How Smaller operators Keep Up With Senior Living’s New Operating Landscape 

Senior living operators with smaller footprints are making moves that will help them compete in a new operating landscape.

Small-home operator Dallas-based Sage Oak has grown through ground-up development but is shifting to focus on “aggressive acquisitions,” according to CEO Loe Hornbuckle.

“We did a distressed acquisition of a chunk of someone else’s portfolio that was in the same niche as us,” Hornbuckle said during the Senior Housing News TRENDS conference in August. “We’re looking for more opportunity now, so we’re growing, but in a very niche way.” 

To keep up with the modern pressures of senior housing and care, Chicago Methodist Senior Services has pivoted away from it skilled nursing, representing a 105-bed reduction in its operations, according to Paul Spence, vice president of U.S. operations for United Methodist Healthcare Recruitment. 

Instead, the Chicago-based nonprofit has pivoted toward joint-ventures and a city services business.

“Being a mission-based company, Medicaid rates were just too low for us,” Spence said. “It wasn’t worth putting money into. It just wasn’t getting the returns.”

Among the other ongoing operations shifts at both organizations is staffing adjustments and recruitment efforts when it comes to bringing in workers from abroad, which has faced additional challenges stemming from the Trump administration’s crackdown on immigration.

Alongside this, both operators are finding ways to create efficiencies and manage expenses through a number of new strategies.

Thinking in new ways

According to Spence, taking a step back and trying to think in new ways is the biggest departure CMSS is making for its operations. The new focus on joint ventures is helping with revenue generation for both parties, especially when partnered with other nonprofits and small providers.

Sage Oak is homing in on what it means for the company to take on acquisitions rather than development, resulting in expanding its portfolio and bed count by around 20%. Today the company has eight communities.

The company takes a “scaling small” approach and acquires communities that average between eight and 16 units and are often overlooked by larger operators. When targeting these kinds of acquisitions, Hornbuckle said he prefers to find communities where occupancy had dropped to essentially nothing.

It’s easier for Sage Oak’s staff to implement new policies and changes without having to worry about existing residents that can complicate any transition from one operator to another. When Sage Oak takes over a property and implements its model, the company sometimes ups rates accordingly, and it’s easier to introduce that price structure to a newcomer rather than someone who has lived there for years.

“We’d rather start at zero, which is pretty counter to the whole industry,” Hornbuckle said.

CMSS started its staffing recruitment business, United Methodist Healthcare Recruitment, in 2005 to get ahead of the curve by over 20 years, with an emphasis on recruiting foreign nurses from the Philippines. In recent years, the organization has expanded its recruitment efforts and opened an office in Africa.

It can take as much as four years for a worker to move to the U.S. and fully integrate into the senior living workforce.

“Immigration policy is way behind in terms of skilled employees for healthcare. We need them badly. There’s a huge demand,” Spence said. “Our African offices are still recruiting, we’re still filing visas, but they are on the no-fly list … When they come over, we’ve got hundreds of nurses ready to come when the floodgate opens.”

According to Hornbuckle, one of the fixes the industry can look to when it comes to recruitment while it is waiting on foreign workers is ramping up efforts to appeal to other industries that are subjected to the threat of AI replacement, such as retail, fast food and hospitality.

“We have HR professionals that can come over from other industries, ales professionals that can transition … There’s plenty of industries where there’s some opportunity to kind of move over and do that,” he said. “I think the new strategy is to go after industries that are being impacted and talk to people.”

Creating efficiencies and lowering expenses

CMSS is a small organization with just three communities. But it is able to operate above its weight class through a series of vertical integrations across its partnerships. The move allowed it to find savings and efficiencies with IT support by working with other providers to form the Parasol Alliance.

The idea was to pool in with other providers and be equal shareholders, according to Spence, and now provides services across the country. It took similar approach by partnering with other operators and vertically integrating for in-house physical therapy management, risk management services, although it is now discontinued, and now is focusing on staffing and recruitment services.

Sage Oak’s playbook is centered around clustering communities to share resources among them, such as having two maintenance workers float between two communities rather than having one full time and one part-time worker at each.

Other efficiencies for Sage Oak come from getting to know its residents and clients and working around what they are actual willing to pay for, which has helped at a time of unstable inflation and rising global costs.

“If you think about all these technological investments or all these amenities that don’t get used, they add to the cost structure, but then they don’t have an ROI from a revenue perspective,” Hornbuckle said. “We have to make better bets on technology. We have to make better bets on amenities.”

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