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Some notable news broke on Tuesday night: the acquisition of a 113-bed assisted living and memory care community in Brentwood, Tennessee.
I know that sounds more like a modest deal rather than headline news, but the transaction could have a big impact on the sector, if the players involved — including Arnie Whitman, Chip Gabriel, Omega Healthcare Investors (NYSE: OHI), and a newly launched operator called Kalven Senior Living — achieve their vision.
They aim to turn the acquired community, The Rivers at Maryland Farms, into a Senior Living Transformation Center. The idea is for The Rivers to be both a fully-functioning senior living community and a testing ground to develop and refine a model that — as I’ve described in past columns — would be tech-enabled, data-driven, and integrated with value-based care payment frameworks. This model will enhance value for investors and elevate residents’ experience and health outcomes — at least, that is the conviction of the people and organizations involved.
Joining Whitman and Gabriel in launching the Senior Living Transformation Company are Cory Bennett, a managing director Formation Capital; and Joelle Poe, who has led product design and management at several health care-focused technology and managed care companies, including Alignment Healthcare and SkyPoint Cloud. Other players involved in The Rivers deal include industry veterans Jerry Taylor and Chris Taylor, who co-founded Kalven Senior Living. And Omega, of course, is one of the largest real estate investment trusts (REITs) in the senior living and care sector.
“We absolutely see the potential of senior living becoming a partner in the value-based care ecosystem,” Poe told me this week. “We see this as a journey to getting to value-based care, and that this is an opportunity to deliver a tremendous amount of value to our stake stakeholders along that journey.”
In this week’s exclusive, members-only SHN+ Update, I analyze this recent news and offer key takeaways, including:
- The significance of involvement from Omega and Kalven Senior Living
- Details on the planned “three work streams” to creating the Senior Living Transformation Center
- How the SLTC effort adds to the trend of better valuing the operational component of senior living communities
A well-rounded — and large — team
While Arnie Whitman shared the basic details of this transaction with me in July, some key pieces of information became public this week, including the involvement of Omega and Kalven. I find the participation of these two companies logical and am intrigued by the possibilities for how they might contribute to the creation of the Senior Living Transformation Center going forward.
It’s always exciting to learn of a new operator on the scene, particularly involving founders who want to pursue innovation but also know the industry well. To my mind, a mix of experience and impetuousness bodes well for success, and Kalven is a textbook example, given that the company was co-founded on July 1 of this year by the father-son duo of Chris Taylor and Jerry Taylor. The Rivers is the first community that Kalven Senior Living is taking on as an operator.
Chris has been involved in senior living and long-term care since 2004, has held leadership roles with various associations, and most recently was managing director for the healthcare real estate group at Capital One, leading a $3 billion-plus book of business. Jerry has been in the industry for more than a dozen years, with a resume that includes roles with Emeritus and Senior Lifestyle; more recently, he was VP of Strategy and Operations at Solera Senior Living and then VP of Operations with National Health Investors (NYSE: NHI).
Chip Gabriel — an extremely seasoned operator himself, given his long-time role with Generations LLC — also pointed to the mixture of experience and openness to innovation as a benefit to working with a new operator on the creation of the SLTC.
“To me, it was exciting to work with a new operator, but with lots of experience in the industry. We get a ‘fresh start’ in doing things,” Gabriel told me in an email.
Jerry Taylor is based in Nashville — the same market as The Rivers — and he is in close contact with Poe, who is leading the “operationalization” of the overall vision.
“I look at Jerry and his team and the residents that we serve collectively as my customers,” Poe told me. “We oftentimes talk about, where are there areas of opportunity to either improve a workflow or improve a process for both residents and for the team on the ground.”
The move-in process is one area where feedback from residents and team members alike pointed to a “worthy problem to solve” — specifically, a “clunky process” involving copious paperwork and followups with many people. Now, Poe is exploring potential solutions that already exist in the marketplace to help solve some of these issues, while she and Taylor also consider process improvements that can be attempted.
Currently, Kalven is “very focused” on the “transition and success” of The Rivers, Jerry told me in an email, but the organization will be “open to slow, strategic growth with like-minded partners” in the future.
I think it makes sense for a new operator to be involved in the formation of a Senior Living Transformation Center, insofar as Kalven does not bring a lot of baggage and preestablished systems to the endeavor. And to the extent that the SLTC is a testing ground that creates a replicable operating model for the team to scale up, Kalven will then be positioned to potentially operate future communities without an existing portfolio creating limitations or distractions.
I also think that the involvement of Omega makes sense. The REIT — which is the largest skilled nursing facility owner in the United States — has been interested in expanding its senior living portfolio in recent years, while also taking steps to be a leader in the integration of new technology into operations, which is one of the main goals of the SLTC.
Omega’s primary senior living operating partner, Maplewood, has undertaken notable technology investments and innovations, with VP of Clinical Innovation and Population Health Brian Geyser helping to lead the charge. And Omega has made direct investments in senior living technology companies such as Connected Living and SafelyYou, while also subsidizing costs for its operating partners to harness such technology.
In working with Omega to create the Senior Living Transformation Center, Poe described a “yes, and” approach of potentially working with the tech companies that Omega already has a stake in, as well as identifying additional “pain points and whitespace” and working with new solution partners accordingly. This same approach will inform the overall approach to creating the tech stack, given that the Senior Living Transformation Company can leverage existing relationships with certain tech companies (such as SkyPoint Cloud), but also is seeking additional partners to solve for particular needs.
Taken altogether, there’s a well-rounded team striving to create the Senior Living Transformation Center. The team has a mix of financial, real estate, operational, technological, and managed care experience, has access to significant capital, and includes some of the most battle-tested veterans of the sector as well as some people who are newer to the space or from different generations.
I believe this diversity in backgrounds and mindsets could be a huge advantage in the team’s shared question to “transform” senior living, but it also could be the biggest hurdle, in terms of maintaining alignment of interests, productive pathways of communication and clear arenas of authority among the Senior Living Transformation Company, Centered Care, Omega, Kalven, and additional organizations that they intend to work with, such as managed care payers, technology companies, and health care providers.
So, starting small — with this single, 113-bed AL/memory care community — also seems like a good move, not only to create a manageable laboratory to test new technologies and operational practices, but to coordinate the team members and define roles.
That said, the goal is to scale up, including working with other operators. As Gabriel told me:
“As we grow and work with other operators, we will have established systems that we will want them to implement in communities that we own. That is what will drive the data and analysis to implement our care model and work with payers.”
Poe talked me through some key elements of the playbook that they are working from, in pursuit of this objective.
3 work streams
The plan is to pursue “three overarching work streams” at the Senior Living Transformation Center, in order to create a replicable model that fulfills the team’s vision, Poe explained.
The first work stream relates to the physical space, with the team making physical plant improvements to improve efficiency of operations, accessibility of amenities and services, and ensure that the building supports the primary objectives that the team is pursuing, such as greater integration with the health care continuum. Changes will occur in a phased manner, in the interest of avoiding resident disruption.
“For example, we are planning to put in a telehealth-enabled treatment room; well, there may be a time that actually matures beyond just being a treatment room into an actual clinic on site,” Poe said. “So, the whole idea is, can we start with an interim step … I call it progress over perfection.”
Poe also intends to draw from her experience working in hospitality-focused technology.
“One of the things I learned during that time was, how do you get value out of every square foot — and so, [we’re] really thinking about this from the perspective of orienting a community more toward holistic care and activities, and even making it a destination place for the community at large.”
The second work stream is focused on technology, or what Poe calls “digital transformation.” This is more than replacing manual or paper processes with electronic ones, she emphasized.
“It’s really starting to understand, where are those critical friction or inflection points that exist between the team members on the ground and the care and service that they’re trying to deliver to the resident, and how do we start to find … the appropriate way to solve this problem, and how do we leverage technology to do so?” she said.
That technology also needs to be harnessed to leverage the “data-rich environment” of senior living, Poe said.
She called out advances in nurse call technology as one example, saying that too much insight currently is “locked away,” but should soon be accessible. That is, nurse call data, cross-referenced with other information about a resident, should allow operators to more accurately determine “the level of service or needs” for a given resident, and to predict the likelihood of more advanced needs or adverse health events in the future.
The Senior Living Transformation Center should be a place where promising technology companies can “do, test and learn” to drive innovation more quickly, Poe said, noting the “death by pilot” problem that tech entrepreneurs often face in the sector today. One reason The Rivers held appeal as the site for the SLTC was that its size and unit mix are similar to many other senior living properties across the country, making it a good single-site testing ground for tech and operational practices that should have broader applications.
The ability to collect more robust data and leverage the information in more sophisticated ways also will be key to supporting the third work stream, which involves health care and clinical services — and, eventually, integration of senior living within managed care frameworks.
First, Poe pointed out that “unmet health care needs” in senior living communities are “driving unintended consequences” such as lower length of stay and lower occupancy, while also putting more pressure on staff members that is contributing to burnout and turnover.
So, the SLTC intends to partner with health care providers to “layer in the appropriate clinical services,” Poe said.
Of course, this dovetails with SLTC’s goal to partner with payers — or perhaps even become a payer via, say, launching or joining a Medicare Advantage Institutional Special Needs Plan (ISNP), which Whitman in the past floated to me as a possibility. Medicare Advantage can be the platform through which additional clinical services are rendered in a senior living community, via clinicians who are paid through the MA plan’s benefits structure.
“The foundation of any highly successful, outcomes-driven health care program is rooted in data and analytics,” Poe said. “When I mentioned earlier that we’re looking at this from the perspective of not only how may we invest in solutions and programming that actually has a tangible impact in the community today, but where we may also be able to extract additional data and insight, all of that is leaning toward the idea of understanding each community as a unique population, knowing how we’re actually driving quality outcomes for that resident, which translates to health care, quality outcomes, and then being able to position ourselves well to have those conversations with the health care system in the future.”
Obviously, the creation of the Senior Living Transformation Center is in its earliest stages, and the team is planning for each of the three work streams to go through several phases, Poe said.
Going back to the quote I shared at the top of this column, she views this moment as the start of a journey toward a fully realized model, with the opportunity to generate “a tremendous amount of value” along the way. Part of that value generation will stem from the SLTC’s intention to “define and establish new standards for measuring performance and quality in senior living,” as the team put it in a press release issued Tuesday.
That is, they believe that programming and care drive value in senior living real estate investments in ways that currently are not fully appreciated or quantified. The SLTC team is not alone in this belief; in 2020, just before the pandemic hit, The Springs Living CEO Fee Stubblefield spoke about efforts at NIC to create a “quality growth curve” to help capital providers understand how much they should be investing to drive better on-the-ground results.
“I think the big question is, as an industry, are we investing enough into our operational capacity to deliver the outcomes?” Stubblefield told SHN at the time. “The goal here is to create a universal set of indicators that can give capital an indication and really help us as operators answer that question.”
This sounds similar to what Poe described as SLTC’s plan. Namely, to develop a set of key performance indicators (KPIs) and gather higher-quality data than typically has been collected, in order to determine whether those KPIs are being met and how they are related to performance.
“I think we all understand the importance of NOI [net operating income] as a metric for how you can translate to real estate value,” she said. “But when you dig a little bit deeper there, how may we start to show these important operational decisions that we’re making and the influence that it actually has on driving value in real estate?”
Pick your metaphor — digging deeper, journeying forward — the fact is, the SLTC has a lot of hard work to do ahead. Given the track record of the players involved and the scope of their ambitions, the industry will be closely watching their progress, and my hope is that even before they reach their final destination, they will be able to share insights and practices that drive innovation and transformation not just in their own projects but across the sector.