Bottom Line: How One CFO’s Retail, Hospitality Background Led to Skilled Nursing Turnaround Success

Robert Specht had spent years at the financial helm of companies in a variety of spaces, but he was a post-acute and long-term care newcomer when he accepted a crash course in the business: a consulting position for a 33-building senior housing and care chain in receivership.

Working with Health Dimensions Group, the provider and consulting firm that stepped in to take over during the receivership process, Specht helped to clean up the operations of the former Atrium Health & Senior Living skilled nursing and assisted living properties — which were eventually sold to two permanent owners as of December 1.

His work on the Atrium deal led to a position as the Minneapolis-based HDG’s first-ever chief financial officer, marking the latest in a string of financial leadership jobs for Specht: After a stint in public accounting, Specht worked in the gaming and hospitality space, eventually switching industries again to serve as the vice president of finance at outdoor retailer Gander Mountain for 12 years.

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SNN caught up with Specht, who formally joined HDG earlier this fall, to hear a relative outsider’s perspective on the financial side of the senior care equation — including why he believes operators across the space need to boost their financial acumen.

The Bottom Line regularly shines a spotlight on chief financial officers and other finance executives in post-acute and long-term care. Know a top CFO who’d want to be profiled in an upcoming Q&A? Drop us a line at editor@skillednursingnews.com.

Tell me about your experience, and what prompted your move into health care.

There’s two schools of thought out there about how generic knowledge can be applied to other industries. The other school of thought is you absolutely must have a deep-rooted knowledge in this industry, that you can’t succeed [otherwise].

I saw a great opportunity here with a middle-market-size company, and I bring an ability to help HDG in a few different ways, even though I’m not coming out of the long-term care industry. My background’s kind of a long one, with a lot of depth and and breadth to it. I started out in public accounting, and worked with the Big Four firms for almost seven years, and just had a lot of different industries, but got a great base and background from being able to audit work with some of the bigger companies in the country.

I got a great foundation in public accounting, which served me well, and I moved into a couple different industries. I got into the gaming, hospitality, and leisure industry early after leaving public accounting, with a company that was pursuing riverboat gaming and Native American gaming — a PE firm formed by some executives. We had four major casinos out West we built, and we built a New Orleans riverboat casino. I spent a few years with them. After that, it brought me out to Minneapolis here to a large casino operation. I spent four more years there.

It’s a great environment; it’s highly internal-control driven. You think about the cash and the chips on the gaming floor, the internal controls that you’ve got to have to be able to track the movement and don’t have holes that lead to missing cash. It’s a very internal-control-intensive environment — 24 by seven operations, lots of different systems that really drove the productivity of the place.

From there, I spent a few years in software development — about four years with a company we created, a new software that really automated the whole R&D process of companies from ideation all the way through to commercialization and launching the products. So brand new, from-scratch software that ultimately became successful. They’re out there doing it today.

I left there 15 years ago, and it did end up being successful, but I spent four years and we just lost money every month. I had an opportunity to be the VP of finance at Gander Mountain come along — a large, growing retailer. I spent 12 years with Gander in that retail space. We took it from $400 million to about a billion, $1.3 billion in revenues, and grew to 160 big-box stores.

I also did a couple years with a Verizon company, a private-equity-backed company that was buying independent Verizon retail stores — a large PE firm out of Texas that had about 600, grew it to 1,200 stores. Because of all the acquisition work we did, it had offices all around the country, and they ended up consolidating everything in North Carolina.

I declined to go and became a bit of a freelancer and consultant for a year, and that’s when I joined Health Dimensions Group here. One of their big projects was Atrium, a 33-center mixture of SNFs and ALs and ILs in Wisconsin that went into receivership about a year ago. They brought me on board to really be the person to keep the thing going, to make sure the vendors kept getting paid, to handle the money and the financing with a company called MidCap that was the ABL [asset-based lending] player involved in it — and basically create financials and look for ways to just improve it and keep it going. I did that for them. That was a large, large project.

That was the extent of my long-term care experience. But I do bring a lot of things. There’s always good carry-over. Being in retail, there’s a very distributed environment, right? We had 1,200 different stores out there around the country for Verizon, 160 — and half the country — of Gander Mountain stores. Now, there’s certainly some lessons to be learned from: How do you keep your operating standards up, and everyone adhering to them across all these different operating units? Communications, controlling cost — a lot of different things that I think for HDG would apply to them as well.

That’s a pretty good education, stepping into that receivership situation. What were some of the biggest challenges, and what were some of the ways that your experience helped kind of guide you through that process?

It’s interesting because it’s more of a soft thing than it is a hard thing, but a lot of it is in the vendor management. You have a bank that’s behind it that obviously doesn’t want to pay; they want to pay as little as they can for anything, and then they want to keep it going so we can sell it.

But being able to step in, and know when to push back — you’ve got have seasoning and acumen to know when they’re taking too harsh a position on something, and you can push back. Really just being able to connect with the key and critical vendors to keep this thing going — that is so valuable to give them some assurance, when they can talk to somebody that’s financially oriented and knows what’s going on, and can explain it to them. It’s just a world of difference.

That’s one of the things that we’re going to focus on — and one of the things that my experience can bring to it — is somewhat of a turnaround management business. We’ve done some turnarounds; Atrium was sort of a turnaround, obviously a financially troubled organization. We made improvements; we actually raised the occupancy on one set of facilities — about 22 of them. We actually grew the occupancy during this time when everyone was speculating that they’re going out of business or going to close.

In the end, I think it was just really being able to manage the vendors, manage the bank, and just keep people calm about things.

That seems to be the answer so often when I talk to operators that have a history of successful turnarounds — executing on basic things that may have fallen by the wayside, and tending to vendor relationships.

I’m still very early in this, but it just seems to me, my gut is, the financial acumen is kind of thin in the industry — and maybe because it’s just so fragmented, right? Each home is so independently run and operated, and you want them all to be on the same quality standards — but that depends on your ED and how good they are, and what kind of communications you have with the corporate manager like HDG.

So there’s a lot of challenge in that, and I think I bring a real diversity of financial acumen that I know will help these guys a lot. Even as we pursue a little more of this turnaround business, going after ones that are struggling — maybe they’ve made a decision that they want to sell it, maybe they haven’t.

My background, in a very upfront kind of way when we analyze these situations, I think can be very valuable. You don’t want them all; you can walk into some that are that are real mess.

I think I can help structure up all the right standards and things that we should go through on a financial basis before we accept these clients, and really take a good measure as to: Can we help improve it there? Can we help them reach their goals, whatever that end goal may be?

What’s something that, from your perspective, surprised you about the industry as a relative outsider looking in, and what are some strengths you’ve seen?

Sure, there would be some positives. The people — just their mindset and their love for the community that they work for, I think that’s a big strength. You know, Atrium was kind of a mess, but my AP manager stayed. He’s still here today. He stayed through the whole 14 months, and even though it was a struggle and not fun at times — obviously, the uncertainty of what happens next — he’s still hanging in there today.

There’s a commitment from the people in the industry, and that’s going to be key because labor is a challenge that’s going to get worse. They’ve got to strategically be smart about it to attract and retain good people — because at the end of the day, especially in the nursing home business, if you don’t have good people, you’re going to run into regulatory issues, things are going to get dropped. Regulatory issues lead to monetary penalties and it just snowballs. In a competitive arena like this, you’ve got to maintain and hopefully be increasing your five-star rating and quality — or else then you’re back to the census and occupancy problem.

Is there anything that strikes you as particularly different about the nursing home industry, at least from a strictly financial perspective?

People weren’t really drilling into the into the numbers deep enough to really understand what’s going on. I look at dietary — and I’m only speaking of the Atrium piece — I look at dietary and I talked to some of the facilities; I don’t think anyone tries to control or measure food waste, and things like that. Coming out of the gaming, hospitality industry, we ran restaurants, and my God, we knew exactly what was being thrown away as spoilage or shrinkage. I don’t see that kind of control at any of these facilities. I think there’s an informality with some things that processes and standards would help to improve.

The key is just to get it happening across all of them, so you get some kind of economies of scale. I think the high-quality FP&A function, too, is probably needed — that whole finance and planning, but the true FP&A side of it, not the financial accounting or the banking side of it.

I have a bit of a vision here, and some of this is coming from a retail background: Have a mindset for big data. At HDG, we own five communities ourselves, and manage another 13 or 14. But if we can aggregate and bring a lot of that data together, you can start to really do a lot of things.

You’ve got different communities and different parts of the country, and you can get all their data aligned. Understand what’s the nursing costs running across the board: Which ones are the good ones? Which ones are the bad ones? I think I can help these guys here with the technology to make more out of our data. And I think that’ll be a big plus, and a big win going forward.

So much of the nursing home business is local, from regulations to Medicaid reimbursements to market demand. But you’re right that there are functions that should be uniform across most buildings.

I think we’re in a good position to be able to do that. We’ve just got to bring in a little bit more technology, and just focus on it: What’s the model when you outsource the food and the dietary versus doing it in-house? Just understanding and knowing those differences, when you go to evaluate another opportunity, you’re just way ahead of the game. And that’s a big part of why I’m here — to help them expand partnerships.

They’ve got opportunities to invest and look at other things that are coming up, and I think all my finance and M&A and banking background will help them make better decisions going into these things. But my role is certainly about expanding partnerships and bringing some real strategic finance vision to this middle-market size company. They’ve done pretty well over the years, and they’re committed and they’ve got good values, which is what attracted me. I think it’s a good move to start to get the talent in here — people who know how to take a company from a smaller size into that next stage or two.

What you think are the biggest opportunities — both for your group and for nursing homes in general — going into 2020?

I think one of them would be making the right decisions around opportunities. That due diligence upfront, and that understanding of the operations, and where it fits with your strategy — and if it fits with your strategy — is key.

So for 2020, more internal here, I think it’s bringing more of a technology focus — absolutely a focus around efficiency, scalability, and getting everyone to think about incremental margin. I think there’s some good opportunities, because the finance talent seems to be a bit thin in the industry.

This interview has been condensed and edited for clarity.

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