Riding the Wake of Economic Turmoil

As an avid water skier, I love the thrill of being pulled across the water at break-neck speed as you leisurely cut in and out and over the boat's wake. My favorite ski times are the calms of the early morning and late evening runs, when the lake water is smooth as glass and it's just you and the water, in perfect harmony, as the boat cuts an easy path for you to frolic in its wake.

I suppose there is a correlation here to how we go about the business of our work. The economy is much like the boat, in that it is the energy and engine that is needed to pull us along our way. I have skied behind smaller less powerful boats and it is not as easy. Without the necessary horsepower, it is difficult for the boat to pull you out of the water. The longer you are dragged before you reach a level plane, the more resistance you encounter and the more effort you must extend. The vast majority of falls and failures occur at this point.

It's no different in business. Without a strong and powerful economy, we don't have the economic engine necessary to pull us through the "resistance" of all the routine challenges and obligations of our business.

I have also skied on lakes and at times when the conditions are rough and the waters are whipped into massive waves by outside conditions. Sometimes the boat traffic is so outrageous that your own boat must constantly veer to the right or left to avoid congestion, confusion or collision. The water skier is left holding on for dear life and the ride becomes more about survival as you helplessly hang on and follow the boat's wake.

When the economy is whipped into a frenzy, the ride becomes a similar condition of survival. Like the water skier that needs to become more cautious and defensive to navigate the swirling massive waves, so does the business person to navigate the changing economic tides. Suddenly the fun and thrill is gone and one must be prepared to ride out the waves or suffer the consequences of a fall.

At Kirkhaven, the current economy of the State threatens once again to challenge our revenue stream with massive cuts to our Medicaid rate. About two thirds of our residents are Medicaid recipients and currently Medicaid pays us only 75 cents for every dollar we spend caring for Medicaid recipients. The shortfall must be made up by "profits" made on the private paying or Medicare covered residents. Since the private pay market is dwindling and Medicare rates are also declining, nursing homes are facing a potential revenue crisis.

The common response to this revenue crisis is to simply cut costs. The dilemma is where. Nursing homes are already operating on slim (if any) operating margins and costs are already at lean levels having been forced to reduce in response to previous revenue reductions. Two thirds of our costs are labor related and reductions in staff have a direct negative impact on the quality of care we can provide.

And what impact does the current economic turmoil have on the Kirkhaven Replacement project and our vision for culture change? Will we be able to continue funding our planning and development costs? Will we be able to find the necessary funding for our project? Will the economy support our project? The waters are getting very choppy and the ride suddenly is less fun!

At Valley Manor, we are entirely dependent on the private pay market and seniors who desire and are able to move into our retirement community. As current residents "age out" and move out to nursing homes or pass away, we are dependent on new move-ins to generate the revenue necessary to meet our routine costs. Often new move-ins are dependent on the ability to sell their existing home in order to generate the necessary capital to reinvest in their new home at Valley Manor. How will the current real estate market impact their ability to sell their home? How will the current erosion of savings and investment accounts impact the ability for seniors to make a move? How will Valley Manor be able to meet expense obligations if occupancy continues to fall? The economic wake is creating waves that are not going to be easy to handle.

Like the pebble tossed into the lake that causes a ripple effect across the water or the waves of passing boats that eventually crash upon the shore line, the economic turmoil is and will have a drastic negative impact on Seniorsfirst. Short of "getting out of the water", our only choice is to get into survival mode and "ride it out". We will not be alone, as every business will be challenged and suffer to some extent. Our strategy will be to proceed cautiously and diligently. We will move to a conservative position with regard to new expenses and hold costs down where we can, while continuing to provide our service. We will look for opportunities to save where we can and must.

We don't really know yet what the real impact of the economy and State budget crisis will be on Seniorsfirst, only that the economic engine is sputtering and in its wake the waves are growing treacherous. We can't assume it will impact others and not us. Our ride will get bumpy and may not be enjoyable, but we can hang on and navigate through it. We will certainly communicate our intentions as they are known and work together to develop any required action plans, so please be patient, supportive and stay tuned for developments.

Somewhere in the future there is another beautiful sunrise over a serene mountain lake where the water lies still, waiting for the dawn of another joyous day and the continuation of our mission and journey.