Senior Living Providers Turn Upbeat on Labor, Show Potential for ‘Disruptive’ Operational Improvement

For the first time in a long time, I am hearing general optimism about the senior living labor market.

Owners and operators have expressed this optimism in conversations I had at the ASHA conference, in recent presentations from public companies, and in reporting that we’ve done for Senior Housing News stories.

Some of the momentum stems from factors beyond providers’ control. With the holiday season and the peak of omicron now past, agency use — and costs — have come down notably from the previous two quarters. And the Fed’s aggressive interest rate hike suggests that labor markets might soon cool, lessening wage pressure and competition for workers.

But over the last year, owners and operators also have launched a panoply of initiatives to improve recruitment and retention, and are now reporting successes.

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

• Improvement in labor practices shows the power in “professionalizing” operations and the potential for even more “disruptive improvement”

• Leaders joining senior living from other industries are helping drive this professionalization

• I am hopeful but skeptical of bullish predictions about how these improvements will boost future margins

Making strides

As in other areas of operations disrupted by Covid-19, I believe that many senior living providers have done a commendable job in rising to the Great Resignation and other labor market dislocations.

In addition to higher wages, this is just a partial list of the various initiatives that companies have been pursuing:

• Many providers — including Brandywine, Juniper, The Springs Living, Erickson and Stellar Senior Living — have made their recruitment efforts mirror their sales processes, making the application process easier, more high-touch and data-driven.

• Operators such as Aegis Living and Sonida Senior Living have implemented more flexible scheduling or launched efforts to create flexible workforces to limit dependence on agency labor.

• Companies such as QSL Management and The Arbor Company added new leadership roles dedicated to recruitment/retention.

• New or expanded professional development programs have created more career advancement opportunities in senior living, and companies like LCS also have played a leading role in fostering internship opportunities and other entry points for younger workers.

• From Brookdale’s “corporate athlete” training to Watermark’s offering of life coaches, providers have gotten more creative about how to support their workers’ wellbeing.

All this work appears to be paying off, changing the tenor of the workforce conversation from pain to hopefulness, or even pride at what has been accomplished recently.

Ventas described marginal progress in net hiring as “a step in the right direction” during a presentation at the Nareit REITWeek conference, and certain providers are touting larger gains. 

Again, just a few examples of the positive news I’ve been hearing:

• Erickson has hired 3,400 new dining and health care employees in the past six months, CEO Alan Butler shared in a column that will be published on SHN in the coming days.

• Trilogy Health Services has been able to leverage an internal flex worker pool to limit agency usage and has a net gain of about 1,200 workers since January, American Healthcare REIT EVP, Asset Management Ray Oborn told me.

• After acquiring nine buildings about five months ago, Retirement Unlimited (RUI) has been able to eliminate agency use in seven of them, mainly by improving the culture in those communities and driving referrals from the in-place workforce, according to VP of Human Resources Michele Johnson.

Professionalization of labor practices

RUI is worth a closer look. Johnson joined the company about six years ago, and her resume includes nearly a decade as a human resources leader with retail giant Target.

Drawing on lessons from her corporate background, she “100%” believes that greater workforce professionalization is needed in senior living. She has brought this perspective to RUI, with a particular focus on elevating customer service, with the idea that senior living providers essentially are selling an experience.

“We always say our residents vote with their feet … they could have one bad experience, and they don’t want to live there anymore,” she said. “So our team members have to be 100% great at customer service every day.”

Creating a more professional environment with clear and rigorous standards is key to attracting a large enough and talented enough workforce, she argued, making a case for going beyond “purpose.”

It’s true that senior living has an advantage over other employers because of the strong sense of purpose that workers feel — and many providers have relied heavily on this sense of purpose in recruiting and retaining workers. But Johnson does not think mission alone is enough to excite young, ambitious professionals who not only have a caring heart but a lot to offer based on their education or experiences.

“We have to make sure that as we’re talking to the younger generation, they see that purpose, they see that drive, and they see where the professionalism that they’re trying to bring can come [into play] out of education and come out of what they’ve experienced,” she said.

Her comments about professionalizing senior living called to mind remarks from Welltower COO John Burkart, who earlier this year spoke of “truly huge,” “shocking,” “disruptive” improvements that many senior living providers could make in running their businesses. And Sonida Senior Living’s new CFO, Kevin Detz, made a similar point recently, describing how the labor crisis resulted in “people at the property level wearing multiple hats,” which meant “they weren’t truly effective.” He sees greater centralization of certain business processes as a way to avoid this situation in the future, with scale, efficiency and automation taking burdens off workers at the community level.

Like Johnson, Burkart and Detz came to senior living from other industries — multifamily housing for Burkart and hospitality for Detz. I think it is no coincidence that they all see areas where senior living can operate more professionally, based on their experiences in other sectors.

A long-time senior living exec recently told me that Burkart’s comments and my coverage of them had ruffled feathers in the industry. I can understand why, but I also think his assertion is supported by the fact that so many providers — including many of the most respected brands in senior living — have overhauled hiring and retention practices so substantially in the last year. These improvements have included some changes that I would argue were overdue and obvious, such as actually tracking turnover rates, and getting current on how today’s workers apply for jobs — quickly and easily, often on mobile devices, including via text.

So, anyone who was offended at Burkart’s comments about professionalizing senior living operations should reflect on the many ways in which labor practices needed a refresh, and could still use improvement.

Not to mention, many senior living executives for years have said that the industry needs to attract and learn from talent from other sectors. Getting defensive when such talent does arrive will not help move senior living forward.

And note that Ventas — with senior living industry veteran Justin Hutchens in a leadership position — also is making a case for how operations can be elevated. Ventas this year launched its “Operational Insights” asset management platform, with the intention of harnessing the company’s data and analytics, and its in-house operating expertise, to support more sophisticated and successful performance.

“Ventas and Welltower are investing in professionalized decision-making across senior housing,” BMO Capital Markets analysts wrote this week. “We believe enhanced operational platform investments may drive greater long term SHOP upside vs historic levels.”

Certainly, the REITs are bullish on future margins. Ventas can potentially reach higher margins than pre-pandemic levels, Hutchens said at REITWeek. And Welltower CEO Shankh Mitra in fall 2021 predicted that the REIT’s senior housing operating partners eventually will beat pre-pandemic margins on a stabilized basis.

I’m a bit skeptical of these predictions — the senior living market will only become more diverse and competitive in the years ahead, and I’m not sure that current pricing power can be sustained, while I believe there will be an escalating need for greater investment in workers, tech and other elements of operations.

Of course, I’d be happy to witness exactly how a mixture of data and operational savvy can indeed drive margins to new heights, and I do trust that the REITs can marshal business intelligence, scale and capital to tremendous effect.

And if the last year of labor woes proves anything, it’s that providers can rapidly and successfully improve and become more efficient in critical areas of operations — the key will be doing so proactively going forward, not just when compelled by unprecedented challenges.