• April 4, 2017

    Meet Rod Burkett, CEO of Gardant Management Solutions, based in Bradley, Illinois. With the senior housing options available today largely not able to meet the needs of the “middle market,” Gardant has pioneered a very viable model for meeting that need through Illinois’ state Medicaid waiver program. Originally founded as BMA Management, the company now counts more than 40 senior living properties. We sat down with CEO Rod Burkett to hear about his original ambitions for BMA/Gardant, how he views middle market senior housing solutions on a wider scale, and why even in a middle-income community, it’s important not to skimp on the necessities, like technology.

    Spotlight on Technology

    How important is technology in your business model?

    Technology is important because we have to perform efficiently. If we have a significant amount of our revenue that is under the control of state and federal government, we need to be efficient in how we perform. The other thing we are always very cognizant of is the fact that we never want to be considered—because we do offer the affordable model—that it’s ever anything substandard or second class. So all of those things you would expect, you know, resident portals and family engagement and electronic health records, we know we need to keep up with the pack of those things so the resident/family experience of living in one of our communities isn’t, from that standpoint, very different from living in a very upscale property.

    Do you think the industry has done a good job investing in technology up to this point?

    I know there’s more and more things to come, and a lot of creative, bright people out there that are creating things that I’m sure we’re going to need to incorporate as time goes by. But I wouldn’t say it’s been a strength of our industry.

    Why do you think that is?

    Are there usually bigger fish to fry? Maybe. I think we as an industry are wrong about this, but hey, the typical 80-year-old right now didn’t grow up in a world with a lot of technology, so are we wrong? Yes, we have more and more people that are using computers and internet and becoming more technologically savvy with apps, but our end user right now hasn’t been clamoring for it. But that’s different next year and definitely five years from now.

    Tell me about how you got into senior living.

    I had a health care management background in the county health department, home health, running medical clinics and hospital work. So my first foray into senior living was a rural hospital that had a nursing home, and we added assisted living. We had done a community needs assessment, and [were] in a rural area. We tried to provide as many services as possible, and we added assisted living to the hospital’s nursing home campus in ’93.

    That was pretty innovative back then, was it not?

    It’s what we thought was assisted living back then; it was probably a little more independent living with services, but I saw how the pieces fit together, and it definitely was a much more fun part of the overall health care industry, in working with residents and families that actually wanted to be there.

    When did you make the jump to Gardant, which was then called BMA Management?

    We formed the company in ’99. After my last hospital CEO gig, I went to work for a nursing home company that had about 200 properties across three states, so I got regional operations and marketing experience and multi-site management experience, and that really helped increase my skillset into helping form BMA Management.

    What did you learn during that period?

    How to be productive while you travel, be very efficient in your time—and that was even before smartphones and technology that we have now. There are only 24 hours in a day, so how much more exponentially you can produce or perform through other people was really eye opening [from a multi-site perspective].

    Tell me about the opportunity with BMA.

    My partner and I saw how Illinois in [the ’90s] created its Medicaid waiver program for assisted living, as a vehicle to create not only volume but also the ability to serve seniors of all income levels. We purposely created the company to take advantage, on the ground floor, of Illinois’ waiver program, called the [Supportive Living Facilities] program of assisted living. I don’t think we really had a clue that we could scale that much volume, but we knew we could do volume, and at the same time there was really something about passion and purpose of not only being able to serve seniors in, say, the upper third of income, but serve all income levels. It definitely had a good feel to it. It was a good business model, but also really impacting a lot more lives that way.

    At the time, did you have smaller ambitions than you have now?

    I’d be lying to you if I said we thought it could be 30 or 40 properties. We were just focused on doing the best job we could of creating this assisted living community, and then that assisted living community. I don’t think I realized until a few years down the road that we really had the opportunity to be something greater than just a series of local assisted living communities.

    Did you have any moments where you said, “We’ve got this great business, but gosh imagine what it could be if we go to 30 properties?”

    That took a few years; [it was] probably somewhere in that range where we were at 8 to 10 properties.

    I wouldn’t say there was ever any specific number of properties in mind when we started, but more the realization [that] doing this affordable model is a win-win situation. You’re able to serve seniors of all income strata and at the same time save federal and state budgets because it’s a more efficient, high value way of spending Medicaid dollars. That was the ambition. Not a certain size, but a certain impact on this industry.

    I wouldn’t say there was ever any specific number of properties in mind when we started, but more the realization [that] doing this affordable model is a win-win situation. You’re able to serve seniors of all income strata and at the same time save federal and state budgets because it’s a more efficient, high value way of spending Medicaid dollars. That was the ambition. Not a certain size, but a certain impact on this industry.

    Most of what Gardant is doing has to do with Medicaid waivers, right?

    Yes, we’ve focused heavily on an affordable model. We’ve done a lot with creative financing, and so we use the [Medicaid] waiver program in Illinois and Indiana, we have property managed in Minnesota and then Ohio has a couple of projects that might be developed next year. Two-thirds of our residents are Medicaid recipients, so we’re highly interested in what’s going on in D.C. and from the state capitol on what would be the federal government’s CMS [policy] and the state’s in regards to Medicaid and home and community based services, and so forth.

    Many people say you guys are the trailblazers as far as affordable assisted living. Would you agree?

    I would, and that’s been intentional. Once we had a platform to speak from, a portfolio that had enough history and size to it, and the numbers were proven, then yes, I think we felt not only an opportunity but somewhat of a responsibility to say that we can do better in this country and in our society. [These days, we are] able to serve moderate and lower income seniors and not treat them like second class citizens once they’ve gotten into their 70s or 80s, and either never created a nest egg or spent the nest egg. They shouldn’t be saddled with less options and more concerns and worries of the trials and tribulations of life. Why shouldn’t we do this? I think intentionally, we wanted to be some of the leading thought leadership in how to do this affordable model more across the country.

    Do you ever worry that you can’t help enough people based on the model? Are there people you wish you could help that you can’t?

    We’ve gone into some other states that either haven’t created a waiver program, or created something but then kept it really small, so we’ve looked at, “Is there a way to move that along?” And yes, there have been times we’ve left meetings feeling frustrated or unfulfilled that we didn’t move the bar forward, but never to a point to say, “Forget it,” but rather, “We’ll come back and take another run at it.”

    More from the Leadership Series

    Rod Burkett, CEO, Gardant

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    Do you feel like you have to sell the dream to the legislators or the states?

    Absolutely. Let’s face it, a lot of politics or elected officials are on one or two year cycles [where] very often, the nature of the beast is making some short-range decisions. And this sector is more of a long-term impact. We’ve teed up some national research that we think would really prove this point; we’re struggling getting it funded, but the University of Chicago would do the research to show that using Medicaid waiver dollars at the assisted living level truly saves both Medicaid and Medicare globally through better outcomes by the use of assisted living. [We would] love to have that printed research to be able to open hearts and minds a little more, so we’re working on that.

    The term “middle market assisted living” has become very hot. Would you consider affordable assisted living and middle market assisted living two different things?

    It depends on how you structure it, but I feel that we already serve a middle market senior in our business model because, as I’ve said to you, about two-thirds of our residents are Medicaid recipients, but the other third are cost-conscious seniors who are looking for high value for their dollar. You could live in this community and be a gazillionaire, or you could be middle market, really trying to slow down the burn of your assets before you’ve exhausted your funds. Or Social Security could be your only form of income, so we usually like to be at a price point that would be attractive to middle market seniors and families. We may not have the sexiest piece of property, but when we look at the finish quality, of light fixtures, lighting, doors, cabinetry, it’s still good. When the length of stay is two to three years, is it not more the service and the care that is attractive, versus the truly physical amenities?

    Do you think the industry can create a strictly private pay affordable assisted living product? Or do you think the government has to be involved?

    I think in some markets that would work. Internally we’ve described that sometimes as the Southwest model. I fly Southwest a lot, and I’m never concerned about the plane and the pilots. I know I may not be getting a luxurious meal and first class seating, and we look at that [model] as far as our staff and the experience and our physical plant. You’re looking for high value and consistency, and knowing [you’re getting that].

    Do you think you guys can create the product?

    We are looking at it. We have one market in Indiana we feel will serve all income sectors, but definitely the focus is going to be the middle market. We’ll be testing that soon.

    Do you think the middle market is the biggest opportunity in assisted living right now?

    I think that’s one opportunity. Medicaid policy comes out of Washington, or what collaboration between states and feds comes about, but to the lower income, serving lower to moderate income seniors could also be a huge opportunity in that you hear a lot of people say, “Does Medicaid between the feds and the states need to be thought of, done in a different way, does there need to be an alternative way?” The waiver program is already there, and there is an alternative way, a lower cost environment of care: Medicaid-supported assisted living. So depending on how things get structured, there may be challenges in that, but there could be big opportunities in that also.

    Being in Illinois—one of the most fiscally challenged states in the country—do you ever worry about operating in a state like this?

    Yes. Medicaid many times is a lower pay, slower pay environment, so you have two strikes against you already. But if you’ve built into your business model knowing that’s just a given, and you create reserve funds to get you through those times when payments get elongated through a state’s fiscal year it still works. The concern is, there’s not much room for it to slip. Performance can’t slip either on behalf of the individual assisted living community, or from the state performance of processing your bills and paying them.

    It seems like you know what you’re dealing with.

    It’s not a surprise. We use a lot of low income housing tax credits for equity to help build these buildings, so it’s not a surprise; we know going in what those challenges are, but the concern is, what state or federal government will make it more challenging? That’s the thing we have to be proactive about. We know the challenges of the playing field, and let’s get at it—but if the playing field changes, that’s the concern.

    THE CASE FOR TECHNOLOGY

    What technology would you say residents are going to be demanding? Is it just standard like Southwest’s Wi-Fi on all flights?

    I do think a lot of technology will be expected that helps families have that virtually ‘there with you even though I’m not’ [connection], and more of the technology around security and monitoring in a building for safety and health reasons. The whole brain wellness and educational webinars, the switching to the boomer cohort—anything electronically that keeps them more engaged and active is going to be something that our industry is going to need to step up in.

    Is there specific technology that Gardant is prioritizing?

    [We] just stay up with the times. We’ve had Wi-Fi in the buildings almost since our inception. We’ve always been wireless with our emergency call system and our phone system. We’ve never wanted our caregivers or nurse’s aides to be strapped to a desk or to a monitor.

    You’re kind of shattering what I thought affordable assisted living would be like.

    I think to be efficient and empower your staff, they can call a colleague, they can answer an emergency call button, they can make an outside call, an inside call—that provides them efficiency, and we just felt we needed that. It wasn’t really all that expensive and you’re not running all that wiring; you put in a Wi-Fi backbone and how many more modalities or applications we’ve added, cameras and things, and just staying connected to the residents. We just knew once you put in that backbone, more and more things would be added to it.

    Most people don’t have the the foresight. 

    Depending on what’s in pre-opening—44 communities with four more in pre-opening stages—all but two of these had been ground up, new construction. We’ve learned from the very early days where you can create more efficiencies, and we learn from our mistakes, not only in the cost of construction, but staff efficiencies and operating efficiencies, and the cost of utilities. So I think we just learned from our mistakes and tried to improve on it each time.

    We’ve learned from the very early days where you can create more efficiencies, and we learn from our mistakes, not only in the cost of construction, but staff efficiencies and operating efficiencies, and the cost of utilities.

    Would you say your investment in the infrastructure of technology is for both residents and staff?

    Yes, both. We don’t lead with the fact that our community is an affordable community. We’ll lead and market that it’s an assisted living community, and [what are] your needs? “Oh, you need assistance with bathing, you need assistance with medication, and also you need some financial assistance—we have a program, a methodology, for helping you.” We don’t want people to look at us that we’re affordable first. We’re assisted living, and we’re here to meet the needs of the situation that you and your family are in, and finance is just one of the ways that we can help you. We don’t want people to think affordable first. Think assisted living and what your needs are.

    You’re creating assisted living first, then providing solutions for people, it’s a different way to look at it.

    Granted, we have to do pro formas and create plans and get financially underwritten; yes, all of those numbers have to work. That’s the investment customer part of our business. For the end user, they don’t come to us because they have less financial resources. The triggering event to come to us is, they no longer can live independently; they have a need. And that need, whether you’ve got a trillion dollars in the bank or you have $800 in the bank, your physical needs and personal care needs, the correlation is no different from how much money you have, or how little money you have. It’s first a need of saying, “There’s a triggering event, I can no longer live safely at home and I need this other environment.” Then let’s talk about if you need financial assistance or not. We have to go through that exercise to make our business model work, but for the end users, the residents and their families, we know they come to us with care needs first.

    Since Gardant is working with the state, have you been approached by any hospitals or ACO partners that you’re looking at options with, from that standpoint?

    We’ve always tried to be a good partner with hospitals, and I think moreso assisted living should be getting a better seat at the table for the local health care delivery system.

    Why’s that?

    Well, [with] hospitals, how they’re paid is different now….They need post-acute care partners to protect their razor thin margins. Their outlook on us is different than it used to be.

    How have some of those conversations gone with them? Are they starting to understand?

    I can’t say that we’re that far in depth [in terms of] joint venture kinds of partnerships with them, but I think their interest is in what our resident outcomes are. In the assisted living industry we have had to step up our game. We need to be able to speak their language and document quality, prove quality, and be able to interact with hospitals. With our industry, are we at—or have we been at—a tipping point? Are some operators saying, “I don’t want to be that involved into the throes of the health care delivery system, I want to stay more independent living or hospitality-focused?” Or if operators and developers feel it’s a new era that’s coming and is here, and [with] higher acuity and being able to be better partners with hospitals and hospital systems and managed care, we have to document and prove our value to hospitals and, really, the health care delivery system. Some operators have to choose which way we are going to tip.

    Do you think the industry has enough good data to show that we are good partners, or does the industry need to get to that point?

    I think it’s property by property, community by community. Is it a strong point of ours as an industry? No, not yet. But all of the software companies that court this industry, they see it, they’re getting there [with] the benchmarks we need to prove resident outcomes, reduction of falls, hospital readmissions, ER returns—you know, tracking those key indicators. It’s coming fast.

    LEADERSHIP

    What’s your definition of leadership?

    My definition of leadership is all about influencing people. I think it’s critical to know the difference between management and leadership. You manage systems and processes, you manage agreements amongst people, but people don’t want to be managed; they want to be led. It’s all about influencing people, developing people. My first administrator job, I became an administrator of a county health department, home health agency, the day before I turned 24. Why would anyone give someone that naive and inexperienced that much responsibility? But hey, I was always open for taking on responsibility.

    It’s critical to know the difference between management and leadership. You manage systems and processes, you manage agreements amongst people, but people don’t want to be managed; they want to be led.

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

    No doubt the risk was when we started this company, and after about three years we only had two properties. It took so long for us to create the critical mass we needed. We were four employees, and there wasn’t enough revenue to pay all of the salaries. It took so long to get that third, fourth, fifth property because we were using some very low income housing tax credits and HUD loans. We were using creative financing, but it was so bureaucratic we almost starved to death.

    The biggest risk was, I had another job offer with a good company. I could’ve gone, but I took the risk of saying, “I think we’re right on the precipice here of something that could be a really great passion and purpose-driven business, and we’re this close.”

    Looking back, do you have advice for other entrepreneurs looking to start their own management company?

    Don’t be afraid to think big and think bold, and temper it with logic and proven numbers, I guess.

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

    It is a saying from Maya Angelou, poet, activist, writer. It’s that people will forget what you say and fairly quickly forget what you did, but they never, ever forget how you made them feel.

    Who would you consider to be your mentor, and how has that person helped your career?

    I have several people who are influencers. George Dinges, who’s probably our biggest owner/ investor partner—I think he’s shown me that every partner in a deal has to win. Every partner in a deal has to get value. My first boss showed me, ‘Play to your strengths, delegate when it comes to your weaknesses.’ My former partner really showed me the strengths of having business relationships. My wife is a personal and business coach, and she’s shown me that people think in different ways and accomplish things in different ways, and to appreciate that diversity in people. For 10 years I’ve also been in a Vistage group, which is one of the largest leadership development groups. I have an individual coach, and every month I meet with 12 to 14 other CEOs. We get to know each other and what our blind spots are, and what our businesses are, and we call each other out. So that’s been highly valuable to keep another level of accountability. Just seeing phenomenal people, how they’ve created businesses, learn from their mistakes, and I think they can all have different personalities and all be successful. My Vistage experience has really been invaluable.

    Now being CEO of a big company, you employ a lot of people. What do you think about giving other young people those kind of opportunities you had? Is that important to you?

    I’ve raised three kids past that age, and I think about what I was like at that time… But yeah, I think we’re really having to be very intentional and work at that to find people and give them some type of career path or a succession track. Finding people who would make good leaders—the content we can teach, but those that really ‘get’ the people context, [we need] to give them an opportunity that I don’t think we as an industry, and we as a company, [have done]. We’ve done a C- or D+ job of that. We’ve got a long way to go in that. There’s definitely some things we need to do to attract more millennials into our, not just frontline positions, but on a career track.

    How do you think you do that?

    We’ve got to reach out to where they are and make it more convenient for them to communicate in their style. But really, if we connect them, if their purpose and passion can connect to caring for seniors like we do, the rest of it will fall in line.

    Do you have any initiatives internally aimed at find that next generation of leaders?

    We’re trying to work more with colleges and universities and a feeder system which has a fledgling administrator-in-training (AIT) program. My son is in the military, and you look at that, they don’t hire people from the outside. All of their leadership is grown from inside, and we’ve tried to think of some of those things. So if we have nurses, business office managers, marketing directors, maintenance directors, activity directors that show us their personalities would fit as good leaders, we try to individually create succession plans for them to elevate them and create something individual. We’re fledgling at that, both that and the AIT program, but we’ve got the basic rudiments of it started. But I think that’s an area we know, as the military does, we’re going to have to grow more of our internal leadership as we get bigger.

    What do you think the biggest challenge is for assisted living to create an affordable model?

    First of all, you don’t manage anything if there’s no brick and mortar. There’s capital to put up—let’s face it, [it’s a] $20-25 million endeavor, so [you need] access to equity and debt, and then from our view, if you’ll make that payment, the ongoing [debt] service payment at enough of a level that we’re not creating some kind of scaled down service program. Human resources can sometimes be a challenge, but if we have the capital that allows us to compete in the market for salaries and personnel, we can make it work.

    Do you see as part of the answer, moving into the individual’s homes through home care and home health? Is that part of the answer?

    I’ve done that before at a home care agency, and it depends on the acuity. But here in its simplest form, in an 8 hour shift, in the assisted living environment, one caregiver can care for and interact with 20 residents, and in a home care environment, a caregiver in the same 8 hour shift could probably only see four to five individuals given their travel requirements, which illustrates a higher labor cost in the home care environment.

    A lot of people think that everyone’s going to be taken care of in their homes, because they think it’s cheaper. But anyone in the industry knows it’s not.

    Here, we can provide 24-hour care and oversight on an individual basis. The cost of doing something 24 hours in a home? It’s a phenomenal cost. The person at home, they can’t determine, ‘Well, I can only have needs the two-and-a-half hours a day that my caregiver’s here.’ It doesn’t work that way. I think we all would want to stay at home as long as it’s appropriate and safe. But there comes a time where the care needs are such that it’s not only financially, but programmatically done better in a congregate living environment where you can have bench strength—depth of staff, and more than just one person being there.

    Is Gardant offering ancillary services that are outside of your typical assisted living model?

    Yes. We always have therapy as active as possible both through a clinical setting and home care, therapies and skilled nursing when they’re needed. We have visiting physicians sometimes, podiatry and some other things in the building. We’ve had pharmacy [services] before, just to control the quality and be very user-friendly in its packaging and delivery. If we don’t do it directly ourselves, but we want to have coordination and collaboration with all caregivers. We know that the more acuity, the more therapies we can offer in the building, the better it is for the resident and family, the longer they can stay. Or, their exodus to a hospital or nursing home gets shorter. Not that we do so much of it directly in businesses that we own, but we always coordinate it with trusted partners.

    Are you having to use technology to communicate all of these different things? It just seems like it gets more complex when you start to bring in all of these outside sources.

    Yes, having compatible systems and ordering of things, it’s still a struggle. It could be a little different region to region for us, but we know that’s something that needs to be moved along.

    How do you move that along?

    [By] getting much more of a standard platform, clearinghouses that allow medical records to talk to each other. There’s another technical [term] for it. I get three to four times removed from those things, but have good people that do know.

    As the CEO of the company, if there was a CEO dashboard you could look at of your communities, what would be on it?

    You’ve probably had similar answers, but occupancy, resident and family satisfaction, employee satisfaction… I think we would also look at resident and employee turnover, and then some of what’s trending in regards to our key wellness initiatives: fall reductions, hospital readmissions, probably a little bank of some of those health and wellness outcomes.

    People often say that in order to offer those services you have to be high end, which you just said is not true. Everyone wants to serve the 1% with fancy fountains.

    I consider that we are private pay, but we do that and take those that need some help with it. I think if someone in their life always went to the Ritz-Carlton or the Four Seasons, then we’re probably not going to appeal to them. Based on need, would someone go to a high end Hilton product, or would they say, “Oh, I’ll go to the Fairfield Inn”? Do they go to a moderate product by Hyatt or Hilton because there’s great value to it? It may not have the chandelier and fountain out front, but it still fits their needs and it’s high value for the dollar they pay.