Heritage CEO Shifts Focus to Margin as Occupancy Approaches Pre-Pandemic Levels

Heritage Senior Living CEO Milo Pinkerton discovered his passion for memory care in a way similar to many other industry leaders: Caring for his mother.

Fast-forward to 2022,Pinkerton believes that the future of memory care lies in the same kind of person-centered care he sought for his parent. And in the wider senior living industry — including in other parts of the world than North America — he sees many tools to achieve that outcome by improving how communities care for and engage residents.

“Technology makes it easier,” Pinkerton said in his most recent appearance on the Transform Podcast from Senior Housing News.

Advertisement

Although average senior living occupancy has risen for the past four quarters and many operators have reported steady demand for their services in 2022, margins are still an industry concern. In fact, margins are all the West Allis, Wisconsin-based operator has focused on in the last two months as expenses have climbed, Pinkerton said.

“It’s going to be a catch-up that … we won’t make up in the first year,” he said. “It might take two years to actually repair that margin compression.”

But on the occupancy front, things are moving ahead of schedule, he added.

Advertisement

“I was looking at 2023 as a year to get back to where we were pre-Covid,” Pinkerton said. “I would say now we’re going to achieve that in 2022.”

Looking ahead, Heritage plans to center its growth strategy around acquisitions, according to Pinkerton. But the operator is also keeping an open mind on development, and Pinkerton said he has recently “looked at certain areas where there may be growth opportunities.”

Highlights from Pinkerton’s podcast appearance are included below edited for length and clarity. You can listen to Transform on Soundcloud and Apple Podcasts.

On the state of Heritage Senior Living at the midway point of 2022

At the beginning of the year, I was not too upbeat about the 2022 year as some of our properties have experienced a resurgence of the (corona)virus. We care for a lot of frail residents. We have residents with high-acuity needs that we take care of. So, we’ve had a few of our residents pass away that were already on hospice.

Otherwise, things are going fairly well. We’ve had a resurgence in occupancy in the past three months. It’s great to see.Initially, I was looking at 2023 as a year to get back to where we were pre-Covid. I would say now we’re going to achieve that in 2022. So I’m very upbeat about this year.

Typically summer has been slow for us. So, to see the resurgence that we’re seeing at this time is due to the post-Covid pent-up demand.

On recruitment and retention

We’re going through every outlet we can.

We’re looking at sign-on bonuses of $1,000 or more for direct care workers and $2,500 to $5,000 for nursing staff. Early on in the labor crunch, we went to mobile applications so that it was a quick turnaround. We also reduced our application paperwork to a minimal amount, so we could get as many applicants to sign up with the least amount of hassle.

We have a retention program, a mentoring program and something we call the “We Care” program, which looks at our workers as individuals instead of just labor.

On robots and tech in senior living

I do think that technology is here to stay. I think that there are a lot of products in the marketplace and the question is, are we jumping too soon to buy the latest flashy item? Or is it something that the system will flush out?

I know that early on we could have bought eight or nine items. But I think, over time, some of these are merging together so that one item will handle five or six different tasks that used to be separate different items. But, I do think technology makes it easier.

At Heritage, we’re looking abroad at how robots are being brought in to areas that are struggling with staffing issues more than we are in the U.S. — places like Japan and Switzerland to see how robots can be deployed more. For example, in Israel, they’re already using robots to do a lot of the things that staff used to do.

The robots that I’m seeing are identifying health risks earlier. And other technology tools like cameras and sonar in the rooms can identify fall risk, or a risk that maybe is not even visible or known, particularly in our memory care areas.

Memory care residents don’t tell us what’s wrong. So if we can see this, we might be able to identify fall risk or patterns or restroom use patterns to identify a possible urinary tract infection that might not show up otherwise.

I think it’s a game-changer that’s going to really bring a lot of tools to our properties that will make our residents safer and avoid emergency admissions in hospitals, as well as avoid delays in treating things that we would not otherwise have known.

On Heritage’s memory care model

First of all, memory care is near and dear to my heart. My mother, bless her soul, lived to be 99 years old and was living in one of our buildings in Monona, Wisconsin for the last five years of her life. So, I saw the devastating effects of Alzheimer’s up close; so, it’s very personal to me.

I think that through technology, we’re bringing new tools into the industry to make the lives of our memory care residents richer.

One such tool that we started using is called MapHabit, a platform that we’ve added on to all our caregivers’ cell phones that provides a detailed history of our residents. Because we have, unfortunately, so much turnover at the moment, this tool allows any member of our staff, no matter how tenured, to know our residents well.

This way they can access the history of that particular resident’s patterns that they’ve had throughout their lives; when they get up, potential sundowning, or maybe they go to milk the cows in the afternoon.

So then they know that at three o’clock, maybe there’s agitation and something they might do differently for that particular resident. It’s such a great tool to give more person-centered care, which I think is so important, particularly memory care.

On educating families on senior living

I think a lot of it is up to the families and the individuals as to what’s appropriate for them. I know with my mother, with her memory care, over the span of just one or two years she just said one day, “You know, I’ve given up making meals,” and for me, that should have been more of a wake-up call, that she’d forgotten how to make the recipes.

The socialization we offer in assisted living with meals and identifying fall risks and other items that are removed when you enter a community. And living alone in a home is not only more dangerous, but it can be more isolating as friends have to come over to visit.

It’s easier to move your loved ones before they need the care. I think that there’s a lot of negative understanding of what senior living might be like. It is perhaps best to show them a meal and show how they can make friends and establish community.

Even on the tours, we have a lot of our residents come up and talk to our new prospective families and talk about how they came in here. And now they play cards every week, and they’ve got a set of friends. I think that this aspect of socialization is difficult when you are alone and do not have that social support network.

On growth plans

So we’re actually doing a corporate strategic retreat to identify some of the areas that we’re looking at for possible growth.

We have looked at certain areas where there may be growth opportunities as well as acquisition opportunities. So right now, at this point, we’re just looking at options and have not identified a particular path forward for growth.

I think the market is leaning to acquisitions more than construction at the moment, especially with the high cost of construction and the higher cost of accessing capital.

Having said that, I do think that new construction, by the time you get approvals and get your plans bid out and together, you’re probably two-and-a-half to three years out before you occupy. So, you have to be thinking about the landscape three years from now.

On expanding margins

That’s all we’ve been focusing on in the last two months – margin compression. The first task after Covid was to recover occupancy. So during Covid, we had some buildings that had a discount in rent as an incentive to recover occupancy. But now, our street rents are back up to where they should be. However, we’ve noticed that we have an existing population with considerably lower rents than our current street rents.

And so part of that is an income repair to our income side of the business. And then on the expense side, the largest expense, of course, is salaries. Primarily, the cost of nursing and caregivers has ballooned dramatically — much more dramatically than we anticipated.

So, we’re needing to catch up on increasing existing residence rents at the appropriate level to compensate for the increased cost. It’s going to be a catch-up that … we won’t make up in the first year, it might take two years to actually repair that margin compression.

Companies featured in this article: