About a year ago, Illinois-based Heritage Operations Group significantly reduced its skilled nursing footprint, divesting almost half of its 44 skilled nursing facilities and an assisted living facility. At the time, the company cited added challenges posed by staffing shortages and increased staffing costs amid a challenging economic climate. But a year makes a difference.
At the time, Heritage executives had shared that the company was strategically evaluating its approach to delivering healthcare services in the future, and that the decision to sell those facilities was part of a broader strategy to navigate financial pressures.
“It was the right move in retrospect,” Steve Hart, chief operating officer for Heritage, told Skilled Nursing News. “It’s always hard to part ways with facilities that you’ve really grown to know and we love those relationships. But [the divesting] has allowed our organization to be a little more nimble as we come out of the Covid-19 pandemic. Our organization is positioned much better than before the sale.”
One way to navigate those pressures at Heritage has been a sensible use of technology, Hart said.
“So we’re trying to find a fair and balanced way to do that by using meaningful data. So we’ve tried to say less is more. Let’s use analytics, but let’s not go crazy,” Hart said, adding, “There are three things that are crucial in [the use of data]: It has to be real time data, it has to be sustainable and it has to be meaningful information.”
Use of data and analytics has helped Heritage use labor more efficiently and reduce labor costs as well as guide decisions for improving quality, tackling bedside problems and achieving stability in predicting financial results.
Moreover, a better picture for staffing is finally emerging for Heritage, with costs from staffing agency use getting drastically reduced in 2023.
“I’ve been pleasantly surprised in the last six months to see the power balance between nurse agencies and operators shift a little bit,” he said. “We’ve seen an over saturation in my opinion of the number of agencies that are out there. So, they’re all kind of vying for the same groups, kind of cannibalizing each other.”
And as the company moves forward now with fewer SNFs under its belt, Hart sat down with SNN to talk about the company’s move to pare back Heritage’s holdings in skilled nursing as well as its new initiatives and the success of its more streamlined operations.
The following interview is edited for length and clarity.
SNN: About a year ago, Heritage reduced its SNF operations? What was the motivation behind the decision and was it the right move in retrospect?
Hart: We felt that was a strategic decision to better bolster the organization’s likelihood for long term success. In an unstable world, Heritage has been providing skilled nursing services for more than 60 years. We prefer to think in decades instead of what is going to happen in the next few years. So, the strategic decision was really driven by climbing interest rates in early 2022. And we knew that they were going to continually be incrementally increasing. And we saw that as a risk to potentially having financing costs that were dramatically more expensive than we originally anticipated. And once you added that in with uncertainty that we saw in a capable and sustainable workforce in rural Illinois, or certain rural Illinois communities, we had some concerns because [of] those rural communities … So ultimately, we saw that short run uncertainty to potentially harm that long run sustainability. It was the right move in retrospect, I am very happy with that decision.
What is the one key goal for your company for 2024? And why?
We’ve actually been working very closely and very hard to establish a culture where we embrace and actually celebrate the use of data and analytics, the purpose being that we want to facilitate and improve communication between our corporate service support team and the facility leaders that are leading the skilled nursing facilities, day to day.
I was an administrator during the Covid-19 pandemic. And I just remember it being so hard. If I had rapidly changing operating scenarios, I would talk to my regional director, and we didn’t always connect because she couldn’t have a measured response for what I was saying without data to back that up. [What we realized] from these rapidly changing scenarios is that it would take a tremendous amount of time … to be able to make an informed decision. And so, we just felt that there was a disconnect there and that we really wanted to improve our ability to communicate. Now, we’re doing that through data and analytics to be able to realize and recognize change that’s needed on the ground faster.
Can you speak to the specifics of that, and are you using specific technology or AI tools in order to achieve certain goals?
What’s interesting is that we’ve been very guarded in trying to adopt too much technology. And really, what we’re focused on is meaningful data … We’ve created a kind of custom visualization tool with Power BI – a Microsoft product – and a single display.
We look at two different things with precision: We look at our labor expenses, and how that compares not just day to day against budgets, but also what type of trends we’re seeing in 10 days and 30 days, because we want to know if there’s a massive drop off in hours worked within say, the laundry department. You want to know when that happens so you can respond quickly. If, let’s say, it increases with significant pressure, that might affect your bottom line.
We’re being very deliberate and intentional about how we go about [tech use].
What is the one notable win that your company has notched in the last year?
I think the notable win has been to really celebrate a [company] culture that is focused on data, recognizing that data is truth, analytics is objective, and that it’s not a scary thing … 10 years ago, we didn’t use that type of information, but what we’ve found is that it’s incredibly relieving to be able to have an objective source of truth, and that the managers in those buildings actually prefer that because they can communicate their needs, and we’ve set fair and consistent expectations for them. So you know, as long as you know exactly what your goals are, you’ve been able to work towards that and if they need something, it’s much easier for them to ask for that now … We’ve rallied around that. And, the way that we communicate has entirely changed because of that. So I consider that the biggest win, and something that we feel is crucial to our long term success.
Generative AI is trendy right now, but we had to be able to focus on the core fundamentals of our business and not chase those cool ideas too far. We’ve created and distributed information in a way that’s effortless now. So we do feel it’s sustainable because of that.
We’ve seen significant stability come to our financial statements because we’re able to pivot and adapt, and we’re more aware and knowledgeable [due to data and analytics use]. We’re really surprised and impressed that we can achieve [financial goals] with a high degree of accuracy.
What’s your sense for staffing pressures going forward? Are you expecting them to ease with the federal staffing mandate looming on the horizon?
We’ve seen staffing in some markets start to ease. It is overall easier to fill some of our clinical and ancillary shifts. I’ve been pleasantly surprised in the last six months to see the power balance between nurse agencies and operators shift a little bit.
We’ve seen an over saturation in my opinion of the number of agencies that are out there. They’re all kind of vying for the same groups, kind of cannibalizing each other.
What has helped in Illinois is that the state has sponsored a CNA tenure subsidy program, or targeted funding to increase the pay that CNAs receive … So for somebody who has six or more years of experience, it’s very likely that they’re going to be paid more to work for an operator than for a nurse agency.
So I am seeing that get a little bit better [although] we’re still seeing targeted rural pockets, where that sustainable and competent workforce maybe is a challenge while some places where it’s thriving because the workforce is there. So it just depends.
At the start of 2024 what word would you say best describes the year so far for your company? And what are some key goals going forward?
We’ve actually got pretty strong goals for 2024 that have already been established. For me the word that I would use as focus. It’s easy to get caught up in the trends of the day. We want to be data driven. We’re using analytics in a way that we feel is very meaningful, but it’s so exciting. And it’s so easy to say, well, let me jump into five other initiatives. So being able to focus on innovating within our core business is where we want to see ourselves go in 2024 and
in operational fundamentals of those [SNF] businesses. We want to make sure we’re using our tools wisely, but not spreading ourselves so thin with many different tools.
