Successful Strategic Planning Board Retreats Board Retreats.pdf · Source: U.S. Census Bureau National Population Projections based on 2010 Data. 2016 Base Population; Projections

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Successful Strategic Planning Board RetreatsPresented by: Tim Cain, David Lewis, Sarkis Garabedian

September 27, 2018

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What We’ll Cover

• Hot topics in senior living. Demographics, competitive landscape, consolidation, post acute care

• The five indicators that reveal when your industry is about to be transformed

• How LCS has helped communities we work with respond to and prepare for rapid change

• Capital Manor Case Study

Hot Topics in Senior Living

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Upcoming Demand!

Source: U.S. Census Bureau National Population Projections based on 2010 Data. 2016 Base Population; Projections updated in 2017 (released March 13, 2018)

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1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100+

Popu

lati

on

Age

2016 U.S. Population

Millennials Generation X

Baby Boomers

Silent Generation

WWIIGeneration

Generation Z

Average CCRC move‐inAge approximately 78‐80; 

Oldest Boomer 72U.S. Population

Oregon Demographics

• 76% growth rate 2015 to 2040 projected for 65+

• 141% growth rate 2015 to 2040 projected for 85+

• Senior population expected to grow much more rapidly than 30% growth rate for the state as a whole.

Source: State of Oregon Office of Economic Analysis, March 2013.

Knowing Your Consumers

• The consumer, regardless of setting, is changing– Looking for choice, options – Increased connectivity– Value walkability, access to community at large– Want greater input, demand for transparency– Comfortable with change?

• People are living longer and may or may not have same resources as previous generations

– Middle market conversation– Contract and unit choices

• Desire for lifelong learning, intellectual stimulation

• Demand for fitness and wellness programs

• Increasingly savvy with technology

• We are serving multiple generations with different needs and preferences

Source: Ziegler Investment Banking

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Growth Among NFPs Defined

Source: Ziegler Investment Banking

NFP SL Growth

Expansions/

Repositionings

New Community Locations

Sponsorship TransitionsHCBS Offerings

Affiliations, JVs &

Collaborations

For-profits Are Growing Fastest and Building Majority of the New Communities

• For-Profit growth continues to outpace NFP growth:

– Significantly more new locations

– Largely rental IL and AL/MC prototypes

– Some FP developers shifting to higher-end “Micro CCRCs” without SNFs

– Differentiation between FPs and NFPs diminishing in some markets

– Bifurcating the SNF market with luxury short-stay rehab locations

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Seniors Housing Construction by Profit Status; MAP314Q05 – 1Q18

Not-For-Profit

For-Profit

Portland CCRC Occupancy: 93.6%

• For-profit providers are more likely than non-profits to invest in new moderate income CCRCs

• However, even if product is different, age- and income-qualified market is being saturated as for-profits grow

• Don’t be deceived into thinking all for-profits provide poor quality care and are therefore not a threat to you

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For-Profit Not-For-Profit

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Seniors Housing Construction by Profit Status; MAP31As of 1Q18

New Properties Expansions

Source: NIC MAP® Data & Analysis Service, as of 3/31/18 © National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org

Age of Oregon Continuing Care Retirement Communities

Source: Ziegler Investment Banking

Approximately 90% of Oregon CCRC's > 25 Years Old

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New For-profit Competition – Portland

• Touchmark in the West Hills opening in 2018

• Located three miles west of downtown

• New “hybrid” rental/entrance fee community

– 126 ILUs

– 70 ALUs

– 68 MC

– 18 cottages planned for second phase

Source: Willamette View Official Statement, 2017 and Touchmark website.

New For-profit Competition – Lake Oswego

Source: Mary’s Woods Official Statement, 2018.

• The Springs at Lake Oswego located off of Boones Ferry and Kruse way in Lake Grove

• Predominantly rental, but may include some entrance fee plans

– 105 ILUs– 87 ALUs– 24 MC

• Expected to open in late 2019

• Located approximately 5 miles from Mary’s Woods

New For-profit Competition – Seattle

Source: Senior Housing News, March 6, 2018.

• New $115 million high-end rental CCRC announced in the First Hill neighborhood of Seattle

– 194 ILUs

– 21 ALUs

– 28 MC

• 24-story property expected to be completed in 2019

• Located near existing NFP CCRCs in First Hill, Skyline and Horizon House, and three major area hospitals

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NFP Expansion Trends - West

• 40 Ziegler senior living expansion financings totaling over $1.8 billion involved the following elements:

Where incremental margin is generated

Source: Ziegler Investment Banking

NFP Sponsorship Transitions – Cumulative Data

Note: Includes market-rate communities; excludes government subsidizedSource: Ziegler Investment Banking 8/30/2018

29 41 6397

149204

264320

353

3651

75

111

174

254

345

405

498

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2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

Cumulative Totals (2010-YTD 2018) by # of Transactions & # of Communities

Transactions Market-Rate Communities

Drivers for NFP Senior Living Consolidation

Source: Ziegler Investment Banking2010

Influ

ence

Complexities of Healthcare

Leadership Turnover

Technology Demands

Diversify Service Lines

Hospital Consolidation

Ability to Attract Talent

Financial Pressure

Access to Capital

Competition

Ability to Attract & Retain Talent

Financial Pressure

Diversify Service Lines

Hospital Consolidation

Access to Capital

Reinvestment Requirements

Growth Capital

Leadership Turnover

Technology Demands

Competition

Board Strength

TODAY

Complexities of Healthcare

RECENT ADDITION

INCREASED PRESSURE

INCREASED PRESSURE

INCREASED PRESSURE

INCREASED PRESSURE

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Skilled Nursing TodaySupply of SNFs/Age of Plant

Occupancy/Length of Stay

Reimbursement

Staffing Shortage

Tech Needs/Cost

Home Care and Assisted Living Competition

ACA/Networks/ACOs

Aging Population

Increasing Lifespans

DRIVERS

DISRUPTORS

Source: Ziegler Investment Banking

Skilled Nursing Today

DRIVERS

DISRUPTORS

Source: Ziegler Investment Banking

Long-term SN

Resident

Long-term SN

Resident

Post-acute/Short

Stay

Post-acute/Short

Stay

Skilled Nursing Overall

Skilled Nursing Overall

• Changing preferences among consumers to stay in AL or IL with services

• Future of private pay?

• “Skip the SNF” trend• Decreasing LOS• Referral networks narrowing• FP up-scale development

Proactive Single-Sites

• Investing in current physical plant

• Ensuring strong occupancy through a firm commitment to marketing and sales

• Seeking operational efficiencies to combat rising costs

• Fully understanding the supply and demand characteristics of the local market

• Committing to solid and profitable operations, while at the same time planning for future growth

• Making sure that brand, identity, mission and values are clear and known to all stakeholders (internal and external)

• Exploring partnerships and joint ventures, where it makes sense to do so

Source: Ziegler Investment Banking

What are proactive single-site LPCs doing?

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ABOUT ZIEGLER

• Ziegler is a privately-held investment bank, capital markets, wealth management and proprietary investments firm

• A registered broker dealer with SIPC & FINRA

• Ziegler provides its clients with capital raising, strategic advisory services, equity & fixed-income trading, wealth management and research

• Founded in 1902, Ziegler specializes in the healthcare, senior living, educational and religious sectors as well as general municipal finance

DISCLAIMERS

*Investment banking services offered through B.C. Ziegler and Company. FHA mortgage banking services are provided through Ziegler Financing Corporation which is not aregistered broker/dealer. Ziegler Financing Corporation and B.C. Ziegler and Company are affiliated and referral fees may be paid by either entity for services provided.

This presentation was prepared based upon information provided to Ziegler Investment Banking (ZIB) and contains certain financial information, including audited andunaudited information, certain statistical information and explanations of such information in narrative form (the “Information”). ZIB believes this information to be correct as ofthe date or dates contained herein. However, the financial affairs change constantly, and such changes may be material. Today’s discussion may contain forward-lookingstatements, which may or may not come to fruition depending on certain circumstances, including those outside the control of management. Please be advised that ZIB hasnot undertaken, assumed no duty and are not obligated to update the Information. In addition, please be advised that past financial results do not predict future financialperformance. The material in this presentation is designed to present potential financing structures and options for discussion, however it does not represent a commitment tounderwrite bonds, place debt or provide financing and thus should not be relied upon as a promise of financing or underwriting commitment.

Survey the Audience

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Strategic Planning

Response Percent

Annually 32%

Every 2-3 years 13%

Every 4 years or more 29%

Never 26%

A transformation is upon us. It is about whether you plan to reinvent yourself and redefine your

business based on the transformations happening, or whether you stand still.

-Daniel Burns, Huffington Post

5 Indicators reveal when your sector is about to be transformed.

John Sviokla“How Old Industries Become Young Again”

Strategy + Business, Issue 76 Autumn 2014

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5 Indicators

5 Indicators

New Customer

Habits

New Customer

Habits

New Technology

New Technology

New Competitors

New Competitors

New Regulation

New Regulation

New Means of

Distribution

New Means of

Distribution

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What signals are emergingin your communities?

Growth Maturity

Decline

Revival

Death

Birth

Life Cycle of an Organization

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The average lifespan of leading US companies has decreased by more than 50 years in the last century,

from 67 years in the 1920s to just 15 years today.

-Professor Foster, Yale University

5 Key Points of Recommended Change

1. Guidelines that help boards to promote prudence, but to also understand that being risk averse is itself a risk

2. Regularly assessing whether or not the work of the charity is still relevant in a changing world

3. Increased expectations about board composition, ethical standards, and terms of office

4. Increased emphasis of the role of chair of the board in promoting good governance

5. Increased emphasis on openness about their work, results, as well as about the interests of trustees and those involved in leadership

Source: Not-for-Profit Quarterly, February 2017

…at the higher levels of board thinking, the whole enterprise is put in the context of the overall business situation. [Strategic] Thinking encapsulates past

experiences, current information and expectations about the foreseeable future. It is an ongoing

process, not the creation of a specific plan.

Bob Garratt, 2003, Developing Strategic Thought

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1. Prepare – Review, inform and educate planning participants

2. Include – Ask all stakeholders to weigh in

3. Assess – Summarize and share expertise

4. Define – Strengths, weaknesses, opportunities and threats

5. Identify – Collaborate and refine strategic objectives

6. Adopt – Establish key drivers for decision-making

7. Implement – Move forward with an actionable plan

STRATEGIC PLANNING – 7 Steps forming your strategic plan.

Common Themes from 20+

• A need to reposition

• HC Reform/Regulatory

• Recruiting/Workforce Development

• Connectivity– Current

– Future

• Board Development

• Leadership Development

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Beyond Bricks and Mortar

• Changing health care environment

• PAC strategy

• Technology

• War on Talent

• Changing resident expectations

• Wellness

Changing Health Care Environment

• Develop post-acute care strategy– Aligns with origination's future plan

– Achieves mission / vision

Home HealthHome Health

ILUILU

ALAL

MCMCSNFSNF

HospitalHospital

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We are on the cusp between “what is” and “what will be”

How to create opportunity out of change

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Do your resources support your strategy?

Financial MeasuresFinancial Measures

Benchmarking ComparisonsBenchmarking Comparisons

Best PracticesBest Practices

Setting Financial Targets

Setting Financial Targets

Metrics that Matter Most

• Need to establish a small number of key metrics that are critical to your success.

– Resident Satisfaction

– Occupancy

– Sales and Closings

– Revenue

– Net Operating Income/Margin

– Labor

– AR

– Cash and Debt

Ensure visibility and accountability to these metrics.

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Capital Manor

• Opened in 1963

• Currently 281 independent living apartments, villas and townhomes

• 83-bed health care

• No direct CCRC competition in Salem

About the Speaker

• Industry for 25+ years

• Life Care Services 18+ years as an Executive Director at Lifeplan/CRCC Communities

• Capital Manor 7+ years

Board’s Reason for Envision

• We already were working on a Master Plan for expansion.

• Wanted to make sure we were preparing not just for 5 years but 10 years down the road.

• Wanted to make sure we were not neglecting current needs operations while working on the Master Plan.

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Envision Planning Report Highlights

• Summary of Speaker’s Main Points

• SWOT Analysis

• Summary and Next Steps

• Only 11 Pages

The Board Met Again and Prioritized

• On-site home health and healthcare, physician access

• Technological upgrades and expansion for both operational and resident needs

• Recruitment and retention of staff: education, educational partnerships, internal career ladders

• Expansion planning for facilities and operations

• Multiple dining venues, amenities, choices

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Current Status

• Have staffed Home Care and applied for our licensure

• Adopted Odessey Resident Portal

• Changed all work computers to cloud-based

• Hired a Human Resources generalist (former intern at Capital Manor).

• Promoted staff to be Nursing Staff Development

Current Status

• Completed a best practice analysis for Memory Care and Manor Care (RCF)– Increased staffing

– Added new resident programs

– Added a formalized Memory care training for all staff

• Liked it so much, we are doing a Best Practice Study for Dining and Wellness this year

Where we are now…

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T H A N K Y O U

Sarkis GarabedianZieglerEmailPhone

Tim CainLife Care Services

EmailPhone

David LewisCapital Manor

EmailPhone