IntegraCare CEO: Senior Living Industry Can Follow Toyota’s Example, Reduce Hiring Friction

IntegraCare CEO Larry Rouvelas is an admirer of Toyota’s lean management approach — and he thinks the senior living industry can learn from it in a few ways, particularly with regard to staffing.

As he surveys the senior living hiring process, he sees many points of “friction” where prospective employees might drop out of the running to work elsewhere. So, he’s focused on reducing that friction and instilling “flow” in the company’s operations, much as Toyota did with its production system many years ago; and how many large companies still operate today.

“I got into this industry in part because I wanted to do for senior housing what Toyota and Walmart did for their industries,” Rouvelas said on the Senior Housing News podcast Transform. “I’m blessed by senior leadership that shares my passion for Six Sigma, for Kaizen, for flow.”

If recent accolades from U.S. News and World Report are any indication, IntegraCare is doing something right. A dozen of the company’s communities made the 2022-23 “Best Senior Living,” list, which designates senior living communities as “best” in several categories.

“We take pretty seriously the idea that if you’re good and you work hard and you rise to greater responsibility, that you will find … opportunities at IntegraCare,” Rouvelas said.

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

On IntegraCare’s ongoing recovery:

Occupancy is up. I think we are seeing leads up across the board pretty solidly across the portfolio. But it’s kind of a tale of two cities, when it comes to conversion of those leads to move-ins. Some communities have seen move-ins grow nicely. But others, particularly those with the toughest staffing challenges, move-ins haven’t grown correspondingly. We’re working hard to address that.

My sense is that in the most staffing challenged communities, when, you know, when customers walk around, they get a sense of stress in the staff or the salesperson, you may feel concern about the staffing issues, and the salesperson has some difficulty in conveying confidence. And then when they sense that, the customers walk back out. It’s one of the many reasons we need to deepen the labor pool in our industry for hourly staffing. But other communities where we’ve been able to work that out, I think we’re seeing solid progress there.

On operational, sales and marketing challenges in 2022:

Operationally, it’s definitely the most challenging I’ve ever seen. As you said, I’ve been in the industry since 2003. I’ve seen a number of different situations. In between the staffing challenges and Covid, it’s rough, the teams are tired, wearing a mask all day is taking some of the fun out of work.

Sales and marketing wise, it’s hard, but it’s not the hardest that I’ve seen. I think the early 2000s were rough in many markets, because there had been a lot of overbuilding, there was just too much competition relative to what was, at that stage, a pretty early demand pool.

On U.S. News and World Report rankings:

We had 15 communities that were surveyed and 12 of the 15 won.

That’s well above the industry average. It’s mainly about the dedicated team members. I mean, we have some amazing, talented, experienced, caring people. They were working incredibly hard through a challenging past couple years; they connect with the residents, and they connect with their families.

It showed that they provide a good quality of life; not perfect– the survey showed areas that we could improve in– but certainly relative to others in our industry.

We play a role in recruiting and retaining those great, dedicated, hard working people and giving them the resources to do the job. Our brand — which I think has something to do with the results — is built around a three-dimensional focus. We focus on team members, residents and families. For the team members, we’re working to create engagement; for the residents, we want to give respect; and for the families, peace of mind. And these are nice words, but you know, you have to operationalize it. There are a number of things that we do to turn that into reality. Ultimately, all that support and all those resources and those directions and focus come down to the local team.

What IntegraCare did to win the U.S. News accolade:

I think we all know that having team members that are committed to getting through challenges is an important part of good service. And, at least for team members of ours who want to grow in their careers, we have a fairly robust career pathing process for them. For the hourly team members, we have something called the MAP program, which allows them within a particular job to get recognized at the bronze, silver or gold level for various training and accomplishments.

Many of our managers have been promoted from within. We take pretty seriously the idea that if you’re good and you work hard, and you rise to greater responsibility that you will find those opportunities at IntegraCare. So I think that has something to do with it.

On the company’s hotel conversion project in Maryland:

It’s the conversion of a hotel in Solomons Island, Maryland, to independent, assisted and memory care.

It’s a terrific area. We’ve got three other communities that are in that general area, and it fits our cluster strategy. It’s going to be 170 units total. We see a lot of hotel conversion opportunities come across. Most of which we say “no” to. The gates that we take a project through are things like: Does it fit our strategy? Does it serve a market need? Can the project economics deliver? Is this something we can be proud of. This one really hit all of those marks.

The project economics, that’s where conversions can oftentimes really shine, because you’re taking a building that’s already there, and a lot of the costs are sunk costs. On this one, we do not need to do that much work to convert it. And so, we have the opportunity to come in on a really attractive basis. Now, that’s not always the case with hotel conversions, but in this case, our basis is going to be quite attractive.

The last thing is, is this a building that you want to be associated with? That is where many hotel conversions fail, because they end up looking like hotels. This one, we’re going to be able to significantly physically reposition it. Inside, there’s just all kinds of space to play with. Oftentimes, when you’re building something from the ground up, you’re constantly shaving square feet to see if you can save a little bit of cost here and there. We don’t have to do that here because the footprint is set.

One fun thing that we’re doing is an idea that came from a friend of mine in our industry, Lori Alford with Avanti Senior Living. I visited one of her communities not too long ago, and she has a day spa in her community where it’s like the Ritz Carlton. You walk up to a desk and there’s a marble top and somebody’s waiting, and to the left is a yoga studio and an activity room; and to the right is a massage room and you’ve got the hairdresser behind it. And I said, that’s great, let’s go do something like that in Solomons island. Think Ritz Carlton spa, and that will give you a picture of what we want to do here.

We as a company, have a strategy to grow by two to three communities per year over the next five years, which is enough growth to keep things interesting, but not so much just to stress out the organization or hurt our existing communities.

We are currently in Pennsylvania, Maryland and Virginia and that is where we are going to stay. We are not going to Ohio and we’re not going to West Virginia and we’re not going to New Jersey or Delaware because we want to keep a very compact footprint. So from a strategic standpoint, this project fits well a number of the boundaries that we have put around our company strategically on the market need.

On integrating technology:

Let me describe the near-term ones. Call bells are really important in our company, and we invested in a call bell system on steroids in one of our communities. I am really excited to see it six months from now. During Covid we were so focused on infection control, staffing and driving census that we lost some discipline on the business side of things. Expenses just ballooned. So we are putting better tools into the hands of our executive directors to manage their business.

We are exploring some labor saving technology and dining and housekeeping but nothing worth talking about just yet. We are working with Carnegie Mellon University on some robotic technologies to assist caregivers. It’s less about labor savings and more about eliminating some of the scungiest parts of the job.

Our hope is to broaden the pool of people willing to work in our industry. It’s not 2 years away but it’s also not 10 years away, it’s medium-term. Secondly, I think I see some possibility in IL for adopting many of the age-at-home technologies that Silicon Valley is coming up with.

On the year ahead:

I think we’ve got good solid census growth for the next six months ahead of us. Our biggest competitor is people staying home with home health care, at least in assisted living and memory care. Those home health guys are suffering a lot from staffing shortages, as much as we are in many ways. Skilled nursing facilities are closing wings. All that drives people into our buildings and bodes well along with the normal seasonal aspects of the business.

I think this Covid resurgence is troubling. The housing market is perhaps rickety right now, and inflation causes lots of corrosion. But I am definitely more optimistic than not.

The good news is that we all learned a lot over the last couple of years, and we’re better prepared. We know how to manage teams and manage residents and families, and we’ve got our PPE. I do think that the one important change from before is regulatory. The impact of having to shut down visitation in buildings, to have people stuck in buildings, that was just devastating to the census in our communities. And we still continue with the after-effects of that in the eyes of the consumer, even though we’re not having to do that anymore.

I think the other worry I have is that cases among team members are rising. And that both compounds the staffing challenges that we have, because they have to call out if they’re sick; and it’s just more of the same kind of stress associated with that.

I’ve been very blessed with capital partners who’ve been great throughout Covid. They had resources and understanding and asked me what I needed. I think they are getting Covid fatigue, I think they look around and they see everyone with masks off and they say Covid is in the rearview mirror now. But you know, at the communities, we’re still dealing with it.

On broadening the senior living labor pool:

I think that there is a role for states in training the workforce for industries like this. I think that the associations also have a role to play in that. And then the last thing I think is that there’s certain aspects of the job, which just drive people away.

There is a first-mover disadvantage to a senior housing operator that goes out and tries to attract people into the industry. If I take somebody who’s worked in retail, and say, ‘Come on over and work in senior housing,’ and I spend a whole lot of time and effort to train them up, show them how to how to care for residents, show them the culture and all of that; once I’ve trained them up, it is easy for them to move over to a competitor for a slightly higher wage. I’ve invested the time and effort in that, but then my competitor gets the benefit. In many ways, it’s a lot more economic for me to poach staff that a competitor has trained up.

In Pennsylvania, we have a really good senior housing association — there’s several of them, but perhaps the most active is the Pennsylvania Health Care Association, which is doing a lot to drive workforce development at the state level. The nice thing about this issue is that it’s a bipartisan issue.

There are certain aspects of the job which just drive people away. One of them is peri-care, and if we can get some of that work out of the job requirement through things like robotics and so forth, we can then draw people in. Look, you can work at Sheetz and stand behind a cash register all day, or you could have human contact taking care of senior citizens. The latter is a much easier thing to sell.

On what’s ahead for IntegraCare and future growth:

First we have a few properties that are underperforming their potential and I personally spend a lot of time with my team working on those properties to get them where they need to go. Second is that we’re working hard to get the hourly staffing stuff right. The lack of hourly staffing is at the root of so many problems. We’re examining every assumption that we have and partly it’s about the wages, but there’s a lot of stuff that we can do to improve things.

There’s a lot of friction that goes into the hiring process, from the job posting to the application to the Covid- and drug-testing and background checks. And in each step, we lose candidates.

One of the principles of good operations is to create flow, so that’s what we’re trying to do: streamline the flow of applicants into our jobs and get them trained up. That’s part of sort of a broader philosophy we have at the company. Toyota transformed manufacturing with its lean approach a generation ago and Walmart and FedEx have transformed logistics with their focus on flow.

I got into this industry in part because I wanted to do for senior housing what Toyota and Walmart did for their industries, and they deliver high quality affordable products by bringing superb operating discipline.

I’m blessed by senior leadership that shares my passion for Six Sigma, for Kaizen, for flow, the three dimensional focus that I talked about. We have probably five years of projects that are stacked up that will make us increasingly distinctive. But we have to be judicious, we can’t cram all of our bright ideas down on the community teams right away. As the saying goes, you can’t chase two rabbits. You have to pick a few things and do them very well.

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