By Rob Love, President/CEO
Congratulations to Dan Hermann, Lisa McCracken, Kat Dymond and everyone involved with pulling together Ziegler’s 2022 Senior Living Finance and Strategy Conference held in mid-September at The Greenbrier in West Virginia. As always, it was an amazing conference, filled with great educational information, fun activities (my first time ever playing pickleball!) and engaging social connection opportunities.
Here are five key takeaways I gleaned from the conference that I think are important to share with others in senior living.
1. 290% growth occurred in the high-income senior population
For years, we’ve heard that boomers aren’t savers, and they will have trouble affording senior living, and especially Life Plan Communities, in the future. And to a degree, there is more than a little truth in the growing number of middle-income seniors. Between 2018 and 2033, the number of middle-income seniors age 75+ (those with annuitized incomes and assets of about $25,000 to $100,000 in 2018 dollars) is projected to almost double from 8.4 million to 15.9 million, which certainly presents a significant growth opportunity for our field.
That said, Ziegler’s Lisa McCracken shared that the growth in middle-income seniors is dwarfed by the growth in high-income seniors (those with annuitized incomes of $100,000+). That population, estimated at 4.6 million in 2018, is projected to almost quadruple, growing to 17.9 million by 2033. This is very positive news for Life Plan Communities!
2. Grow organizational revenue through vertical integration
Dan Lindh, President and CEO of Presbyterian Homes & Services (PHS) in Minnesota, shared insights on his organization’s strategy to develop a strong operating margin. Over the years, PHS has been implementing a strategy of building smaller communities throughout the Twin Cities area, with individual communities within six miles of each other, and with all communities within a 35-mile radius.
This volume of residents, plus households served through other PHS services, enabled the organization to add a variety of vertically integrated service lines, including primary care medical services, pharmacy, hospice, senior dining and care navigation, among others. Today, the organization typically generates $15 million to $25 million of its $30 million in operating margin from these ancillary services. As Dan shared, “Our care center margins are a problem, of course, but the ancillary revenue more than offsets that and keeps the organization strong.”
3. Use your sales commissions to meet your financial goals
Michelle Gramoglia, President/CEO of Woodland Pond in New Paltz, New York, shared a unique approach to sales commissions that her community has used to improve its financial performance over the past several years.
In constructing this plan, the community mapped out specific financial goals, including:
- The amount of entrance fee revenue needed each month and quarter
- Occupancy goals
- Goals for sales by specific types of contracts (e.g., Lifecare, 50% refundable, etc.)
- Double occupancy goals
Next, the community developed a highly detailed commission structure that directly ties to achieving those goals. Rather than just a set commission per sale, sales counselors receive higher commissions for selling contract types that are more desirable to the community, higher commissions for certain specific residence types, and a bonus commission if a sale is made to a couple. Then, on top of those commissions, each counselor can earn an additional 20% premium if the community achieves its entrance fee goals, and can achieve even larger quarterly and annual bonuses for achieving quarterly and annual revenue goals.
While certainly more complex than most commission plans, Michelle reported that this structure has been a critical element in ensuring Woodland Pond consistently meets its financial goals.
4. Enhance revenue by diversifying contract options
As a co-panelist with Michelle, John Spooner, Co-CEO of Greystone Communities, expanded on how communities can increase revenue through modifying existing contracts and/or adding new options. Emphasizing that consumers wanting “choice” really means that they want “control,” John explained how offering additional contract options provides senior living prospects with greater ability to control their financial futures.
John covered many options, including (among others):
- Offering a blend of Lifecare, modified and fee-for-service contracts, with specific options designed for those with long-term care insurance
- Offering a range of refundability options
- Reducing refundability of certain options
- Unbundling services
- Creating flexible spending credits
- Creating entrance fee options that allow prospects to reduce their monthly fees
While offering a broad range of options may seem like it would overwhelm prospects, our sales teams can make it easier for them. The job of the sales counselor is to discover each prospect’s unique needs and goals, then only present the contract options that best fit with those goals.
5. The future is bright!
Yes, inflation is high. Yes, the stock market fell by nearly 7,000 points by the end of September. Yes, labor challenges are difficult. Yes, construction costs are out of this world. Yes, the supply chain is clogged.
Yet despite all these things, I felt a strong sense of confidence and optimism at the conference. The sense was, “We’ve made it through difficult times before, and we’re going to make it through these as well. And we’re going to come out on the other side stronger, just as we’ve done before.”
The growth of the population we serve is tremendous, and the number of people that can afford our services is growing just as fast. We are a field of innovators, and we are exploring new ways to address staffing and healthcare, as well as new ways of operating. It felt like the future is so bright, perhaps Ziegler should have been handing out shades instead of shirts!
