A taste of long-term care success

Mark Parkinson, former president and CEO of the American Health Care Association and the National Center for Assisted Living (AHCA/NCAL), along with Dr. David Gifford, AHCA’s chief medical officer, and Rae Anne Davis, AHCA’s chief strategic officer and senior vice president for administration, have authored a unique new book about how long-term care (LTC) providers, even in the most difficult times, both clinically and can be financially successful.

Filled with in-depth interviews, descriptions of bold strategic initiatives, and in-depth analysis, the book provides long-term care professionals with a guide to how they can be successful in all aspects of caring for our nation’s seniors. Learn from some of the most successful companies in the industry, regardless of your company’s size or business structure.
Below is a short excerpt Success in Long-Term Care: How Senior Care Communities Thrive Clinically and Financially.

Ensign’s Rise revolutionizes the LTC business model

Roy Christensen was a remarkable businessman with a good heart.

Everything he touched turned to gold. He was an even better person. Those of you who are good to great disciples know that he lived the life of a humble, self-sacrificing servant leader long before Jim Collins ever wrote about Level 5 leadership. If you are a fan of leadership and self-deception, you know that before the Arbinger Institute existed, he treated people like people. Roy was born in 1933 and could have done anything. Luckily, he chose a life in long-term care.

He saw a business opportunity in our aging population. Roy’s kind heart led him to a ministry that would improve people’s lives. He used this combination of talent and heart to build and grow some of the largest companies in long-term care. He became a true giant in the industry. He was a founder of Beverly Enterprises, which became the largest long-term care company in history, and helped found other major operators.

Unfortunately, these companies all have one thing in common. They all failed. The companies experienced great heights. Roy and others who created them became financially successful. And for a while, the companies were successful. But as time went on, everyone went out of business.

Roy and others had thought that size was an advantage. The more buildings, the better. Finally, a large company could provide resources for buildings that smaller operators did not have. They could handle all the administrative work in the back office, create standardized policies and procedures, and disseminate best practices across the platforms. Additionally, a large company has economies of scale that lead to increased efficiencies. They have better deals with supplier partners because they can buy everything in bulk. Size offers real advantages. As a result, these companies continued to grow. At its peak, Beverly had over 1,100 buildings.

But the size had a major disadvantage. There were no owners working in and managing the Beverly buildings. The owners were shareholders or senior management who were distant from the local environment of the facilities. This is important. Long-term care is more than a real estate investment. It wasn’t just 1,100 buildings in Beverly; They were buildings full of people who needed attention and care.

Caring for nursing home residents is difficult. Really hard. It takes passionate people who work hard for residents and employees. It takes someone losing sleep worrying about the success of the building and the health of the residents. To meet all of these challenges, having an owner or someone who acts like an owner in the buildings is crucial to success.

There are several reasons for this. When a shift needs to be filled, a resident needs special attention, or when there is an emergency, it is important to have an owner or someone to act like an owner in the building. Consider the example of an open shift. When a shift is open, an owner’s immediate thought is to fill it themselves or with someone who doesn’t work overtime.

Stacy and I worked every weekend for 10 years. It wasn’t because we were so committed. The reason for this was that we couldn’t figure out staffing for the weekend and didn’t want to hire an agency. An employee who doesn’t think like an owner will be tempted to fill open shifts with temporary workers or to fill them by creating overtime. These decisions are bad for care and bad for the bottom line.

Even for a non-owner, it is difficult to develop the passion of an owner. It’s not impossible. It happens. There are phenomenal building managers across the country who demonstrate this every day. But it is not universal. A large company can have the best processes possible, but if the leadership in the buildings doesn’t care passionately about the employees, the residents and the success of the company, it doesn’t matter.

Roy learned this the hard way. While his companies had well-trained administrators, it was different than having owners. These companies typically paid administrators modest salaries, and some viewed them as commodities. The decision-making took place in the home office. The administrators were in the buildings to implement company policies, not to drive innovation and provide leadership.

As companies grew larger, this diseconomie of scale became more apparent. There are several companies with 40 to 50 buildings that have managed to create a model where their administrators do not own the company, but behave as they do. There are even companies in the 200-building range, like Good Samaritan Society, Saber and LifeCare, that have succeeded in developing passionate building managers and providing great care. Many of their administrators share the same mission and passion as their owners. But as organizations get larger, maintaining that commitment becomes more difficult.

Furthermore, the big companies have made a fatal business decision. You have taken on too much debt. This is a mistake that operators of any size can make, but large companies have increased the pressure to make this mistake. Shareholders often demand that providers squeeze every last cent and more out of their properties so that they can achieve a one-off capital gain. Very few companies have resisted the temptation to do this. These transactions can directly represent hundreds of millions of dollars for shareholders of companies using debt financing. But these transactions then burden the operator with huge mountains of debt, which makes success difficult. Virtually all companies that have succumbed to this temptation have failed. Beverly was no exception and her debts were part of her downfall.

But Roy Christensen didn’t want to give up. He wanted to learn the lessons from these failures and create a new kind of nursing home company. At the age of 66, he decided to start over again, this time with his son Christopher. In one of his final speeches, Roy explained the reason he founded Ensign:

“Ensign was designed to redefine long-term healthcare. Driving the evolution of delivery from where it was to where it should be. The very name “Ensign” means the standard that the world should follow. It was a bold excuse to start a new business. Ensign was an attempt to improve on all the mistakes I made in Beverly, all the things I had done wrong in terms of growth, and the whole cultural concept of Ensign was a complete paradigm shift.”

Roy and Christopher made promises to each other as they developed the Ensign model, a set of unbreakable commitments to sustain the company. To develop the promises, they reviewed everything Roy and other large companies had done that hadn’t worked. Before they even made a dime, they spent time deciding why they would exist and what core values ​​they would hold themselves accountable to. Two of these promises proved crucial to Ensign’s success. These were:

• That they would distribute the property generously. Each of them initially had a 50 percent stake, but the plan was to give the majority of that to team members who proved worthy at all levels of the operation. The strategy was to create real owners in every building and at every level of the company.
• Be frugal and avoid leverage. They were committed to avoiding the mistake so many companies had made when they took too much money out of the business and left the operation with massive debt or lease payments.

The unbreakable promises became the foundation of remarkable business decisions that partly explain why Ensign has become what it is today.

The year was 1999. It was a remarkable time to start a new company. In 1998, the Medicare payment model changed, which had a devastating impact on the nursing home sector. Fully 20 percent of the sector went bankrupt and investors fled the market. But Roy and Christopher were determined. From the ashes of a series of failed companies and a failing sector, Ensign was born.