Assisted Living works to get facilities up to par
Nov 10, 2012 (Menafn - Milwaukee Journal Sentinel - McClatchy-Tribune Information Services via COMTEX) --Understaffed assisted living centers and residences, high turnover and angry state regulators, residents and families awaited Charles "Chip" Roadman when he was named top executive of Assisted Living Concepts Inc. in May.
And that was just the shortlist.
The Menomonee Falls-based firm soon would see its stock lose roughly half its value. It would agree to a costly settlement of a lawsuit filed by the owner of 12 centers that it leased. And earlier this month it would report a net loss of 23.5 million for the first nine months of the year, wiping out nearly all its profit from 2011.
Roadman, a physician and former surgeon general of the U.S. Air Force, has been straightforward about the challenges ahead for Assisted Living Concepts. He said the company has moved quickly to address its problems.
"The bones of this company are good," he said. "Everything we've found is immanently fixable."
At the same time, the company -- which reported record profit of 24.4 million last year, a 48% increase from 2010 -- faces a turnaround that could take several years.
In recent months, Assisted Living Concepts has hired about 800 people, and that burst of hiring suggests one reason for the company's strong financial performance last year and for its current problems.
The cost of operating assisted living centers and residences was 3 million lower last year than in 2010 and 14 million lower than in 2008.
The company attributed the decline last year largely to being able to hire people at lower wages because of the weak economy.
But costs may have fallen for another reason: In the past year, regulators in several states have contended the company's centers were understaffed, and that understaffing and poor training had resulted in substandard care.
For example, employees of one of the company's centers in Georgia told state inspectors that family members had to assist with feeding residents to ensure they are fed and that residents did not get bathed and their teeth were not brushed because of inadequate staffing.
"We clearly had staffing and training issues that we had to take care of," Roadman said. "And we have assiduously gone after those issues."
That's come at a steep cost: Despite fewer units, operating expenses for the company's assisted living centers and residences was 7.8 million higher in the third quarter ended Sept. 30 compared with the same period of 2011.
But the company may have had no choice.
"In the long-run for this company, that's exactly what needed to occur," Roadman said.
Damaged reputation
It also will be essential to restore the company's reputation.
Most of Assisted Living Concepts' 211 assisted living centers and residences in 20 states are in small markets. The problems at some of its centers resulted in local news stories that clearly damaged the company's reputation.
"We can fix the fundamentals very quickly," Roadman said. "We are almost there. Reputation is going to take some time."
The damage to its reputation compounds an additional challenge facing the company: Its occupancy rates are relatively low compared with industry norms.
The overall occupancy rate at its centers averaged 59.5% in its third quarter ended Sept. 30. Offsetting the company's higher costs will be impossible without increasing occupancy.
Assisted Living Centers is planning to sell unprofitable or underperforming assets.
But in a recent report, Daniel Bernstein, an analyst with Stifel Nicolaus, wrote that the company's stock price and the value of its real estate will not increase without an increase in occupancy.
The prospect of a lengthy turnaround has sparked speculation that the stockholders of Thornridge Holdings, a private Canadian company that holds controlling interest in Assisted Living Concepts, may take the company private rather than wait for its stock to recover.
Increasing value
Assisted Living Concepts' stock jumped 20% on Nov. 2, to close at 9.64 a share, when the company said its board was continuing a review on how to increase the company's value.
The stock has drifted back down to below 8.50 a share -- less than half its close on its first day of trading in November 2006, adjusting for stock splits and dividends.
In his report, Bernstein questioned whether another company would be willing to pay a price that would satisfy Assisted Living Concepts' stockholders. He wrote that it was possible that the company could be taken private.
Assisted Living Concepts declined to comment on its review, or the prospect of the company being taken private.
Regardless of who owns the company, the challenges will be the same, and Roadman has said his focus is on the company's operations.
That has included providing additional training for employees, reducing turnover among the managers who oversee its centers and working to rebuild relationships with state regulators.
He has met with regulators, for example, in all of the states where the company operates.
"They were the ones who contacted us and said, 'we want to make this right,' " said Tom Shanahan, a spokesman for the Idaho Department of Health & Welfare, which shut down one of the company's centers this year.
The management changes appear to have made a difference, Shanahan said.
The Indiana State Department of Health also confirmed that the problems at the company's centers in that state have been resolved.
Roadman stressed that the turnaround will hinge on the quality of its care and services. And he acknowledges that will take time.
"Our job actually is to sell peace of mind -- peace of mind for the people we are caring for and for their families," Roadman said. "We had some ways to go to attain that. I think we are getting there."
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