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Erin Hennessey

Discussion with Erin Hennessey, President & CEO at Health Dimensions Group

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The rural market is tough because it's not about recruiting and retention and that you're doing anything wrong. It's that they're not there.


Erin Hennessey, President and CEO of Health Dimensions Group, joins Scott Tittle on VERSED to discuss her life-long commitment to the long term care sector, the trend towards value based care, the potential role of AI technology, and the labor crisis post-COVID. As a certified gerontologist with 20+ years of experience in senior health care, Erin also discusses the impact of CMS's minimum staffing ratio rule on skilled nursing facilities, expressing concerns about its feasibility and potential consequences, particularly for rural providers where staffing is scarce.

Hi, welcome to VERSED podcast powered by VIUM Capital. We'll be hearing from leaders all across the long-term care sector who are shaping the future of our profession. Through these discussions, it's our hope that you'll be even more well-versed as you tackle your day in seniors' housing and healthcare. I'm your host, Scott Tittle, and this is VERSED. 

Scott 00:25

I'd like to welcome this episode of our VIUM Capital VERSED podcast Erin Hennessey, president and CEO of HDG out of Minneapolis. Erin, welcome to our podcast.

Erin 00:33

Awesome. Yes. Thank you so much for having me. I'm looking forward to our time together.

Scott 00:36

We’ve got a lot of fun things to talk about. I just want to jump right in because I love talking to people who are in positions of leadership, who came up through the industry. I understand your family is deep into long term care. Tell us a little about your family history and involvement with the sector.

Erin 00:50

Sure. My dad was a nursing home administrator in the late 70s and early 80s, and my mom was volunteering there in the activities department, so my mom's baby shower for me, with me, was held by the residents of the White Bear Lake Care Center here in Saint Paul. And so really started working in the communities as a volunteer right from when I was born; my first birthday was there. So I've been working and Health Dimensions Group for many years in a lot of different roles. And, I would say my first real job was 25 years ago when I actually was able to receive a paycheck as a dietary aide. In Minnesota at the time you could work at 14, so I was a dietary aide in assisted living, and that's where it started. And since then, I've really had every job in between; worked with my dad for about 20 years. And so now I'm in my leadership role and he's retired, but definitely was an operator, am operator. We also do consulting, but I always say my heart goes back always to operations because that's where I really was raised. So yeah, strong connection. Just love seniors is kind of been a legacy.

Scott 02:02

You literally and actually grew up in the industry.

Erin 02:05

I did, and it's awesome way to grow up. It's just my love of seniors started really young. And I think that as a leader, hopefully it gives me an understanding of the decisions that I make. What we implement impacts our frontline caregivers.

Scott 02:20

Because you've been on the front lines, you've seen it, you know it. And your staff knows that. And you're all bought in, which is tremendous.

Erin 02:28

And if I need to I can always jump in.

Scott 02:30

That's right. And I do want to ask you about that a little bit, especially as we, dive back into Covid and those memories. So you took over as the CEO in 2018, right? So what did your portfolio look like then across several states?

Erin 02:47

Sure. So, we operate right now in nine states probably pretty similar to what the portfolio was in 2018. And it must have been right around 2016, 2017, leading into me moving into my role as CEO, we started to take a look at our portfolio of assets that we were managing or owning, as well as the makeup of HDG and where our revenue mix was. And we were about 90% skilled and 10% housing. We were about 70% revenue coming from management of our third party, management of owned, leased or just third party managed communities. And we decided that we needed to diversify because we're looking at what the future of senior health care looks like. What we could do to make Health Dimensions Group, the core business, stronger. So we set a goal to be 50% housing and 50% skilled. And we did hit that goal, I believe, in 2019, and that was through a mix of acquisitions as well as divestiture. So we brought on new communities, and also moved a little bit away from the skilled space. Not that we didn't believe that there was a strong future in skilled care, I think skilled care will always be a part of the continuum, but to really balance risk we knew that. And also consumer preferences. We knew that we needed to balance that out. And then we started adding services to consulting to be able to grow our consulting revenue to match our management revenue. That was really strategic to move more into seniors housing and to grow our consulting services.

Scott 04:26

I would imagine as you've made these transitions over the years, what's that meant for you from a labor standpoint? Because you've had to manage to bring on a whole new group of professionals to kind of manage the portfolio and new perspectives and new percentages. And so say a little bit about your team and how that's moved over the years as you change your portfolio mix as well.

Erin 04:44

Sure. You know, it's interesting that all of these decisions were made before Covid, but helped us a lot during Covid because we knew we needed to make some changes to our labor force to match the change in our organization that we were making. And at the corporate level, at the support, at the leadership level, we needed to invest in senior living executives. We knew that we knew how to run skilled nursing really well. We are not afraid of clinical complexity. That's been the world that we've lived in. But really that hospitality piece, sales and marketing is very different. So we brought on new sales and marketing leaders who had a lot of experience in senior living, hospitality, culinary, quality, revenue maximization. So we really grew our team to be able to support that area of the business. Our workforce that's boots on the ground, you actually need a little less staff in assisted living, which through Covid and the subsequent labor crisis, in a lot of ways benefited us because the fewer staff that are needed specifically clinical caregivers in housing. So these decisions were made without that in mind, but really helped us as we worked through that.

Scott 05:57

When I think about the senior housing side, a lot of people think about the Pacific Northwest and the East Coast and even, of course, the Sunny States is sort of like the central point for senior housing assisted living. But a lot of people don't realize the Upper Midwest has a very rich A.L. and you guys have been a part of that, too. Say a little about what it's like to operate in the Upper Midwest on the senior housing side, specifically your home state of Minnesota.

Erin 06:20

We've actually always had a lot of assisted living here. I think Health Dimensions Group opened up its first assisted living, it must have been late 80s, early 90s, kind of one of the first ones in Minnesota, right on the edge of understanding what consumer preferences would be and how people were choosing to age. We have a lot of not for profit organizations in Minnesota that have kind of paved the way for senior living. So I love operating in the upper Midwest. It's probably because I'm from here, but we also have a huge group of organizations that operate across the continuum. And those are the kind of operators that I love because they're really experienced senior living operators and they're really experienced skilled nursing operators. But the best thing is being able to care for people across the continuum. And we actually also do work in PACE, in home health. So understanding that not everyone wants to live with us, but programs like the program for All-Inclusive Care for the Elderly or Home Health, people are in the continuum, not necessarily living with us. We love when they live with us, but would prefer that they wait until they need to.

Scott 07:28

So say a little about, kind of continuing on that labor discussion, how about frontline staff? That has been such a conversation since Covid of course, the labor recovery side for long term care. Certainly it's the sector among health care sectors that has not recovered to pre-COVID levels. What's your experience been like in the markets you operate? Has it been trying to attract and retain frontline staff, and kind of market to market and state by state?

Erin 07:55

It's something that the labor crisis that came after Covid was something I don't think any of us had ever seen before. I remember when I was in ED many years ago at an agency contract that was like this emergency contingency plan, always had one sign in case you needed it. But it's such a last resort, and now agency kind of became a part of your make up of your labor. And I remember this gentleman, right as the labor crisis was starting say, “Well, how good are you at managing agency labor”? I said, “Well, not good. I've never really done it before. We've never had agency in our communities.” So I think we're all kind of on this really steep learning curve of trying to balance not only financially but operationally: How do you bring agency labor into your community? Because it wasn't a necessary thing. Now we even use the word necessary evil because you have these people coming into your community who don't know your residents. There's a lot of price gouging going on. But the good news is, is we've really worked through that. And I would say most of our communities have either eliminated or really minimized agency labor, which I think really helps us financially, but most importantly improves the quality of care for our residents. But you had mentioned in the question, labor and geography; it's very market specific. We have some markets that never needed agency, and we have some that still have it in there. And it really depends, market by market. So our agency reduction and labor management strategies are done at a community level. And of course, there's a lot of work going on at a corporate level of same day pay and scheduling flexibility and all the programs we can roll out. But it's so market by market. But I would say it's getting better. It feels better every day.

Scott 09:48

How about in terms of urban and rural? Are you still seeing a lot of people saying that that rural market is just really tough.

Erin 09:55

The rural market is tough because it's not about recruiting and retention and that you're doing anything wrong. It's that they're not there. We operate really deep rural in Minnesota, and they're are just not enough nurses or certified nursing assistants in the market. They just don't live there. And sometimes if you're rural, but maybe 30 or 45 minutes away from a little bit bigger community, there's a hospital. Not only are you rural, but people who do live there, who have the skills you need, are willing to drive 30 or 45 minutes to work for a hospital where we know that the wages and benefits are a little bit bigger. But I'm pretty passionate about rural health care because I know that our communities that are deeply rural, if anything were to ever happen to them, it's a long way for family and friends to go visit them. So it's really our commitment to keep them going and you just have to get very creative.

Scott 10:49

Let's dip a little bit into politics. CMS released its final minimum staffing ratio rule last week for skilled nursing facilities, which we all know is going to impact not only the entire spectrum, but certainly rural markets tremendously. So have you had a chance to look at that rule and maybe even take a look at internally what this could mean for your communities and just even a raw cost figure of what it might take if, assuming the people are there and we know that they're not, what is that going to mean for your company in terms of how many people you're enough to hire and what the cost could be?

Erin 11:18

We've looked at it really quickly and in depth. We were able to do that pretty quickly. Mainly because the benefit that we have of having a consulting organization. So we were able to dig in and read it. And even on our website we have a top ten things to do right away. I guess I had a couple different thoughts. One is: it's wild. There's not any provider that doesn't want or think that we need more staffing. But I think that the result of this, you have two things: if you have to have PPDs you have staff and residents. If you're forced to have this amount of staff, you can have this amount of residents. I think there's a disconnect in what Washington thinks will happen if they implement this. Some communities won't survive. I think I heard, 19% of communities could do it. I think some organizations won't be able to survive because they can't find that staff. Now, it sounds like there's going to be some waivers in rural health if you're in an area where you just can't find that labor, even if it's more urban, the only thing you can do is reduce the amount of residents that you take. Then there's a ripple effect through the entire continuum. I think our best friend during this needs to be our hospital association's because our inability to care for residents will be their inability to discharge patients to our setting. So I think my initial response when reading it was that it was absurd. And, having 24/7 nursing in certain communities is impossible. We calculated you need about 5 to 6 nurses doing a mix of full time work to part time work to be able to cover that. In some places we operate we don't even have 5 or 6 RNs on staff right now. So my first response was, it's absurd and we all wish we could have that, but it's not reality. But then when you look at the timeline, it's 2027. A lot can change. The  world will be a different place in three years. So I think that we have a lot of time with our advocacy groups, our trade organizations to really make sure that our story is heard and that our voice is heard. That we're all on the same side of taking care of residents. We just need to be a little more realistic of how we do it. Those facility assessments need to be done, I think, in 90 days. So we're all going to be taking a pretty close look at our organizations this summer and understanding what we're going to need.

Scott 13:36

And I think when we first heard this, the draft rule coming out, we thought, well, gosh, maybe this is sort of a moment of willful blindness by CMS. But boy, as you sort and see the the final will come out and what it could mean, it's sort of like the law of intentional consequences, I think. It's almost, there's this disconnect that seems to be somewhat intentional. But you're right, Erin, there’s a lot of opportunity on the advocacy side. We have several general elections to go, their bills moving through Congress, there's litigation to be filed. So hopefully at the end of this, despite all the hard work that's going to be needed, the right solution comes out. You really touched on something that I think is really important is that our sector does want more staff, and the sector’s not against minimum staffing ratios. It just has to be reasonable, realistic and funded. There has to be a recognition that there's a significant cost there that's got to come from somewhere. And with the fact that this whole thing is unfunded is just tremendously concerning.

Erin 14:30

And I worry about the parts of the sector that can't dictate their own pricing. And what happens to Medicaid patients where you don't have as much control over your rates and then you have managed care coming in? What do you do in settings where you don't have as much control over your rates? Private pay we have a lot of flexibility, but what happens to people who can't just pay anything? 

Private pay, and who does this punish at the end of the day?

Scott 14:56

We would hope it doesn't get to the point where you and I were just hinting, which is we're going to have a real lack of access to care for people in rural markets because some operators are just not going to make it work. Buildings are going to close and we're going to have counties, many counties in this country, they're just not going to have a nursing home in their county, and they're gonna have to travel a long ways to get the care they need.

Erin 15:12

I think it's kind of an illusion that skilled nursing won't be in demand. We can take care of people with home, community based services and assisted living and if you look at the demographics, the diseases and the chronic illness that our seniors have, it's always going to be a part of it. I think the government doesn't understand how many skilled beds are going to be needed for this wave of people coming our way.

Scott 15:32

Well, let's kind of pivot and talk about some fun things to look forward to because I have a feeling you're on the front end of a lot of interesting movements inside the sector to help serve residents in brand new ways through technology and new services. And so I want to ask a little bit about behavioral health. I know that's something you've been focused on before. Tell us a little about your focus on behavioral health and some of the new services you provide to some of your residents.

Erin 15:53

I think behavioral health has become more of what we do in skilled nursing facilities, the way that there's been more accessibility to private pay communities. A lot of those are assisted livings, and we can take pretty high acuity patients in our assisted living. So people with private pay are able to stay in those settings for a long time. So we have a lot of dually eligible patients that are in our skilled nursing facilities. And we know that with dually eligible patients, there are more psychosocial issues. We also see people are living longer, we're seeing more dementia. And I think just caring for people who are a little bit different than I think of that I was caring for, 20 plus years ago. Now, straight behavioral health is something we've been approached on, and I was approached on last week again. This is just an area of our business that we've made a strategic decision not to do straight behavioral health because it's not our area of expertise. So I never want to do something where it's not my area of expertise. If HDG does something, we want to be awesome at it. And I think to do a great job in behavioral health, we'd have to build out a new team. That's just something that we're not investing there right now. That may change as the environment changes, as the landscape changes, as patients change. But, right now we're leaving that to the experts. But I definitely think it's an awesome opportunity. There are a lot of closed or closing skilled nursing facilities, and it is a nice setting. If you actually think about the physical plant for behavioral health: private rooms, commercial kitchens, community spaces… I think our physical model matches really well. And I think that the back office matches really well. We're building managed care, we have revenue cycle, we have HR. So I'm open to the back office support that we do for external clients. But as far as day to day operations, I always say we're a health care firm, we're a health care consulting firm. So we're broad but narrow seniors only.

Scott 17:51

And maybe along the same lines, there's been this big movement push towards value based care and that's defined a lot of different ways: I-SNPs, D-SNPs, C-SNPs, networks. Say a little bit about has your company moved into that space at all? And what do you think about that in terms of future opportunities?

Erin 18:09

Well, I always say that the kings and queens and the people who invented management of value based care, skilled nursing leaders, we've always been dealing with a Med A stay, we had to manage all of the expenses of a patient under, a per diem. And we've had people with complex needs that live in our communities who are responsible for all of that care. How would I describe it is that we know what we're doing when it comes to value based care. We know how to take care of people in a holistic way, because I think value based care comes down to holistic wellness of a resident. And managing all parts of their care: financial, clinical, spiritual all of these different things that come together. But I think the pressure on value based care is really coming, and we're seeing it come from the government, we're seeing it come from private organizations with managed care. But I think our profession will do well because we know how to manage people. I think that we have to be careful that managed care payments don't go too far because you only can cut expenses so far where you start to dig into quality. So I know that the federal government has been really vocal about moving to value based care and moving to managed care, but I think there needs to be a balance that we don't go too far. And it's on us as providers to negotiate.

Scott 19:32

I think from the government’s perspective it sounds great. Having a third party manage the care for you so you don't have to worry about it. But at the same time, to your point we know our residents better than anybody else. And sometimes you just don't want a third party being inserted into the payment stream that has no relationship with the residents whatsoever. So as I talk to operators like yourself and thinking about how they can take more control over the payment and the outcomes, that's the sweet spot, right? So I know those are efforts you're focused on all too well.

Erin 20:01

Absolutely. I think that our communities, especially in skilled care when you get recertified frequently and people are only covering a certain amount of days, you know, we know these patients well. We know their families, we've heard about their homes. And so I think the fact that we know our patients allows us to decide when it's the right time to go home versus some sort of algorithm that says,

here's the number of days you get.

Scott 20:23

Well, speaking of algorithms, I've also heard you talk a little about the role that technology and really AI could play. So say a little bit about what your vision could be for AI because I think that's a really exciting conversation.

Erin 20:35

I think AI, and when you think about it too much it can be a little scary, because you also hear the horror stories of what could happen. But I think any time that you can elevate a human to do what humans can uniquely do is complex thinking, working together, teamwork, problem solving. Those aren't necessarily things that AI can do. So what I think about is AI will help us take tasks away from humans and technology too, like robotics. I think these things they take tasks off of humans plates and allow humans to elevate to what we can uniquely do because we're people taking care of people. We're human to human. But what can all these things do to give us more time for human to human contact and interaction? So I think that it will help us elevate. And it doesn't replace any of us, it's just a huge helper. But we're definitely looking at it. I downloaded ChatGPT and have been trying to learn it and understand what it does and what we can do to automate certain things. And very open minded to technology because our workforce and our demographics don't align.

Scott 21:55

Well, Erin, this has been an awesome opportunity to talk to you a little bit about get to know you better, know more about your company and see what's on your radar. I'd love to have you back down in the future. Maybe, especially as we start to understand better where this minimum rule could go. And then I’d love to hear where you are on your AI journey at some point. I always like to end with a couple of personal questions. Our listeners don't know this, but you and I have connected over the fact that we both love to go on cruises with our families. And you've just been on a recent cruise. Where has been your favorite place to visit on a cruise with your family?

Erin 22:20

I would say the best thing I've ever seen on a cruise is going through the Panama Canal.

Scott 22:25

Oh, my gosh, how special that had to be.

Erin 22:27

Mindblowing. You know how it happened. You know why and how and what. But seeing it kind of blows your mind. Especially back when they did it. How much it changed the world. So I would say that. You and I both share the love of cruising and that time with family. And I think it turns your mind off. I just love it.

Scott 22:46

It does. It's a special way to travel and see the world and I certainly have some wish list trips and our future; love to kind of do an Alaskan cruise or Greek cruise, Greek Isles cruise. But the Panama Canal, I'd love to add that one to the list. That's got to be pretty amazing. How about, one last question. What's on your nightstand? What do you recommend to people? What do you hand to people?I just always love to get a good recommendation from our guests.

Erin 23:07

Much to the teasing of many of my friends who are really into fiction, they're always talking about all these crazy books they're reading, I love articles. I love research articles. I love reading the latest and greatest in our profession. I love reading science articles and history articles. So I'll say on my nightstand is probably my iPhone or I'm texting people all the time, “I read this article. I think this is of interest to you or to my team. I read this article on leadership. Isn't this interesting?” So I would say that versus a book is always into if there's something that pops up, I'm always online researching and reading articles and sending them to friends, family, colleagues.

Scott 23:51

I'm not sure what the eclipse did in Minnesota. Were you and your family into the eclipse as well? Knowing your background, interested in science and technology?

Erin 23:58

No, actually, we didn't watch it too much. I think we kind of knew right away we weren't going to have that great view, but it was fun explaining it to my daughter. And thinking back to, I think I must have been around her age when we had one. And I remember, we were in elementary school and we all had these funny glasses, like, “Don't look at it. You're going to go blind.”

Scott 24:14

We were down in Florida, and, unfortunately, Indianapolis was one of the best places in the world to see it in the United States. But we were in Florida, but we got to see a little bit on the beach, so we got into it pretty deep. That was fun.

Erin 24:24

Yeah it's fun researching all these different things. And I always think it's good to be curious and learning. And I think it's a good way to teach your kids about what's going on in the world. Don't make them sit down and read a history book. Read them little snippets of what happened.

Scott 24:37

Well, Erin, I can't thank you enough for your time today.

Erin 24:39

Thank you.

Scott 24:39

It's great to know you better and hear everything that HDG has going on. And again, I'd love to have you on again in the future and hear where you are on your journey in all these directions.

Erin 24:46

Sounds great any time.

Scott 24:48

Great. Hey, for our listeners, thanks for tuning in. It’s been really special to have Erin on. Please tune in the future to hear conversations and discussions with other leaders that are changing our sector. This is VERSED.

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