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Management issues require diversity of expertise

Seniors housing is an operations and management intensive business. Here, industry insiders tell you what to expect and what issues are on the table.

The management intensive business of seniors housing requires an expertise in several distinct areas, not limited to healthcare, hospitality, food service -- and, oh yes, property management -- which makes the seniors housing industry far more complex than just collecting rents and maintaining properties. For this article, several of the industry's leaders shared what they believe to be the most significant management issues affecting the operation of seniors housing facilities. Property management was rarely mentioned as a compelling factor, while marketing, staffing and responding to expanding state and federal regulations topped the list.

MARKETING AN ONGOING COMMITMENT Notes David Schless, executive director of the American Seniors Housing Association (ASHA) in Washington, D.C., "Each area of expertise involved in managing a seniors housing facility is no more important than the next, though the job of marketing is becoming more critical, particularly with expanding competition among assisted living providers. Marketing in terms of attracting new residents to fill units as well as minimizing resident turnover is increasingly important, given the tremendous amount of new assisted living products on the market."

At Parkside Senior Services of Park Ridge, Ill., a developer, marketer and manager primarily of independent and assisted living facilities, Edward McCarthy, executive vice president, states, "A pressing issue we deal with regularly is the number of seniors who regularly move out of a facility, due either to sickness or death. As a result, even fully stabilized buildings need to be continually remarketed. Facility managers need capable marketing directors and strong marketing programs that keep the property in the public eye, conscientiously follow-up on leads and requests for information, and continue to maintain strong connections to the community via referral agencies, senior groups and local social service agencies."

"To help overcome the significant issue of turnover, companies need to conduct a good market survey, before breaking ground, that identifies from where its clients will come," asserts Wendy Horn, senior vice president of Hospital Affiliates Development Corporation (HADC) of Nashville, Tenn. HADC is an elder care facility solutions company that develops many assisted and elder care living projects nationwide. "Today there are many property acquisitions taking place, but many focus primarily on the strategy of building an asset base, without enough regard for understanding market potential and limitations. For example, the number of seniors supported by a community's hospital discharge planners and general physicians needs to be quantified as part of a marketing strategy that keeps a project full," says Horn.

"Part of our marketing strategy is finding niches that create a different product, not more of the same," reveals Mari Jo Grace, executive vice president of Minneapolis-based Grace Management, a property management firm specializing in independent and assisted living projects. "For example, we're identifying underserved communities such as memory impaired, down syndrome and other population segments, and designing products to meet those markets." Niches help counter-balance a softening of the market, especially in the assisted living category in some major cities, continues Grace. "In Atlanta, on one street alone, there are six communities all lined up, and in Savannah, there's a softening of the market from just nine months ago. Denver has several assisted living communities all going up at the same time. This is not cause for alarm, because overall the demand is there, but just how deep is it for more of the same product in a single area?"

STAFFING FOR OPTIMUM SERVICE DELIVERY An outgrowth of the marketing mix is a strong training program that insures the proper delivery of care, states McCarthy of Parkside. "This is a fairly young business and it's hard to find good-quality people with 10 or even five years of experience. Staffing and staff training has become a crucial management challenge."

"Many of the people entering this business from a purely real estate background don't appreciate that assisted living isn't just real estate where services are delivered to seniors, but the other way around: It's a residential setting in which services and personal care, which are the primary drivers, require a lot of real estate," declares McCarthy. "As a result, some competitors putting up buildings and attempting to attract residents with lower rates are unable to hold onto their customers because their service delivery systems are inappropriate," he states.

Reports Bill Lasky, president and chief executive officer of Alternative Living Services of Brookfield, Wis., a developer and operatorof about 100 freestanding assisted living residences in 18 states, "Creating a corporate culture and mission-driven philosophy across a varied and geographically diverse group of employees is how we fulfill our goal of customer satisfaction. This to me is the first activity of management, with recruitment, retention and training as offshoots.

"Too much focus has been put on developing beautiful assisted living buildings, but what customers and their adult children really look for is the quality of the person taking care of Mom and Dad every day," says Lasky, who also serves as chairman of the board of the Fairfax, Va.-based Assisted Living Federation of America (ALFA). "The successful operator will be the one providing high-quality care to people by delivering services through high-quality people."

Adds Lasky, "Typically in our country the healthcare provider is paid for by a source other than the user of the service. But with assisted living's unique combination of healthcare and hospitality, a new event for our country, customers are empowered to determine their healthcare provider, and are voting with their feet. We need to train healthcare professionals to be oriented towards delivering customer satisfaction and respecting the power of choice wielded by today's assisted living customers. The force that sits in the assisted living movement is that our customers can shape what our industry is providing for the communities we service."

States Michael Gosman, executive vice president of CareMatrix Corporation of Needham, Mass., a developer and operator of independent living, assisted living and Alzheimer's facilities, "Today's seniors look at everything from a room's appearance to the quality of a meal to how well the grounds are kept. Hospitality is a key management issue, and we need to be sure we've got the right employee to provide it."

"Since the assisted living business is selling a residential environment to consumers, the challenge is to recruit, train and motivate a facility's entire staff, from maintenance engineers to corporate executives," insists Karen Wayne, ALFA's president and chief executive officer.

"The challenge in any emerging industry is finding and keeping good staff, continues Wayne. "I feel the most important criteria for hiring an assisted living facility administrator is his or her ability to interact with the people being served. Far more important than the education and certification they offer are their skills in maintaining close and regular contact with the residents. They should be the ones pouring the coffee each morning and conversing with the residents, not sitting at a desk behind closed doors."

Grace of Grace Management adds, "There's a demand for residents but the industry is having a heck of a time finding good, competent staff. We'll all just have to grow our own, then treat them like gold. Among other incentives, our company now offers benefits for part-time employees, and bonus programs for the hourly staff, just to get them to stay.

"In some markets, we have to be more creative with keeping staff than competing against dollars for dollars," says Grace. "At some point in time, if employees keep hopping from competitor to competitor for a little more money, the consumer won't be able to afford the industry's services."

REGULATIONS PRESENT A CONTINUING CHALLENGE Kayda Johnson is executive vice president and chief operating officer of the Senior Lifestyle Corp. of Chicago, whose 42 communities in 15 states cover a wide spectrum of seniors property types. She reveals that training in multi-state companies like hers entails keeping employees abreast of the plethora of state and federal regulations governing the seniors industry.

Using assisted living as an example, Johnson elaborates, "Assisted living is licensed differently in every state, and we need to understand and comply with all the variations. For instance, one state might mandate a stringent caregiver/ resident ratio while another is more lenient. Some states don't allow assistance with medication, just monitoring,while others do. Some admit incontinent residents, but others won't. The challenge is to meet all the regulations in every state in which we operate."

Adds Grace, "State regulations will have a tremendous impact on this business as more and more controls come down the pike. Assisted living started as private pay, with consumers in control; it will be a shame if we as an industry allow legislators to take control, rather than consumers. Our industry's leaders should work harder to educate legislators about what assisted living is," she says.

According to Joan Dugan, president and chief executive officer of Evansville, Ind.-based Sage Health Services, consultants to the financial community regarding healthcare investments, "Hands down, the most significant issue affecting the management of seniors housing is government control. Every time there is a change to the Medicaid program, which currently is being affected by Congress, our industry has an entire set of new regulations to follow.

"In addition, new enforcement regulations began this July that have serious monetary penalties for non-compliance. The method for surveying for compliance has changed, resulting in greater fines at the nursing home level. The biggest change now is that even isolated instances of non-compliance can cause penalties; previously, the government primarily looked for severe, widespread patterns of problems. All of us are seeking better quality assurance tools to comply with each regulation, but it's not an easy task," says Dugan.

In addition, Congress' recent five-year budget plan repealed The Boren Amendment, which had required states to financially support federal nursing home standards. These standards were created in 1987 to raise the quality of nursing home care, requiring states to deliver a certain level of care. The Boren Amendment permitted nursing homes some recourse against state Medicaid agencies to provide fair and adequate reimbursement for nursing care services. States can now set rates at levels they determine.

"With their many other budget pressures, and without a mandate to support federal quality standards for nursing homes, states have no resistance to backing down on financial support," laments Dave Kyllo, community relations director for the Washington, D.C.-based American Health Care Association. "If care costs $97 a day per person, and a state says it can only provide $75, the level of care has to be cut.

"If states are struggling now to meet Medicaid obligations, what will happen in 20 years? With two-thirds of nursing home residents now relying on Medicaid, the system just won't support the long-term needs of the elderly in this country," adds Kyllo. "Medicaid was created for the poor, but became the long-term care financing system for the elderly by default, because the country lacked another system. The personal and public financing of long-term elder care is definitely one of the most significant management issues in this industry."

Confirms Scot Park, managing director of Cleveland-based Karrington Advisory Services, which provides consulting services to the seniors housing industry, "With the repeal of The Boren Amendment, many nursing home providers fear states will lower reimbursement rates, and that the homes will begin to feel what could be a state budgeting fall-out. This could lead to growing pressure on assisted living facilities to accommodate lower income populations."

UTILIZING INFORMATION TECHNOLOGY Karrington Advisory Services also provides information technology consulting services to healthcare professionals. Park says in general the healthcare industry has done a poor job of leveraging information technology, "in part evidenced by Microsoft's recent decision to invest heavily in developing tools aimed at the healthcare industry," he observes. "The assisted living segment is about five to 10 years behind the general healthcare industry in its utilization of information technology. The seniors housing providers that become successful at finding ways to be more efficient through the use of information technology stand a better chance of being around in the future."

Schless of ASHA strongly agrees. "Increasingly as the assisted living industry becomes more a part of larger health systems and networks, it will be extremely important for the industry to develop information systems that allow it to effectively assess residents' developed care plans, track service provisions and tie it all back into cost-based accounting systems. It's a brave new world in the assisted living arena, and information technology is becoming a key factor for management."

Information systems should include preventive maintenance software that tracks building components and individual mechanical pieces at each property, claims Richard Seibert, vice president of Des Moines, Iowa-based Life Care Services Corporation, a developer and manager of more than 53 seniors housing communities in 23 states. "There are two types of aging going on as the industry matures: the people and the physical buildings themselves," he says.

"In addition to building wear and tear, remodeling for marketing purposes and complying with new code standards mean constant upgrading of the property. Computerized preventive maintenance and scheduling systems need to be utilized, instead of waiting for something to break or be out of compliance."

He adds, "Preventive maintenance software coupled by an active capital refurbishment plan help assure that seniors housing facilities are always market ready. Management must have the ability and foresight to set aside $20,000 a year, for example, for an $80,000 HVAC replacement expected in four years, instead of borrowing the money when the system needs replacement." Seibert points out that as the industry matures, those communities built 10 and 20 years ago will have had an entire generation of residents come through, and will need refurbishing and upgraded preventive maintenance plans.

"The aging in place of the residents themselves is also a big management issue," Seibert adds. "Seniors want to age in the same place before moving on to an assisted living or skilled nursing facility. All residences in the continuum should provide a rehabilitative environment that provides a quality, enjoyable lifestyle, allowing seniors to remain engaged as they age in place for as long as possible."

Notes Grace of Grace Management, "I'm seeing a blur between aging in place at an independent vs. assisted living facility. Some older independent communities are going to quasi assisted living to remain independent yet allow the seniors to age in place, which means an additional staff and increased prices. Independent communities have to determine what they are, in terms of their corporate philosophy, then either encourage aging seniors to move on to assisted living housing, or add one to their campus.

"Our company works with the families who have chosen an independent lifestyle to remain as independent as possible by decreasing the average age of entrance from the mid-80s to mid-70s," says Grace. She adds that it is difficult emotionally to approach families with the subject of moving on. "In addition, with fair housing and ADA, we don't want to appear discriminatory, but if we can't care for the senior adequately, and our liability increases, that's where I draw the line."

Indeed, the business of seniors housing entails numerous, complex management issues that seem to grow more intricate by the month. The industry leaders sharing in this article mentioned other operational issues not reported here, and sometimes seemed overwhelmed when discussing the challenges they face -- but all agreed on one thing: It's a great business.

Lorna Pappas is a freelance writer based in Andover, N.J.

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