It's been more than a month since the merger between Brentwood, Tenn.-based American Retirement Corp. (ARC) and Portland, Ore.-based Assisted Living Concepts (ALC) was terminated, but ARC President Chris Coates isn't crying over spilled milk. Instead, he's looking toward the future with a vision of a country linked by networks of ARC-branded seniors communities.
The ARC/ALC merger, announced last November, had been part of ARC's strategy of growing Senior Living networks across the country, but, after being advised on Feb. 1 that ALC intended to restate its financial statements for the 1997 fiscal year and the first three quarters of the 1998 fiscal year, ARC and ALC determined it was in their mutual best interest to terminate the merger agreement. Even though that did not work out, Coates says, "We stay on very friendly terms with ALC and we hope one day we'll consummate something with them."
Such mergers have been a major source of growth throughout ARC's history. In fact, Coates, himself, joined ARC in December 1992 when ARC merged with the seniors company he had founded.
As owner/operator of 45 or so seniors communities across the country, ARC focuses on the continuum of care for people 75 and older with varying health challenges. "We think that continuing care model allows people to age in place. It minimizes the emotional and psychological impact of moving from one level of care to the next when their health and aging conditions require them. And it allows us to capture a customer at a younger age, before they would otherwise need stand alone assisted living - get them in our system and keep them there assuming we continue to provide quality services in a quality environment," Coates says. "We think that model that offers different levels of care and different price points is one that allows us to grow with the changing marketplace."
GROWTH REVOLVES AROUND NETWORKS ARC's core growth strategy involves creation of "Senior Living Networks" - a clustering of products or services from a variety of price points within a 30 to 45 minute driving radius. The hub - a continuing care retirement community - is surrounded by additional products and services, dictated by submarket, such as stand alone assisted living, stand alone or attached Alzheimer's care, occasionally additional independent living units, or an additional nursing home on a campus of assisted living community or standing alone. The physical plants are linked with a host of services including home care and companion services, therapy services and pharmacy services.
>From the consumer's standpoint, this is a network that provides services >that they can enter network anywhere along the continuum, according to >Coates. "Hopefully they will enter it early on and stay with us, but once >they enter the network they will get the advantages of working with the >sole provider, regardless of their needs. Since they will be dealing with >the same provider whose goal is to provide seamless services, it takes >some of the worry away from adult children of the residents." In fact, >Coates says, when it's time for a resident to move to another facility, >ARC will actually move them.
>From the company's perspective, the concentration of services and >facilities in one area creates economies of scale, particularly for >marketing and networking, as well as operating costs. "We can share >services and facilities, which means we can be a low-cost operator," >Coates says.
As far as a branding strategy goes, "We think senior living, like healthcare, is a local business," he says. "People want to be able to identify with something local." ARC's Senior Living networks are typically named after the hub, which has usually been in existence longer than the balance of the product. Eventually, Coates says, ARC will probably add its own name onto the local network name, but he acknowledges, "People don't usually get a lot of comfort out of a big chain."
No single network is fully completed yet, but some are farthest along in Denver, Houston, St. Petersburg, Tampa, Cleveland and Phoenix. "We think that diversity - both geographic and type and price - allows ARC to withstand some of the competitive forces," Coates says, pointing out that ARC operates over 1,200 nursing home beds, 8,000 or so independent living units and 2,500 or 3,000 assisted living units.
Being able to source, recruit, hire and train qualified and good people continues to be a challenge for the entire industry, Coates observes. "We are fortunate at ARC that our company, by and large, has had high retention."
He cites a study conducted a couple of years ago which found that ARC's mid-level managers had average tenure with the company of over six years; field managers, executive directors and residence managers - the people who run larger communities - had average tenure of over four years with the company, notwithstanding rapid growth; and senior management had over 11 years' tenure with the company and an average of 15 years' industry experience. Nursing associates, RNs and foodservice people, industrywide, have very low retention rates, but ARC's still were two or three times better than national average.
"ARC is a good place to work," Coates says. "Our mission focuses on people. The people who really make a difference are our front-line employees, more so than us guys in coats and ties in the corporate office." He notes that ARC will spend over $1 million on front-line employee training this year.
FUTURE LIES IN SHAPING INDUSTRY ARC sees its major contribution to serving seniors, by being involved in shaping the industry, both from a regulatory standpoint as well as a new product standpoint - helping to define and try new innovative senior living solutions.
"We're a company that has a bigger healthcare component than many of our competitors. We've always liked the healthcare aspect," Coates says. "So we have nursing homes and medicare home health and some other things that a lot of people don't have. We see ourselves as much as a healthcare provider as a senior provider, but we feel that is necessary to provide real service to our senior customers as they age in place, because you just can't separate health and aging."
If there are two kinds of seniors companies - those that are in it for the financial investment and those that are in it for the long-term service to customers - clearly ARC is one of those in it for long-term service.
"We're definitely in the missionary side of the work. We see this as something that we really want to do. We're not going to sell out," Coates says. "We do see ourselves as a consolidator, but [we'd be] the surviving entity. We are positioning the company that way. We might acquire others because they are looking for that financial exit, but we're looking for the long-term growth of the company so we can serve our customers."
"We started out as senior living company. That always has been our focus," Coates says. "I don't see that changing."