Boosting financial performance for senior living communities
Learn how a senior living provider improved margins, cut costs and increased revenue by $500K annually through strategic financial restructuring.
Client background
A senior living provider was looking for opportunities to increase revenues and reduce expenses. The objective of the engagement was to assist management in evaluating the current revenue and cost structure to initiate the process of enhancing financial performance.
Business challenge
The client was continuing to experience recurring losses within its Skilled Nursing Facility (SNF) division within the Continuing Care Retirement Community (CCRC). The losses stemmed from both its skilled nursing facility and its independent living fee structure. Challenges within SNF included being committed to vendor contracts that were outdated and potentially expensive and cost centers within the SNF that have gone on for years without any continuous oversight. The senior living provider's independent living fee structure was not evaluated for a significant period of time and were not sure if the fees were completely covering the costs associated with the division.
Strategy and solution
Baker Tilly was able to identify cost centers that contained cost per day outliers using national benchmarking data. Using this data, Baker Tilly was able to assist by narrowing down the problem cost centers within the organization, to allow additional focus to those cost centers. Baker Tilly evaluated accounts payable and vendor lists and identified potential vendors to renegotiate contracts. Market studies were performed on independent living fees, to assist with comparing independent living fees to peers and competitors.
The accomplished results
Baker Tilly was able to propose cost savings relative to nurse staffing and nurse hours per day, as identified by the benchmarking database. The clinical team was able to assist with the proposed restructured staffing. In addition to the nurse staffing cost savings, other cost centers such as dietary and housekeeping were identified as outliers via the benchmarking database. In regard to revenue, the market studies relative to independent living fees and monthly maintenance assisted in increasing revenue and cash flows from increased fees. The senior living provider was also able to renegotiate vendor contracts, based on outdated contracts and out clauses in the contracts. Overall, the client continues to evaluate cost saving measures, and now has the tools to continue to perform these tasks. Financial performance was increased by approximately $500k annually.
