By Jack Cumming
Above all else, most senior living communities are businesses. Some are run from central offices, large or small. Others are single-site and more intimate. Budgets, variances, occupancy, and other metrics govern them. It’s not a ministry. Money is central to the survival of the enterprise.
It’s a Business
That money interest was in evidence recently when Brookdale announced that it would not renew 120 community leases with Ventas when they expire at the end of 2025. Both Brookdale and Ventas announced the news in press releases. Brookdale said it was losing money with the leases, while Ventas was more opaque:
Ventas’s plans are intended to maximize the performance and value of these communities and further expand the Company’s SHOP footprint to increase Ventas’s future growth rate amid an unprecedented multiyear growth opportunity due to secular demand from a large and growing aging population. The Company may also choose to sell, lease or take other actions respecting a portion of the currently leased portfolio based on its Right Market, Right Asset, Right Operator™ approach.
In their announcements, neither Ventas nor Brookdale had much to say about residents or the staff members who take responsibility for those residents. Given that Brookdale gave a year’s notice, it appeared that this might just be a publicly visible negotiation, much like the appallingly insensitive games that unions and Congress play in their negotiations.
The two parties have now reached an agreement. However, the lack of concern beyond money that their conversation evidenced is a departure from historical business practice. Until the 1970s, the privilege of limited liability was justified by the customer value that corporations created.
That changed when an influential article by Milton Friedman of the University of Chicago endorsed greed by holding that the social responsibility of business is solely to increase its profits. Many business leaders took that as license to enrich themselves and their enterprises, and that remains a common outlook today. You can’t enforce integrity or a value mentality.
Paul Krugman calls this countinghouse notion “plutocracy.” That seems too mild. With power, including economic power, comes responsibility beyond mere self-interest. The purpose of business isn’t to maximize profit, though profit is necessary and motivating, nor is the purpose of business to advance societal social engineering. The purpose of business, plain and simple, is to provide customer value. That commitment to improving the quality of living justifies the social privilege of limited liability.
It’s a Job
The people who do the actual work that enriches investors and executives are the employees who deliver on the corporate promises. This was set in stark relief not long ago when a post-pandemic workforce shortage was labeled “the great resignation.” Good workers are to be valued. They are not, however, more important than paying customers, but more on that later.
The challenge for senior living is that so many of the jobs are either mind-numbing, e.g., medication management, or distasteful, e.g., incontinence management. Then there are those round-the-clock caregiver jobs. Without going into detail, I can share that I often encounter these caregivers, and their minds are generally off in space; the work they do is so uninspiring. Keeping such minions motivated is a major senior living challenge.
That’s where a well-paced, proactive technology and automation initiative can help. Letting technology handle the least meaningful, most repetitive chores can free staff for more challenging opportunities. In total candor, some of those opportunities may require some employees to transition to other employers or self-employment, but wise provider organizations can encourage such transitions by adopting pragmatic principles.
It’s My Life (Our Lives)
Residents have the biggest stake in all this. They pay the bills. If the community isn’t comfortable for residents, it won’t thrive. When asked what the job is, a sensible executive director replies, “to make residents and their families happy.” Those are wise words for corporate as well. Sometimes, all that is needed is to get corporate out of the way so that executive directors can partner with residents to make aging great.
Newsflash for Ventas and Brookdale. Maybe Milton Friedman went too far.
As someone who has spent years in the senior living industry, I can attest that there are ways to improve and be more cost effective, but what is ‘enough’ profit? Seniors are paying thousands of dollars a month and they will continue to pay (as they are able) if they experience the value in the community they live. Operators need to look at this value from the lens of their respective customers. Many investors are looking at quick returns vs. thinking about how this investment cares for the most vulnerable of our population and how this investment also supports the economy by employing dedicated frontline workers.