Future Age – March/April 2010 - 36

“Not-for-profits hold their staffs; they are committed to mission and community, making life better for seniors no matter where they call home. They need to tell their story.”

intentions,	some	folks	in	Washington	say	 we	need	more	regulation	and	tougher	 enforcement.
Daniel	Hermann,	senior	managing	 director,	head	of	senior	living	finance,	 Ziegler,	Chicago,	Ill.

FutureAge:	How	are	providers	focusing	 their	efforts	on	surviving	the	poor	economy	and	setting	themselves	up	to	thrive	in	 the	future? Dan Hermann:	As	a	general	rule,	they	 are	more	focused	on	operations.	When	we	 come	out	of	this	recession,	just	[as]	The Wall Street Journal	noted	that	productivity	 stats	always	go	up	when	you	come	out	of	 a	recession,	they	will	wait	to	add	staff	or	 spend	money	until	they	truly	feel	stable.	 The	ones	who	made	the	most	effective	 changes	will	come	out	of	this	lean	and	 mean. Nearly	everyone	has	raised	their	focus	 on	marketing.	It’s	gone	from	being	a	topfive	priority	to	now	number	one	or	two.	 Our	research	shows	they	are	educating	 seniors	through	seminars,	seeking	partnership	with	local	realtors	and	others,	 deferring	or	discounting	entrance	and	 monthly	fees,	offering	resident	referral	 programs	and	more. Finally,	the	exploration	of	home	and	 community-based	services	(PACE	programs,	for	example)	is	as	high	or	even	 higher	than	it	ever	has	been;	people	have	 more	confidence	and	time	to	spend	on	 these	programs,	because	they’re	not	spending	the	time	they	would	have	spent	on	 development.	 FA:	What	are	providers	doing	in	terms	 of	debt	and	credit? DH:	People	are	working	on	managing	 debt.	That’s	the	other	area	of	management	 focus;	there’s	been	a	dramatic	change	[on	 the]	housing	and	bank	fronts.	It	couldn’t	 have	been	a	worse	combination.	Banks	are	 much	more	restrictive,	reacting	to	cov36	
futureAge	| March/April 2010

enant	violations	much	more	aggressively.	 Fees	on	letters	of	credit	are	up	50	to	150	 percent,	in	some	cases	forcing	refinancing.	 Where	[a	provider’s]	credit	has	been	weakened,	it’s	a	bad	combination. What	we	believe	might	be	permanent	is	 in	fact	the	bank-qualified	program.	Part	of	 the	stimulus	modified	a	provision	in	tax	 law	that	fosters	banks	buying	municipal	 debt.	It	did	not	used	to	include	not-forprofits,	but	now	it	does,	and	it	has	been	 upped	from	$10	million	to	$30	million	 per	year	per	borrower.	That	program	has	 definitely	helped	with	smaller	and	medium	 [organizations]. On	the	credit	side,	providers	need	to	 focus	on	operations	and	performance,	 meeting	certain	standards.	This	economy	 has	caused	management	teams	to	be	much	 more	focused	on	operations;	they	know	 they	have	to	live	on	their	operations.	They	 are	also	working	on	getting	fundraising	 platforms	in	place. FA:	Despite	the	problems	we’ve	seen,	 there	is	no	doom-and-gloom	in	your	outlook.	Can	you	explain? DH:	We’re	very	optimistic	on	the	sector.	We	know	the	demographics	are	very	 forgiving,	and	we	know	that	new	supply	 is	not	being	built	at	the	same	pace	as	the	 [changing]	demographics.	A	large	number	 of	people	believe	that	time	will	take	care	of	 the	occupancy	problem.	Numerous	people	 are	doing	very	well	and	are	in	a	position	to	 thrive.	At	newer	campuses,	the	biggest	risk	 is	[for	those]	that	are	still	filling.	Those	 who	have	had	to	halt	projects	or	stumbled	 in	their	execution	become	the	headline	 news,	but	they	are	a	small	fraction	of	the	 total	supply	in	the	country.
Cheryl	Israel,	executive	program	director,	construction	service,	MedAssets	 Supply	Chain	Systems,	St.	Louis,	Mo.

economy?	What are	the	most	worrisome	 things	you’re	seeing? Cheryl Israel:	The	mission	of	my	 program	is	to	help	reduce	the	cost	of	 construction	projects	by	helping	with	subcontractor	purchases—we	help	them	buy	 [materials]	at	better	prices. Last	year	funds	were	frozen	and	capital	 was	hard	to	get,	although	it	was	a	buyers’	 market.	But	still,	some	of	your	big	organizations	were	hiring	and	building	even	 while	the	recession	was	in	full	swing—if	 they	had	the	capital	and	were	in	a	good	 financial	position,	they	could	build	 cheaper	than	before. Now	things	are	freeing	up;	people	aren’t	 as	concerned	about	spending	reserves	on	 property	improvements,	but	are	looking	 forward	to	getting	bonding	and	additional	 money	that	last	year	they	wouldn’t	consider.
Jim	Glynn,	principal,	GlynnDevins	 Advertising	&	Marketing,	Overland	 Park,	Kan.

FutureAge:	For	those	providers	that	 are	stretching	out—adding	new	revenue	 sources,	offering	more	HCBS,	etc.—what	 kind	of	strategy	should	they	be	taking	to	 get	the	word	out? Jim Glynn:	They	want	to	be	a	leader	 in	the	market	for	anything	a	senior	might	 need.	You	want	to	have	that	awareness.	 Then	I	think	you	can	expect	greater	revenue.	The	community	that	has	a	good	 reputation	among	professionals	and	families	will	do	better	with	those	groups. FA:	What	should	CCRCs	be	doing	to	 prepare	themselves	to	thrive	as	the	economy	changes? JG:	Always	look	at	additional	sources	of	 revenue.	We’re	all	for	home-based	services,	 but	here’s	what	I	think	we’re	missing:	The	 average	occupancy	right	now	for	CCRCs,	 of	which	85	percent	are	not-for-profit,	is	 about	89	percent.	Let’s	be	sure	we’re	doing	

FutureAge:	What	kinds	of	problems	are	 providers	having	as	a	result	of	the	poor
Future Age – March/April 2010

Table of Contents for the Digital Edition of Future Age – March/April 2010
