The global coronavirus pandemic has created a “tsunami” of decreasing occupancy, coupled with increasing costs related to personal protective equipment and labor, to create an operating environment unlike anything seen before in the senior living industry, according to a panel of speakers Wednesday at the virtual Argentum Senior Living Executive Conference.
HealthTrust, a Florida-based senior housing and healthcare real estate valuation service, released a report Monday related to 30 operators representing more than 180,000 units. Panelist Colleen Blumenthal, chief operating officer and partner, said some common themes emerged about financial performance during the pandemic: occupancy declines, increased labor costs, unbudgeted PPE, sanitation and testing costs, and other expenses.
Even at communities maintaining waitlists, overall occupancy declined due to the new logistics of moving someone into a community during a pandemic, she said. Recovery, Blumenthal added, will depend on the location of a community, how many new units have been introduced in the preceding 12 months, and the severity of occupancy losses sustained by competitors.
Labor cost increases are attributed to a combination of “hero” pay, overtime, agency use, unlimited paid time off, stipends for child care, telehealth expenses to keep staff members out of physicians’ offices, and meal provisions or conversion of community kitchens into staff pantries to limit staff member exposure to the virus in the outside world, according to the report.
“By and large, when agency was needed, they were paying four times the premium rate because everyone was competing with hospitals,” Blumenthal said. “It was out of control.”
Although PPE typically is part of a community’s budget, Blumenthal said that N-95 masks, gowns, booties, face shields and head coverings were not, or the costs of those items increased significantly early in the pandemic, according to report findings. Another driver is testing; some operators said they were spending $500 per week on testing, she said, whereas others reported spending $15,000 per week.
“Testing wasn’t even a word anyone heard of when preparing their budgets this time last year,” Blumenthal said, adding that operators needed to pivot quickly to account for a variety of unexpected expenses, including serving trays, visitation tents, hand sanitizer and soap dispensers.
Diane Bridgewater, executive vice president and chief financial and administrative officer for Iowa-based Life Care Services, said the organization’s communities began tracking COVID-related costs early on, which provided insight into where dollars were being spent and identified communities in need of assistance. The effort also proved helpful on relief funding applications.
“Our ability to report on the expenses and, ultimately, up through the government, was critically important,” Bridgewater said.
Chris Hyatt, president of Wisconsin-based New Perspective Senior Living, said his company took a “Keep the Tank Full” approach, looking at how to keep the company financially, mentally, physically and emotionally aligned using projections and budgets.
In terms of mitigating unbudgeted expenses, Hyatt said the focus should be on needs versus wants and on obtaining what is necessary to operate communities and keep everyone safe.
Natural spending reductions occurred related to activities, transportation and marketing events due to the pandemic, he said, but he suggested revisiting and potentially renegotiating existing contracts, assessing purchasing versus leasing equipment, and placing non-essential capital expenses on hold to ensure adequate cash flow.
He also said communities need to look at standard operating procedures and charge and collect for services delivered, including evaluating and assessing resident acuity needs, meal plans, and annual or anniversary rent increases.
Hyatt also suggested considering ancillary products or services that could potentially enhance revenue streams, and rethinking whether to offer discounts when the cost of care and safety “are at a peak.”
“We have a tendency to focus on the safety front. It’s important to ensure collections are paid on time and not prolonged,” he said. “Keep an eye on the daily sales and keep the cash coming in, because that’s part of what we call operations. Keep that tank full.”
Bridgewater said another key piece of the puzzle is understanding the various relief programs and guidelines, which she called “one of the great challenges of COVID-19.”
“Just at the moment where you think you have one understood, an additional fact or interim final rule related to the application of a program comes out,” Bridgewater said, adding that evolving program guidelines, differing product types, differing complex structures and reporting requirements are challenges the industry is working through together.
The conference continues through Thursday.