Sonata Senior Living CEO: ‘Pendulum Has Swung’ in Favor of Recovery, Growth

Sonata Senior Living has seen seven straight quarters of growth in occupancy and revenue — and definitively “the pendulum has swung” in favor of continued recovery and new growth, according to President and CEO Shelley Esden.

The Orlando, Florida-based operator is growing at a healthy clip, having just added three senior living communities in the last few months. Meanwhile, the company has hit 85% occupancy on its portfolio of 14 communities and is on track to end the year at 93% — a key indication that conditions on the ground have turned a corner.

“It’s the first time we’ve been able to give projections like that since the first quarter of 2019,” Esden said during an appearance this week on SHN+ TALKS.


That said, the company is still seeing some challenges, primarily related to expenses. One big and lingering challenge is liability and property insurance premiums, which Esden said have in some areas seen double-digit increases year-over-year.

Another challenge relates to staffing, though not for frontline staff. Instead, Esden said Sonata is facing stiff wage competition from other companies looking to hire department managers and higher.

Esden — a big backer of using technology and data in operations — said she has been keen in recent years to separate expenses into two piles: Controllable and uncontrollable. That has been an important step to getting costs under control.


“That has allowed me to really understand where to focus our resources, where the problem is, and how we can … come up with some creative solutions with some of these uncontrollable expenses,” she said.

We are pleased to share the recording and this transcript of the SHN+ TALKS conversation with SHN+ members. Read on to learn about:

  • How Sonata Senior Living is approaching staffing and hiring in 2023
  • Where Esden sees the biggest opportunities for growth this year and beyond
  • Other conditions pushing the senior living “pendulum” to swing in a more favorable direction

[00:00:05] Tim Regan: Good morning, everyone. I’m Tim Regan with Senior Housing News. Welcome to SHN+ Talks. Today I am very glad to be joined by Shelley Esden, who is president and CEO of Sonata Senior Living. Sonata is based in Orlando, and they have 14 communities, three of which opened in the last three months.

I’m excited to talk with her about growth and all these other things that they have going on right now. Shelley, welcome. I’m really excited to talk.

All right, Shelley, let’s just jump right into it. I’ve got a lot to talk about today. Let’s start with the state of play at Sonata right now in 2023. It is the second quarter. A lot of operators tell me this is the time of the year when the rubber meets the road on a lot of their initiatives. Folks are moving in, this is kind of when they figure out if some of their plans are going smoothly. With all that as the backdrop, what are you seeing right now with regard to things like demand, move-ins, occupancy, et cetera?

[00:02:06] Shelley Esden: Hey, Tim, it’s a pleasure to be here. Thank you for having me. First of all, I’d like to say I’m very glad that I’m talking to you now and not in the second quarter of last year. I picked a wonderful quarter to be speaking with you. I’m very, very excited about where we are right now. I really think that I can confidently say I think the pendulum has swung.

We are looking at key metrics on all levels, whether it’s our lead generation, our move-ins, our move-outs, our conversions. All indications are that we are seeing growth from an occupancy side, from the revenue growth side, and even with some of the challenges that we’re seeing with inflation and the current economic climate that we’ve all been struggling with. And NOI is growing year over year.

With that said, we’ve had over seven consecutive quarters of growth. That’s very promising and encouraging.

[00:03:17] Tim: Well, I think you’ve probably answered this follow-up question I had, but in terms of the rest of the year, it sounds like you’re pretty optimistic then?

[00:03:25] Shelley: We are. Currently, we’ve seen, year-over-year, 17% growth in our occupancy, and we’re currently at 85% as a portfolio. Based on our current trajectory and our projections, we’re anticipating ending the year across the board at 93%. So I’m very excited about that. It’s the first time we’ve been able to give projections like that since the first quarter of 2019.

[00:03:56] Tim: I do want to ask you about the current challenges that are still ongoing. Where are you still feeling lingering pressure in your operations right now?

[00:04:16] Shelley: I think that we are still seeing some workforce challenges. We were very successful with the elimination of agency in Q4 of ’22, and we’ve put a lot of thought and effort into our culture cultivation, our workforce development, and actually workforce retention. All of those things have helped on the line staff, caregiver positions, and in the nursing positions.

What we’re starting to see, though, is this change as far as the wage pressure on departmental management positions and higher-level positions goes. Whereas the hourly rates have stabilized for caregivers and nursing and our line staff, the managerial positions are really starting to further compress margins. I think that’s going to continue for a while.

It’s becoming increasingly challenging to minimize our turnover in these positions with such strong competition — and wage competition– taking place with department managers and higher.

Uncontrollable expenses, especially in Florida, are further impacting our ability to grow our margins, even though we are seeing some relief with our GLPL [insurance premiums]. In the prior year, increases in our general and professional liability premiums were significant. And over the last year, we’ve seen year-over-year increases with our property insurance due to the significant amount of storms that we’ve seen, especially in Florida. But many states have seen this, and this is not just a problem that’s exclusive to Florida.

We’re seeing year-over-year increases in our property insurance — 20%-plus — and you throw that in with utility increases, taxes, insurance — all of these uncontrollable expenses combined with the wage pressures are the number-one challenge that we’re dealing with. It doesn’t help when we’re still having so many frivolous lawsuits that are out there where we’re having to put time and resources into that as well.

It’s forcing us to be a lot more creative, and there are a lot of different ways that that’s taking place. It may be different in each community, in each market, but we’re really having to sit down, speak with the teams at the community level … and put our heads together and come up with strategies that can make us more efficient at what we do; and leverage technology in the best way we possibly can to achieve that goal. But also, we are trying to create a culture that attracts people because it’s not always about the money. You can’t make it about the money, because you’ll never succeed.

It’s about efficient operations and technology; and then at the same time, how do you balance that with growth? How do you continue to grow when you’re also focusing on your existing operations and efficiency? How do you overcome compressed margins and create value in a world that we’re living in today? The good news is it can be done. It just really takes a lot of creativity and it takes a lot of hard work, and it takes having the right team players at the table.

[00:08:10] Tim: What are you finding is making the difference for folks? If it’s not, ‘We’ll pay you this premium over what you’re making now,’ what is that cultural item that people are coming to at Sonata?

[00:08:55] Shelley: I wish there was one little recipe I could give you, because I probably wouldn’t have to be here today if I did have that recipe, at least in our world and in my organization. I’ve been here for 15 years, and we’ve always had a very strong culture. I’ve always been very hands-on, very present in communities. What I’ve seen is really the impact of relationships and the impact of caring.

As leaders, we always talk about, “Oh, it’s important to listen,” but it’s not just listening and it’s not just about being a servant-leader. It’s about really truly caring and showing appreciation, but it’s also your presence. That really became obvious to me over the last three years. Prior to 2019 and 2020, I was a lot more visible in the communities I was present, and I’m pretty passionate about what I do. And my team, I’m a huge advocate for line staff. I really enjoy getting to know them and I truly do care about them.

One of the goals when we founded Sonata was to create an environment where team members flourished, that we would find passionate folks that shared our vision and our dedication to seniors, and that we would find a way to really invest in them and help them grow and show appreciation. They knew that it was sincere and they knew that we really cared, and that was conveyed. During those couple of years of Covid, I became distracted and had to deal with the multiple challenges that everybody else was dealing with. And I wasn’t as visible.

I saw a change in my culture. We were relying more on electronics and video. We integrated all of these wonderful solutions even down to our payroll applications, where I thought a video to my employees and my line staff could replace me being in the community or me visiting at Christmas time or holiday time, or just attending employee appreciation events. What I found was that the culture changed. Sometimes, it’s just being there and saying, “Thank you.”

Now, that said, it also helped that we put some real conscious thought into cultivating our culture. That’s the lesson I learned — culture is not something you can just say, “Okay, this is our culture and it’s going to be self-sustaining.” You have to continually, continually cultivate it, work on it, and then it will continue to flourish.

It’s constantly changing, we’re always looking at ways to show our appreciation. Every community is different. We rolled out this campaign called We Are One last year. The purpose of this campaign was to really recognize the fact that our success is not going to come from the home office, it is not going to come from me. Our success is going to be through collaboration from the line staff, from the server, the housekeeper, the caregiver, on up through management, but also with our family members and with our residents, and how do we get them to know each other, how do we get them to connect, how do we get them to engage.

Everybody’s using these words — engagement, and connection, and everything else — but how do you really do it? We are doing these roundtable discussions with the line staff where maybe I don’t do as much talking, and I started asking some questions.

Then we started looking at technologies to get the same type of feedback on a more regular basis. It’s amazing, that’s when my creativity starts flowing and I’m able to say, “You know what? Oh, my gosh, this is what we need to do.” I get my best ideas from being in the field and talking and asking my team members questions.

We also rolled out a “Sonata Star” program, which has gone really well. We show appreciation, but then we also make a big deal about it because you can’t just give somebody a pen in an envelope and say, “Happy anniversary,” you have to make a really big deal about it. That’s where they start videotaping the ceremony where you give them the certificate, then the ceremony where you give them the pen, and they show their children and are proud.

When you have proud employees that understand they’re not only appreciated but they’re honored, they feel good about themselves. In our industry, we need more of that. As we all know, our workers haven’t always been recognized as truly essential, and they haven’t been honored as they should be. I want to do everything I can to try to make them feel really special, because I think they’re rock stars.

[00:14:09] Tim: I actually have a quick follow-up on staffing while we’re on the topic. What needs do you see to bring other types of workers from elsewhere into the senior living industry? Secondly, are there any places that Sonata looks for folks, such as the hospitality industry, that you think hold a lot of promise for the industry right now?

[00:15:12] Shelley: I think that we’re all having to look at other industries. Hospitality has been particularly challenging in Florida. They’ve gone through a lot of the same challenges we have because of the tourism industry and just the impact of the pandemic overall, and the highly competitive nature.

I think the school systems, too, are an interesting source for workers. At the end of the day, daycare is another industry. If you find a manager of a daycare, they actually make really good operators for senior living. Their business mindset combined with a nurturing mentality is a great fit. A lot of individuals that worked in our school system, those skills have been easily transferred and we have two or three school teachers and those that have worked in school administration that are now on board with us, and they’ve excelled.

The other thing is looking internally. I think one thing that is a huge opportunity for us, — and we’re actually evolving this internally — is our own mentorship and growth opportunities where we can create opportunities for individuals to go through career paths that can help them achieve their long-term goal. We have several individuals that started out in some of the lowest positions that have been very successful over the years. I have dining directors that are area managers that started out as cooks with Sonata. We have executive directors that started out as business office directors and maintenance directors, and the list goes on.

Everybody’s different so we have to be a little flexible, but I think looking internally is a great place to start. Secondly, when you interview and when you advertise, I think we shouldn’t get locked into a position’s title. We need to do a better job of advertising for skill sets. In today’s world, it’s easy to do that with your keywords and technology, especially since we’re doing online recruiting, and finding individuals that have certain attributes that you’re looking for.

[00:17:49] Tim: Absolutely. I know that technology is an area of focus for Sonata and for you. What’s on your mind with regard to technology? What shows promise right now? Is there anything on the horizon that you’re using or piloting that you are excited about?

[00:18:20] Shelley: My head is spinning from all the technology that’s out there right now. Last year, we reorganized with a very purposeful growth agenda and strategy in place. Part of that strategy included my focus to be ensuring that our existing operations maintain the level of attention and focus that I had always had in place while I in turn, took my operational background and applied it to new growth acquisitions, turnaround opportunities, and also evaluating technologies. To be successful, we have to improve our efficiencies. At the same time, it’s becoming increasingly challenging to provide that top-level quality service when we have all of these other demands on us.

Not only do we want to be more efficient, we want to be more effective and I really want to find things that can positively impact my team and get them off the computer and allow them the opportunity to engage with the residents and do what they really want to be doing. What I found is there’s a ton of new things that are being introduced, and some of them are very exciting. Everybody’s talking about AI, everybody’s looking at all the different individual applications. The challenge is, how do we determine what’s best? How do we take on all of these different applications?

It does add up operationally. One application may not impact you financially. Operationally I think it’s very important that we evaluate what makes sense so that we do not do things just because we think somebody else is doing it. We really have to analyze what is truly necessary for value creation and or efficiency and how it’s going to impact the team. If your team cannot embrace it, own it, execute it, then it’s not going to be effective, number one.

Now having said that, I also think that the integration of a lot of these applications has really, really improved the redundancy of data entry. We’re seeing more and more of this integration with APIs. We’re going to see an infusion, I think, of continued growth in AI because of this increased sharing of data. As we do, it’ll be interesting to see how that impacts our sales and marketing journey, our electronic medical records, our resident engagement, and even the way that we obtain feedback.

I think one of the things I’m most excited about is that we’re rolling out an automated survey tool that is integrated with our payroll applications and it’s also integrated with our CRM for sales and marketing. Whereas historically in assisted living, we tend to be a little bit behind the times, we would do surveys twice a year through an email survey or whatever it is.

Now technology exists where it’s real-time and it’s triggered by an online event behind the scenes, whether it’s a move-in date, whether it’s a tour, whether it’s a move-out, whether it’s an anniversary date, or maybe it’s a change of condition. It allows us to push out a mini survey that automatically escalates if it’s less than optimal service as defined by the user. It also goes to a review site if it’s excellent. That is a game changer for me because it not only adds a level of accountability, but it gives me real-time feedback on a service failure.

Look at it from the recruitment side: In your payroll data you have, when they apply, when they interview, when they’re supposed to be there for orientation. And after the orientation: How did it go? How was your training? If we can capture feedback that gives us an indication that it didn’t go so well, maybe we can save that one team member that just wasn’t going to show up tomorrow.

Now it takes making sure that the escalation works and that we do follow up and that we provide the feedback, but if you tie that to performance goals and other reward mechanisms, it works. Then also it takes out the human error and a lot of paperwork too. I think that’s one of the things I’m most excited about. We’ve done it in some pilot studies and it’s been very effective.

[00:23:38] Tim: Anytime we talk about technology, I always like to ask about some of the maybe sexier stuff that we see in communities, one of those being robots. We just had an event in Atlanta, DISHED and WELLNESS, where during the event we had one of these little Servi robots zooming around. It was very interesting to see.

I still, to be frank, wonder about the practical applications of some of this stuff. The cool factor was certainly there. Do you see a role for robots in senior living?

[00:24:37] Shelley: I think everybody has an opinion on robots and their utilization. I think it is cool. I think that on a very minimal level, I think it does have a place. It could be not as obvious as actually having a physical robot that replaces a server, but it could be as little as having conveyor belts that take your dishes and it’s a little more self-serve-like.

I’m seeing a tendency for a lot more of the restaurant-style technologies to enter into senior living, such as QR codes for menus on the table, handheld devices for order taking with POS systems, integrating that into your EHR where you have the resident preferences and their dietary requirements that ties into the POS and menu requests and everything else.

Even taking that a step further and looking at family engagement and how does that all integrate. Even your grab and go and trying to allow the ability for residents to explore other options for dining other than traditional dining from their room via some type of engagement platform that maybe is on their television or on their device through an application. A user-friendly resident application that is easy make sense of and also are opened up to their families, I think that’s where the next phase is going to be — Looking at how we can use technology to ease and expedite the flow of information, versus robots.

I’m an old-school operator, I believe in the human touch and the human interaction and I think that means a lot to our residents. But I wouldn’t be opposed to a cute little robot that’s in the kitchen that helps the servers out. Anything we can do to make it a little more efficient. I think it’s a stepping stone to something better. I just don’t know which is better.

[00:27:05] Tim: That’s a great point. I think you talked about some of this already, but is there anything that you wanted to share about how Sonata collects information or tracks data or any of the other cool things you do there?

[00:27:28] Shelley: Well, it’s interesting. The business intelligence revolution and the dashboards and the data analytics — I think we’re starting to see an explosion of software applications and vendors that are offering products that are allowing operating companies, regardless of size, the opportunities to have this data at their fingertips. Because data is king, and we’ve been trending data for years and years.

I’ve always been an advocate of measuring trend lines, whether it’s quarter over quarter, year over year. Everything from your worker’s comp to your level of care, to your move-ins, to your conversions. Also, your RevPOR, ADU and correlating those data points, with the goal of seeing how it matches with the same-store and how you can pick up on opportunities to improve your operations.

We had sales and marketing, professional referral dashboards that were created years ago and we’ve continued to evolve those. And then of course we have our operating dashboards. We do those at the community level and then we also do that at the portfolio capital partner level and at the regional level. Then that rolls up to the company level.

What’s important about these dashboards, though, is that I think there’s an opportunity to automatically do this with integrations through a BI platform with our CRMs and whatever operational software you’re utilizing. I think that will take a little burden off of us from analytics and a manual dashboard creation.

What’s important is, who’s looking at it and what are you doing with it? You could have all the data in the world, but if you’re not analyzing it and really looking at it and it’s not getting into the right hands and it’s not forcing you to look at it, what are those primary key metrics that make a difference? Call it a scorecard, if you will. What are the four things that are going to give you an indication that you need to be focusing your resources here?

Too much data can also bog you down. It’s been really effective to evaluate what are those three or four primary data points or key metrics that are most likely to make a difference in nursing, in sales and marketing, in operations. How do we gauge then what our strategies are, and how they’re going to be modified to affect the outcome? Then how do we use that data to realize that we have opportunities, whether it’s training, or evaluating our service, our protocols, and our systems to make sure that we’ve got the right policies in place to ensure success? I’m excited about some of these software applications. What’s interesting is that I’m seeing capital partners are doing the same thing. They’re developing these wonderful dashboards and data platforms.

What I’m seeing is some of them are actually wanting to work closely with their operating partners, and share this information, and take the burden off of the operator, which I think is amazing. I think there’s still opportunity though for us in industry for us to maybe agree upon what some of these data points are because many of us, with the RIDEA changes in 2007 and 2008, we’re looking at multiple capital partners. When you have multiple capital partners and JV relationships, and everybody has different key metrics, dashboards and analytics that they’re looking for, it’s a little challenging.

I would love to see some collaboration amongst senior living as a whole, where we can all agree upon certain assumptions, whether it’s how we’re calculating turnover, how are we looking at defining a bed, a unit, et cetera? How do we measure ADU, RevPOR and some of the basic definitions of those metrics? I think it would help us streamline our data, and help the industry overall.

[00:32:07] Tim: It’s something I’ve heard more and more people talk about over the last six months, at the very least. The question that we typically get whenever we talk about business intelligence is, “Okay, we’ve talked about singling out some metrics. What are those metrics?” At Sonata, what are those big flagpole metrics in your mind that help tell the financial story and history of a company?

[00:32:47] Shelley: I think everybody uses pretty much the same ones, it tells a financial story. I track rent per unit and the growth of my rent per unit. I also analyze my level of care separately.

We’ve seen a 36% growth in our level of care, year over year, because we pushed our rates so much last year that now we’re having to look at other creative ways to drive revenue. That’s been a focus for us. It allowed us to really see, “Oh, year over year you’ve had 18% revenue growth. That’s great, but how and why?”

Making sure that we can really look at where we are seeing the revenue growth, and what’s driving that, what’s behind it I think is important. Something I hadn’t done until the last couple of years was really pull out uncontrollable versus controllable expenses. That has allowed me to really understand where to focus our resources, where the problem is, and how we can better leverage our relationships with some of our vendors, and come up with some creative solutions with some of these uncontrollable expenses. The other thing that we’ve been doing is tracking the real-time status of our rates and our discounts.

What are we doing? As a leader, how do you know what all your communities are doing at any time, and how do you manage that? We came up with a tool that allows us in real-time to evaluate the actual rates that are being charged as it compares to the market rate. Then it goes a step further, and it integrates what the future potential rate would be should the vacant units be rented at market rate because one thing we don’t think about is the unit type, and how that may bring down your rate per unit once you’re full. Looking at that, it helps guide our decisions. We’ve been able to educate our team members at the community level to use these tools to their advantage.

It’s their community. They’re the ones that are determining whether or not they need to offer a discount for that community fee. If they know that at the rate they’re going that their rate per unit is going to be below budget because all they have left are studios and they’ve offered some discounts in the past, it really changes the way that they make their decisions. Empowering your teams at the local level with this data has been very effective. Then also allowing them from an expense management side with more advanced spend-downs. Knowing where their expenses are on a more real-time basis has been very useful as well.

The ADU, we’re now tracking all of our census on an average daily unit, which is much easier in projecting future revenue. That’s been beneficial.

We’re working closely with our CRM to take all of these things that we’ve done manually that we found beneficial for key metrics, and see how they can do it from an automated perspective. What I’ve found is that most of our partners are willing to do this, and they’ve come up with customized reports for us. It’s automatic and it’s been very beneficial.

[00:36:35] Tim: Shelley, we have an audience question for you about strategic growth. This is maybe a good time to pivot to talking a little bit about that. Our audience member wanted to know, where do you see the opportunities for growth right now with all of the other challenges that we’re facing as an industry?

[00:37:01] Shelley: I think one of the greatest opportunities we’re going to see or that we are seeing right now is the fact that the economic climate and inflation has created an unusual world where there’s going to be a lot of communities that are going through potential foreclosures.

I think we’re going to see that as a continued trend for at least the short-term. I think what that does is it opens up opportunities for management or turnaround opportunities for providers who have the resources and the track record of ongoing success in those types of situations. I also think that there are opportunities for acquisitions.

There’s been a recalibration of the market, and we’re seeing some phenomenal pricing, and opportunities for groups that have the equity. A lot of them are able to provide cash for these deals. I think the M&A market is very opportunistic right now. We’re going to see the turnaround market is going to continue to grow and for groups like Sonata, 50% of our portfolio was turnaround acquisitions.

I’m excited about that. We are looking at those opportunities, where can we leverage our strengths? We have an entire division that has been established to go in and focus on those types of opportunities, which is allowing us to look and position ourselves for growth over the next 6 to 12 months.

[00:38:38] Tim: I have a follow-up on that. I’ve heard that as folks are looking across the industry, some communities, great opportunities, the pricing is right, you can make this work. I’ve heard though that there’s also a decent amount of the product that’s out there that probably just is maybe better not suited for senior living down the road, behavioral health, conversing to something else. Are you seeing a lot of that on the market too?

[00:39:06] Shelley: I’m seeing some of it, but I’m also seeing a specialization opportunity as well where providers and we’re even looking at that. Memory care is a perfect example. Memory care has had significant struggles over the last few years. We’re finally seeing our occupancies grow. The length of stay for memory care is finally growing, and our rates are growing. We’re actually starting to see the pendulum swing from this all-inclusive pricing model, which really negatively impacted a lot of operators over the last few years.

We’re seeing a diversion from, or where we’re getting away from that because it really doesn’t make sense as when it comes to cost creep. As we’re able to evolve and look at our product types, there may be some situations where some of these buildings are not going to work.

Maybe they’re too small, maybe they’re in an area that’s overbuilt, but I also think that we have to be creative. We’ve found a lot of success with specialization. We’ve recently, over the past year, run some pilots with a “memory care for her” concept. It was not just the physical environment and not just talking about [how] this is exclusively for women, but creating a lifestyle and a physical plant — and the engagement, the sounds, the activities, the meals. And, just the overall sense of being more feminine. It’s been hugely successful.

Doing that in an area that perhaps over the last few years has seen a huge uptick in the amount of new developments, offers a new niche for us. It’s something that I think we’re going to continue to see. I know that there’s also operators that are looking at specialized Parkinson’s communities as well. As the number of … seniors grow — we all know what the numbers look like, we’ve all seen the trend lines, and what the demographics are, and where we’re headed.

I think there’s going to be more and more opportunities for this specialization. We just have to make sure that we do it the right way. I think there may be a few that end up being turned into other uses, but I’m hoping that we can actually use that creativity to find what’s really needed in a particular area.

[00:41:52] Tim: I remember the “memory care for her” program, and I’m glad to hear that it was successful. Is that something I guess, then that you might expand or plan to expand in the future, more of these kinds of units or communities?

[00:42:06] Shelley: We’re evaluating the opportunity. I think it’s very market-driven, and that’s what’s unique about senior living. Everything is market-driven. It would be nice if we could treat this industry like a McDonald’s franchise, but we can’t. That’s the one thing I’ve learned. A lot of it is based on the market that you’re in. It has been more successful in a market area where a spouse is placing a spouse, so maybe a retirement destination for instance, versus adult children. Adult children may be more inclined to look at the financial aspects of placement and with memory care for her costing a little more.

Maybe that added level of security, and peace of mind, and a preferred environment that makes mom feel like she’s in a slumber party is not as important to the adult child as it may be to Mrs. Jones’ husband. I do think that you just have to look at every single market. It also matters on whether or not it’s part of an existing community, whether it’s part of a standalone memory care. We’ve seen both, and it works in both, especially when you have a large number of memory care beds.

I think that the market may have pushed the envelope a little bit by developing too many memory care beds in some situations. This offers an alternative to split that up. It’s been a little more effective than the transitional care units that we’ve seen in the past.

[00:43:50] Tim: What do you think of the value-based care movement? What do you think it can bring to the industry? If you’re preparing for it at Sonata, tell me how you’re preparing for it.

[00:44:29] Shelley: Tim, it’s very interesting that this is a conversation that really seems to have finally gained a lot of momentum. I remember conversations about managed care and the role of assisted living in managed care taking place over 10 years ago. I was at a conference and we were talking about, I believe it was the HMOs at that time, how skilled nursing has a place at the table in hospitals, and how [should ALFs] enter that network; How do we start tracking rehospitalizations, and hospitalizations, and things like that? We’ve actually been tracking the hospitalizations, rehospitalizations for years and years.

I just have all this data. I think that there’s absolutely a place for value-based care. I think that that’s going to be critical for the challenges as it relates to the need for more middle-market products. I think that if we can figure out how to bring all this data together, and expedite the whole roll-out of value-based care — we’re seeing it in very limited roll-outs in a state that may have one or two situations here. There may be another one over on the West Coast, but there’s not anything that seems to be bringing the providers together, looking at this from an industry perspective.

In place, it can consolidate all of this data, help us expedite the actual roll-out because at the current pace that we’re looking at this, we’re still looking at years before we could actually see this come to fruition. I don’t know about other operators, but as a regional operator, I don’t have the time and resources to put all of my eggs in that basket, and solely focus on that, and help expedite that alone.

Perhaps there’s an opportunity for more of the regional operators to come together, collaborate, and pull their resources, because I do think it’s a game changer. I think it’s absolutely going to be essential for the middle market. Some of the challenges that we’re going to see is the next generation of seniors have less resources to pay for private pay senior living.

[00:47:05] Tim: Perfect segue. Middle market, that’s something else I wanted to talk about. What do you make of that opportunity as a hall right now for, maybe specifically for the things that you guys do in your communities? How do you think the industry can best, through things like value-based care, best meet that demand?

[00:47:44] Shelley: I think that working with your regulatory agencies and becoming a little more involved at the state level with your reimbursements. In Florida, we have a Medicaid managed care product which allows a supplement to the family’s contribution. You could still get market=rate, but it allows the affordability factor to really improve.

Looking at those reimbursement rates, they’re extraordinarily low, and they haven’t really been increased to match the cost of living increases that we’ve seen over the last few years. I think lobbying for those increases would help.

Then it would encourage providers to participate more, and as individuals who may not be able to afford market rate are coming to the market, we are able to offer that as a potential resource. I also think that in new developments, we may see a little less expansive over a monetized space. We may see more dual-purpose spaces, and more creative living units, and better use of those physical spaces. I’m also seeing we’re returning back to the day of companion living. It was a big concept in the late 1990s. It went by the wayside, and then it went up to two-bedroom apartments, and things like that.

Well, at some point where do we draw that line between all of this space, and all of these amenities, and the desire of somebody to have it all, but an inability to pay for it? There has to be creativity there.

I do think there are a lot of amenities that aren’t used. I also think that that correlates with the average age of our residents going up in assisted living. Looking at the amenities that are utilized in assisted living versus independent living and memory care, I think is pivotal. The other thing is being cognizant of how we educate our residents and our families. What other resources are out there from the financial management, and other interesting sources of funds, and et cetera that we can empower our sales teams to educate the families and the residents early on to help manage the use of their resources moving forward, and how they can lengthen their stay before running out of funds for senior living.

[00:50:41] Tim: I know that this has been a year of expansion for Sonata. As you look ahead, what avenues of growth do you see on the horizon?

[00:51:14] Shelley: Actually right now, Sonata’s looking at rolling out several technologies. We are looking at some BI options. We are evaluating a QA module with Aline, and I’m very excited that we can integrate our total quality success system into an automated system. We’re looking at our website automation platform that we’ve had with our existing marketing partner for years, Matura Marketing.

How do we take that workflow and what we’re doing with them, and take it to the next level to really fine-tune the sales journey? And make sure that we’re properly converting our marketing-qualified leads to sales-qualified leads at the right time? How do we make sure that that data is consistent so that our conversion ratio measurement is consistent? That’s very important because your data integrity has to be there.

Looking at that, evaluating others, and actually looking at other digital groups to maybe do a check and balance on what we already have in place. Technology is big. We are also looking at creating an application for our team members, our residents, and our family members, which I’m very excited about. Developers and coding, it’s finally getting to a point where operators like me can afford such extravagant add-ons and things like that.

I think those, combined with the surveys and some of the other data analytics that we’re going to be integrating, is going to help us be more efficient. I think the other thing that is exciting on the growth front is the management opportunities. We are looking at potentially adding 400 to 500 units over the next six months. I alluded to this earlier, but we have a dedicated team that is focused solely on transitioning these communities, “Sonatatizing” them if you will, and allowing us to ensure that we are not taking resources away from our existing operations.

Because over the years, one thing I’ve seen is operators that may go out and they want to grow, but you have to make sure that you’ve got the resources and the ability to execute because if not, you’re not going to be able to create the value you wanted, and it’s not easy. Like I said, communities are not franchises. Every community is different, but you still have to have a very formalized system in place where you can plug and play, and go in. You need to have the resources to provide the support because you cannot install your culture in one day. It has to be cultivated, and that’s going to take a presence, and it’s going to take time.

Balancing that with your growth plan is pivotal, and making sure that you’ve got all the processes defined, systems in place, and a good strong team that understands your culture, your philosophies, your core values, and that they’re able to bring that to your new community. I’m excited we are growing, but we’re not going to do so at a rate that risks our ability to execute. I do foresee us potentially doubling in size over the next couple of years. Very exciting times. I actually think that we’re also for the first time looking at going outside of the state of Florida in particular states.

Lastly, very involved in advocacy efforts at the state level. I encourage everyone to take a greater role in this because there’s a lot of things going on in regulations that could make a difference to your ability to do the things that we’re trying to do, and to provide the services at a higher level of quality. It’s not going to happen if we all don’t get involved, and we work together to achieve that.

[00:55:24] Tim: That’s certainly an exciting time. Thank you for sharing.

This next question is from the audience and it goes back to our discussion on the middle market. Do you see age-qualified 55+/active adult as part of the equation in the middle-market because of its lower staffing, amenity and cost model?

[00:56:14] Shelley: That’s a very interesting question. I think that we have to be careful because we’ve seen a lot of growth in independent living, and the services, and because we don’t have any barriers to entry for active adult, for independent and assisted living I think in most states.

The risk is that we compete and put our independent living out of business because there is an overlap. What happens is the individual that is looking at your independent living may be willing to sacrifice the amenities and that second meal, especially when they can use Uber Eats if they need to save $1,500 a month, or whatever that price differential is.

Now, I also believe that in a lot of situations where I’m seeing campuses that are in the pre-planning phases, where you may see this active adult component. Then there is independent living, but it’s almost like assisted living where there’s some minor services. With the onset of active adult, I think we’re going to see a potential increase in the acuity level of our independent living residents, and an even higher acuity level of our assisted living residents and our memory care residents as we’re already seeing to some extent. I think that’s going to further push the envelope in that regard.

[00:57:55] Tim: Any other thoughts on maybe where that independent “line” is, or where it’s going?

[00:58:10] Shelley: I think it’s all about the services. Again, each particular state is different, but the consumers are more and more educated, and their needs are different. I think we’re still learning what it is they want. A male resident has different needs than a female resident, whether it’s meal preparation, or whether it’s socialization. How does that impact who is moving in? What are the demographics behind the active adult world? Is it the same ratio? Is it 75/25 female-to-male? Is it more 50/50? Is it more couples? As we see more development and more active adult congregate living per se, I think we’ll be able to answer some of those questions.

I think we have to do a lot more analysis though, and really, really look into it. It’ll be interesting too. What’s the impact of providing services at this active adult congregate setting? Will it be home health? Will it be a third-party meal provider delivering meals? How do we offset that with the current industry? What’s currently out there for independent AL and memory care? I think there’s a lot of unanswered questions, but going back to our initial topic, I think the data will start to paint a picture for us. As usual, we’ll pivot and operate accordingly.

[00:59:47] Tim: Absolutely. Shelley, we are out of time. This has been a wonderful discussion. I just want to thank you for coming on and answering all these questions. Thank you for joining me today. I appreciate it.

[00:59:58] Shelley: Thank you, Tim. It’s been a pleasure.