

A new brand

Even before the Diversified transaction, Phoenix was segmenting its portfolio into different brands as the company grew. In addition to the core Phoenix brand, the company created a “Retreat” brand for certain acquisitions, as well as developments in smaller, more rural markets.

Development has been done under the auspices of Phoenix Development Group, a separate company also founded and led by Marinko. The development firm has been studying consumer buying behaviors, as well as analyzing where past projects have succeeded and fallen short, in order to drive innovation. Those efforts, and the need to respond to market dynamics and pressures, led to the creation of the newest Phoenix brand: The Hammocks. 

The first Hammocks project is taking shape in the northwestern South Carolina town of Seneca. The design is a more decentralized model than is typical in senior living, with cottages, a clubhouse for amenities, and a light care component.

“Especially with Covid, some people like to have their own back porch, some people like to have their own garage, and then they want to choose when they interact within an environment,” Marinko said.

At the same time, consumers tend to be attracted to communities with a large amount of amenity space, but the rising cost of construction makes expansive common areas difficult to pencil.

With The Hammocks, the goal is to place all the amenities that might otherwise be spread out across 25,000 to 50,000 square feet in the more compact clubhouse.

The Hammocks at Seneca is scheduled to open in winter 2022, and is part of Phoenix’s development pipeline of two to three projects per year.

The ultimate vision is to create a regional platform with a concentration of communities in each state, but there is no specific target number for the portfolio size. Marinko’s main concern is that every community is receiving the needed level of support — if they are not, Phoenix will “hit pause” on growth.

“There is no number, because the number is an outcome of the process,” he said. “And so our process is very much, how do we help? How do we support? How do we become advocates in the local market? And how do we just become good business partners within each market that we serve?”

‘They’ve never forgotten’

Serving the market was on Marinko’s mind during the early days of the Covid-19 pandemic, leading to the Healthcare Partnership Program.

Under this program, Phoenix dedicated areas at certain communities — and at a property that was newly acquired but unoccupied — to take hospital overflow patients, helping maintain bed capacity throughout the health system. Phoenix team members cared for these patients on a voluntary basis.

The move “was not financially advantageous,” Marinko said, but it made a “big, lasting impression” on Atlanta-area health systems.

“They’ve never forgotten,” he said.

Now, he is confident that Phoenix is the first senior living company that the health systems call to discuss partnership opportunities.

Prior to Covid, there were barriers to partnerships, including more gatekeepers to go through in order to interface with health system leadership, Marinko said. Now, the conversations are “very real,” although hospitals are still too focused on the pandemic — particularly with delta-related infections surging — to undertake any comprehensive efforts.

However, Phoenix is testing an approach of taking on short-term patients who otherwise might be hospitalized but can appropriately be served within the senior living setting, with a complement of home health, hospice or other services.

This approach should save the health systems money, but in this effort and others, collecting and analyzing data is essential, Marinko said.

And payment is still a sticking point in health system partnerships, given that they are typically seeking Medicare and Medicaid savings, while senior living operates on a private pay model. The growth of programs like Medicare Advantage offer a path forward, Marinko and other senior living leaders believe.

“Medicare Advantage, as you’re seeing every day, is really becoming a daily conversation amongst companies versus a theoretical that you talk about at a conference,” he said.

Marinko has traveled a long road since he first tried to launch an operating company in 2010. At that time, he “got patted on the head” and told “you’re not ready young man,” he said. A decade later, he is ready to keep pushing forward.

“I sit here humbled but … just as hungry today,” he said. “There’s a ton we can improve on; we can make this industry better, we can make our company better.”