Investing in Skilled Nursing – The Basics

I just finished a two-day non-deal roadshow.  Princeton, Philly, and Boston.  Now headed south for a property tour of a couple buildings we have under contract.  As usual, the insititional investors we met with were impressive.  Everyone has their investment “box” that they’re trying to see if we fit in.  This trip, we spent a fair amount of time educating analysts and portfolio managers on the some of the fundamentals of the skilled nursing business.  That got me thinking it would be helpful to provide a high-level intro to the business for investors wanting to get up to speed on the basics.

20 Years of History in 175 words

Skilled nursing facilities exist to provide 2 types of healthcare:

  1. Custodial” (worst term ever), long-term care for “residents” who live in the facility and
  2. Short-term rehabilitative care for patients who are transitioning from hospital to home.

Historically (20 years ago), a “nursing home” or skilled nursing facility (SNF) was where grandma went to live the rest of her life if she needed more assistance with activities of daily living (ADL) than she could get living alone or with family.  For the last 20 years there has been a massive shift in the purpose of SNFs.  With every passing year, they have focused more on caring for higher acuity (clinically complex), short-term rehab patients.  The patients in the SNFs’ rehab units today were treated in acute hospitals 20-30 years ago.

Hospitals and health plans (HMOs) are incentivized to lower the cost of healthcare by reducing the time of inpatient care, thus hospitals have been pushing higher and higher acuity patients out faster and the stronger SNF operators have equipped themselves to meet that demand.

Who Are You?

To understand why SNFs have been willing to adapt to meet the demand of sicker, more clinically complex post acute care (PAC) patients, let’s take a look at the universe of possible patients a SNF cares for …

Medicaid is healthcare for the poor.  In a SNF, Medicaid pays room & board and medications for long-term residents.  Generally speaking, these are NOT the “patients” in the facilty receiving physical therapy (PT), occupational therapy (OT), or Speech therapy (ST).  Rather, they live there.  It’s their home.  Medicaid reimbursement varies by state.  Some pay a fixed rate.  Others pay based on a case mix index (CMI).  The CMI states recognize that the amount and cost of care for all Medicaid residents is not equal.  The more assistance a resident requires, the higher the CMI, and therefore, the higher the reimbursement.  Medicaid reimbursement is the lowest of any type within a SNF.

Medicare is healthcare for seniors (65+).  In a SNF, Medicare pays for short-term rehab for patients who had to be in the hospital for at least 3 nights.  These patients are usually receiving “Skilled Services” from therapists (PT, OT, ST), and/or from nurses (IVs, tracheotomy care, wound care).  The length of stay (LOS) could be anywhere from less than a week to 100 days (Medicare covers 100 days of a SNF stay) depending on the the patient’s needs and prognosis for improvement.

Managed Care or HMO, like Medicare, pays for the same short-term rehab skilled services.  These patients are Medicare eligible people who have signed over their Medicare benefits for a Medicare-replacement type of insurance product offered by health plans like Aetna, Kaiser, etc.  The reimubursement is lower than Medicare (though in some cases the HMO rates pegs to Medicare rates).  And, because it’s “managed” care, case managers at the HMO push on SNFs to care for these patients faster.  HMOs make more money if the length of stay is shorter since inpatient care costs more than care provided in the home (home health, HH).

There are also Private Pay residents.  Expect this to be a shrinking piece of the census pie as assisted living facilities have continue to adapt to provide more assistance today than 20 years ago as well.

The Numbers

Now, let’s take a look at a hypothetical facility through financial eyes.

Let’s call it Dave’s Rockin’ Rehab Facility (anything other than Dave’s Gardens, Village, or Manor, please!). The vital statistics are these:

  • 100 bed facility with the following mix of residents and patients
    • 50 Medicaid residents
    • 20 Medicare patients
    • 10 HMO patients

Now, let’s do some simple math.

50 Medicaid residents x $180/day x 365 days/year = $3,285,000

20 Medicare patients x $525/day x 365 days/year = $3,832,500

10 HMO patients x $420/day x 365 dats/ year = $1,533,000

Total Annual Revenue: $8,650,000

What does is take to run Dave’s Rockin’ Rehab?

Labor is, by far, the biggest expense.

  • Nursing (Registered Nurses, Licensed Vocational Nurses, Certified Nurses Aides)
  • Rehabilitation (PT, OT, ST)
  • Dietary (Cooks, Dietary Aides)
  • Housekeeping (Housekeepers, Janitors)
  • Laundry (Laundry workers)
  • Maintenance (Manager, assistants)
  • Social Services (Social Workers)
  • Activities (Activities Director, assistants)
  • Business Office (Biller, Accounting)
  • Human Resources (HR/Payroll rep)
  • Marketing/Admissions (Admissions coordinator, external marketer)
  • Medical Records (dept. head)

Other primary expenses include:

  • Medications
  • Food
  • Medical Supplies
  • Paper & Plastics
  • Insurance
  • Chemicals
  • Linens
  • Electronic medical record system
  • Marketing
  • Oxygen
  • Labs
  • X-Rays

Let’s put it down on a simplified P&L:


Medicaid       3,285,000

Medicare       3,832,500

HMO              1,533,000

Total               8,650,000

Operating Expenses

Labor             6,000,000

Supplies         700,000

Ancillary        500,000

Food               200,000

Other              200,000

Total               7,600,000

EBITDAR:     1,050,000


Rent:                 750,000

EBITDA:          300,000

So, we see the financial levers are

  • Census (overall occupancy)
  • Skilled mix (percent of patients on “skilled services” aka short-term rehab patients aka Medicare + HMO divided by total census)
  • Daily rates (Medicare RUGs/ADLs — we’ll cover this another time; private pay — again, a shrinking % of the SNF census and so less of a lever than in assisted/independent living/memory care)
  • Labor — staffing efficiently
  • Medication management
  • Expense controls for purchasing

Investors New to Skilled Nursing

Needless to say, there’s a lot that goes into efficiently operating a high skilled mix, profitable facility. This isn’t your grandma’s nursing home.  Or Buick.  And, there’s a huge difference between the blue-chip operators like The Ensign Group and folks still clinging to maintain the status quo from 20 years ago.  I frequently see small owner/operators deciding to sell their facilities because they realize they haven’t kept up with the constant changes and it’s too late (or they’re too tired) to re-tool.

  • There are over 15,000 skilled nursing facilities in the country.
  • Somewhere around 25% of those are owned by large chains.
  • And, somewhere around only 20% are owned by REITs.

It’s a very fragmented industry that has been under pressures to provide better, faster, and cheaper care to sicker and sicker patients.  That trend has been accelerating over the last couple years with bundled payments (I’ll write about that soon).  The only thing that hasn’t changed is that the operators (of all sizes) who are sophisticated, engaged, and committed to quality care are able to adapt to the changes and win and those operators (of all sizes) who don’t adapt, lose.

Why Don’t He Write?

I just thought of a scene from Dances With Wolves.  Not because it takes place at “Fort Sedgwick” — though can there be a better reason?  Not, because it inspired me to write this.  But, because it’s been too long since I’ve written here.

“Why don’t he write?”

As a facility executive director and chief human capital officer at The Ensign Group for 13 years, there seemed to be endless material to write about.  Since moving to the investing/financing side of Seniors Housing/Healthcare, I haven’t taken the time to write as often as before.  But, I think that’s going to change.

I get asked regularly by analysts, investors, bankers, and other industry observers what I think about the constant breaking waves of news and changes in the skilled nursing business. Candidly, I’m frequently disappointed to see the over-reaction to those headlines by the market (and even by other REITs).  Industry observers are quick to declare the death of the skilled nursing operators.  It seems like there’s been some headline to that effect every year for the last 15 that I’ve been in the business.  I add my voice to Mark Twain’s off-misquoted correction …


I remain as bullish as ever on skilled nursing because the best operators always find a way to adapt and thrive while the weaker ones fall.  And, not that it takes one to know one, but it certainly helps.

Topics on the table right now include: Changes to the 5 star program, CJR (Comprehensive Care for Joint Replacements), Bundled Payments, ACOs, etc.

Ironman Maryland 2015

I started writing here over 8 years ago to share the many lessons learned from my own and others’ experiences (failures and successes) in skilled nursing and seniors housing management.  One thing that I saw in myself and others in our industry, repeatedly, was the lack of any semblance of balance.  Running facilities 24x7x365 can take its toll on your life (professional, personal, health, spiritual, relationships, etc.) … if you let it.  And, its fairly easy to let it.  In fact, if you’re not deliberate with how you allocate your time, you naturally sacrifice the important for the urgent.  So, also about 8 years ago I made major changes to my diet (90:10 90% whole food plant based, 10% not) and got more serious/consistent with running, riding, and eventually triathlon.  Things have progressed since then …

I first wondered about attempting an Ironman when I was around 10 years old and I saw the footage of the world championship on Kona, like these.

Fast forward to 2010, Jess and I flew to Kona, HI for my first 1/2 Ironman.  I shared that experience here.  That was a big deal for me, athletically and psychologically.  After that race, completing a full Ironman seemed more possible and impossible at the same time.  At the end of the 1/2 I was completely spent physically and emotionally.  I just could not imagine doing double that distance.

Jess made a lot of sacrifices to enable me to commit to the training needed to do the 1/2.  About 12 months ago, she knew what she was getting into when I asked her how she felt about me doing an Ironman in 2015.  She knew how important it was for me and she knew it meant I would be gone every morning before she woke up; that she would be getting the kids ready for school on her own; and, that Saturdays would be more difficult for her and the kids as I put in my longer training days then.  In spite of all that, she was positive throughout.  I really don’t remember one time when she expressed any resentment or frustration over the following 12 months.

Because I was so intimidated by the distance, I hired a coach based in Boulder, CO to get me ready.  She told me what to do every day and how hard to go.  I was surprised how much low intensity work she gave me.  She emphasized low intensity to train the body to burn fat for fuel and to create a cardio engine that could go all day.  She made sure I didn’t overtrain which is probably the biggest risk for first timers like myself — scared of not being fit enough.

I spent the long winter and spring of 2014/2015 in the basement on my bike trainer and treadmill and at the YMCA pool.  The progress was slow and steady.  The key was consistency.  Every day, putting in the work.  Every morning, I would drop Madi off at Seminary and then train for 2-3 hours.

My work requires a lot of travel.  I have my pools and gyms in New York and Chicago and would always look for hotels near gyms during the cold winter months.

About 4 weeks before the race, I crashed on my bike.  I was at hour 6 of a 6 hour training ride.  I was coming down a sharp corner too fast and struck something that caused the bike to slip under me and me to hit the pavement going about 20mph.  Road rash on my ankle, knee, hoop, elbow and and cracked my helmet.  Whiplash followed for a week.  Then, a soreness in my back rib joint became more and more severe.  It was painful to breathe hard, cough, and sneeze.  Breathing became difficult during runs.  I went to PT and to the chiropractor a few times.  The chiropractor thought I might have a cracked rib but that I definitely had injured the soft tissue and cartilage in the joint.  A week before the race, I was feeling worried that the injury may inhibit my ability to complete the race.  Not only did I have the injury but I also was sick.  I attended the Spanish Branch and asked the Branch president, Chris Trimble, a friend of mine, to give me a blessing.  I felt hopeful.

A hurricane warning caused the race to be cancelled and postponed by two weeks.  This turned out to be a blessing as it allowed me more time to recover and be ready for race day.

The day before the race, Caleb drove out to Cambridge with me to help me check-in and get ready.  I loved being with him, talking about the many facets of the race.  We had our big pasta dinner together that evening before the rest of the family joined us at the hotel.  I got to bed at about 10:30pm and, predictably, had a restless night, waking up every couple hours.  I woke up at 4:30am, ate my peanut butter, honey, and banana sandwich and got dressed.  Jess took me to the race and kept me relaxed up until the swim start.

Why did I commit to doing an Ironman?

  • I wanted to give my children an example of becoming the best you can be; of doing hard, positive, stretching things.
  • I wanted to test/push my own limits.  Being a competitive athlete has been an important part of my self-identity since I was a child.
    • During my mission I decided to not continue with basketball at BYU because my perspective on life had changed significantly during my mission: I realized I wasn’t going to play professionally and that I needed to take the massive amount of time that basketball demands and allocate that to preparing for the rest of my life.  Also, I saw, during my mission, more forcefully, my own pride and how playing basketball was a pride-fueling endeavor.
  • After several years of marriage and beginning a career in healthcare management, I filled the basketball void with triathlon.  I felt like replacing the competition with others inherent in basketball with competition with myself inherent in triathlon was positive and I found that I enjoyed the sport — even if I was very slow.
  • Turning 40 in 2015 was a motivation as well.  Since making major diet changes about 8 years ago to predominantly whole food plant based, I became more serious about my health and fitness.  I was motivated by the idea of being able to honestly say that the year I turned 40 I was in the best shape of my life.



Windy and cold.  Wind chill air temperature of 32 degrees at 6:30am.  Water temp was 63 degrees.

The Swim.

The wind was strong and constant and caused a small watercraft advisory which forced them to modify the swim to 3,000 meters.  Because of my ribs issue I didn’t do a lot of stretching or warming up.  I tried to relax.  Jess was there with me which was awesome.  The start got pushed back to 7:30am and then it started.  I put myself in the 1:30hr swim speed group.  The water was cold but not bad.  After about 2 minutes I was surprised that I hadn’t lost my breath, which I normally do at the start of the swim before I can settle in to a rhythm.  This time, I took it easy and found my rhythm right away.  The water was very choppy at times.  Other times there felt like small sets rolling in.  But, I think what was most notable was the collisions.  There was the normal feet and hands bumping into each other, but I also got struck in the face a couple times.  It didn’t bother me, but I had to adjust the goggles a couple times.

The water was actually pretty clear, though visibility was limited by the early morning light and churn of athletes.  I found myself passing people pretty regularly.  Spotting was good.  I sort of wandered off the line during one stretch where my mind starting wandering too.  I swam aggressively around the buoys and to pass people who were slowing me down.  But, I kept my breathing easy the entire time, never really pushing my pace.  I really enjoyed those few stretches where I could really use my best form and just motor along.  About half way through the swim I realized that my back/ribs were not sore at all.  I could stretch and pull without limits.  We have a saying in my family, “The Lord is the best,” and that’s exactly what thought as I realized He had answered so many prayers (and the blessing I received) that I would be able to complete the race (the day before, my back/ribs, were as sore as ever but I barely felt them throughout the entire race).  I finished the swim feeling fresh and ready to get out of that wetsuit.


T1 took forever b/c of my frozen fingers.  Due to the cold weather, I decided to wear my compression socks for the ride and run.  They’re hard to put on in normal conditions, but with frozen fingers, it took me a long time.  I just stared at my fingers trying to get them to move.  I wore an extra pair of wool cycling socks on top of my compression socks (it took the entire ride before I could move all my frozen toes again).  I also put on arm warmers, gloves, and a sleeveless windbreaker.  Under my helmet I had a gortex cap.

The Bike.

I got a Retul bike fit done the Monday before the race.  I know it’s not the smartest to tinker with bike fit that close, but the vast majority of my training was done on my road bike and I’ve always felt that my tri bike didn’t fit as well as it should.  Plus, I was worried about being in the aero position so long with my back injured.  So, I got it done, and they actually adjusted quite a bit.  They brought my seat up and forward and raised my handlebars and pulled my aero sticks way forward so my arms rested on my elbows instead of my forearms.  I did one 6mi ride on Wednesday around my house to feel it out and it felt fine so I went with it.  I’m glad I did as I felt more comfortable in the aero position than I normally do.

The wind was murder.  There were a couple times I just sort of laughed at how crazy it felt to grind into a 30mph headwind.  It felt like we had a tailwind for about 1/3 of the race and the rest was cross wind or head wind.  During the run, an 8x ironman told me this was the hardest bike he’s ever had.  I focused on my heart rate, keeping it as low as possible while maintaining a 20mph pace.  Most of the time I think I was at about 130-135 hr and 20mph.  The special needs bag at the half way point was huge for me.  Jess surprised me by putting in a bracelet with a scripture that has been a theme of ours for years: Look unto me in every thought, doubt not, fear not.  I put it on felt a surge of emotion and shed a few tears.  She also put in a bag of salt & vinegar potato chips and fresh fruit.  I downed about a cup of pineapple, watermelon, honey dew, stuffed the chips in my shirt pocket and headed off for the second half of the ride.  I immediately tore into the chips and was in heaven.  The salt and flavor of those chips were exactly what my mouth/body needed.  I spent the next 5 minutes in the aero position, just taking small bites of those chips.  Then, I remembered my coach’s advice to stop at the special needs bag even if you don’t need it at the time b/c you might need it at mile 90.  I thanked her for the advice and stuffed the bag away for mile 90.  I brought them back out at mile 90 and savored every bite.

I said I didn’t feel any pain but that’s not right.  My neck, as usual, was in severe pain from keeping it up in the aero position so long.  I finally found a way to alleviate the pain while staying aero and that was to prop my chin in my hand (sort of like a thinker’s pose) with one hand while keeping the other hand on the aero handlebar.  I’m sure I got some funny looks as I passed people propping up my head, looking like I didn’t have a care in the world.  Today was definitely a day where not being allowed headphones or drafting off others was relevant.  I saw a lot of guys get penalties for drafting.  Mentally, I mostly zoned out.  I wasn’t in pain and wasn’t pushing very hard so I just sort of went on cruise control mentally.  The wind is what had my attention most of the time and trying to balance my effort with conditions with the need to save up for the run.  My only worry on the bike was getting a flat tire and fortunately, that never happened.


My whole family was there for T2 and that was a big lift and exactly what I needed before the marathon.  I took some time with them at the start and end of T2.  I changed from my bike bibs to my normal tri shorts and headed out.

The Run.

I was surprised by how fresh my legs felt right away.  I was expecting a few miles of really heavy legs but they actually felt fine and ready to go right away.  I kept in mind my coach’s advice to start out really slow/easy and so I did.  Instead of looking at my heart rate, I focused on my splits and just tried to keep them around 10mi/min pace as long as it felt easy.  The first 5 miles went by quickly and I felt good and thought about going faster.  Instead, my legs started to really tighten up (my left IT band/quad/knee) and I started to “feel” different parts of my legs from time to time, which caused me to slow down and be more conservative.  My only fear on the run was that I would pull, strain, or cramp and then have to walk/shuffle for a long time.

As far as fuel goes, the aid stations had two things that I hadn’t thought of before but found my body craved: ruffles chips and chocolate chip cookies.  I only drank water and had either chips (mostly) or cookies practically every aid station.  When I had 8 miles to go, I had my lowest point.  8 miles isn’t a lot, but by that point, I did not feel like running another 8 miles.  I started chanting “Look unto me in every thought, doubt not, fear not” in my head to bring positive thoughts back and, of course it helped.

As the sun was beginning to set I saw Jess and my kids.  She asked me how I was doing, and I said, I’m dead.  She said, “don’t quit! you’re so close!” and that actually helped a lot.  I was so close.  When I got to mile 21, I got new life.  5 miles is just 2.5 out and back!  My legs were tight and sore.  I finally pulled over and stretched on a bench and it was like a miracle.  I felt great.  I kicked myself for not doing that hours earlier.  The tightness and pain was gone and I started to speed up.

With one mile left, I let it go and ran about a 8:30ish min/mile.  Adrenalin/emotion had taken over.  It was an emotional last mile as the crowd was big and loud and I realized I would finally achieve a goal I wondered about since I was a kid.  With about 100 yards to go, I spotted my son Caleb running towards me.  I said, “I think it’s time, buddy,” and he agreed.  He ran with me, weaving in and out of spectators to the side of the course as I sped up and held back the tears, crossing the finish line.

I felt so relieved, happy, proud, and grateful.  My whole family was there in the cold cheering for me and proud of me (with shirts that have a quote of ours that says, “the pain of discipline is far less than the pain of regret.”  I hoped to set an example for my kids to do hard things and stretch in life and I’m sure they’ll never forget that day.  Neither will I.  I still have some reflecting to do to learn everything the last 12 months have to teach me.

I told a few people before the race that I would be absolutely stoked if I finished under 13 hours and content if it was under 14.  I finished 11:47*  Needless to say, I was stoked.

  • Times: enter bib: 1915 for my times.

1158_014428  1158_0426491158_035440


  • Endure to the end doesn’t mean to stand still and hold on.  It means to keep moving forward, regardless of the conditions.
  • Momentum is a very real force in my life.  Just like in a basketball game, the same is true about our health/fitness/discipleship/spirituality/marriage/etc… the wind can feel like its at our back or in our face and the momentum can change in a moment.  The word moment starts the word momentum because momentum can change in a moment.  In a moment of choice, we can turn momentum in our favor.
  • Life is short.  You lose a father and best friend early in their lives and mortality and the sense of time we have on earth changes.  Early in my training, I was riding by one of the many historic churches and cemeteries here in Maryland.  The carpe diem scene from Dead Poets Society flashed and I envisioned the souls buried there were yelling at me, “Go!, Run while you still can!  Don’t stop!  Life is short!”  Those thoughts powered me through much of my training and race.
  • Endurance is achieved through a steady, sustainable heart rate with sufficient fuel.  If you go too hard, too fast, you flame out/bonk.  If you fail to eat and drink enough, you stop.
  • After my half ironman in Provo this summer, I had a flash of thought and emotion as Jess and I drove up to SLC to catch our flight home.  It was a hot day.  Every aid station had ice cold water and the effect of the water on my thirst and my overheated body was powerful.  I thought of this, in John 4:13-14
    • 13 Jesus answered and said unto her, Whosoever drinketh of this water shall thirst again:  14 But whosoever drinketh of the water that I shall give him shall never thirst; but the water that I shall give him shall be in him a well of water springing up into everlasting life.
  • Build up endurance through daily, consistent work
  • Negativity is your enemy.  Pres. Packer’s “your mind is a stage” … chanting Look unto me in every thought, doubt not fear not replaced the negative, complaining, quitting thoughts that inevitably creep in.
  • God answers prayers.
  • Ralph Waldo Emerson was right when he said, “That which we persist in doing becomes easier to do, not that the nature of the thing has changed but that our power to do has increased.”


Jess and Caleb getting their swim training in TOO
My home away from home. Towson YMCA
A lot of work-related travel means finding pools all over the country and texting pics like this to Jess so she knows where I’m at each night on the road 🙂
It was very cool to participate in the Iron Cowboy’s 50th Ironman in Provo, UT (swim and bike)
Jess did the Iron Cowboy swim too as she trained for her longest tri to date, the Savage Man in Maryland.
Iron Cowboy
Deer Creek Iron Cowboy swim
Lots of logistics, fitting in training into busy travel schedule.
Eating right. Don’t get me started.
A few weeks before the big race, big crash.
Road rash all over but the injury to the ribs/back caused concern
Jess looking strong coming out of the water at Savage Man.
Wait. I thought Jess was the pianist?!
Her favorite leg of the tri.
Running strong.
Our hero.
Oh, and she and her girls, Jean and Amy, podium’d!
Race day eve with Caleb, getting set up.
Pasta dinner the night before.
The calm before the storm.
Stoked to share the morning pre-race with Jess.
The run started good/easy, then tightened up.
Cold, windy night for these iron girls.
“I think I see him!”
“Stop it, I think he’s coming!”
I’m the Ironman in this family.
It’s almost over!!
After a long day
Luckiest man alive
Stoked to have the support of the whole fam.

IMG_7838 IMG_7840 IMG_7842

“Bring your heart to work”

I shared this with an operator the other day and thought it would be a good topic to bring me back to after so long …

Like most people I know, I’m inundated with data/articles/stories/information every day. So much so that I tend to skim the surface of a lot of stuff but I rarely take the time to actually pause and read/watch and think. This article and video caught my eye today and it reinforced for me that the most important thing in skilled nursing is “bringing your heart to work.” I can’t think of anything more important than deliberately, systematically, structurally driving this in the culture at every level of the organization at every location.

This is a great reminder and a powerful example of another healthcare provider. I hope it inspires you in some way too.

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CareTrust REIT

It’s hard to put in words what the last 12.5 years at The Ensign Group have meant to me (though I’ve tried many times to share bits and pieces on this blog) …

20 days ago, Ensign completed the spin-off of its real estate into a new, separate, independent real estate investment company specializing in senior housing & healthcare called CareTrust REIT.

CareTrust Logo Black-02

The CEO of CareTrust is Greg Stapley.  He’s an Ensign founder, primarily responsible for acquiring the portfolio Ensign has today.  Early last year, as we were headed towards a sale of Doctors Express, Greg told me about the plans for the REIT and his likely departure from Ensign to run it.  He asked me to join him.  At that time, I joked that I still had PTSD from the prior 12 months (moving my family to Baltimore to run a business that we ended up selling a year later … and all the accompanying ups and downs) and that I needed time to clear my head before making a long-term decision.

Immediately after the sale of DRX, I went to work for Ensign in skilled nursing operations again in Colorado to fill in for a couple guys who left their buildings in Denver at the same time.  What was to be a 30-60 day interim project turned into an 8 month assignment — that I absolutely loved (except for the commute).  It was GREAT to be back in daily operations, especially with the devoted and talented “Ensignistas” in Denver.  Ensign asked me to move to Colorado and oversee operations there after a short time but I felt like I needed more time to decide.  I genuinely didn’t know what I wanted to do next.

After our relatively short time in Maryland, my wife and I wanted to stay here for many years to come.  By the end of the summer, I had narrowed down the decision to 1) join Greg and build CareTrust together or 2) open a new market for Ensign’s operations here on the east coast.

Ultimately, I concluded that CareTrust was the right course for me and my family.  Even though it’s based in So. Cal. like Ensign, I’ll be the east coast office as we look to acquire senior housing and healthcare properties nationwide.

When it comes to real estate, they say its location, location, location.  But when it comes to skilled nursing real estate, its really operator, operator, operator.  In a way, my role at CareTrust is similar to one of my roles at Ensign for those 5 years I led the new leader selection & training (AIT) efforts.  Ensign’s growth strategy depended on the pipeline of homegrown talent to lead its new acquisitions.  My role(s) at CareTrust will be to build a bullpen of exceptional operators across the country who we can confidently lease our new acquisitions to.  After a couple of operator “interviews” its pretty clear to us that it “takes one to know one.”  I commonly hear, “You’re the only REIT that’s asked us about X, Y, Z (In-house rehab, centralization v. decentralization, RU%, Culture, turnover, clinical support, PPDs, readmission rates, etc.)” So, I’ll be working on operator relations, business development, investment underwriting, and oversight of our 3 operating independent living facilities in Dallas and Salt Lake.

When I made my decision last fall to go to the REIT, I did so with mixed emotions.  I have and will retain deep, meaningful friendships at Ensign.  Today, I’m thrilled for this opportunity to build on what we built at Ensign with new partners, in new places, and in a new way.

I just want to be … feared?

This video is a worthy 12 minutes to make us pause and reflect.  The danger I see in talking about leadership is that the “lessons learned” or the lesson “meant to be taught” usually overemphasizes that one aspect of leadership.  The responsibility of leadership REQUIRES several traits/skills/habits, not just one.  Even though this focuses on one, as long as we see it as a string in the tapestry of what leaders need, I find the concept here to ring true.

Making people who “work for us” feel safe seems to require taking the LONG VIEW toward your business and the co-people around us.  Ofttimes, a company’s culture will trump our better-inner-leader.  We perform according to how we’re measured and so its critical that we find a culture that allows for that.  Even better … its critical that we shape our company’s culture into one that fosters that long view as well.

Love, Part 3: “This isn’t for you”

I’ve written about Pat Lencioni’s books before.  Really good stuff.  Weighted heavily towards the so-called soft stuff.  The same stuff, I believe, that creates separation from the pack and great companies.  I bring him up because the last two posts about “love” in the workplace or “love” as a leader remind me of a story he tells.  I think its a good illustration of what I tried to convey in Part 2

Pat’s POV — January 2014
When Meg Whitman Loved Me

No, this is not a tabloid headline. It’s a true story, and not a steamy one.

It was more than twenty years ago, long before Meg Whitman became the CEO of Hewlett–Packard, or candidate for governor of California, or CEO of eBay. I was just out of college in my first job as a research analyst for the management consulting firm, Bain & Company, and she was the lead partner on one of the projects I was working on, which made her something of my boss.
As a senior in college, I had decided that management consulting sounded really interesting. Management had always fascinated me, and being a consultant seemed like a wonderful way to help people. It was a perfect fit. So I applied for one of the most coveted jobs available to me and my classmates, and somehow was hired.

After about eighteen months on the job, Meg invited me to her office for a meeting. She said something pretty close to this: “Pat, I think you’d be a really good partner some day, but I don’t think you’re a great analyst.” Meg wasn’t one for fluffy conversation or saying things she didn’t mean. I knew that she was being sincere about both of her comments, and while I was simultaneously flattered and wounded, I was a lot more wounded. But I had to confront the fact that in the competitive world of big consulting firms, I was not on the fast track, and needed to find a new track.

Looking back and understanding my Myers–Briggs and DiSC profiles, I can see that I was never cut out to be a research analyst (I’m an ENFP and a high I and high D). My attraction to management consulting had to do with the work that partners did, but the only way to rise to that level in a big firm was to be better at quantitative analysis and number crunching than my peers. Meg made clear what I already knew, even if I didn’t want to admit it: I wasn’t ever going to love or be good at that kind of work.

I won’t say that I took the news easily. I certainly didn’t stand up and hug Meg (I don’t remember her being a big hugger). I probably agreed with her assessment a little sheepishly, and slinked back to my cube to begin pondering the future of my career (which would eventually take a new turn that has been a great blessing in my life). As I look back at that moment today, I realize it may have been the kindest thing anyone did for me in my career.

Let me be clear. I’m sure that Meg didn’t particularly enjoy having that conversation with me. But she did it anyway. She was gracious enough, direct, and most important of all, honest. And that’s a form of love. Love is not an emotion; it is a verb. What Meg did is take responsibility for helping me, regardless of whether she felt like it or how it would make me feel about her.

More leaders need to understand the power of honest feedback, because they would better serve their organizations and the people who work there. Keeping people in jobs or situations that are not suited to them is almost never an act of kindness, even when intentions are good. In most cases, it only prolongs suffering and prevents the pursuit of a better life. That’s not an argument for abruptly dismissing people who need to move on, but rather an invitation to have difficult conversations that give them clarity early and help them begin to take responsibility for their own success.

Ultimately, kind but direct feedback reduces the number of painful and expensive surprises that too often result in lawsuits for companies and personal scars for employees. If this seems like a simple message, that’s because it is. Unfortunately, this kind of love is all too rare.

So here’s to loving our people enough not just to hug them, but to tell them the kind truth. And here’s to Meg (I promise not to hug you).

Pat Lencioni

You can read/follow Pat on his website here: