After climbing the ranks for over 30 years, Nelson takes the reins at one of the industry’s biggest owner-operators.
By Jeff Shaw
Working at LCS was one of Joel Nelson’s first jobs out of college, and he’s had no reason to look back.
After a brief stint with a local hospital system in 1986, Nelson joined the Administrator in Training program at LCS. He started in the field, learning the day-to-day operations of seniors housing communities, before serving in several executive director roles and moving up to the corporate level.
After several years as the president and chief operating officer, a long-planned succession was set in motion. In January, Ed Kenny relinquished his role as CEO, handing the title to Nelson. Kenny remains chairman of the board.
Des Moines-based LCS is a family of six separate companies, each serving seniors housing in some form or another — including development, management, real estate, group purchasing, insurance and home health. As of June 1, LCS ranked as the second largest U.S. seniors housing operator with a portfolio of 130 properties and 33,883 units, according to the American Seniors Housing Association. It also ranked as the 24th largest owner with 34 properties and 7,151 units.
As one of the pioneering companies in the seniors housing industry and original innovators of the sector, the LCS name is itself almost synonymous with seniors housing, particularly continuing care retirement communities (CCRCs).
Seniors Housing Business spoke with Nelson to see what the future may hold for LCS under his leadership.
Seniors Housing Business: You were executive director with several LCS communities before entering the executive level of the company. Do you think it’s important that seniors housing executives have that hands-on role in their background?
Joel Nelson: I can only speak for myself, but it’s been very beneficial in my career. Having that hands-on experience and understanding the intricacies of how seniors housing communities function is a plus on a lot of different fronts.
But I will add a caveat. While it’s been very beneficial to me, I wouldn’t say it’s a requirement. Our industry can also benefit from other industries, such as hospitality and healthcare. There are other ways to learn and bring outside industry experience into our space as we advance what we do as an industry in serving seniors.
Technology is changing so fast, too. As long as there’s balance between technology and human need and what we do in our business, there are other ways to advance to the executive level without being an executive director.
SHB: What are some examples of what other industries do better than seniors housing?
Nelson: We’re working with Argentum, NIC and other organizations on standardization and professional certification. The hotel industry, for example, has done a very good job of standardizing metrics across the spectrum and across operators.
With the new product types and increasing number of rental communities, the executive director certification is not unlike the financial and accounting space. The designee of a CPA is just further strengthening the credentials of the professional.
Passing the baton
SHB: You were promoted from COO to CEO in January, as Ed Kenny moved to chairman as part of a retirement strategy. How has your role changed? Are there any plans for a replacement COO in the works?
Nelson: Ed and I have worked very closely together for 25 years. My job as the COO was really to execute the strategy. The two areas where my role has changed most greatly is a higher focus on setting that strategy for the organization going forward and communicating it to the company. Secondly, I have an even greater focus on growing the businesses.
We have not replaced my position of COO. We are leveraging one of the most experienced executive teams in the space. We expanded some roles and expanded my leadership team.
Today I have an executive leadership team of five. Each of those individuals has taken on a bigger piece of the responsibility within the organization.
Diane Bridgewater, CFO and chief administrative officer, now has responsibility for two business lines: our insurance business and our procurement business.
Rick Exline, a 40-year veteran, has actually relocated to Des Moines from Indianapolis and added responsibilities working with our development team now.
We brought in an industry veteran, Chris Bird, to run our rental company.
The last leg of that stool is David Laffey, a veteran investment banker in our space who has been with us over 10 years. He’s handling our real estate company growth.
We had a lot of talent when I assumed the role. Those individuals had some bandwidth to take on more responsibility, and we used them to create a formal executive leadership team.
Will we ever have a COO again? It’s likely we will, but the model we put forth today seems to be working pretty well.
SHB: Has anything changed under your leadership since taking over in January?
Nelson: In terms of sweeping changes, not really. This is a planned transition and orderly succession plan that’s frankly been occurring for a while.
What I will say is our focus on real estate and owning more communities is growing. That’s been a big focus over the years. We closed on our own $300 million discretionary fund this year to really drive the real estate strategy.
Then I would say the one initiative that the leadership team and I are deeply, heavily focused on is … I’ll call it a cultural adjustment, rather than a cultural change. I want to be clear with that distinction because one of our greatest strengths is our culture, but we felt there was a piece we could strengthen to help drive results. That was on the sales and marketing side.
We are starting the SalesFirst initiative across all business lines, with an initial focus on Life Care Services, the management line. We’re becoming a more sophisticated, astute, sales-oriented organization.
That involves retraining from the top down and implementation of some new systems. What’s behind that is our overarching goal to serve more seniors. The focus to sell first gives us the best opportunities to serve more seniors in our communities.
SHB: What are some concrete examples of changes under that plan?
Nelson: We teamed up with a professional sales consultant organization, and all senior executives have completed the initial SalesFirst training program. It included six weeks of meetings with our class, homework assignments, review, training and assessment on our sales acumen, and opportunities where we could augment the processes.
We followed that with a training program for every executive director and administrator out in the field. We are just now launching the same program, more oriented into the direct-sales functions themselves with our community sales staff. This program will complement our existing hands-on sales training program, Exsell.
SHB: So you literally worked from the top down.
Nelson: Yes. We believe everybody in this organization sells. Sell our business, sell our culture, sell our best practices, rolling into selling our customers, our clients and our residents. We felt like we all needed to go back and refresh and learn and make sure we were consistent with our messaging, training and sales expectations. That’s why we started at the top, so we really could understand what was going to be taught and trained for those who are actually doing the jobs.
It’s all in the family
SHB: Can you walk me through the LCS Family of Companies — the size of each and what each does?
Nelson: There are six companies within LCS, all senior-centric. We do not veer away. If it doesn’t benefit seniors in our work, in our business models, then it’s not something we look to.
The first company is our largest — Life Care Services. That’s the senior living management company. It really is separated into two distinct divisions that operate totally independently of one another. The first is our life plan (or CCRC) division, which has nonprofit, third-party contracts and for-profit owned communities. In that portfolio, this division serves about 100 communities across the country.
The second division of Life Care Services is LCS Rental, which serves about 40 properties. Led by Chris Bird, the rental communities include those that we own and those that we third-party manage.
Next we have LCS Development. That’s really the first company of LCS when we were founded 45 years ago. We started in development, then took on management. It has three business lines, the first of which is providing third-party, fee-for-service development. This division will do expansion, renovation, repositioning for both LCS clients and non-LCS clients. Today we have one new life plan development that is being developed from the ground up. Our team is providing all the development services, including design, entitlements, finance structure and ultimately the marketing, sales and operations.
Company No. 3 is CPS, a national procurement company. It’s unique in that it has as many non-LCS clients as LCS communities as clients. Our whole goal of CPS is to build scale and develop group-purchasing services for ourselves as well as some of our competition. We have the infrastructure, we have the specialists, we negotiate contracts. The more volume we have, the more we can offer and extend that value industry-wide.
The fourth company is an insurance captive (meaning an insurance company wholly owned by the insured members) called Hexagon. We partnered with AIG, and the LCS portfolio is the largest senior living portfolio insured by AIG. This is to provide an insurance advantage where we share in the risk. For us, Life Care Services will basically take the first layers of risk as it relates to workers’ compensation and liability. It aligns the interest of all stakeholders. It reinforces the importance of best practices, safe work environments. We have over 100 communities in that program.
The fifth company is our fastest growing and most progressive, LCS Real Estate headed by David Laffey. We just closed on a $300 million fund and we have $2 billion of assets under management. We are continuing to deploy capital for new development as well as acquisitions that will be under the LCS ownership umbrella.
The last company is Health at Home. That’s a service-add in some of our markets where we provide Medicare and private-pay home healthcare services for residents in communities managed by Life Care Services.
Between the six companies, we serve 33,000-plus seniors and represent about 145 communities across 33 states.
SHB: That’s a wide umbrella.
Nelson: It’s a wide umbrella, but the companies all complement each other. The strategy is that each one of these companies can bring value to each community.
I’m always asked, “Will there be a seventh company?” It’s likely. I don’t know what it will be today, but we always look at opportunities to add value, synergies and service to what we do. If there’s one that fits and there’s a need, there’s likely to be a seventh company.
Steering a heavy ship
SHB: With a company this large in an industry this dynamic, how do you adjust to the ever-changing landscape while maintaining that scale?
Nelson: We are a national network, but served via a regional platform. We have nine regional offices across the country. We really try to remain nimble and provide hands-on service and be present in the communities we serve. You look at those nine locations and draw a radius — it’s at most a few hours’ drive to any of our communities.
The other key part is increased standardization. With the regulatory environment as it is, and the service expectations only increasing as we expand, there is an increased level of standardization.
It’s very important to us, though, that this is not franchising. You have to have core practices, while maintaining the regional feel that allows an entrepreneurial spirit to serve that local market. That’s been very successful for us.
This industry is always changing. You have to recognize that and build the infrastructure to support working through the changes that we’re always facing each and every day.
SHB: What do you think is the greatest challenge facing seniors housing today?
Nelson: Most people answer that question by saying the workforce is our greatest challenge, and I don’t discount it. It’s not only hiring and recruiting, but also retaining employees. There are a lot of drivers behind that such as immigration law.
In addition to that, though, are supply challenges. We have to manage the abundance of supply with the need, which is driving pricing and occupancy compression across our space.
Going out on a limb a bit, I might also suggest one of the biggest challenges is identifying the product of the future. That’s where we spend a lot of our time. What’s being built today is very nice, and there are a lot of providers offering some great senior living options. But is that going to be the product of the future with baby boomers?
Figuring that out might be one of the greatest challenges in understanding the future market. It’s not necessarily that these communities will be out of the market. It’s not only the physical product, but also the service product. What are the amenities, services and lifestyle for the future senior? You have to make sure you’ve got that right.
I pose the question to my team this way: “How do we differentiate ourselves from looking the same as retirement communities out there that everybody’s doing?”
SHB: Any insight into what that future might look like?
Nelson: I’d like to reserve judgment on that. We’ve got some stuff we’re working on but I don’t want to get ahead of myself.
Serving a wider community
SHB: You’re a member of the NIC operator advisory board. What does that service entail?
Nelson: The NIC advisory board is a group of some of the industry’s best operators, large and small. That’s what makes it so powerful — the diversity and perspective.
The role of the board is to provide feedback to the NIC board of directors in its mission to identify and study meaningful data, metrics, market information, application and how that helps the overall industry.
We will study and provide feedback on the research NIC is providing, deciding whether it’s meaningful in how we can take that information and apply it as operators out there in the community. For example, we want to really understand pricing, how that interacts with market rates and discounting.
It’s really a sounding board that can provide operator feedback to the NIC board as it looks for better ways to serve our industry through research.
SHB: You are also on quite a few other boards and do a good bit of charity work. Tell me more about those groups, including the LCS Foundation, and why you participate.
Nelson: Wherever I’ve lived, I’ve always been very involved in the community. It’s important to immerse yourself in the community if you have something to offer. And there’s always a lot to learn. For example, I just finished nine years with the largest children’s rehab organization in Des Moines, ChildServe.
LCS Foundation really has three purposes, or pillars, behind its mission. The first pillar is investing in our future professionals within the industry through scholarships, training, development and participation in college programs.
The second is to celebrate the first Alzheimer’s disease survivor. We are certainly in the top five in the nation with our national Alzheimer’s fundraiser campaign. It’s our goal to be a million-dollar annual contributor.
The third is for our 24,000 employees serving our seniors. With that many people, there’s tragedy every day out there. Life’s hard enough. We have folks lose their homes to fires and hurricanes, communities that have been in floods. The foundation is a way to help those employees and families through those times of hardship.
Credit goes to Ed Kenny, who started the foundation about a year ago. It continues to build on our mission of serving areas specific to the senior space.
SHB: What’s something people in the industry would be surprised to learn about you?
Nelson: I’m a fan of wrestling. I’ve officiated for over 15 years at the high school and collegiate levels.