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Today’s senior living industry has a problem: Too many operators villainize their capital partners.
That’s the view of The Springs Living CEO Fee Stubblefield, who shares this and other candid assessments of the senior living industry–and his own company–in a newly-published book, “A Culture of Promise.”
While other executives in the industry, from Brookdale (NYSE: BKD) CEO Cindy Baier to Christian Living Communities CEO Jill Vitale-Aussem, have written books on the business of senior living, so it’s not often a top executive dedicates 218 pages reflecting on the sector. So, I think it’s important to reflect and analyze what Stubblefield penned.
According to Stubblefield, today’s senior living operating environment revolves around two central promises: An aspirational promise to care for residents and a business promise to fulfill capital obligations.
I recently spoke with Stubblefield about “A Culture of Promise” in which he outlines various ways The Springs Living has succeeded and failed in its journey to improve operations, deepen resident care, and grow sustainably.
I identified several themes in the book that apply to the wider industry, including how operators needs to better support staff through leadership development while also maintaining strong relationships with capital partners.
In this week’s exclusive, members-only SHN+ Update, I analyze takeaways from Stubblefield’s book and our interview, and tie them to broader industry trends, including:
– How the industry’s promises to residents and staff need to evolve
– Why operators should stop “villainizing” capital partners
– Why operators must “embrace change as a cornerstone” to grow
Fulfilling promises to residents while improving staffing
Senior living operators have spent the last four years managing increasing acuity of residents while attempting to address staffing challenges. In his book, Stubblefield extensively discusses an aspirational promise to senior living residents and staff at The Springs Living to provide care and improve quality of life, all while remaining a viable and profitable company.
Stubblefield said that operators often make “two promises” – one to residents, and another to capital partners. Those promises don’t always work in tandem.
“One’s very aspirational that we’re going to take care of you,” Stubblefield told me. “By the very nature of it, we will fall short because people will die. The other side of the coin is the business promise, and we must meet our obligations.”
But, Stubblefield told me, it’s also imperative that capital providers understand that senior living is “judgment-based and messy,” as workplace cultures between a senior living operator and capital partner can differ.
Fitting in the theme of promises, I also think operators have a promise to keep to their employees, and evidenced by the rate of turnover across the industry, I’m not sure those promises are always top of mind for operators.
Employee turnover has plagued the industry in recent years, and this concept could shape the industry’s approach to staffing well into the future. This comes amid broader health care staffing challenges, with over 32 hospitals and health systems cutting jobs near the midpoint of this year, according to a recent analysis by Becker’s Hospital Review. While competition remains high for competent, driven-employees, reaching them is another challenge.
Stubblefield identifies why employees leave, with reasons ranging from burnout to conflicts with leadership. Senior living operators often turn to higher wages as their first tool to attract new workers and keep the ones they have. But they often tell me that higher wages are not enough.
In his book, Stubblefield argued that workforce issues must be solved “with more than just salary.”
“We must create workplace stability through understanding, connection, and resources,” he wrote.
His point is that, although senior living workers should earn a decent wage, that is not where operators should stop., Instead they must work harder to improve the work environment, leading to a positive cascading effect on operations.
The Springs Living caters to staff wellbeing through adding amenities to break rooms, and baking in design elements to improve operations at the company’s most-recent newly built communities. In our conversation, Stubblefield noted how The Springs Living recently created a “workforce stability initiative” for new and existing employees that offers career development opportunities, increased training for staff unfamiliar with senior living and support resources.
Other operators are offering more flexible scheduling to attract workers, in addition to offering leadership development, recruiting hospitality and outside industry staff to providing direct financial support for frontline staff.
Through commitment to solving staffing challenges, operators will eventually see a payoff in improved operating performance and resident satisfaction. As I look across the industry, I see operators now doing more for staff, but I believe operators must continue to support employees to meet operating performance goals.
Capital and ownership relationships central to profitability
Recent industry transactions driven by distressed properties and ownership groups swapping out their operating partners indicate changing relationships between lending partners and operators. Capital partners request real-time data and community performance metrics, while providers struggle with ongoing operating challenges and slowed margin growth due to rising inflation and costs.
No doubt, senior living operators and the companies that provide them equity and debt experience friction as a result of the tough nature of operations. But Stubblefield believes that is no excuse to point fingers.
“Operators, stop villainizing your capital partners,” Stubblefield wrote. “You took their money! Now you have a business promise that must be fulfilled.”
In supporting operations, Stubblefield told me operators must support their most-challenged communities while balancing expectations from capital partners. That means needing to find value-alignment on mission between operations and capital partners to deepen a relationship, he also said.
“Business promises are behind the scenes,” Stubblefield said during our interview. “If we’re going to promise to grow so fast that we can’t find staff, and we don’t have the operational infrastructure in place to fulfill our promise to those residents and those employees, there’s no way we can keep our business promise.”
I think this is central to the mission Stubblefield writes about, bringing the promises to residents, staff and capital partners to a nexus of strong operating performance.
To Stubblefield’s point, some operators have grown quickly using what they describe as a strategy of transparency and mutually beneficial agreements with ownership groups.
It’s a theme that has been touted by Discovery Senior Living CEO Richard Hutchinson, who has pointed to the company’s growth in the last two years, launching multiple regional and national senior living brands fueled by a recapitalization from Lee Equity and Coastwood.
Earlier this year, Discovery also announced a recapitalization with Comvest Credit Partners for corporate-level financing to build out the Discovery Management Group.
Central to Discovery’s strategy has been finding mission-aligned capital partners that support research and development and the regional growth of operating companies, all while bringing dry powder to the fight to bring in new portfolios, Hutchinson told me in April.
“It’s a great environment to beta test something with these communities where we have enough scale so that it’s statistically valid information coming back to us, so we can make really good decisions,” Hutchinson told me.
Similarly, newly launched operator Evolve Senior Living’s co-founder Andrew Agins stated during a Capital + Strategy panel in April that the current state of owner-operator relations is “fundamentally broken” and deeper ties are needed between capital and ownership to support communities.
“We’re caring for the highest-acute part of our population, and we don’t even have electronic medical record systems that are all integrated so we can have a more holistic view of our residents,” Agins said. “That’s a problem. The data and technology in the sector are far behind other real estate investment types.”
I think that while operators must ensure deals won’t starve operations of needed resources, capital partners must also understand the complexities of managing a profitable senior living portfolio. I agree with Fee’s point of view that capital providers and operators must end the blame game in order for the industry to move forward and capture future demand.
‘Change as a cornerstone’
Recent news of senior living operators merging to find operational efficiency and scale highlights the changing pace and nature of growth in the industry. With less ground-up development and more measured approaches to expansion, operators must consider various factors when planning growth.
From the financial crisis of 2008 to surviving the pandemic, operators have faced many challenges in the last two decades. This has led some, like The Springs Living, to adopt a more conservative approach to growth. Stubblefield attributes this cautious mindset to his family’s experiences of losing and then regaining the hot springs the company is named after.
“Embracing these challenges really frames your perspective, and just because you’ve been successful in the past, it can disappear. Living through that has an impact on how we view growth,” Stubblefield told me.
In “A Culture of Promise” Stubblefield writes about how The Springs Living aims to “embrace change as a cornerstone” of operations in pursuit of new opportunities.
Looking across the industry, I do see many operators embracing change as a cornerstone. Change was a big theme at our recent DISHED and BRAIN event in Chicago, where senior living companies showcased new thinking in food and memory care.
From refocusing operations to support higher acuity residents to operators revamping communities to be ready for the next generation of consumer, change is constant in today’s operating environment. I think embracing this change is important for operators to tackle in order to remain relevant in the year’s ahead. That relevance being both an operator’s ability to differentiate on resident care and experience while supporting staff to fuel growth.
But the very nature of change, and commitment to organizational transformation brings risk in play. The future of the industry could rely on operators taking risks in some areas while remaining conservative in others. Although, the alternative of being too cautious could be worse, with Stubblefield noting in his 2021 SHN Changemakers interview that it was “riskier to avoid change.”
“No road is straight forever,” he said.
So operators must keep their eyes on the road that’s lined with aspirational promises to residents and business promises to capital providers.
