• August 30, 2016

    Meet Mark Parkinson, President & Chief Executive Officer of the American Health Care Association and the National Center for Assisted Living. Parkinson’s background spans not only policy and government (he served as Lieutenant Governor of Kansas from 2007 to 2009 and served as Governor from 2009 to 2011), but he and his wife, Stacy, also owned and operated assisted living communities for more than 15 years.

    As the leader of an organization that serves more than 13,000 for- and not-for-profit nursing homes, assisted living residences, and care facilities, Parkinson knows firsthand the challenges facing the industry—both on the large scale, and on the operator level. We sat down with Parkinson to learn about his take on the upcoming election, why leverage in business can be a good thing (or a bad thing), and how being an entrepreneur ultimately helped shape his role in leading one of the largest health care organizations in the nation.

    How did you get into senior care?

    I was in the Kansas State Senate, and a very aggressive group of developers—they were called Sterling House and later became Assisted Living Concepts [now Enlivant]—had built some buildings in Kansas, and they had not gotten them licensed.

    Some of the nursing homes complained that these assisted living buildings were there and hadn’t been licensed, and asked the state to shut them down. Their lobbying strategy was to bring legislators out to see these assisted living buildings, thinking that once somebody saw them they’d think that they were great and not want to shut them down, and want to create a licensure for them. So I went out and toured a building and thought it was a fantastic service to have a level of care that was in between living at home and a skilled nursing facility. I was so enamored with it that I called my wife (this was in 1994-1995), and she came over and toured it that same day.

    That night we made the decision that we wanted to take the meager amount of money we had made at that point in our lives and do everything we could to try and build an assisted living facility. We opened our first facility in 1996. We thought that it would be a hobby and we would still practice law and raise our kids and all that. Well, it’s not a hobby. In an assisted living facility you’re running a hospital, you’re running a restaurant, you’re running a hotel. We were practicing law together at the time, and after the first building opened she left within a week to work full time at the building. When our second building opened up, I left the law practice to work full time with our buildings, and I didn’t run again for the state senate.

    What were you doing at the building?

    Everything. We were independent owners running the business, but we were also helping out at breakfast, we were taking people to doctors’ appointments, Stacy ran the exercise class and I took people to movies and the opera and whatever we needed to do to make them happy. We also did all of the landscaping, and I believe that our philosophy with our employees was ‘Everybody does everything,’ so I also did some of the very dirty jobs just to make sure everyone understood that we were all in it together.

    And then you ended up having 10 buildings?

    [With our business partner, Shirley Allenbrand], we ended up building, developing and owning and operating six buildings, but then we came up with a very specific model, which at the time was unique. Other people are doing it now, which we’re thrilled about. It got some attention; some other people like Brookdale asked us if we would develop our model for them, so we developed four other versions of our model for other people. So we actually developed 10 buildings, but we only owned six.

    What was the model?

    We came at skilled nursing from the assisted living side. Our first two buildings were assisted living, so when we built a skilled nursing facility, it never crossed our minds that we would have shared rooms. Or that we would have it not be super nice. When you walk into our buildings, the skilled nursing buildings are on one story, but the middle section is 25 feet high because we built a city inside of it. We have a movie theater, a restaurant, a church, a town hall, and then we have wings off of it that are all private rooms. At the time, the thought was that you shouldn’t build new nursing homes at all, and if you do they could only be 300 square feet per resident. We were building these massive, super high-end, really nice facilities (other people, like Mainstreet, are doing it now). At the time it was brand new, so when they would open up, we didn’t do it because we thought people would flock to them; we did it because we just wanted to build really nice places, and the market responded in a very favorable way.

    Did you know how you were going to pay for it then?

    We really didn’t. I’ll never forget when we were building our first nursing home; I was on a hospital board and I explained to one of our strategic planning consultants what we were doing. He said, “That’ll never work.” And I thought, “Hell, this guy is twice as smart as I am. This may not work.” I then heard about a group out of Omaha named Vetter Health Services. Somebody said, “Well, Jack Vetter is already building upscale nursing homes.” So I drove up to Omaha to one of his buildings. It was very nice, and that’s when I realized we were going to be OK. As soon as we would open up a building, it would fill.

    What was the unit mix when you were building these facilities?

    The model that we ended up with was 100 beds of skilled nursing in the center, with the same kind of physical plan I described. On one side, we built about 50 units of assisted living, non-dementia, connected to the same building, and then on the other side of the building is about 40 units of assisted living with dementia care. So it’s about 190 total units, kind of depending on the land [and other factors], with about half being skilled nursing and the other half being assisted living.

    Assisted living is a very dynamic and exciting part of the market, and if I were out there developing now I would always look to have an assisted living component in my projects.

    Mark Parkinson, CEO of AHCA & NCAL

    Picture 1 of 5

    Why is that?

    A lot of folks come into our rehab center and most of them go home, but some of them still need to be in a nursing facility. Having assisted living units connected or on the same site is a tremendous service to the residents, and it’s also a great business model.

    You later sold the buildings to Brookdale. How did that happen?

    We weren’t looking to sell. Brookdale is very aggressive and had heard about what we were doing. We had other people who approached us, but very honestly, for me, what I learned was that 90% of my headaches were in operations and 90% of my joy was in development. Brookdale came along and said, “Here’s a number, and oh by the way, we’ll enter into a development agreement with you where you’ll develop buildings for us.” It was kind of a perfect scenario. We did our due diligence on Brookdale to make sure they would continue to operate them at the right level for the residents and the families, and they passed all of the tests and have done a fantastic job with all of our buildings. As we sit here and speak this morning, my wife is in Overland Park, Kansas in one of our buildings with her mom, which is a building that we built that Brookdale now owns, and they’re doing a great job taking care of my mother-in-law.

    Is that a pretty cool thing, to see your mother-in-law in one of your buildings?

    It is. This is a building we developed for them after we sold—and I don’t tell any of the residents or employees that I know every square inch of this building; I just act like a regular customer. I think it demonstrates that Brookdale is doing a great job taking care of her. She’s not getting any special [treatment] and they’re doing a good job.

    The Brookdale of today is probably a different from when you sold it.

    We actually sold to ARC, and I got this call from Bill Sheriff five or six weeks after we had sold because we had the development deal. Bill said, “You might be surprised by something you see in the paper tomorrow. I can’t tell you what it is, but give me a call at this time and I’ll explain to you that everything is still fine.”

    Did that make you nervous?

    Not really. I trusted him and he’s a really good, stand-up guy.

    Do you ever miss being an entrepreneur?

    More from the Leadership Series

    Not really. We had our 15 minutes in that world and it was fun, [but] we were highly leveraged. Being highly leveraged can be a great thing, but it can also be a really scary and horrible thing, so I wouldn’t want to go back to doing that. One thing that I do miss is we had a very specific philosophy about operations that had to do with quality, employee satisfaction, resident satisfaction, etc. A lot of it we’ve implemented here at AHCA. I’ve often wondered if what we did could be applied to scale. It would be fun to see if you could do it in a 60-building or 100-building or 200-building operation. I love what I’m doing right now. It’s a combination of this passionate side I had for taking care of folks and this other interest we have, which is politics and public policy and all of the intrigue behind that. It’s just a perfect combination.

    When you talk about leverage, were there any scary nights? Can you tell me about one or two?

    We didn’t know what we were doing. We had a passion to take care of people but we didn’t have enough metrics; we weren’t measuring employee satisfaction and staff satisfaction. People would say, “What is your budget for food?” Our answer was very cavalier: “Whatever it takes to make the employees happy.” That sounds cool and kind of cutting edge—it’s not. You need to have parameters and things that you’re measuring. Our first two buildings were on the same campus. Our third building was off campus, it was five miles away. When we had the first two buildings, we could overcome our lack of knowledge by sheer passion and being there if anything went wrong. When you get spread out all of a sudden to five miles away, you can’t just do it with passion. The state came in and did a survey shortly after we had opened the third building and we had a terrible survey, so bad in fact that we had a ban on admissions until we corrected it. The national TV station CBS was doing an expose on horrible nursing homes and they had sent out the tape to their local stations [to find] the ‘local flavor.’ We were the local flavor. So yeah, very scary. That actually turned us around though. We looked in the mirror and decided it was our fault.

    What was the problem?

    We weren’t measuring enough. We were trying to run it kind of like a hotel, but it’s not a hotel, it’s a hospital. We became a real health care organization. We started measuring employee satisfaction, resident satisfaction, all of the things real operators do, [including] how much we’re spending per day on various things, how much time we’re spending per day on nursing. Then we’d hold ourselves accountable and our administrators were incentivized to hit certain numbers, and it completely turned us around. We ended up, in that particular building, deficiency-free almost every year after that.

    That’s a good story.

    I’m really glad that I went through that though, because one of the things it taught me, that I’m not sure I would’ve appreciated in this job [as AHCA president and CEO], is that really bad things can happen to operators that really care. There’s a tendency even if you’re in the sector, to see somebody that has a building close down, or they get on the special focus list or they get sued or whatever, and to think: “Oh God. Well, maybe they’re not that great.” Let me tell you: really good providers that really care can have bad things happen to them. I know that firsthand.

    Do you think being an entrepreneur helps to prepare for your job today?

    Definitely. I generally know what is keeping the members up at night, what they’re excited about, why they’re still in it. The industry has changed tremendously in the years since we’ve sold, but the basic parts of it have not. I really know what our members are thinking and that helps; it’s invaluable.

    I generally know what is keeping the members up at night, what they’re excited about, why they’re still in it. The industry has changed tremendously in the years since we’ve sold, but the basic parts of it have not. I really know what our members are thinking and that helps; it’s invaluable.

    What do you think is the biggest change from your time as an operator to today?

    We sold in 2006. The biggest change in post-acute is that until then, the way you got post-acute residents was that you had the best marketing person who would go around and ingratiate themselves with the discharge planners at the hospitals with cookies and donuts and whatever they could take without violating the kickback laws. There’s still some of that, but now it’s more about data and who can meet the metrics that the payers are concerned about, and they really don’t care how perky your marketing person is. There’s way, way more focus on quality than there was before. Things like rehospitalization rates weren’t even an issue.

    Rather than the states’ participation as of today, do you think the federal government is going to start to pay attention to assisted living?

    I think the federal government will pay attention to it, [but] I don’t think the federal government will regulate it. I realize the mantra is that eventually the federal government is going to regulate senior living. I’ve been hearing that for 20 years. When we poll our membership in private pay senior living, which for us is essentially our assisted living membership, the two issues that they want us to focus on is one: how can we help [assisted living providers] get better quality and create data that demonstrates that; and two: that they don’t want federal regulation. Not because they don’t want to be regulated, just because they’ve seen the nightmare that federal regulation has brought on the skilled nursing side.

    We are, as an organization, extremely focused on responding to our members who say they don’t want federal regulation. I think the political lineup in D.C. will make it very hard, for those who want federal regulation, to succeed. I’m not saying that it’s not possible; it is. It’s a risk that all of us have to be conscious of, and it will continue to be one of our primary goals on the private pay side every single year. But, you’ve got a bunch of folks who are in office right now, particularly in the house and the senate, who are not pro-regulation. As long as the industry continues to stay focused on quality and can demonstrate that in ways that are beyond just anecdotes, it’s a threat, but I don’t think it’s inevitable.

    Do you think the government would ever start paying for assisted living? That would require more federal regulation.

    Well another thing has changed since ’06, which is a really positive thing: A lot of operators have figured out how to take care of people in an assisted living setting by using Medicaid waivers. Stacy and I used to sit around all the time feeling a little bit guilty, thinking about how we were taking care of people in a great way, but they were all upper-middle income. On the AL side, it was purely private pay. We thought endlessly: Is there some way we can offer this to the middle class? We couldn’t figure it out. The folks that have figured out the Medicaid waiver program are doing an incredible service to the country. I think the best that we can hope for is to continue to defend that. There are people who don’t think that the waiver should be used in an AL setting, and all of that money should be used at home, so we’re in a constant battle in D.C. over that issue. To get beyond that to where the government would pay for just a middle income person who didn’t spend down to zero in private pay assisted living, I don’t think that’ll ever happen. It’s too expensive.

    What should senior living providers be paying attention to this presidential election?

    I’ve spent my entire life as a politician telling people they shouldn’t be single issue voters; that they shouldn’t just vote on abortion or gun control, and that they should look at the whole person. I’m completely single-issue at this point, so if it helps people who are taking care of older folks, that is my attention. Both parties have views that help us and both parties have views that on occasion hurt us, so there is no silver bullet candidate or silver bullet party for the sector.

    I think that generally, we are better off in America, in our sector, if we have people who believe in the free market enterprise—who believe that capital should flow freely, that people should have access to capital if you work your tail off, and if you don’t work your tail off, too bad, it’s just not going to work. A capitalist as opposed to a socialist would probably be better for the sector.

    I think that generally, we are better off in America, in our sector, if we have people who believe in the free market enterprise—who believe that capital should flow freely, that people should have access to capital if you work your tail off, and if you don’t work your tail off, too bad, it’s just not going to work. A capitalist as opposed to a socialist would probably be better for the sector.

    You mentioned data as an industry challenge. Is there anything you think assisted living providers should be investing in right now in order to be able to collect that data? It’s pretty widely known that the industry is behind on technology.

    One of the primary things we’re doing with NCAL is addressing that issue. We are asking all of our members—and we’re now at over 200,000 beds—to submit their data to us on some key metrics so that we can develop some industry metrics on rehospitalization, on staff turnover, on resident satisfaction, so that we’re not just in a battle of anecdotes with the regulators.

    When you’re in a battle of anecdotes with regulators you can’t win. The horror stories are more horrific and more newsworthy than a story that we’re taking care of an 86-year-old woman and she’s happy today. That’s great, but you can’t win a battle of anecdotes. We have to have data.

    A key initiative of AHCA/NCAL is to create that data pool for AL. We already have done it on the skilled nursing side. We have 7,000 of our skilled nursing buildings that give us their data every month and we aggregate it and can demonstrate all sorts of different things. We’re now doing that on the AL side. To individual operators, I’d say join us, and give us your data.

    Do they have the ability to give you that data? I’d be surprised if you said yes right now. I’ve talked to CEOs who don’t even know what their average length of stay is off the top of their head.

    We have an instrument called Long Term Care Trend Tracker where we publish all of this information. We launched it on the assisted living last year. It currently gathers data on staffing and customer satisfaction, and we are adding more measures at our annual meeting this October. You’re right, it’s much harder on the AL side because you actually have to aggregate the data yourself, so it’s all voluntarily submitted information.

    On the skilled nursing side, folks have to put this data together anyway for CMS. It’s tough, but it’s critical. We have to demonstrate where we are and that we’re getting better.

    Leadership

    What’s your definition of leadership?

    I think about how to get from A to B and how organizations can be effective. I have a very definite philosophy of that. My view is that for any organization to hit the maximum level of effectiveness, they have to have two things. First, they have to be driven by a mission. There has to be a simple, short mission statement that’s so compelling that it causes you to be willing to work 80 hours per week, make any physical sacrifice to do whatever you need to do to hit that mission.

    Second, I think you need to be based in metrics. Just having a mission statement isn’t enough. You’ve got to hold yourself [to the mission], set goals that are metric-based so that you can figure out if you’re achieving them or not. What we say here at AHCA/NCAL is, Don’t aspire to adjectives. We’re not interested in being world-class. What the hell is world-class? How do you define that? We aspire to specific policy outcomes and to numbers. We have annual goals, and there’s no debate about whether we’ve achieved them or not, because they’re numeric or they’re specific policy outcomes.

    To me, leadership is, How do you get from A to B? How do you pull people together to inspire them to get from A to B?

    So what are the differentiators of leaders? The leaders that I’ve known that are really, really good listeners, that seems to be an important differentiator.

    Was that whole philosophy in place when you came to AHCA?

    No, that philosophy is something that we’ve developed, my wife and I have developed in 35 years of good and bad events.

    I do think it gives us a competitive advantage in D.C. There are 7,000 trade associations, and to get through to Capitol Hill, to get through to CMS, we have to have some competitive advantage. I think our competitive advantage is that we’re mission-driven and we’re based in metrics.

    There are 7,000 trade associations, and to get through to Capitol Hill, to get through to CMS, we have to have some competitive advantage. I think our competitive advantage is that we’re mission-driven and we’re based in metrics.

    During your time, what’s been the biggest challenge the organization has faced?

    The biggest challenge we faced when I first came to the sector was divided. AHCA has been around forever, but about 15 years ago the big members left and formed a group called the Alliance. So when I came to D.C., AHCA existed and so did the Alliance, and they each had basically the same function but they had separate staff, separate lobbyists, etc. I knew from being a politician, a policy maker, that when you have a sector that’s divided, at best it’s not going to do very well, and at worst it’s going to lose all the time. We were pretty close to losing all the time in this sector, and I think the members got tired of losing. About two and half years ago, almost three years now, the Alliance and AHCA merged and we came together. It’s been fantastic since then. Issue one was just holding the membership together, and we’re way beyond that.

    The second challenge is that the government is out of money. Everybody that’s a recipient of funds, whether they’re health care, defense, you name it, is at risk, so we’ve had to navigate ourselves through some really tough times the last few years.

    What’s the biggest risk you personally have taken in your career?

    I would say that it was on the financial side; the decision to build our first nursing home when we were so insanely leveraged that we signed over everything. Our bank had us sign over our retirement accounts, which I’m not even sure is legal.

    I’ve had some very unusual career steps. When I graduated from law school, most people wanted to go to super big firms and I went to a really, really small firm so I could learn how to practice law.

    I haven’t had success because I’m so smart. I’ve had success because I’ve been really lucky. Since I left to form my own law firm in 1986, every single day that I’ve woken up I’ve been working on something I really cared about, and was passionate about and was fun. People said “Oh, you work all the time.” I never work. I’m actually a hedonist. I won’t spend any time doing anything that I don’t want to do. I’ve just been lucky to be able to find something that I like doing, that the market thinks is important enough to pay me to do it. It’s been a lot of fun.

    What’s the best piece of advice you’ve received in your career?

    The notion that you have to do something that you’re passionate about. That’s easier said than done, and a lot of people just aren’t in the position where they can do that.

    Who do you consider to be your mentor and how have they helped your career?

    My mentors have been people that I don’t know. When I was very young I learned about Warren Buffett and said I was going to read everything that Warren Buffett’s ever written. Well, it turns out he hadn’t written anything. But he had a mentor named Ben Graham, so I read Ben Graham’s book and I followed Warren Buffett ever since then; I really admire him. I think it’s so cool that the first or second richest person in the world is so modest, so normal, so humble, etc. I love that. On the skilled nursing side, I told you that I went up and visited [Vetter Health Services in] Omaha. That group is owned by Jack Vetter, and if I had somebody that I would ever want to be compared to—and I shouldn’t be, I’m not in his class—it would be Jack Vetter, who builds really nice facilities, who’s completely focused on quality care, who believes like we did, when we operated, that our first goal was quality care. Our second goal was employee satisfaction and our third goal was financial performance, and if we do the first two, we’ll achieve the third. It was so much fun to meet someone like that, and Jack is still at it—he’s over 80 years old now.

    What would be one book you would recommend on leadership?

    Well at the risk of sounding crazy, the book is called Leadership and Self-Deception, which I predict no one else will suggest. It was written by a group called The Arbinger Institute, which believes so much in humility that even though it sold over 1 million copies, there’s no name on the book. So just imagine having the humility to write what could potentially be the most important leadership book ever written and you don’t even put your name on it. That in itself is a lesson. I am also a huge fan of Good to Great and of Jim Collins, but 80% of people will name that book as their recommendation.

    People are finally starting to focus on attracting the right people to the industry. Say I’m about to graduate from college. What would be your pitch to me for why I should look to assisted living as a career?

    Assuming someone has a passion for taking care of older people, there’s no better place to be. If you look at the demographics, we do projections in terms of what different parts of our membership are going to end up being. There are probably 1.4 million or 1.5 million skilled nursing beds in the country and we think that’s going to be the case 20 years from now. Other people think even fewer than that. If you look on the assisted living side, say there are maybe 700,000 beds [in communities with 25 or more beds]. I bet 20 or 30 years from now it’ll be double that.

    Do you still have nightmares about the leverage that you had at one point?

    Let me brag a little bit. In 10 years of operations, we never got sued. Not ever. But I was never able to compartmentalize issues the way that folks that own all of these buildings can apparently do. We had members whose buildings were under DOJ investigations and got sued by the various players all the time. If that was happening to me I would be going absolutely crazy. But somehow they set that aside and can still kind of move forward. I wasn’t able to do that. Unfortunately, and it is a flaw, if I’m in a situation and 20 things are going right, but one is going wrong, I can’t get the damn one wrong thing off of my mind, and trust me, if you own a bunch of buildings, there’s going to be a lot of things going wrong, no matter how good you are.