The last year was big for resident rate increases, and Anthem Memory Care CEO Isaac Scott thinks 2023 will be similar for one reason: expenses.
When labor and other expenses spiked last year and into 2022, many operators hoped such cost increases would be transitory in nature. And as the industry stands on the precipice of 2023, many operators still have not returned to pre-pandemic margins despite occupancy approaching early 2020 levels.
While Anthem kept its rate increases relatively muted in 2020 and 2021, the operator enacted a significant increase for residents last year. And yet, Scott said it still was not enough to counterbalance the operator’s current expense levels — and he does not believe Anthem is the only operator in that boat.
“It was double the increase that we had historically facilitated for our residents and still, it didn’t put a big enough dent in what we’re doing to get back to those margins,” Scott said during a recent appearance on SHN+ TALKS. “I would expect the same in 2023.”
But while he sees 2023 as another big year for rate growth, he is also optimistic about the road ahead, and about returning to pre-pandemic conditions down the road where possible.
“We have done a really good job over the course of the last nine months … I think that we’re trending in the right direction,” Scott said. “We’ve got a ways to go, but I’m feeling good about where we’re currently standing.”
We are pleased to share the recording and this transcript of the SHN+ TALKS conversation with SHN+ members. Read on to learn about:
– How Anthem has worked this year to get back to pre-pandemic occupancy and margins
– Why Scott believes middle-market memory care is not feasible under current market conditions
– Anthem’s newly launched “Pathways to Purpose” engagement program
[00:00:00] Tim Regan: Good morning, everyone. I’m Tim Regan with Senior Housing News. Welcome back to SHN+ TALKS.. Today, I am very pleased to be joined by Isaac Scott. Isaac is CEO of Anthem Memory Care. Anthem is based in Lake Oswego, Oregon and it manages 21 communities across the U.S.
All right, Isaac, let’s just jump right into it. Again, thanks for joining us on SHN+ TALKS.
[00:01:21] Isaac Scott: Thank you for inviting me.
[00:01:23] Tim: I’ve talked to a lot of operators in the last few weeks. Most of them tell me that things are trending in the right direction, at least at this point of the year. So I want to just set the stage: How are things at Anthem Memory Care in terms of occupancy and just generally, what have conditions been like over the last few months?
[00:01:45] Isaac: We are trending in the right direction. We had a number of banner months last summer. In 2021, when we were coming out of the vaccinations, we had our three best sales months in our company’s history, and then it flattened and got back to business as usual, increasing about the same pace that we had historically seen. The last couple months have been really strong. In that respect, it’s been great. In fact, in August, we increased by over 200 basis points of occupancy. We feel really, really good about that.
If you look at where we’re at occupancy-wise for the year, it’s a story of move-ins and move-outs. Our sales have been strong, but move-outs have at times peaked above their averages, so that mutes a little bit of that growth. But I feel pretty optimistic that September and October are going to follow the same suit as August because of the lead volume that we’re at. I’m also feeling optimistic in terms of our agency usage, which has been a battle for us in 2022, and one where we started Q1 really facing an uphill battle when it came to labor.
We have done a really good job over the course of the last nine months in getting that back into what I would call a reasonable number. I think that we’re trending in the right direction. We’ve got a ways to go, but I’m feeling good about where we’re currently standing.
[00:03:23] Tim: When I talk with memory care operators, some of the things I hear from them is that, obviously, people need our service. But I’ve also heard you have to be empathetic in the sales process and you have to connect with people and learn their stories. Along those lines, is there anything that’s helped move the needle in sales that you’d want to tout today?
[00:03:55] Isaac: It’s art and science. The science piece, it’s needed and folks recognize the need for it. Then the art piece is how a salesperson engages a family, gains their trust, et cetera.
I think that there are two things for us. One is that when we came through Covid and through vaccinations, we saw some of that pent-up demand, which is more the science. Folks needed a place to place their loved one in, they had recognized that they had outpaced their abilities and needed some professional help. We saw a lot of that fuel that growth.
Since then, it has become more of the art. I go back to our purpose statement, which is protect, engage, and love people living with memory loss. You can tackle those three elements with the family and gain their trust that their loved one’s going to be protected and secure. Coming out of Covid, that was a big question mark and we had to overcome that. A lot of our ability to overcome that over the last 12 months has been in the protection area.
Engagement, the second pillar of our purpose statement, is one of those areas that we have to communicate really well with families who maybe have seen some of the social isolation of their loved one through Covid and through that period of, “Gosh, do we need to put mom or dad in a community?” We have to communicate how we are going to engage that resident and make sure that we’re giving them as much life as they possibly have.
Then the love piece is monumental in what we do. We try to instill that in every staff member that we have that when folks come to us there, they’re usually at the last steps of their life, and they deserve love and compassion. It’s really communicating those three things that has been helpful for us in the last several months of our sales process.
[00:05:55] Tim:. What strategic goals do you plan to tackle over the next 12 months, and why are you pursuing them?
[00:06:14] Isaac: I don’t think we put our strategic goals on a calendar. I think that they’re just constantly out there for us.
I also don’t think profitability is a strategic goal. It’s always the underlying piece, and I know that a lot of operators have been out talking about regaining margins and getting back to margins. The way we look at that is getting back to profitability. Covid and the labor challenges that ensued after Covid were a big sideswipe to our business. We have had to really get back to the basics when it comes to profitability.
From my desk, we created what we call Pathways to Profitability, which is an offshoot from our engagement program which I can talk about later. Pathways to Profitability has seven pillars. Those seven pillars are our KPIs. We focus on those daily and weekly to make sure that our KPI trending is going in the right direction. It’s our goal to get back to the margins that we enjoyed pre-pandemic. Whether that’s possible or not is a big question. Aim for the moon, you’ll hit the stars — that’s what we’re going with it. Profitability is an underlying strategic theme and goal for us, in what we do.
In the first quarter of this year, we recognized risk mitigation and management were becoming a big piece of our business. I think that the regulatory environment as a whole has gotten a lot more difficult. Litigation has crept its way into what we do. We recently added a person to our senior management team. A VP of general council, but they are really focusing on risk mitigation and management. We’re going through piece by piece in constructing what we feel is a better risk-management system. That’s been a critical piece to what we do this year.
Another strategic goal is going to be a goal that’s there now and forever: retention, retention, retention. How do we throw enough spaghetti at the wall to retain the folks that we want to retain? We have found that amongst our one thousand employees, each of them has something specific that they’re looking for that’s going to make this home. It can range from financial to potentially a career path. It can be born in training. It can be born in, “Hey, my friend works there and I just like being with my best friend.” Just all of those different pieces are at play, and so that’s become a challenge, but it’s one that we’re trying to tackle.
[00:11:37] Tim: Something that I have heard a lot over the past few years, especially with the pandemic, is the real need to educate consumers prospects and their families about what senior living is, why someone would need it. I’m guessing that that’s probably a little bit clearer in memory care, just given that there’s a more straightforward need there. I am curious, how do you think the senior living industry should be working right now to educate people more about what all this is, and why and when you might need it?
[00:12:11] Isaac: I mean, you’re right, it’s easier in memory care.
We spent gobs of time researching, understanding, crafting our purpose statement, and what we found is when we were out gauging why people move into senior housing as a whole, number one, something has happened in their life where they’re in need of a slight bit of security and protection.
Living on their own has created certain risks, and the move into community gives them a little bit more comfort. Maybe it’s their loved ones’ comfort, maybe it’s their own comfort, but they have some oversight and assistance and management of their daily lives, so protect, that’s the first goal. Engage is probably the driver for us in memory care, but I think it’s the biggest driver toward senior housing as a whole. As folks are getting to that age, maybe they’ve lost a lot of their friends, social life, isolation, maybe they’re not driving anymore.
Some of the happiness and joy that life has brought them has started to dwindle away. I think that’s the big story in senior housing: we have the opportunities to link our folks together with both professionals, but also peers to bring a little bit of that life back to them. We feel engagement is our side, and that is the key.
Then love. It’s a soft word, we don’t try to treat it as soft. But I think that purpose statement, those three pillars, are really the selling points for senior housing as a whole.
[00:14:05] Tim: Something that I’ve heard more and more these days is the need to either create transitional memory care or stratify memory care into acuity levels or something like that. Is that an approach that Anthem takes, and if so, tell me more about why?
[00:14:44] Isaac: I’ll tackle the first one first, is there an opportunity for transitional memory care? I think the answer is yes. Within the Anthem building, our range of memory care residents, as well as the issues in which we’re tackling, is vast. It’s really from early onset to late stage. If you’re an assisted living provider, I certainly think that there’s an opportunity. Whether it be through design or programming, you can create this thing that just gives people more memory support back.
Really, the enhanced part was a memory care transition. I think that that can be effective. How long it can be effective, I think is up in the air because of the declining nature of folks that are in memory care. Usually, it’s a very short-lived opportunity, and then the need for really dedicated memory care is there. We track levels of care based on the resident’s needs and the increasing responsibilities we have to cater to the various needs that they have. However, we have gone away completely from the approach of really segmenting our building or segmenting our residents based on that.
Once a month, I do a service day at one of our communities. I go in, don some khakis and a work shirt, and 99% of the time, the staff have no idea who I am other than maybe a temp housekeeper.
[00:16:21] Tim: Like on Undercover Boss.
[00:16:22] Isaac: We don’t play it up as much as Undercover Boss, but we do try to allow this as an opportunity to really be amongst the staff for the day and the residents. What I can tell you is that in that effort, I have sat there and painted walls with a resident who was every bit as skilled as I am with a paintbrush and safety. We converse, and oftentimes we have the same conversation over and over, which is one of those interesting things about memory care, but we’re pals.
In that same environment, you’re dealing with folks that are a bit more physically frail, maybe a lot more physically frail. Their cognitive decline is fairly significant. You’re dealing with behaviors, both folks that are very ecstatic, but also folks that can often be very agitated. That’s just the one thing about memory care: You can’t put it in a box. We have tried, other people have tried, a colleague in this industry who I respect more than really a lot of people in this industry asks me, “What is your memory care program?” I couldn’t answer the question because it’s not something you can put in the binder.
For us it’s a culture, so everything we do, our dining program, our engagement program, our clinical program, the way that we operate here in the home office. It is a vast and wide array of behaviors and interesting personalities that we work with.
[00:17:56] Tim: I only started discovering this industry about five years ago. And the technology that has come about in the last five years still amazes me sometimes. I’m curious, what are you seeing out there these days, either memory care specific or not on the technology side, that’s catching your attention?
[00:18:32] Isaac: Well, from a technology standpoint, I think the most interesting area of technology right now is fall management. Through the history of Anthem, the two things that have led to the most risk areas for us are falls obviously, and then aggressive behaviors.
Fall management has been a real area of concern. There’s really only one way to completely eradicate falls and that’s to have one-on-one caregiving, 24/7, in our buildings — and really in all senior housing buildings, because we’re dealing with the resident population that is prone to imbalance and that’s going to lead to some falls. But where we have seen a huge uptick is in fall management technology. We’re piloting a technology now in three of our buildings. We really like the results of that. However, we’ve also seen a steady increase in competitors in that area. We do want to take a look and identify which of those is best in class, which of those provides the affordability that we can add to our buildings.
We are also piloting a new engagement program. We’ve always had engagement as a backbone in all of our buildings, but we’re looking at some new ideas and opportunities. The one thing about engagement technology that we’ve found is that it really is only as good as the facilitator. The human facilitation of the engagement, that is really what folks are buying into.
It’s a tool that they can use and that they should use. Focusing a lot more on the human side of the engagement tool is where we focused over the course of the last two years. That’s big. Then we’re also seeing some technologies presented to us, maybe not as sexy as some of the things you might see on the floor, that are helping us in our back office. They include dashboards, business intelligence software that we can input that potentially those seven pillars of profitability and look at it on not only a day-by-day basis but tap into it any time.
We are exploring a lot of technologies. I would say that Anthem Memory Care probably isn’t the most technology-forward company that’s out there in the senior living space in terms of care and providing for residents. It’s really what we call hand-to-hand combat. You have to have a human component to do that, but we do know that there is a spot for technology and we are trying to implement it where it fits best.
[00:21:38] Tim: You specialize in memory care. What is something in your opinion that more non-memory care senior living operators should know about this product type?
[00:22:20] Isaac: It’s a great question. Because we do standalone memory care does not mean that the group out there that has memory care as a component of their campus is the wrong way to go. They are a great fit for a certain class of resident who may want to age in place or may have a spouse since senior housing. There’s just a lot of different fits for folks. That’s what makes senior housing so interesting.
I would say from our standpoint, somebody asked me a while ago, what would you do about assisted living? I looked and I said, “I’d be lost.” Because memory care is absolutely what we have focused on since day one it has become our culture. And trying to pick up that culture and look at how you would incorporate that amongst other cultures of assisted living or independent living, where you have to change your approach to the resident — I think that would be the hardest thing to do.
Our longest-tenured employees and staff come to work. Why? Because we are in memory care. That is what their passion is, that is what they are passionate for. That’s what they wake up every morning to do. It’s very tough to just pick up and move around and kind of try to fit within a larger organization. That’s just one person’s opinion though.
[00:24:17] Tim: Earlier, you had mentioned your engagement program, Pathways to Purpose. Can you tell a little bit more about that and how that works?
[00:24:34] Isaac: I’ll tell you, it’s been years in the making. It’s finally come to fruition. It feels really good. I’ll take you on a bit of a journey. When we started our company and the engagement program, what we found early on is that when we really put that in the hands of our engagement directors in each community, each one of them had a different passion and enthusiasm for a certain area. Some folks were really on outside of community events, so they would organize these great events for our staff to go to Colorado Rockies games and Denver Broncos training camp, and really eye-opening things for our residents that brought them a lot of joy.
Others were very much into pets and pet therapy and the use of animals within the building so they do different things. Early on, we felt, hosh, let’s give them a lot of latitude to do what they do best, and then the pendulum swung when we realized, gosh, we’re growing as a company, we want some more consistency. And so we battle with, how do you put that in a box? How do you put that engagement kind of creates a structure on it and so we set on a journey through Covid.
We build a 197-page tome of engagement, all the way from the clinical reasoning behind engagement to the benefits of engagement, et cetera, et cetera. That hit right pre-Covid with the idea that we would take that and kind of boil it down into a program. But we’ve come back to it and we’re really, really pleased with what we’ve come back to.
We’ve worked with an agency that’s come in and helped us take that tone and boil it down to what’s now called Pathways to Purpose. Pathways to Purpose works within our umbrella of protecting, engaging and loving. It’s really a four-step program and some folks within our communities may never get out of step one or they may come to us and they may be right in step two. The steps are:
Invite. Inviting our residents into what we’re doing, making sure that they feel wanted and feel accepted so invitation is a big one.
Familiarize. A lot of our folks spend every day trying to familiarize themselves with what we do and where they’re at, and the next day it starts over. Some folks come in and they’re immediately familiarized. We have to always check ourselves and our residents are familiar with their surroundings and what we’re trying to do.
Support. All of our engagements really are not meant to be kind of at you, but with you. We never use the words, “Oh my gosh, you’re doing that wrong,” or, “Don’t do that.” When you’re working on a painting project and the person decides that they’re not going to paint on their canvas, they’re going to paint on the chair — “Hey, that’s great, that looks beautiful. Oh my gosh, that’s wonderful. Hey, what if we did that over here?” instead of, “Don’t do that. You’re doing that wrong,” and that just defeats the purpose of engagement.
We rolled it out in March. We do a further rollout here in September. It’s branded. It’s something that we can rally behind so if you sense some enthusiasm in my voice, it’s real. I’m very, very excited about what we’re doing in that area.
[00:28:11] Tim: On the expense side, where are you still seeing the most pressure in your operations, and are you finding any good strategies for reducing those expenses right now?
[00:29:22] Isaac: Gas, food, and all those line items that we’re managing are really nibbling around the edges in our business. Labor is the key line that we are constantly managing, so, yes, we’ve seen some reduction in expenses on some of the ancillary items that we bring into our buildings, and those have helped. Nothing is moving the needle like labor, and labor is too far for us.
Since the beginning of 2021, we’ve gone through a number of wage analyses, which have led to wage increases at most, if not all of our buildings. We’ve had to match the market, we’ve had to increase our wages to be competitive. It’s just a fact of doing business right now in any community whether it be rural or urban, it’s just what we have to do, and that’s here to stay. We don’t foresee a moment where we get to roll some of those back. I think that’s become the new labor baseline.
The piece that we’ve done, I think, a really good job in is controlling agency usage. We saw agency expenses in January, February, March at what we would say are historic levels. Everybody got hit at the same time. I’m really proud of what our team’s done with agency usage over nine months, because it was concerning, really concerning.
We have an operation specialist who has sat down and worked with each of our teams on managing the schedule and the opportunities to leverage our current staff with the reduction of agency. We put in some processes that help facilitate a conversation before the phone is picked up and we call an agency. In doing all of that really making it one of the focus and efforts and energies of our regional operations folks, we’ve seen that slide dramatically. We do have agency still remaining in a few of our buildings. I would say that there’s two buildings in particular that we’re having to fight daily.
When we look around, it’s stretched thin, no matter if you’re running a restaurant or you’re running a memory care community, it’s stretched thin. We do know that there are some market things going on there that we have to work through. And we may have to accept the fact that agencies are going to be a part of those buildings for a period of time until that labor market gets buoyed up. That’s really where the focus has been for us on expenses, and nothing is moving the needle more than that when it comes to the expense increases that we’ve seen.
[00:32:36] Tim: As you look ahead, are you expecting 2023 to be another big year for rate growth, like 2022 was?
[00:33:27] Isaac: I can touch on two things going on there. One is, what is our expectation on rent increase? The second is the affordability of our business and what that looks like in the future. I’ll tackle the person. We instituted a couple of what I would call minor increases in 2020 and ’21 to really catch us up with Covid-related expenses, both in hero pay and agency and supplies.
We were suffering from big spikes in expenses that we needed to cover and they were Covid-related. In 2022, we went away from anniversary increases to an annual increase. Now, we have an annual increase in January of every year. It was significant in 2022.
I would love to tell you that it caught us up, and it didn’t even come close. It was double the increase that we had historically facilitated for our residents and still, it didn’t put a big enough dent in what we’re doing to get back to those margins. I would expect the same in 2023.
A guy that I got in the business with a long time ago who had been in senior housing for 20 years before we started the company, his mantra was, “No margin no mission.” If you have a mission of providing great care for people suffering from memory loss, you need to have a margin.
When we got the business, those margins were healthy, and we thought, “Oh, gosh, this is great. We can do it.” Well, those margins are not there anymore. In order to get to a return to a margin that allows you to administer your mission, under the current parameters, it’s going to have to be through revenue increases.
When we look at our expense profile, there just aren’t those opportunities to claw that back. Unfortunately, that’s going to have to happen in resident revenues and fees, and nobody would like more to mute those and keep the affordability for what we do down
We work in a highly regulated environment that requires certain labor ratios to be in place and certain things to be the way they are within senior housing. When you look at just the bare bones of what it costs to perform that, it’s incredibly expensive. Unfortunately, it’s going to increase our rent. The folks that have said, “Hey, we decided not to pass that on to residents,” I want to find out who those folks are and talk to them because I can’t figure out what that looks like.
[00:36:16] Tim: Do you feel like margins are going to find a new normal, or do you think the industry will be able to return to the pre-pandemic margins?
[00:36:49] Isaac: Well, I think there’s going to be a new normal. When we look at it and when you look at your performers or your forecast and you recognize to get back to some of those margins that were up pre-pandemic, what would our revenues have to look like? I think when you look at what that increase would be, you go, “I just don’t know if that’s feasible.”
I do believe that there’s a new normal. What that new normal is, I think, is still in question. We’re still making a lot of progress to dig ourselves out of what we experienced in Covid and post-Covid. I think that it’s still a work in progress. I think it’s going to be difficult to do that, but that being said, when I look at our performance based on actuals that were happening in the industry in 2007, those margins aren’t realistic.
We’ve seen a steady degradation of margins over the course of the last 15 years, due to all sorts of expenses. Insurance and liability is a big one that has crept into our expense profile that’s chipped away at that. Wages, cost of goods, debt service, and rent, all of those expenses have increased, and probably outpaced our revenue– and have outpaced our revenue. We’ve seen that steady slide. If you go back to 2020 and you get there — I’m not confident we can get there, but we’re certainly going to try.
[00:38:17] Tim:I know that Anthem has worked for a while with LTC Properties. I don’t think that’s any secret, if you’ve tuned into one of their earnings calls in the past few years, that CEO Wendy Simpson is very forthcoming about mentioning certain operators. Anthem has come up multiple times.
What in your mind is the key to having a good relationship between a senior living operator and the REIT?
[00:39:09] Isaac: Good question. When we started the company, our goal was to work with people that we liked working with. We wanted to do business with people we enjoy doing business with. But when you’re starting out, you’re going to try to take what you can get. To think of how fortunate we were to arrive at a partnership with LTC as our partner, and they are our partner for sure, is really fortuitous.
The fact of the matter is they’re good people. We’ve gone to them at different times in our evolution with both periods of real accomplishment, but also periods of, “Oh, crap, we’ve hit a spot,” I have to tell you, they have been true partners to each of those opportunities. We just feel really fortunate about that relationship both on a personal and a business side. If I had to think about the reasons for it, and maybe why they have shown us the support that they have; number one, I think that they know that we work really hard, up and down. Every person in the organization, all thousand of us, we work really hard for our residents and for our staff. And I think they know that as stakeholders, we work very hard to benefit them, and that’s a real goal of ours every day that we wake up.
I think the other one is trust and transparency. I believe in the relationship we have. I hope that they share the same trust in us that we have in them, and it’s built through transparency. We’ve gone to them in moments of real weakness and asked them, “Hey, can you help work with us?” They have. I think that through that, you get a lot of trust. We’re incredibly fortunate. I know that good relationships with financial partners are hard to come by, and we feel very good that we’ve got the relationship we do.
[00:41:19] Tim: Where are you still encountering other challenges in staffing? Or is agency and simply just trying to get more people through the door, your biggest challenge?
[00:41:46] Isaac: Yes. Agency is the primary focus there. I think I touched on it earlier, but probably didn’t go into a lot of depth in terms of just the inconsistency in retention. I would say that when you look at where we have opportunities, I haven’t been able to put it in the box of, “Oh, well, we’re struggling in rural environments, but not in urban environments,” or, “We’re struggling in the Midwest, but not on the West Coast.”
These pockets are creeping up. Frankly, interestingly enough, we’re struggling in communities at times that have really, really strong and supportive leadership which is usually a successful community for us. Usually, where that strong leadership is, strong results follow. It has been very difficult for us to get our arms around it. Like I said, the inconsistency of programming around job satisfaction is intriguing to me. It’s a head-scratcher.
We could roll out employee bonuses across the board, and that would satisfy a number of employees if what keeps them coming back is the opportunity of a financial bonus and benefits, but yet we’d be leaving people on the sidelines who are going, “I’m really not in it for that. I want the opportunity to progress in my career. I want more training. I want more support. I want an environment of culture that I can’t wait to get to work every day.”
The other day I was listening to an interview with Tom Hanks of all people. He was talking about what gave him great joy in the movies he made. He mentioned something called “The Hang.” The people that he got to hang out with on sets are who got him coming back, and what gave him the joy in making movies.
I thought, “God, isn’t that interesting?” But I also think it’s true. I think that a lot of our staff that stick around do it because they’re coming to work with people that they really like to work with. They’ve created this bond and this social group within the confines of the community that oftentimes extend beyond the community. There’s just not a single pill that you can take to cure all of those things.
You need to do it strategically, but you also need to have this multifaceted and pronged approach that tries to satisfy the masses if you will, but recognizing that there’s just not one thing you’re going to do, and all of a sudden, you’re going to have your retention rates fixed. It’s going to be vast and complicated.
[00:44:34] Tim: Yes. I’ll have to look up that Tom Hanks interview. That sounds interesting.
[00:44:37] Isaac: It was good. I think it was on Dax Shepard’s podcast.
[00:44:45] Tim: How do you think the senior living industry can do a better job of bringing more people in from outside of the industry who might not know what senior living is, but might have a good career in it?
[00:45:16] Isaac: Number one, one of the goals that we have — it did not make it into the strategic conversation, but it is a goal that we have — is do a better job of branding what we do as Anthem and creating a brand profile for employees.
When we look at employee websites and recruiting websites, we all look about the same and we all look pretty darn boring. How do you create messaging that allows people to realize and recognize the great joy that you have working with Anthem?
There are a lot of people out there whose cup is full when they’re able to care for folks, either elderly, youth, people of all shapes and sizes. We want to communicate that opportunity for folks that they may look at and go, “Wow, I’ve never really thought about that. Now that I think about it, gosh, I did love caring for my grandmother when I got out of school. Maybe that might be a great career path for me.” The marketing of that message is going to be important. It’s going to take a lot of effort for us to get there and fine-tune it, but that’s an effort that’s on the board for us.
The other one, I will tell you I’m excited about it, but I just don’t know how to get my arms around it. A colleague in the industry about six months ago really got in-depth and more detail than I’d heard before about that pipeline of foreign workers into what we do, enhancing that, and utilizing it not only for caregiving staff but also for potentially community management. I think that’s a fantastic idea.
The culture of a number of folks that are outside of this country is so much more rich and deep when it comes to caring for our elderly folks. We have benefited greatly at Anthem by introducing a lot of those cultures into our business. I think using that, not only is it an opportunity for us to recruit and build our staffing up, but also create an opportunity for folks in a form of work capacity that want to get into the United States, and on a path of citizenship, I think is two birds with one stone. I’d love to see that come to fruition. Man, I’ll tell you that is a whole set of policy-making that is a bit above my skis, but I’d like to get there.
[00:47:49] Tim: Whose job do you think it is to advocate for some of those things?
[00:48:12] Isaac: During Covid, a number of operators were trading voicemails and phone calls across our spider web of contacts, looking for everything from PPE to “What the hell is going on” and “What do we do now?” We banded together, 12 of us. We got together, started off on weekly calls, and then this Covid extended and extended, and maybe started to extinguish a little bit in our buildings. We went to biweekly calls, and we have remained tight, and it has been a true force.
Through that group, I’ve seen firsthand through the collection of resources how we’ve been able to move certain balls forward. I do think that many of the other issues that are facing senior housing can be assisted if we come together, if we all as colleagues basically shed our competitive spirit for a second and say, “Hey, what are the issues facing our industry and how do we solve them?”
I think that’s a powerful voice. We’re now administering it when we’re facing some challenges in some state region, some state areas where we go, “Gosh, regulations are going to maybe really negatively impact our industry. We don’t know if they know that, so let’s come together, and collectively share a voice.” Definitely, the sharp end of the spear is our industry organizations and their ability to communicate and get an audience with those policymakers who are going to make a difference. Collectively, they need to hear from us in a unified voice as to some of the solutions that we have.
Our industry organizations did a great job responding to certain Covid issues that were occurring and happening and our need for PPE and financial support. I think they did a great job with that. I think that labor is the next frontier, and hopefully, we can see that come together.
[00:50:28] Tim: We got an audience question though I want to get to. The question is since the start of the pandemic, how has length of stay been impacted?
[00:50:42] Isaac: We saw a decreasing length of stay during Covid because we suffered through a number of premature deaths via Covid. We saw the length of stay drop. That’s returned. Our length of stay in memory care is 18 months. It was 18 months pre-pandemic, it’s 18 months today. We’ve stayed on pace with that, and I would expect that to be the case going forward. We certainly can’t set a watch by it, but it has been pretty consistent.
[00:51:17] Tim: Looking ahead to 6, 12 months from now, what’s your take on staffing? Do you see any of these challenges getting easier, or do you think at least we’ll stay this course for a little bit longer?
[00:51:34] Isaac: I think that it’s going to get easier. It’s a two-part question, I guess. Easier? Yes, I think that the inflationary markets that are out there are creating a need for a lot of people to get back into work. And I think that’s not a secret. I think when folks come back into the workplace, we would hope and expect that a lot of those folks that left the senior housing workspace want to come back to the senior housing workspace.
I think that’s going to get easier. We’ve certainly seen our ability to impact our agency expenses, which have improved, especially over the last three months. We would expect that to continue to improve hopefully through the holidays and become a trend of no agency use in our building. I think those two things are really optimistic. I do think that the realities of labor, there has been a sea change in terms of labor that is not going to roll back. The wage increases that have occurred, again, when I look out there, I don’t see those decreasing, I see those becoming more of the new basic.
[00:52:44] Tim: Do you feel confident in the coming quarters that the occupancy recovery trend will continue? Or do you see any hurdles ahead in that regard?
[00:53:12] Isaac: You caught me on an optimistic day. Where my optimism comes from is, I think that we’ve got an understanding of our business fundamentals and what it’s going to take to get going in the direction that we want to go. It may sound silly and maybe I wasn’t doing my job, but I didn’t feel as confident that we knew about these fundamentals and how much impact they had in our business.
Coming out of that, getting a firm understanding of what those key pieces are gives us a lot of confidence, we’re optimistic about that. I think that if there are some hurdles or concerns, that we are starting to broach a period where affordability becomes the key question mark. In order to get to where we want to go, we are going to see rent increases in every shape and size within senior housing.
Then you ask yourself, well, then how is affordability impacted? Whether that be length of funds, people moving into the industry sooner and maybe their dollar doesn’t stretch them as far, or people that are in moving into memory care, who typically are end of life, and you’ve got a certain amount of funding and you look at it and say, “Okay, how long will my loved one be able to be cared for in this environment given the expense?” For me, that’s the thing that I’m scratching my head and trying to figure out, how is that going to work?
[00:54:53] Tim: Do you see a future where middle market care is even possible in memory care, just given all that you need to do there?
[00:55:32] Isaac: Yes, but I would suggest that it’s not feasible under the current pressures.
I have tried to not use the word disruption. I think it’s being overplayed right now. I do think if there’s an area for “disruption,” it’s in the middle market, but it will require private companies like ourselves and folks like us partnering with public entities who are willing to look at the model differently and say, “Okay, well, in order to approach the middle market, we may need to have a funding source that’s available that is not Medicaid.”
These folks haven’t extinguished all of the financial resources, but they’re on a fixed budget that has a length to it that we know about. How does a person come in and supplement that so that we can provide the care that we want to provide?
Also, looking at the model, and I’m not for one second suggesting that they would create a model that would be unsafe, but that would eliminate some of the regulatory measures that we have in place that do require our expenses to be where they’re at. Our expenses are at a certain fixture point because we have to operate that way. Now, we choose to operate a little bit higher than that, sometimes a lot higher than that. But even if you are just going to create the base level of care, that still is very very expensive.
How do we work together with our public entities, whether that be state regulatory boards and licensing boards or the government as a whole to figure out how you create a scenario, in which the middle market can work and work effectively? That’s a big tackle. I was on a panel eight years ago, talking about affordability for the middle market. I will tell you, trying to come up with ideas, and in those eight years, I don’t know if a whole lot has been done to make any improvement.
[00:57:47] Tim: In my five years of covering the industry, I’ve seen some great models with promise, don’t get me wrong, but on the whole, at scale, it still seems like this is yet to be figured out.
We only have a few minutes here, Isaac, but I want to stick with this theme of disruption, even though I know that you said you don’t like to use that word as much. We actually did have someone on TALKS a while ago, HumanGood CEO John Cochrane. I really liked what he said about the need to self-disrupt. I think you just mentioned one of those ways that you feel like the industry needs to self-disrupt. Do you see any other ways that you feel the senior living industry needs to disrupt what it’s doing? Anything it needs to radically change today?
[00:58:29] Isaac: I was tackling this a couple of weeks ago. I don’t know why it came to me. I’ll try to keep a long story short, but I coach football. I’ve coached football for 20 years and I coach it today. I watched the evolution of football, and 10 years ago, it was a sport that was on a fast track to extinction. Safety concerns, dropping numbers, lawsuits, you name it. A lot of the same things that sometimes affect senior housing were in playing football.
They didn’t take a stick of dynamite to it, but they did focus on some of those very key areas that were causing it. The issue, one, was a PR campaign. There was a safety issue, and they have incrementally made improvements in all of these little areas that you wouldn’t look at and all of a sudden go, “Oh my God, you see what they’ve done?” It’s been incremental. It’s been small changes every year in certain areas that have gone to address the areas of concern.
Now, you have a sport, which I’m now a part of, that has seen an increase in numbers, an increase in satisfaction, et cetera. I think it’s really tackling and approaching things in a very targeted way and making incremental improvements. We’re doing it on the risk management side, saying, “How can we make some incremental improvements year-over-year to get us trending in the right direction?” We’re doing it in engagement, we’re doing that on employee retention.
One of the areas, just as an example, we saw the frailty of our residents start to peak and we figured out, “How do we do that?” Well, we’ve now partnered with a legacy therapy, a therapy partner. They’re now in every one of our buildings. They are part of our management team. They are ingrained in the fabric of what we do, and we’re seeing such better outcomes from physical and speech therapy and all the other therapies that they provide to our residents. Is that a disruption? I’m not sure. I think it’s an adaptation, and adapting certain partners into what we do to create better results, and I think that that’s what we’ll continue to do.
[01:01:03] Tim: Maybe in future TALKS, I’ll have to ask the folks that I bring on how they’re going to self-adapt.
[01:01:11] Isaac: There you go. Self-adapt. I think that’s what we’re trying to do, probably more than the disruption piece, is self-adapt. There’s some areas that need to take a stick of dynamite, but I think more than anything, it’s just adapting to new ways of doing business for improvement.
[01:01:26] Tim: Yes. Well, Isaac, I have more questions I could ask you, but we have really flown through this hour. Thank you again, Isaac Scott, and thank you, Anthem Memory Care, for making this possible and for a great discussion. Of course, as always, thanks for our viewers tuning in. Don’t forget to catch us next week, we’ll be back with another SHN+ TALKS. We’ll see you then, but Isaac, thank you again, and good luck with the coming football season. I guess it’s ramping up for you.
[01:01:50] Isaac: Oh, can’t wait. It’s ramping up. All right. Have a good one. Thanks so much.
[01:01:54] Tim: Yes. Thank you. Bye-bye.