Operators must change with the times

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Smaller senior living operators may find they need to be more competitive.
Smaller senior living operators may find they need to be more competitive.

Looking to the future, a growing number of operators of individually owned, self-managed senior living communities have two major concerns: 1) they may not be fully aware of all of the issues that need to be addressed to keep up with the current state-of-the-art and the growing complexities of the senior living business model; and 2) once they identify all of the issues, how do they acquire them, and can they really afford to pay for them?

Multiple property portfolios and large scale third-party management companies have significant economies of scale and can implement the necessary strategies to keep up with changing trends. The future challenges for individual self-managed operators involve two key time frames: 1) short-run, what must operators consider in the next 18 to 24 months? and 2) longer-range, how can they address the future in at least a 24- to 60-month time frame?

Typical examples of current and future needs include: sophisticated systems and procedures; comprehensive; and expanded business practices, growth and expansion of information technology, and increasing sophistication of prudent business operations including bench marking, sales and marketing, human resources, risk management,and enhanced purchasing power. One issue is very clear: Financial viability and available cash flow must be enhanced in order to procure additional services, resources and professional advice and counsel. The trends of increasing minimum wage also will impact entry level workers.

There are four basic property management options for senior living communities: 1) individual self-management; 2) purchase as required, short-term third-party management company services and resources while sustaining full self management autonomy; 3) procure selective management support on an ongoing basis from either local providers or through a negotiated contract with a full service, third party management consulting firm, and 4) full scope long-term outside management support.

Most self-managed operators desire to remain in complete control. That's understandable. But it will be increasingly difficult to achieve. Some not-for-profits and for-profit operators may think they are somewhat immune. That's not true. To remain successfully self-managed in the future, sponsors and owner/operators must essentially create the same service mix and resources that they might otherwise get from a qualified third-party management company.

Here is but a sample of some existing and future self-management issues to address. There are actually about 25 that will surface in the next five years:

1. Systems, Procedures and Policies — Having sophisticated, yet practical, and cost-effective systems, software, operating strategies, controls and performance enhancements.

2. Achieving Economies of Scale — Realizing the potential for creating significant ongoing operations and procurement economies of scale that deliver substantial (and necessary) financial benefits to an individual community.

3. Staying on the Leading Edge — Sustaining the ability to stay on the leading edge of the state-of the-art in operations strategies and technology in an ever-changing complex industry.

4. Providing Innovative Operating Strategies — Executing cost-effective, consistent and focused market positioning, sales and marketing initiatives, along with cost-effective operations that result in high resident satisfaction and clinical excellence.

5. Risk Management Steps — Having leading-edge risk management knowledge, experience and systems. Contractual and resident care litigation will continue to increase along with potential cost exposure.

6. Succession Planning — Operators must recognize that leadership can change by both planned and unpredictable events. Developing existing “bench strength” with existing staff also will be a mandatory initiative.

7. Growth In Community-based services — Progressive communities are creating an expanded seamless continuum beyond their campus into their Primary Market Areas. This generates additional revenue and sharpens the image and market positioning of the original senior living campus.

8. Enhanced Organic Growth —That's a fancy term for expanding service delivery and financial proceeds from an existing asset — the current community.

9. Increased and Sharpened Board Involvement — Board members should no longer be selected or retained as an honorary position. Boards should be carefully diversified based on specific experience and the ability to directly benefit the community on a continuing basis.

The complexity of the senior living business has increased substantially in the past 10 years. This trend is projected to dramatically increase over the next 10 years. A frequently used cliché is still very appropriate: “Evaluate the past with 20/20 hindsight . . . look to the future with an entrepreneurial vision.”

Jim Moore is president of Moore Diversified Services Inc., a national senior housing and healthcare consulting firm based in Fort Worth, TX. He has written several books about assisted living and senior housing, including Assisted Living Strategies for Changing Markets. A new book, Independent Living and CCRCs, is now available. He can be reached at (817) 731-4266 or jimmoore@m-d-s.com. “Most self-managed operators desire to remain in complete control.”


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