It’s been all over the senior living news the last few hours that Brookdale and Emeritus are merging, but what does it mean to the industry?
My email, phone, Skype and text message inboxes this afternoon were hot with the huge industry news that Brookdale and Emeritus are merging. I am not sure this is exactly right since it looks much more like Brookdale is gobbling up Emeritus: the Brookdale name and senior management will remain. The question really is what does this mean to the industry? High Level Details
- According to the press release, the resulting company will be “the only nationwide network of senior living communities with fully integrated ancillary services across the continuum of care.”
- Following the merger there will be a Brookdale community within 10 miles of 6.5 million seniors 80 years or older.
- Emeritus shareholders will receive .95 shares of Brookdale stock for each share of Emeritus stock.
- The combined company will consist of 1,161 senior living communities in 46 states, with 112,700 units.
- Andy Smith, Brookdale’s CEO, will remain as/become the CEO of the new Brookdale.
- The combined company represents 10% of the total market and they do not anticipate any antitrust problems.
- After the merger Emeritus shareholders will own approximately 27% of Brookdale.
What It All Means
So the big question is what does it all mean? In some sense it is too early to tell but for what it’s worth here are my initial thoughts in no particular order:
- If you are an employee at a Brookdale community it means nothing, or close to nothing.
- If you are an employee at an Emeritus community it means close to nothing except for a possible shift in culture and, perhaps, policies and procedures.
- If you are a regional level team member at Brookdale, unless you are a really weak leader, it means little or nothing, except perhaps a realignment of responsibility.
- If you are a regional level team member at Emeritus your job is likely to be slightly at risk if you are a weak leader, otherwise the combined entities will still need a bunch of regional people.
- Corporate level leadership . . . over the first two years after the merger almost all will drift off to do other things, taking with them substantial personal wealth.
- It will be a big win for some vendors and a big loss for others. I would mostly bet on the vendors who already have a relationship with Brookdale, but I suspect some percentage of Emeritus vendors will end up on the winning side.
Broader Senior Living Implications
My first thought was, “WOW! This will really shake up the industry”, but I am not so sure. Maybe these things:
- At its’ core all senior living is local, which is why some buildings owned by big companies perform exceptionally well and some don’t perform so well. These things are driven almost exclusively by the quality of the local management and, to a lesser degree, local market conditions.
- I have often wondered if there is a size that is so big that the company becomes unmanageable in terms of building a quality culture, providing excellent care to residents, supporting families, staying out of trouble with regulators and the press and making a profit. We have seen some skilled nursing and hospital companies face serious problems because of their size. It will be interesting to watch how the new Brookdale manages this.
- The new Brookdale will become a much bigger target for organizations like Pro Publica.
- A big national company could also incite an increased level of interest in federal regulation.
- In general, the bigger the entity the harder it is to innovate, so we will have to see. The flip side is that it will give them many more resources to innovate should they choose to do so.
- Wearing a marketing hat I would generally rather be marketing against Brookdale than for them only because it becomes so easy to use FUD (Fear Uncertainty & Doubt) about this behemoth for-profit company. – Note: this is not a personal opinion that the FUD would be legitimate, but no doubt it will be used.
It all comes down to execution. If they do it right, if residents and team members come first, they have the potential to create an amazing new company that would be both transformative for residents and their families and would make shareholders a boatload of money. Some websites worth exploring: Emeritus Moving Forward Brookdale Moving Forward What are your thoughts? Steve Moran
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“I have often wondered if there is a size that is so big that the company becomes unmanageable in terms of building a quality culture, providing excellent care to residents, supporting families, staying out of trouble with regulators and the press and making a profit.” YES
“A big national company could also incite an increased level of interest in federal regulation.” I HOPE SO. OBVIOUSLY THESE FOR PROFIT CHAINS ARE NOT SAFE ON THEIR OWN SELF REGULATION BECAUSE THEY ARE PROFIT FIRST FOCUSED.
“The new Brookdale will become a much bigger target for organizations like Pro Publica.”
IF YOU HAVE NOT DONE ANYTHING WRONG, NO NEED TO FEAR MEDIA INVESTIGATIONS.
FYI: I am anti-RCFE after my Dad was neglected, badly and repeatedly injured, severely dehydrated and malnourished and then died under the “care” of Merrill Gardens. One of the many Pro Publica worthy stories out there.
Keep your parents at home and buy them a Vigil call system…a lot safer and better care.
I am not yelling (caps on) …just setting my responses apart from your comments.
“IF YOU HAVE NOT DONE ANYTHING WRONG, NO NEED TO FEAR MEDIA INVESTIGATIONS.”
Oh, if only that were true.
I agree that it’s all about each local community’s performance — those that perform well will be profitable and those that don’t perform well will be losers. My guess is that the biggest benefit for the combined entity is economies-of-scale — related to purchasing, negotiation for services, etc. — which should significantly impact profitability.
Thanks for joining the conversation I appreciate your comments. Some thoughts:
1. I am sort of a “for-profit” leaning guy and I actually believe that doing a great job caring fro residents will always return great profits. That good care and bad care has more to do with culture and heart than anything else. There are some great for profit communities including properties owned and managed by Brookdale and Emeritus.
2. With respect to self regulation I think you are being too harsh on the for profits. In California it is the for profit assisted living association that is offering to pay higher licensing fees to increase the level of inspections because they are committed to high quality care.
3. With all due respect not doing anything wrong is not sufficient to protect yourself from the rabid media like Pro Publica and AC Thompson. As I wrote in a article a few weeks ago. AC Thompson did a one sided hatchet job on an Emeritus community in McMinville Oregon. There were two positives that he essentially ignored. The first and most important what that there most recent survey had zero deficiencies. The second was that many of the problems he wrote about were old and prior to Emeritus ownership.
Ultimately though this is a people business and because of that, no matter how diligent you are things can and will go wrong occasionally. Creating fodder for the press.
4. For many elders independent living and assisted living is a much better option than living at home alone. We know that seniors living alone at home suffer high rates of boredom and depression in large part because of a lack of social interaction. In addition senior living can do a great job of making sure residents get good nutritious meals and adhere to their medication regimen. I am sorry you had a bad experience with your dad.
“In California it is the for profit assisted living association that is offering to pay higher licensing fees to increase the level of inspections because they are committed to high quality care.”
Just a comment on the above. I’m sure the for-profits are willing to pay higher licensing fees as they pass that cost on to the consumer. Senior Living then may become more and more out-of-reach, than it already is to the majority of middle class.
Non-profits, by the same token will need to pass the increase in licensing fees to reducing employee and service costs, but most certainly not their corporate leadership(some sarcasm here intended).
Boards of Directors for both for and non-profit companies will continue to be allowed to define what “good care and service” is for elders in Senior Living. (You can decide if this is something that is positive or negative from your own perspective.)
Will they pass on the costs? I would assume so, but honestly I don’t think it is enough money to be substantive. You are right that quality senior living is out of reach for many people, the question really is how do you solve that problem?
It sounds as if you don’t think boards/management should be allowed to determine what good care and service is. Ultimately consumers (residents and family members) have some responsibility to check out and respond to both good and bad care. I am not so simple minded to think that is automatically enough, but it is a good start.
In addition ALFA is moving in the direction of setting some standards or best practice recommendations which is a good thing I think.
Do you have suggestions on how to improve the quality of care and reduce costs?
Maybe so on the economies of scale, but I can’t help but wondering if given the size of the individual organizations it will be that significant.
Having a spouse that’s been in leadership roles at both organizations (and is now elsewhere) I understood, from at least her perspective, that Brookdale had much stronger leadership, with clearly defined goals and a strong culture, while Emeritus often had operational challenges that were simply “swept under the rug”. This acquisition could potentially be a big win for front line Emeritus employees over the next couple of years.
I have worked with Brookdale and Emeritus. The local team can make a big difference. At the end of the day, it isn’t about us as vendors, anyway. It’s about the 24/7 that a fascinating senior will live and thrive in that community. One person who is passionate about what they do – and is truly engaged in enriching the lives of the residents in their property – truly can set the tone at a local level.
Great comment. Watch for my interview with Andy Smith the CEO of Brookdale where he talks about this very thing.