Company Profile: Anthem Memory Care

by Jeff Shaw

Anthem experiences huge occupancy growth as the company champions the importance of standalone memory care.

By Jeff Shaw

Standalone memory care has been through the wringer in recent years. 

Although nearly every assisted living community now includes some memory care units, properties that exclusively offer this specialized care have fallen out of favor. Lenders and investors have begun to shy away amid low occupancy rates, instead favoring properties that offer a full continuum of care (often including independent living as well). 

Standalone memory care occupancy rates have fluctuated between 80 percent and 84 percent since 2016, consistently below the average for all seniors housing (88 percent in fourth-quarter 2019 not including skilled nursing), according to data from the National Investment Center for Seniors Housing and Care (NIC).

Memory care is extremely specialized in terms of how care is provided and how the staff is trained in order to improve the quality of life for residents with cognitive impairment. For those reasons, it remains an important part of the senior living continuum.

Anthem Memory Care has been there through the ups and downs of this niche. Isaac Scott, the company’s CEO and founder, notes that levels of care frequently go from being in favor to out of favor and back again.

“Seniors housing trends are ever changing,” says Scott. “Five to six years ago, standalone memory care was the place to be — that’s where the money was moving into, where the greatest need was and the undersupply was occurring.

“Meanwhile, anybody trying to develop independent living didn’t have a shot. In five years that has flip-flopped, and it may flip-flop again. That’s the way this industry will go through the peaks and valleys.”

The Lake Oswego, Oregon-based company, which was founded in 2008, is named Anthem because it “symbolized a pledge of allegiance and a promise to our seniors to provide the best care and support in their final years.” Given the year it launched, Anthem put development on hold until the Great Recession passed. In 2011, the company completed its first community, Amber Grove Place in Chico, California. The company now operates 11 communities totaling 834 units in California, Colorado, Illinois and Kansas.

Originally Scott intended to only develop and own the properties. Soon after starting, though, Scott says it became apparent that he wanted to serve the residents more directly.

“Pretty soon after opening our doors, we realized what we wanted to do: We had to control operations. It was vital to carry out our mission.”

Anthem hired industry veteran Lewis McCoy in 2013 as chief operating officer to lead management of the communities. He previously oversaw 1,200 units across the continuum of care as vice president of operations for Generations LLC, another Oregon-based operator, for nearly 15 years.

McCoy launched the operations division from scratch, personally hiring the company’s first executive director.

Patience is a virtue

Anthem much prefers development over acquisitions, with the company building about 90 percent of its communities. Development allows Anthem to control the entire process, including market research, site selection, land acquisition and building design.

LTC Properties Inc. (NYSE: LTC), a California-based REIT, is Anthem’s development partner, funding construction and becoming the landlord upon completion of a new community.

“We never force fit how we manage a community into a different physical model,” says Scott. “We have a say in every aspect of our buildings down to the door colors, carpets and furniture. We make sure we are building with that operating intent in mind. That is key for us in establishing where we’re at today.”

Anthem’s portfolio-wide occupancy took a steep drop when standalone memory care was a hot ticket and a flood of new product hit the market. At the end of 2016, annual standalone memory care inventory growth hit 8.9 percent, according to NIC data. Anthem’s occupancy hit a low of 65 percent in 2017.

But neither Anthem nor LTC panicked. The companies put new development on hold and focused on operations.

By the end of 2019, new inventory growth had fallen to 2.9 percent while Anthem’s occupancy had climbed back to 82 percent, in line with the national average for standalone memory care. That 82 percent is Anthem’s “break-even” point financially, says Scott.

“Frankly, all of memory care got hit with a glut of new supply in 2016 and 2017,” says Scott. “I have to give LTC credit — it stands by us as partner and supported us through that trough. Over the last 18 to 24 months, we’ve seen occupancy grow. LTC is going to benefit from standing by us.”

In fact, it was LTC’s advice that tempered the company’s development pipeline.

“If we had followed the herd, we would’ve put the accelerator down on growth,” says Scott. “LTC was able to see oversupply happening, and we’ve been able to have manageable growth and stay profitable. A number of competitors have suffered, in some cases disbanding their companies, because they grew too fast and operations didn’t keep up with growth.”

The two companies were able to navigate through rough seas for an important reason: Both have faith in the value of and need for standalone memory care.

“If you’re caring for your loved one and their affliction is dementia, you’re going to seek out the experts in caring for that,” says Scott. “I’m not saying our competitors don’t do a great job because they do, but we think we can do a better job because of our ability to focus 100 percent on that type of care.”

And now that the choppy seas have settled, Scott predicts that Anthem will move back into growth mode in 2020 and 2021 due to a stabilization of market fundamentals.

However, he sees a new type of opportunity. With oversupply still an industry-wide issue, and some owners and operators failing, Anthem is eyeing a variety of acquisitions in the coming years.

“We’ve seen a lot of distress in memory care properties that have strong bones, but which need a new heartbeat operationally,” says Scott. “That would be an area that is not only appetizing, but also cuts down on some risk.”

Taking COVID-19 in stride

When the coronavirus pandemic struck, Scott knew that Anthem had to act fast to protect both its residents and its employees. 

Long before governors were issuing statewide shutdowns, Anthem restricted visitation to only end-of-life or medical emergency situations. Admissions and re-admissions are restricted to medical emergency placements only as well.

Anthem found a mask manufacturer to stock up on personal protective equipment, and even got a local distiller to make 55 gallons of hand sanitizer.

The company managed to secure testing kits for the virus on March 19, and began testing on March 23, well before most operators had this ability.

“As far as we can tell we were either the first or within a day of the first seniors housing companies to be testing,” says Scott.

Anthem has introduced a video chatting system at all its properties to enable residents to still see and communicate with family. For staff, adjustments were made to schedules and support programs, while recruitment efforts were moved to the corporate level so that individual communities could focus on safety.

“We turned April into ‘Hero Month,’ and each hourly employee received increased hourly pay and support benefits, such as meals and stress therapy,” says Scott. “The impact of COVID-19 is all-encompassing for our company right now.”

He adds that Anthem is already using the pandemic to learn and plan for safety and quarantine procedures should something like this ever happen again.

Solving the labor puzzle

McCoy believes that Anthem’s medium-sized portfolio allows the company to be hands on and enables it to “transmit culture, directly and personally to the staff.” This is key to the company’s operational success, he says. With good workers in short supply and high demand, “culture eats strategy for breakfast.”

“When you’re in a community you feel it,” says McCoy. “When family members leave a community, they either say ‘that didn’t feel good’ or ‘that felt wonderful and warm.’ It’s not about the grand piano or the fish tank. It’s about that feeling. That’s generated through the team of people you have.”

“We’re waking up every day dreaming about what we can do to be a good employer,” continues McCoy. “What is the experience of our employees? How can we make our communities a place people want to work in every day?”

Anthem has launched an organized labor program known as SPARC, which stands for Selection Performance Achievement Recognition and Culture. The platform focuses on recruitment, training, recognition and how to transmit those best practices to the new staff that comes on board.

For recruitment, Anthem is constantly seeking to smooth out the process for any applicants. “Anything that takes them off track, we have to remove those barriers. We have to treat every applicant like gold,” says McCoy.

“In sales, it’s all about speed to lead. The same goes for our hiring process. We have to act quickly and close the loop on those that we aren’t going to hire.”

The training program under SPARC was revamped, and Anthem is continually building on it. The focus currently is on orientation and mentorship programs that help new hires feel welcome, leading them to fit in and stay for the long term. Training is a mix of online, in-person, group and individual programs that “meet everyone’s preferred learning style,” says McCoy.

The recognition program is also built to appeal to people individually, with honors being bestowed either in person or on a stage, depending on the recipient’s personal preferences.

Similar to Anthem’s development plan, McCoy suggests a measured approach to hiring and retention. That is to say, if an employee doesn’t fit into the company culture, Anthem is not afraid to cut ties with that person.

“Right now, since we have a decreased applicant pool, the tendency is to ‘dance with the devil we know’ instead of jettisoning someone who’s a poor cultural fit,” says McCoy. “We really fight against that urge to keep people in place who are that wrong fit. Temporarily, it’s kind of hard.”

While Anthem’s retention rates for the company are in line with industry averages, Scott emphasizes that the top executives who drive the culture for the 800-plus employees have been a stable force. Three of Anthem’s first five hires back in 2008 still work for the company. The senior management team hasn’t changed in over three years.

“That’s been the major ingredient of our success,” says Scott.

Meet in the middle

Due to the intense services offered in memory care, rents are naturally a bit higher than in assisted or independent living. So with affordability issues continuing to hound the seniors housing industry, how does memory care offer reasonable rates to middle-income seniors and their families?

Anthem’s solution is to offer a wide variety of unit types at each community.

Residents can choose between companion units, private-shared (with private bedroom but shared bathroom), private and deluxe (large) private. Rents range from $4,580 to $10,900, depending on the unit type and the surrounding market rates.

The private-shared unit is the most popular, says Scott. “We’re appealing to a varying demographic so all folks can benefit from what we provide.”

McCoy adds that the rents are within budget for most prospective residents — only about 12 percent of leads are financially disqualified.

“There’s an important nexus between price and what you’re getting for that dollar,” says McCoy. “We’re not going to take the ketchup off the dinner table to reduce our services to hit a particular price point, but we pore over our budgets to make high-quality services affordable.”

One way to offer affordability without curtailing services is what Scott calls “value engineering” during the design and build process. For example, heating and cooling is provided in each room through packaged terminal air conditioners (PTACs) — the wall-mounted units used in many hotel rooms. To avoid a cheap look, the units are surrounded by a cabinet that doubles as window seating.

“That’s significantly less expensive, but they operate at the same level as central heating and air conditioning,” says Scott. “That shed a couple hundred thousand dollars out of each of our buildings without sacrificing quality.”

In addition, Anthem uses flooring that is high grade and functional for a memory care community, but which costs a fraction of carpeting. “Little decisions like that have led to a lower budget when we’re developing and constructing a building,” says Scott.

The company focuses more on the common areas than on resident rooms. This approach serves to maximize the use of the budget and encourage residents to come out of their rooms to be social and active, a key factor in slowing cognitive decline.

“We need to make sure the room is not the reason they move in,” says Scott. “It’s the socialization and engagement.”

When all is said and done, McCoy says, it’s the combination of smart design, a high-quality operation and belief in the value of memory care that has allowed Anthem to survive the recent stormy weather.

“The headwinds were strong and blowing in our direction,” says McCoy. “I want people to know about the perseverance, the focus we have at Anthem. Trying times test people’s relationships. Our people gathered together and had a lot of great results over the last 18 months.”

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