Senior care in tough times

I’d like to never again hear this phrase at the start of a sentence, especially spoken by the double-bass “voice of God”:

In these financially trying times…

They seem to be followed by words of advice or, really, a sales pitch.

During the years I operated our own group of assisted living communities I can’t remember a time that wasn’t “financially trying.”

Oh sure, there were weeks, months, and maybe even a year or two when all our administrators and executive directors stayed put and stayed on track, and when our nurses, caregivers and other staff were happy and productive.

But there were certainly days and months when it seemed like we were in an “all hands on deck” environment, trying to avoid some pitfall or another.

Start-up, my favorite part of ownership, was exciting – and stressful. If the fill-up rate didn’t match projections, we could quickly drift into “financially trying times.”

The ebb and flow of census, even though it seemed to be almost predictably cyclical, could give us moments of anxiety and worry.

I’m pretty sure you know what I’m talking about.

My point is that as a business owner and operator, we know trying times. We live them, breathe them, and know that, with focus and consistency we will survive them.

We’ll survive these times, too, at least most of us. Some of us will have built enough cushion to avoid sleepless nights entirely.

Others of us will see opportunities in the challenges and come out ahead.

Those of us who work hard to consolidate expenses, hire and train smarter and more effectively will see a major upside, not just a slow recovery.

We can learn from watching those in our industry who are plummeting publicly and brutally.

And we can grow stronger. Because tough times are no match for tough, determined people on a mission!

Sunwest reader comment

Thanks to Duane who commented:

Your point is well taken regarding focusing on the people—both residents and staff. I’ve known both Jon and Darrell since they were in grade school and it’s sad to witness their preoccupation with expansion at any cost. They made calculated decisions to pursue the bottom line at the expense of quality of services. Don’t feel too sorry for Jon. At a hearing in Portland yesterday it was revealed that Jon is being paid $54,000 monthly by the management company retained to turn around SunWest. This is after Jon resigned as CEO.

Good point! Often developers start from the point of wanting to do something significant for elderly then become enamored with the rush of new development...losing sight of the people. It would be nice if we could learn from this and avoid these mistakes in the future, but history doesn't show that we learn very well.

Thanks for your participation in the conversation, Duane!

Jon Harder, Sunwest, and the assisted living future

I’ve never met Jon Harder, even though we live less than 40 miles apart, and have roots in the same community.

What I know if him I’ve learned from colleagues who are friends and from the media.

A few weeks ago I wrote about the challenges facing many assisted living companies that focused more on acquisition than on servicing the people in their care. Many have now been caught up in bank and mortgage crises, leaving them with little ability to managing the debt that rapid growth bought them.

Of course, hindsight being so clear, we can now see that these companies were over-leveraged and under-managed, in most cases. They banked on a future of free-flowing money, allowing them to continue to build and acquire; and a healthy economy allowing seniors to sell their homes for a profit and continue to fill their new buildings.

For Jon Harder, it has all collapsed around him.

This week’s Oregonian’s front business page posted a brief article, “Jon Harder resigns as Sunwest CEO.”

Jon Harder has resigned as CEO of Sunwest Management. The 41-year-old Salem man, who built Sunwest into one of the largest senior housing companies in the country, agreed to step aside as the controversy and anger swirling around him has become an impediment to the company's reorganization attempts…

This follows Harder’s personal bankruptcy filing on January 1.

It has to be an incredible low point for a man who built one of the largest senior care companies in the U.S.

One of our readers sent me this email last week:

When I was hired, there was a marketing meeting in Oklahoma City, John Harder came and visited, along with Joe Stephenson, his then VP of Marketing. As a seasoned administrator, I was impressed with their aggressive acquisition phase, but nervous as well. One of the managers asked Mr. Harder what his business plan was. He was a little irritated and told us that they (Sunwest) will keep on growing and looking for opportunities for growth and that was about it. I left that meeting feeling hesitant about my job security.

I had a momentary flash on this subject of my own narrow field of vision yesterday, listening to Barak Obama’s inauguration speech when he said,

…We understand that greatness is never a given. It must be earned. Our journey has never been one of shortcuts or settling for less. It has not been the path for the faint-hearted — for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things — some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom…

It evokes a mental image of the person who determines to make a difference; who takes a risk to create something profound and worthwhile. And perhaps, who does it all without looking for - or achieving - personal glory.

I don’t know Jon Harder. I can only imagine the personal agonies he may be experiencing as he watches the work of his lifetime disintegrate.

What I do know, though, is that our industry will succeed, and will come out of this time of challenge stronger.

Because behind the scenes, every day in every city of our country, men and women “obscure in their labor” work hard to make sure that they are focused on the people in their care – and the people providing that care.

Because in the end, if it isn’t about the people, it isn’t going to stand.

Thriving – not just surviving – in a tough economy: what’s your plan?

You see the news: senior care stocks are in the dumps. Managers of small, community-based properties as well as those operating multi-state corporations are feeling the pain as the housing market has slowed to what feels like a full-on stop.

Some of the stories about the challenges today are so bad they almost make you laugh, like this one, told in a Boston Globe article recently.

The daughter (Ms. McNabb) is trying to help her father (Mr. Looney) move into a retirement community he had finally selected:

First, the housing market slumped. So McNabb helped him spruce up the house and he lowered the asking price. They found a buyer - who died the day before the closing. McNabb lowered the price again, and again an interested buyer died.

The community they had selected – a life-care community with a large buy-in required – offered an innovative bridge loan, which covered the up-front fee until the sale of the home.

This story has a happy ending:

Looney took advantage of the loan program, moved into North Hill, and a few months later sold his house for $425,000 and repaid the interest-free loan.

If you’re going to survive you’ve got to do something. If you’re going to thrive, you’ve got to do something even more…go farther, be more innovative and effective with your services.

Several of our clients have told us that this year is their year to focus on customer service. Their goal is that every single employee, every single day, treat residents, families and guests in the very best way possible. Good customer service is one vital characteristic of superstars.

Other communities are adding services designed to bring people into their buildings on a regular basis. I particularly like the idea of offering memory enhancement classes; letting the public schedule time on a computer-based memory building program, and other similar programs. Great PR; great exposure.

Others are adding hospice care, in-home care and other services to expand their reach and revenue.

Whatever it is that you’ve chosen to do, one thing is clear: you need it to be effective, and NOW. And you don’t have time to wait for everyone on your team to get the idea of what you’re trying to do through word of mouth – you need to train fast, effectively and thoroughly.

You need to get new hires up to speed immediately on your mission and your programs. You don’t have the luxury of waiting until you’ve got a full “class” to start a comprehensive training program.

And while you’re at it, you need to save time and money. You need training programs to not only be available when they’re needed, where they’re needed, but you need them to be cost-effective. You need training that is available right now, when the employee needs to learn.

We often sell our employees short. “They don’t want to learn anything new,” we say. “They like to do things the way they’ve always been done,” we believe.

But ask how many of your employees are using new technologies today that they didn’t use just 6 months ago. You’ll be astonished how many of them not only have Facebook profiles, for example, but how many have learned to upload pictures, movies and search the internet for the newest, funniest Youtube video, not to mention how many use their computer to stay in touch with relatives across the world using Skype and other newer technologies.

They’re eager and willing to learn new things and to change the way it’s always been done.

They just need to be motivated, to enjoy the process and to have immediate gratification for their efforts.

If you’re going to be among the senior care companies that will thrive in the coming year you’ll probably be making a few changes. And you can’t do it alone.

Sunwest, Brookdale, Benchmark: A reader's response

Thanks, Mark Stevenson, for your email in response to yesterday's post:

Dear Ms. Brothers,

I have to ask, any relation to Dr Joyce Brothers? Ok, I got that out of the way.

I am a past executive director of both AL and IL properties for Torch, which is now Merrill Gardens, Alterra, which is now Brookdale and Capital Senior Living, Benchmark and the infamous Sunwest, when I managed a property here in Tyler for them in 2006.

When I was hired, there was a marketing meeting in Oklahoma City, and John Harder came and visited, along with Joe Stephenson, his then VP of Marketing. As a seasoned administrator, I was impressed with their aggressive acquisition phase, but nervous as well. One of the managers asked Mr. Harder what his business plan was. He was a little irritated and told us that they (Sunwest) will keep on growing and looking for opportunities for growth and that was about it. I left that meeting feeling hesitant about my job security.

When I arrived in Tyler and took over a 136 unit AL/IL property, I noticed right away the inability of Sunwest to pay its vendors on time, and the mountains of paperwork we had to fill out just to get approval for capital repairs, it was a mess.

On the other hand, when I worked for Benchmark Assisted Living, I was amazed at the way they did business. They built up their properties and kept most of them at 83% or better occupancy, and carefully and skillfully acquired more ONLY in the New England area and stayed committed to that region. That philosophy has served them well AND, they are totally committed to supporting, training,and encouraging their staff and front line leadership. Their senior management team is great, from Tom Grape on down the line.

The four points you mentioned in your article about the senior living for 2009 are true. The most important is human capital. They either make or break a company. I am so sorry for all those lovely seniors who face uncertainty while living at Sunwest properties and wondering if they will be cared for. The staff that are delivering this care with professionalism and courtesy are in the middle of taking care of their family and their residents. The lazy ones will quit, the dedicated ones will stay as long as they can. The administrators of those properties will face challenges they have never had to endure before.

This industry is very fragile now, and owners and operators need to think about staff and insuring that they are KEEPING their residents by providing great care. And keeping staff by assuring them that they are valued and needed. I love the seniors I have cared for and gotten to know.

Thanks for letting me share this with you,

Mark Stevenson
Project Controls
Data Analyst
CB&I
3102 E. Fifth Street
Tyler, Texas 75701

Thanks, Mark, and no - no relationship to Dr. Joyce!

I think your observations are exactly on target - those companies whose primary focus is on growth are now struggling and may not survive. Those whose primary focus is on service are doing just fine. To which we can say in unison: "Hello? What were you thinking?"

Thanks for sharing your comments and observations, and for joining the conversation about this important topic!

What’s ahead for the senior living industry in 2009?

The current price for a share of Sunrise Senior Living stock is $1.75. That’s down 83% in the past three months; more than 90% for the year overall.

Assisted Living Concepts (ALC) dropped 30% of their value in 2008; Capital Senior Living lost nearly 50% of value; Brookdale (BKD) lost 74%; and Five Star Quality Care lost nearly 65% of value; Emeritus (ESC) lost 53%.

Sunwest Management, one of the largest operators of senior living communities nationwide, is currently trying to reorganize, liquidate and, somehow survive. On December 31, 2008, the CEO of the company, Jon Harder, filed for personal bankruptcy. Private investors nationwide, many of them individuals who invested their life savings in what looked like a good thing, face the prospect of losing everything. Regulators are watching Sunwest properties closely as well, making ongoing management and operations an incredible challenge.

We’re in a society that is rapidly aging. More and more individuals are requiring care and the need will grow dramatically in the coming year.

And yet some of the companies dedicated to caring for them are on the brink of failure.

It was a bad year in the economy – no one will argue that. But senior living stocks fell much, much further than the S & P 500.

The housing slump has made voluntary moves into senior living communities drop off, as seniors, ready to make the move, are unable to sell their homes. The Dec. 21 news article in The Philadelphia Inquirer (Housing slump has some seniors uncertain) notes that this housing problem has led to many individuals delaying their move to pricey retirement communities, and even more need-driven assisted living communities.

The credit crunch has certainly contributed, as many senior care communities depended on continually developing new properties to boost their revenues overall.

What’s ahead for 2009?

Clearly, investors and operators alike will need to watch carefully, as the economic outlook remains shaky for this year ahead.

But the prudent operator will also need to consider these points:

People: It’s always about the people – those providing the service, and those receiving it. 2009 is a year to focus on what the senior care provider does to attract the best, train and equip everyone to do their best, and then retain them. It’s a year to implement all those great ideas for engaging employees – at every level of the business. This year, wise investments may not be focused on building or acquiring new properties, but rather on building up the people who provide your core service. We know what engaged employees can do for the bottom line; this year it’s time to truly engage them and achieve those results.

Leadership: It’s still a people-focused area, but one that needs microscopic attention this year. Corporate philosophy is great, but carrying that out to the hands’ on folks requires strong, capable leadership. One of the challenges for any rapidly-growing senior care company is finding enough trained, experienced managers in this relatively new industry. Developing programs to groom leaders in-house can also help engage and energize new employees who see possibilities for growth and advancement within the company.

Innovation: The smart senior care operator will look for ways, in 2009, to reach out to more individuals in the community without adding more overhead or taking on new debt. Providing care in seniors’ homes, offering day care, and looking for ways to incorporate technology should be areas to consider this year. Offering classes to seniors in the community at large in key areas of diet, fitness and memory may introduce more people to the company, and may even provide additional revenue streams.

Technology: It’s a great year to make sure that technology is being appropriately, effectively used throughout the company. Company websites need to be updated and interactive, as more and more seniors – and their families – search, interact, and learn from web sources. Community operations, education and training, and other services can be streamlined and made much more effective and efficient through use of widely available technology. For many companies, the ability to monitor revenue, census, compliance and other key aspects of operations – at the click of the mouse – makes investing in these programs invaluable.

One thing is certain: the year ahead will be interesting. It should be a great year to be a senior living operator, especially with attention to the finer points of management.