AlerisLife Versus Home Care Giant Honor: An Ominous Contrast for Senior Living Industry

In September 2020, Five Star Senior Living CEO Katie Potter spoke at a virtual conference hosted by home care company Honor.

At the time, Potter spoke of how the lines between senior living and home care are blurring, and of ambitions to transform Five Star from a senior living and rehab company into a diversified aging services provider that would support older adults’ desired lifestyles.

Times have changed.


Early this year, Five Star rebranded as AlerisLife, after shedding 108 communities in a portfolio restructuring in 2021. And last week brought news that Potter had resigned as CEO, with the company now undertaking an operational review.

Honor has been on a different path. The company acquired home care giant Home Instead last year, creating an enterprise with $2 billion in revenue. And this week, Home Health Care News ran an interview with Honor CEO and Co-Founder Seth Sternberg, about the launch of an “Honor Expert” platform.

In this week’s exclusive, members-only SHN+ Update, I analyze this recent news and offer key takeaways, including:

  • AlerisLife offers the latest cautionary tale about the difficulties of innovating in senior living
  • The trajectory of AlerisLife versus Honor does not inspire hopefulness about senior living’s future
  • Senior living providers must consider how the Honor Expert platform could drive — or deter — referrals to their communities
  • There is an increasingly urgent mandate for senior living providers to expand and diversify their business models

Focus versus vision

AlerisLife has offered little public explanation for Potter’s departure and did not reply to inquiries from Senior Housing News last week.

I’m not sure what was happening behind the scenes, but the board clearly seems to have harbored serious doubts about Potter’s vision for the company. Interim CEO Jeff Leer began last week’s Q1 2022 earnings call with comments about a narrower focus.

“At this pivotal time for the senior living industry and our company, it is critical that we continue to maintain our focus on the core business functions of our senior living communities and Ageility clinics,” he said. “ … Our goal is to narrow our focus in the current environment to capture occupancy growth and drive cost efficiencies.”

On the one hand, the operational review and CEO change are not surprising, considering AlerisLife’s share price is down about 79% over the last year, falling from $6.45 in mid-May 2021 to $1.31 at market close on Tuesday.

And there’s no question that AlerisLife’s numbers are lagging industry averages.

The company’s average Q1 2022 occupancy was 74.1% across the managed portfolio. By comparison, average senior living occupancy clocked in at 80.6% in the first quarter, according to NIC MAP Vision data. Welltower reported spot occupancy of 78.6% at the end of March for its senior housing operating portfolio.

Despite these metrics, my initial reaction to the news of Potter’s exit was surprise — in part that’s because her departure came abruptly, just days before the company’s earnings call.

But my surprise also was due to the fact that AlerisLife’s results have not been wildly worse than other publicly traded operators. Brookdale Senior Living (NYSE: BKD) last week reported 73.4% occupancy for Q1. And Brookdale’s sequential RevPAR growth was 5.4%, versus 4.4% for AlerisLife.

Furthermore, as Leer noted on the earnings call, AlerisLife’s portfolio is now more than 50% independent living and active adult, which encountered more occupancy headwinds than higher levels of care to start the year. On an industry-wide basis, IL occupancy slipped 0.1% in Q1, according to NIC MAP Vision data.

I would have guessed that Potter would get a little more time to drive improvement, particularly given that she took the helm while the company was in dire straits and has not had a chance to lead through a period of relative stability.

When she took the reins in 2018, the provider was in danger of being delisted from the Nasdaq and faced “going concern” issues. A major restructuring with REIT partner Diversified Healthcare Trust — then known as Senior Housing Properties Trust — ensued in 2019, while operations were still beset by headwinds related to oversupply. Of course, the Covid-19 pandemic hit in 2020, and this was followed in 2021 by the move to shed 108 smaller properties and exit the skilled nursing market, in favor of operating larger communities with a focus on independent living.

Potter might have been premature in driving toward diversification of services before the senior living portfolio achieved greater stabilization following the shocks of Covid-19. Now might have been a time to keenly focus on blocking and tackling, not pursuing a large-scale plan to reinvent the company.

Still, I think it will be a shame for AlerisLife and the industry if this is an example of how the need to produce quarterly earnings stifles innovation in senior living.

Leer said the company is “not losing sight of our long-term focus on overall strategy,” but with no permanent CEO and the operational review underway, the future direction for AlerisLife seems uncertain to say the least.

Contrast with Honor

It’s instructive to contrast AlerisLife’s recent trajectory with that of Honor.

While AlerisLife’s portfolio was contracting, Honor was gaining massive scale through the acquisition of Home Instead, one of the largest providers of personal home care in the United States, with about 1,200 locations. Honor and Home Instead together produce more than $2.1 billion in home care services revenue.

This new scale, combined with Honor’s sophisticated technology platform, is enabling the combined company to roll out the Honor Expert platform, CEO Sternberg — a serial entrepreneur out of Silicon Valley — told Home Health Care News.

The goal of Honor Expert is to create a one-stop shop for older adults who need care or resources. Consumers can call a toll-free number or use an online portal to reach a live Honor Expert who can provide information, advice and connections to partner organizations to support needs related to health and wellness, care planning and home management.

Already, Amazon Business, Best Buy, SelectRX and Freshly are among Honor Expert’s 14 national partners. These partners pay to appear on the Honor Expert website, enabling the service to be provided at no cost to consumers.

“What Honor Expert does is create this whole new service for consumers. It gives them a whole new resource that they just are deeply lacking right now,” Sternberg told HHCN.

The Honor Expert concept is strikingly similar to the vision that Potter put forward for the future of AlerisLife. She too perceived the deep need for a service to support boomers’ physical, social, emotional, intellectual and other needs and goals — whether individuals are residing in a senior living community or elsewhere.

“This generation is living much longer and essentially will have an entirely new stage of life for experiences, for working, for whatever it may be that they wish to pursue, but they’ll need support to empower that lifestyle,” she said at the SAGE/2020 event that Honor hosted in 2020.

Senior living providers should note that Honor Experts intend to provide information about communal living. The website already includes information on senior living options and touts placement agency CarePatrol as a partner.

The website does not list any senior living provider companies among its partners. Given Potter’s connection with Honor and her vision for AlerisLife becoming a “life services” business, I wonder if she might have pushed for AlerisLife to be such a partner to Honor Expert.

In any case, senior living providers should know that Honor Expert is on the scene and could be giving (or at least facilitating) senior living placement advice to consumers. If the Honor Expert model gains traction and grows, it could become another third-party referral source that senior living providers will need to manage.

To the extent it is possible, connecting with Honor Expert in these early days to offer input and drive a favorable model is obviously a good move for senior living providers.

Bigger picture, I think it’s worth contemplating that while two home care companies have joined forces and are quickly rolling out a new service that they believe will meet the evolving older adult market, one of the largest senior living providers in the country has shrunk and is now narrowing its focus to “capture occupancy growth and drive cost efficiencies.”

This contrast does not exactly inspire hopefulness about the future of senior living, and the ability of providers to respond to dynamic market conditions — including the increasingly well-capitalized and technologically sophisticated home care sector.

And I’m increasingly convinced that Potter’s vision for the future was astute. Her perspective is shared by big thinkers such as Dr. Bill Thomas. He recently told me:

“This is a chance to raise your game. An approach that’s based almost exclusively on rate, occupancy and amenities is only enough to keep you in business. To play in this new world, your organization needs to become more sophisticated in how it handles data, information, systems, partnerships and collaboration with providers of more sophisticated services.”

And MIT AgeLab Director Joseph Coughlin was also a Potter ally — in fact, he spoke with her at the Honor event two years ago. At that time, he told me: “Companies like [AlerisLife] and others that succeed will be the ones who see the writing on the wall.”

The good news is that many other companies entered the pandemic on firmer footing than AlerisLife and do not have the burdens and limitations that come with being publicly traded and part of larger organizations like AlerisLife’s parent RMR Group.

And some of these other providers do recognize the need to reach consumers beyond the walls of their communities, partner more with other organizations to support a greater variety of services, and diversify revenue streams to be less vulnerable to future occupancy shocks.

Just in the last week, we’ve highlighted Bickford Senior Living’s partnership with HCAN to create a home care business, and Merrill Gardens President Tana Gall’s comments on how partnerships are crucial to the Truewood middle-market model.

So, I am optimistic that these and other providers are taking some big swings and — to paraphrase Bickford EVP Alan Fairbanks — are willing to disrupt themselves. Doing so is necessary, or senior living will be disrupted by companies like Honor that are moving fast to recognize and seize opportunities.

I only hope that the pressure of the public markets, whether felt directly or second-hand through operators’ publicly traded REIT partners, does not stifle innovation.

Companies featured in this article:

, , , , ,