Mark Parkinson, the former president and CEO of the American Health Care Association and National Center for Assisted Living (AHCA/NCAL), along with Dr. David Gifford, AHCA's chief medical officer, and Rae Anne Davis, AHCA's chief strategic officer and senior vice president for administration, have authored a unique new book on how long term care (LTC) providers can achieve success both clinically and financially, even during the most challenging of times.

Full of in-depth interviews, descriptions of bold strategic initiatives, and deep-dive analysis, the book offers long term care professionals a playbook on how to thrive in every facet of caring for our nation's seniors. Learn from some of the sector's most successful companies, no matter your organization's size or business structure.  

Following is a brief excerpt from Long Term Care Success: How Senior Care Communities Thrive Clinically and Financially.

Ensign’s Rise Revolutionizes the LTC Business Model

Roy Christensen was a remarkable businessman with a kind heart.

Everything he touched turned to gold. He was an even better human being. For those of you who are Good to Great disciples, you know he lived the life of a humble, sacrificing servant leader, long before Jim Collins had ever written about Level 5 leadership. If you are a fan of Leadership and Self-Deception, you know he was treating people as people before the existence of the Arbinger Institute. Roy was born in 1933 and could have done anything. Fortunately, he chose a life in long term care.

He saw our aging population as a business opportunity. Roy’s kind heart led him to a service that would improve people’s lives. He used that pairing of talent and heart to develop and grow some of the greatest companies in the long term care space. He became a true titan in the industry. He was an original founder of Beverly Enterprises, which grew into the largest long term care company in history, and he had a hand in forming other major operators.

Sadly, those companies all have one thing in common. They all failed. The companies had great highs. Roy and others who created them became financially successful. And for a time, the companies succeeded. But over time, all went out of business.

Roy, and others, had thought that size was an advantage. The more buildings, the better. After all, a large company could offer resources to buildings that smaller operators did not have. They could do all the back-office administrative work, create standardized policies and procedures, and spread best practices across its platforms. In addition, a large company has economies of scale that create efficiencies. They have better deals with vendor partners because they can buy everything in bulk. There are real advantages to size. As a result, these companies grew and grew. At its peak, Beverly had over 1,100 buildings.

But size proved to have one major disadvantage. There were no owners working in and running the Beverly buildings. The owners were shareholders or C-suite executives, far removed from the local setting of the facilities. That matters. Long term care is more than a real estate investment. Those weren’t just 1,100 buildings in Beverly; they were buildings filled with people who needed attention and care.

Taking care of nursing home residents is hard. Really hard. It takes passionate people who are intensely dedicated to the residents and staff. It takes someone losing sleep because they are worried about the success of the building and the health of the residents. To meet all these challenges, having an owner or someone who acts like an owner in the buildings is critical to success.

There are multiple reasons for this. When a shift must be filled, a resident needs special attention, or if there is an emergency, having an owner or someone who acts like an owner in the building matters. Consider the example of an open shift. If a shift is open, an owner’s immediate thought is to fill it themselves or fill it with someone who does not create overtime.

Stacy and I worked every weekend for 10 years. This wasn’t because we were so committed. It was because we couldn’t figure out weekend staffing, and we weren’t going to use an agency. An employee who doesn’t think like an owner will be tempted to fill open shifts with agency workers or fill it by creating overtime. Those decisions are bad for care and bad for the bottom line.

It is also difficult for a non-owner to have the passion of an owner. It’s not impossible. It does happen. There are phenomenal administrators in buildings across the country who prove that every day. But it’s not universal. A big company can have the best processes possible, but if leadership in the buildings doesn’t care passionately about the staff, residents, and success of the enterprise, then it will not matter.

Roy learned this the hard way. While his companies had well-trained administrators, it was different from having owners. These companies usually paid the administrators modest salaries, and some viewed them as commodities. Decision-making took place at the home office. Administrators were in the buildings to implement corporate policies, not to innovate and lead.

The larger the companies became, the more this disadvantage of size became apparent. There are multiple companies with 40 to 50 buildings that have succeeded in creating a model where their administrators may not own the business, but act like they do. There are even companies in the 200-building range, like the Good Samaritan Society, Saber, and LifeCare that have succeeded in developing passionate building leaders and providing great care. Many of their administrators share the same mission and passion as their ownership. But, as organizations become larger, it becomes harder to sustain that commitment.

On top of that, the large companies made a fatal business decision. They took on too much debt. This is a mistake that operators of any size can make, but large companies have added pressure to make this error. Often, shareholders will require that providers extract every last cent out of their real estate and then some, so that they can experience a one-time capital gain. Very few companies have avoided the temptation to do so. These transactions can mean hundreds of millions of immediate dollars to the shareholders of the companies that lever-up. But these transactions then leave the operator with mounds of debt that make it difficult to succeed. Virtually all the companies that have succumbed to this temptation have failed. Beverly was no exception, and its debt was part of its demise.

But Roy Christensen was not going to give up. He wanted to take the lessons of these failures and start a new type of nursing home company. At the age of 66, he decided to begin again, this time with his son Christopher. In one of his last speeches Roy explained the reason he formed Ensign:

“Ensign was conceived to redefine long term health care. To lead in its evolution of delivery from where it was to where it should be. The very name ‘Ensign’ means the standard the world should follow. It was a bold pretense to begin a new company. Ensign was an attempt to improve on all the mistakes I made at Beverly, all the things I had done wrong in terms of growth, and the whole cultural concept of Ensign was a complete paradigm shift.”

Roy and Christopher made promises to each other as they constructed the Ensign model, a set of unbreakable commitments to sustain the company. To develop the promises, they reviewed everything that Roy had done, and other big companies had done, that had not worked. They spent time, before ever earning a dime, deciding why they were going to exist and what core values they would hold themselves accountable for. Two of these promises proved to be critical to the success of Ensign. Those were:

• That they would distribute ownership liberally. Each of them started with 50 percent ownership, but the plan was to give most of that away at every level of the operation to team members who proved worthy. The strategy was to create true owners in every building and at every level of the company.
• To be frugal and avoid leverage. They committed to avoid the mistake that so many companies had made in taking too much money out of the enterprise and leaving the operations with massive debt or lease payments.

The unbreakable promises became the foundation of remarkable business decisions that, in part, explain how Ensign has become what it is today.

The year was 1999. That turned out to be a notable time to start a new company. In 1998, the Medicare payment model changed, and it wreaked havoc on the nursing home sector. A full 20 percent of the sector went bankrupt, and investors fled the space. But Roy and Christopher were determined. Out of the ashes of a series of failed companies, and a failing sector, Ensign was born.

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