• February 29, 2016

    Meet Bruce Mackey, president and CEO of Five Star Senior Living (NYSE: FVE). Mackey brought a background in accounting and REIT management when he joined the national senior living provider in 2001 as CFO. He later worked with management to take the provider public, became CEO in 2008 and now with 274 communities under his leadership, has not looked back.

    We sat down with Mackey in his Newton, Massachusetts office to hear about how a celebrity chef is changing the face of Five Star’s dining platform, the areas where senior living needs to look to its hotel counterparts for inspiration, and why you should never walk away from a challenge.

    What is your definition of leadership?

    My definition of leadership is rising to lead to meet a challenge, overseeing a group of individuals around a common cause, and driving the mission forward.

    Do you think your definition of leadership has changed over the years?

    No, not really. I don’t think my definition of leadership has really changed, nor my style of leadership. For the most part I’m a pretty collaborative leader. I like to build a really good team around me. [This means] consensus building to some extent. As the decision maker with the final say, I like to elicit opinions from the cadre of personnel I’ve built around me.

    Let’s talk a little bit about your history. I couldn’t find too much about you before you came to Five Star.

    I [first] worked for the illustrious firm of Arthur Andersen out of Chicago. I was mostly in real estate as a background and I had a client, an individual I became close with, who came over to this company called REIT Management. They were a REIT advisory group and were growing. They oversaw two REITs, which basically means they were a bank; they really didn’t deal a lot with the tenants. They were building a portfolio of office properties, so it went from collecting one rent check from a number of people to all of a sudden we had one building with 60 tenants that we needed to bill for. I came over as controller for that entity almost 20 years ago. So that’s why you can’t find a lot about me.

    We built that company up. When I joined them I think we had $2 billion of assets under management, and today that entity has about $22 billion of assets under management.

    In 1997, the prospective payment system changed, as we all know, and that pretty much eradicated the skilled nursing industry. One of the three healthcare REITs at the time was a REIT called Senior Housing Properties Trust. The REIT had 70 skilled nursing assets at the time the operation went into bankruptcy. They were left with a number of choices and one of the choices they had was to create a company, take those properties back out of bankruptcy, turn them around, stabilize them, and spin that company off. That’s what we did. I joined Five Star as a CFO. That was in 2001. We soon took the company public, and I’ve been doing it ever since.

    Five Star Senior Living

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    What made you want to make the jump? It’s obviously a big difference going from asset management into operations.

    No question, but it’s where the excitement happens. It’s exciting to build a company. If I go back 15 years, there are not many opportunities like this, where you’ve got a blank slate. What do you want the payroll processes to be? What do you want this process to be? How do you want to do this and that…? It was a wild opportunity, and then to take it public and go out and sell it and nurture it, and at the same time know that we want to shift the priorities of the company.

    The first part was to stabilize it, then spin it off, but then, shift the whole focus of the company. We wanted to get out of the Medicare/Medicaid reimbursement business and end up in the private pay business. What a great opportunity.

    Do you think you called it right? The shift?

    Looking back, no question about it. The pressures that are around for Medicare/Medicaid have not gone away by any extent and will probably only continue to get tougher as the years go on. Looking at the entitlements from the taxpayer point of view, it’s a tough nut to go after.

    It’s scary.

    Yeah, it is scary.

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

    Probably joining Five Star at the time. I was married at the time and she was supportive of [taking the job]. It’s funny, I remember the day I joined Five Star. My son was born on August 21, 2001 and I got the call August 22. Actually, it was in this office; this was the former chairman’s office. He said: “We’re doing this thing called Five Star.”

    Were you expecting that call?

    No, it blew my mind.

    How long did it take you to make your decision?

    Minutes. Like I said, I remember the day like it was yesterday. I went to a Mexican restaurant with my wife. We talked about it, and the next day I came in and said, “I’m in.” And I never looked back.

    Looking back, did you expect it to be as big as it is today?

    No, it’s tough to say. When we started this company we were losing $50,000 a day, every day. Our long-term prospects weren’t great. To be in one of the top 5 players in the senior living space right now, based on a number of metrics, is pretty crazy.

    When we started this company we were losing $50,000 a day, every day. Our long-term prospects weren’t great. To be in one of the top 5 players in the senior living space right now, based on a number of metrics, is pretty crazy.

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

    Don’t walk away from a challenge.

    Who said that?

    Evrett Benton. He was the former CEO [of Five Star]. It was kind of he and I who took the company public back in 2001. Evrett had a number of great sayings [when he was at Five Star]. He is a great leader, a really dynamic person, very charismatic, and can engage with anybody. He just makes you feel part of the team right away. “Don’t walk away from a challenge” was always one thing he said.

    Did he say that to get you to come on board?

    No, the chairman was the one who called me. Then Evrett called me right afterward and said, “Let’s go, let’s do this. It’s going to be a lot of fun,” and threw all of his sayings at me… “Use every quiver in my arrow,” “Get across the alligator-filled swamp…” He would just throw a thousand at you. Evrett’s been gone [from Five Star] now about 8 years, but we still have a lot of Evrett stories; a lot of “Evrett-isms.”

    Who do you consider to be your mentor? How did that person help your career?

    Evrett, to some extent. When you birth a company and you spend that much time with individuals, it’s easy how they can help shape you and guide you. I talk about my leadership style, and it really came from Evrett. Evrett was great about identifying good people. He was not the type to come in, look at something and make a decision out of the blue because that was the way he wanted it. He researched the facts, he got opinions, [he] had a discussion and came to a conclusion. Everything is going to be subject to change. That’s what’s great, things do change all the time.

    Less on the private side though, right?

    Yes, I think with the new competition now, and the construction going on in the industry and just the fact that people are coming in later in life, we’re course correcting right now as the next generation of customers is going to be more discriminatory of what they want and more vocal of what they want.

    What would you say your greatest strengths are as a leader?

    Again, consensus building is a big one. Probably upsets my team to some extent, but I have a rock solid memory; I don’t forget anything. I’m not good at faces and names, but if you told me that x, y and z was going to happen by April 15, I’m going to remember that one. I’m very good in that area. Also, the ability to make decisions and course correct. I think some leaders say, “I made this call; I’m going to stick with it.” If you can’t course correct and adjust while you’re going along, I think to some extent you’re going to run into problems.

    Some leaders say, “I made this call; I’m going to stick with it.” If you can’t course correct and adjust while you’re going along, I think to some extent you’re going to run into problems.

    What’s your greatest weakness as a leader?

    I have none! [Laughs.] Mentoring to some extent. I think I’m a decent mentor, but I don’t think I’m the best mentor. I’m not the type of person to sit down on an annual basis and do a good review and fill out all the little boxes, meets, succeeds, expectations, goals. I like to think I do it on the fly and maybe that’s not always the best way to do it. To some extent I just don’t like doing it, which could be a potential weakness.

    Five Star and the Dining Evolution

    One of the areas you’ve been focusing a lot on is dining, correct?

    Yes, dining is a big thing [for us]. We’ve partnered with a celebrity chef [Brad Miller]; it’s been a huge change for Five Star. Last year we rolled out our chef culinary school, which has been good.

    I feel like you took a big bet when you hired the first celebrity chef to the industry. Tell me how that came about and why. Were you worried?

    We weren’t worried, but we wanted to do it better and we realized that our residents want good service and a good quality meal. I think about what our residents complain about: when we raise rates and when the food isn’t good. Other than that they don’t complain about much. Let’s take one of those issues off of the table and really provide them with a great product.

    Why are we doing this? We are a for-profit company, so ultimately we need to show growth in our bottom line. We want to give our sellers something to sell. What sets us apart from the competition, and what gives people a reason to move into a community? Our biggest competitor, as I’m sure everyone would say, is people staying at home. So what makes it exciting and different to move into a Five Star community? We thought dining was a great place to start.

    Who walked in and suggested a celebrity chef?

    It was a combination of Scott Herzig, our COO and—believe it or not—our CFO at the time had formerly been CFO of [longtime restaurant chain] Friendly’s and brought a huge dining background. Those are the two guys who came in to pitch it to me one day.

    Were you like, “Are you crazy?”

    No! I did think it was unique—crazy to some extent, but not off the charts crazy. The overriding mission is to improve our residents’ experience in our communities, which ultimately leads to more resident referrals, which ultimately leads to higher occupancy. It was a good thing for us to try.

    Dining is important now, but it’s just going to become more important down the road. It’s taking a look at your restaurant where people have three meals a day or whatever it might be—and we know that’s important, but we also want to bring a bistro over and sports bars to our communities.

    [In a community that we just re-did in Reno, we included a sports bar.] You don’t see this in too many senior living communities. What’s cool about this—not only that it’s a great amenity—is we implemented a point of sales system to really re-do the whole dining experience. This is an IL building where we rent out the meal allowances.

    When you go into the restaurant in 99.9% of senior living properties, you know you’ve got two choices, but here we’ve got a whole menu. Say you want to go to the pub instead of the main dining room; you’ll pay over there. Grab n’ go has a full Starbucks-type coffee menu. You can go there and spend your money. The whole point was to give our residents more options, and that’s really what we’re preparing for on the dining side.

    The Next Generation Of Senior Living Leaders

    Say I’m about to graduate college, what’s your pitch to me on why I should be in this industry?

    My pitch would be: “Do you want to change people’s lives at a meaningful time?” We do great things in our communities, and I think the challenge we have as an industry is having people see that from a new college graduate’s point of view. It’s hard work, but it’s incredibly rewarding. You’re building relationships that you’ll have your entire life.

    Has Five Star changed its strategies on how you’re starting to go after those types of people? Any new initiatives you’re working on?

    We are, and one that we’re launching is a glorified administrator training/Administrator-in-Training program. We’re really starting to ramp that up on the senior living side. They’re pretty common on the skilled side.

    So is that an executive director in training?

    Exactly. We’re probably going to open up 20 positions here at Five Star. It’s interesting, I don’t know if there’s a good stat out there right now…for every hundred buildings, how many really qualified EDs are there? It’s not 100, we know that’s the case. Is it 80? That means you are always 20% short of quality EDs who can really do the job. So we’re all pilfering off of each other to some extent. That’s a benchmark right there. I think our retention rate among EDs is pretty good; we have a pretty good benefits package. We’re a growing and dynamic company, we’re a company that does attract good quality people, but we need to make sure we’re doing a better job of growing that next level of talent within Five Star.

    Up above the ED level?

    Up above the ED as well as the ED and below. It’s really in all aspects. I think there’s going to be a real shortage, not just of EDs down the line, but of caregivers all around. There’s a shortage right now. How many buildings are in the pipeline? A couple hundred? I’m not sure what the exact number is,but there’s a lot out there.

    It’s a hard position.

    Very hard position. It goes back to: Why do you want to be in this industry? If you’re a young kid coming out of college and we give you this building, you’re the CEO of that building. You can start small and work your way up. That’s the good thing about Five Star; we can have people go through this ED-in-training program, we’re going to put you geographically across the country, have you start with a smaller building and work up to one of our larger buildings and ultimately that becomes our regional oversight. Probably half of our regionals right now are former executive directors at Five Star communities. So I think we’ve done a pretty good job in that regard. It’s just getting that next cadre of EDs ready. I think we’ve got a lot more room for improvement.

    Do you think you can get that from the college graduates?

    I think it’s definitely possible. But I think as an industry—I’m a member of Argentum too—we have to do something to get up there and promote. Certification isn’t going to get new people into the industry, but it’s certainly going to get us out in front of potential regulatory matters. I think it’s a good thing from a customer point of view if our EDs are certified. We’re just starting that at the Argentum level. One place I think Argentum can help out, as well as NIC, is to think about the hotel industry. They’ve got HRTA—hotel, restaurant, travel, administration—courses across the country. To some extent senior living has got to head in that direction.

    Future of Five Star

    Let’s talk about the future of Five Star a little bit. What are your plans for the next 12 months?

    We’ll probably do a few more acquisitions. We’ve got a number of developments that are in the pipeline that will be coming to fruition in the next quarter or two, so getting those up and ready. We’ll be starting a few other new developments. We’ve got good access to capital at Five Star, so we’re always investing in our communities.

    We’re always looking at new developments. We’re looking at improving our memory care platform. We’ve got a Bridges To Re-discovery—it’s award winning. Tweaking that a little, making sure it’s ready for that next wave of customers. Rolling out new customer service initiatives. I talked about our new executive director-in-training programs.

    Can you tell me about your philosophy on technology? What are you guys doing in that respect, and is that a big part about the next 5 years for you?

    It is. Our investment on the EHR side is going to be substantial. We don’t cut corners when it comes to technology.

    What would be an example of that?

    If there’s a product out there that we think makes sense, from a business point of view or resident point of view, we’ll invest in it and we’ll do a good job at it. All of our buildings are wireless right now. I think we’re one of the first to put in hotel-like kiosk computers. It’s pretty neat. You can walk into any one of our communities and there’ll be a computer station. It’s not just a computer that’s plugged into a wall; picture when you go to a Courtyard by Marriott, you hit a login, it’ll log-in, when you’re done with your session or after a certain amount of time it’ll wipe everything out from that computer so that the residents can’t—for lack of a better word—screw it up or damage it.

    It’s the same thing for the Courtyard by Marriott. We partner with a company on the hotel side so they do all of our resident kiosks. We’re leveraging technology from an operational point of view.

    What’s your goal with EHR? Are you guys ahead of the game with that, at least in the senior living space?

    I think that’s right. Our goal with that is to improve our resident experience. Numbers of studies will show you that at least better clinical care is extremely important to us; one of our pillars is improving our clinical care at all times.

    The next big thing for this industry is going to be both on the skilled side as well as the senior living side, and I’m not talking about AL. Where do we fit in that accountability? With ACOs, having the data to support the work that we do in terms of improving people from a clinical point of view, is going to be huge. We have to be able to show that as an industry that you come out of a hospital and you go into one of our skilled [settings] or one of our ALs as opposed to going home. We’re a cheaper alternative rather than going to a hospital and we’re going to reduce hospital readmission rates, so we’re an important part of that chain. This system is going to be a big piece of us getting there.

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