There is a lot of justifiable talk about how senior living needs to be more data driven. On the other hand . . . data can lead to horribly wrong decisions.
By Steve Moran
In the last couple of weeks I published two articles on Brookdale. In the first, I suggested that they spend too much time blaming others for their own problems. The second was their response to my article. The result has seen a good number of public comments, plus some private, not for publication or attribution, phone calls and emails.
The problem really gelled when I read this comment:
Corporate mergers, the “bigger is better” for cost efficiencies and controls theory of management, when delivering a quality of life experience for older adults, has yet to be proved to work.
I recently left a not-for-profit that got tied up for 2 years in a failed merger (disguised as an affiliation) because the “mission driven” company drifted into daily scrutiny of “operating ratio.” Residents were left out of the picture, monthly fees raised to the highest level in 10 years . . . yet residents are the ones who fund the whole operation.
Staff morale plummeted and left, services diminished and leadership appeared not to notice. Of course, in the aftermath of the failed merger, there is the same clean up as if it had — amends to residents that is helping them heal, but the basic trust of management deeply scarred.
People First vs. Data First
There is a lot of justifiable talk about how senior living needs to be more data driven, mostly in the context of understanding how to tell our readmission prevention advantage story. We also need more data that informs us about staffing and satisfaction. And, of course, data is necessary to do good financial management.
On the other hand . . . data can lead to horribly wrong decisions.
Betrayed By Data
This is a sort of true and sort of made-up story. The reason it is made up is because it is not about one specific community. The reason it is true is because it is based on a compilation of stories told to me over the past few years.
The Story . . .
There was a small local regional developer who had a pattern of building a community and selling a community every couple of years maintaining a portfolio of 4-8 communities. What would typically happen is that the oldest community would be sold to a much larger regional or national provider.
Because they were local owners, operators and developers when they sold the properties to big companies the occupancies were always in the mid- to high-nineties. This high occupancy meant high value to the seller.
The opportunity as seen by the buyer looked like this:
- High occupancy meant no market or sales challenges and low sales and marketing costs
- The staff was established and entrenched and working well together
- High occupancy meant potential to increase rates
- Lots of operational inefficiencies resulting in higher than necessary costs. Three reasons for the inefficiencies: 1) Friends selling to friends rather than negotiating for the best deal; 2) No scale so no power to negotiate better deals; 3) A lack of sophistication, meaning the local operator couldn’t really see the opportunity to save money.
Under New Ownership
New big box ownership comes into the community and begins to implement new systems. Here is what that looks like:
- New and increased technology. This takes team members away from the people business. It is hard work to figure out and honestly, some of the staff just can’t keep up with the new system so they quit or are let go.
- New national menus are implemented that are designed to give great meals and reduce costs, with food costs being one of the things that is really out of whack.
- Local contracts for everything from food to therapy is replaced with standard low cost, high quality national suppliers.
- Staffing ratios are cut to the national standards . . . another big financial win.
- The executive directors can no longer fly by the seat of their pants and are instead give extensive systems, policies and procedures to follow allowing them to not worry about unimportant stuff because it is all lined out for them.
The immediate result is spectacular. Occupancy remains high and costs are cut significantly. The new buyer sees an immediate surge in profitability and cash flow . . .
This is the power of data driven, highly systematized management.
And Then . . .
Over time, occupancy starts to drift lower. Residents are dying or moving to higher levels of care and the replacements don’t come as fast as they once did. The strongest team members leave because they don’t have the freedom to create and innovate. Residents find the food is not quite as good and the food service people are not quite as happy.
Their care still get done and their apartments and laundry are still cleaned. It is just that because the staff has to work more efficiently, there is not the same level of care.
And finally the transformation is complete. Staff turnover and dissatisfaction is high and occupancy drifts to the mid 80% wiping out every single data driven system driving logical savings.
Data and systems are important, don’t get me wrong. But success always means putting people before systems and data.