The post-acute and senior care marketplace has seen an increase in underperforming assets in recent years. Key factors include rapid growth, development in overly saturated markets, weak sales and marketing infrastructure, labor challenges, and untested and inexperienced management. The unprecedented COVID-19-related realities that the industry is navigating at this time only add to the strain being felt by these troubled senior living communities. These challenges will force operators to move from their normal and customary operating routines into planful and robust turnaround management practices.

A planful and purposeful turnaround strategy starts with recognizing the circumstance and being open and realistic that you are in a turnaround situation. Too often, operators find themselves blurred by hope and optimism and somehow think that the challenged situation will “magically” self-correct. However, as the saying goes, “hope is not a strategy” and no truer words can be spoken when it comes to addressing distressed asset situations. You need to clearly understand the true definition of a turnaround, pay attention to the external and internal factors contributing to the underperformance of the senior living asset, pay attention to the warning signs, and execute on a turnaround plan (i.e., the turnaround matrix).

Senior Living Turnaround Strategy Defined

A turnaround strategy can be defined in three ways:

  • In a general sense, to transform a loss-making company into a profit-making one.
  • In a business sense, to deal with the issues of a loss-making company.
  • In an academic sense, to solve the root-cause failure of a loss-making company.

With that strategy in mind, the next step is to identify the factors that must be addressed as part of the turnaround plan.

External and Internal Factors Contributing to Asset Underperformance

HDG has seen numerous external and internal factors leading to underperforming assets.

External Factors

Some of the key external influences on performance include:

  • Market saturation
  • Lack of certificate of need (CON) protections
  • Debt and deal structure
  • Poor market demand
  • Economic changes
  • Social changes
  • Technological changes
  • Government actions and/or regulations
  • Evolving consumer expectations
  • Declining labor market
  • Unforeseen events, e.g., worldwide pandemic

Internal Factors

Personnel issues, including management and staffing, lead the list of internal issues related to  underperforming assets:

  • Management and leadership problems
  • Instability in top leadership
  • Wrong people, wrong seat
  • Dependency on agency staffing, overtime, and premium pay
  • Workforce challenges
  • Weak sales and marketing infrastructure
  • Barriers to intake
  • Overly optimistic financial modeling and/or poor underwriting
  • Ineffective and confusing pricing and fee structure
  • Out-of-control incentives and discounts
  • Ineffective expense management systems and processes
  • Annual and ongoing expenses consistently outpace revenue growth
  • Ineffective revenue cycle management processes
  • Regulatory issues or clinical/care concerns
  • Too many organizational priorities; lack of focus on key drivers
  • Programs not being adjusted to keep pace with current client needs (e.g., medicalization of senior living)
  • Lack of vision and long-term planning

The “Warning Signs”

Some of the warning signs that go along with operational decline can be subtle, so it’s critical to maintain a close watch over the metrics:

  • Pay attention to adverse trend signals—The numbers don’t lie!
  • Proactive and prospective management tools not used, and there is not a clear understanding and accountability to outcomes.
  • Continuous negative performance outside of budget and/or industry benchmarks.
  • Ongoing cash flow concerns; using vendors as “banks”.
  • Indicators of poor organizational health and/or bad management:
  • Lack of referrals
  • Move-outs outpacing move-ins
  • Staff turnover
  • Negative satisfaction results
  • Continuous complaints
  • Not in tune to major industry or general environmental conditions; routine assessments and analysis of your marketplace and competition are essential.
  • Strained relationships with referral partners, regulators, and vendors.

The “Turnaround Matrix”

Based on our experiences, HDG has found the greatest success when following a robust and purposeful senior living turnaround strategy consisting of four critical stages as depicted below.

Senior Living Turnaround Management Stages Matrix

Management Change Stage

The primary objectives of the management change stage are to: put the right top management team in place to lead the turnaround; weed out and replace any top managers who might impede the turnaround; and be swift with action. Don’t be long suffering—chose a capable and experienced turnaround professional; then, assess the skills and abilities of your board and make any changes as may be necessary.

Situation Analysis Stage

The primary objectives of the situation analysis stage are to: determine if the business can actually survive; determine the turnaround strategy and approach that best fits your situation; and develop a concrete action plan with specific goals and objectives. As part of this stage, it is essential that everyone is universally clear and in alignment. Priorities must be set according to short-term issues and problems, intermediate term issues and problems, and the longer-term issues, problems, and desired outcomes.

Emergency Action Stage

The primary objectives of this action-oriented stage are to: take whatever actions are necessary to enable the organization to survive; establish positive cash flow and cash flow strategies as quickly as possible; raise and secure sufficient cash to fully support the chosen turnaround strategies; and work diligently to protect and/or develop resources needed for future sustainability, profitability, and growth.

Business Restructuring Stage

The primary objectives of the business restructuring stage are to: ultimately enhance profitability through more effective, efficient, and sustainable management of future operations; and restructure the business for increased profitability and ongoing return on investment.

Return to Normal—Life After the Senior Living Turnaround

From our experience, a true senior living turnaround can take anywhere from 12 to 18 months with incremental successes along the way. Given the intensity of the turnaround, it’s easy to fall back into old, problematic routines as you start to see successes. Don’t repeat history. It’s a new day with renewed focused, prioritization, and accountability.

As you enter the return-to-normal stage, stay focused on these key objectives:

  • Institutionalize emphasis on profitability, return on equity ,and enhancement of economic value-adds.
  • Begin to seek opportunities for ongoing profitable growth with focus and laser-sharp prioritization.
  • Build on your competitive strengths that will be paramount for your ongoing sustainability and success.

For More Information

If you’d like more information on HDG’s turnaround capabilities, please contact us at or 763.537.5700, and watch our recent webinar in partnership with Senior Housing News, “Managing a Successful Senior Living Turnaround in a COVID-19 Era and Beyond.” We have the ability to assist with interim leadership needs, occupancy development, operational and financial analysis and performance improvement, and overall turnaround planning and execution.