CW Ep. 27: Innovations in Senior Care with Charles Turner
Charles Turner, founder and CEO of Kare, discusses labor challenges across the industry.
It’s not solely just from wage issues, management plays a big role. By the year 2030, the industry will need to fill approximately 312 million unfilled shifts. Let’s talk about it!
As much as the world has changed in the past eight months or so. One thing that has not changed is our need for quality labor in our industry. In some ways, despite the millions of people in America, looking for work, our labor situation has actually gotten worse. There are a lot of reasons for this, but that is a conversation for another day. We wish COVID, wasn’t a thing, but here we are, and I guess we all have to deal with it. So let’s get started. Shall we? I’m Charles Turner, CEO of KARE. Again, that is KARE with a K, our website is, doyoukare.com. Again, KARE with the K. KARE is a digital labor marketplace helping to alleviate staffing shortages in the senior care and post-acute care industry. I figured this month, my final podcast, we are going to shift gears a bit and talk about something that is near and dear to my heart. And that is the frontline worker.
When polling senior living executives, especially in a non COVID world about the three greatest concerns that our industry faces. The top of the list, almost always includes either overbuilding and occupancy challenges, labor, and how to penetrate the middle market. And after a decade of owning, developing, and operating communities all over the Sunbelt, I decided I was personally going to help solve at least two of these issues. One, I was going to help solve the overbuilding problem by deciding that the U.S. does not need another 86 unit assisted living or memory care community. And two, I was going to solve the labor crisis by creating KARE, again, KARE with a K. And industry driven technology platform that helps improve income for the caring labor workforce while decreasing rising cost of labor. In our caring communities, we will get to talk about KARE in a little bit, but first we will dig into some of the major trends and the KARE labor market. We will also explore some of the psychological and sociological carers characteristics of these caregivers. We might even get into some math problems, just for fun. Who knows?
A dear friend of mine once told me that there are three types of people in this world. Those that are good at math and those that aren’t. Okay, now that was a stupid joke, but I’m actually kidding. He actually said there were three types of people in this world. One problem creator; which constitutes about 20% of us, two problem identifiers; which are 70% of us and three problem solvers; which are really excellent, and only 10% of us. Now the problem creators are my kids. They create a lot of problems, but the vast majority of us are problem identifiers. And despite what we may think about ourselves, only very few of us are problem solvers. Now I’ve never actually been able to find this study anywhere. So I think he may have made it up, but it is something I tell my children every time they make a mess in the house and for our conversation today, I wish I could say that I’ll be presenting myself as a problem solver. But in reality, I may only be able, at best, try to identify the problems we were facing. But there are some concrete solutions to the labor challenges we face that I think may be interesting. Let’s talk about one of the heroes on our platform. Everybody who works at a platform is called a hero. And this particular hero’s name is Atasha. She uses KARE, our platform, to pick up extra care aid shifts in her free time, and it makes about $12 per hour per shift. If you look at Atasha’s resume, she’s a licensed CNA, but she also holds various jobs with like FEMA on a seasonal basis and is a licensed medical assistant, and has also worked as a logistics analyst for an air conditioning company.
We have hundreds of Atasha’s with a very similar resume. People who are caregivers also float in and out of the industry. For folks like Atasha, the idea of making ends meet by only working 40 hours a week is laughable to them. For folks like Atasha income insecurity is always high and wages are often unpredictable. Atasha is at an inflection point. She can stay in this industry as a caregiver, or she can leave the job to find another job in an industry that pays more like $15 an hour or more. Atasha is also not getting any younger, she’s in her late forties. She’s getting older. So she must consider whether she still wants to do this anymore or if she wants any sort of retirement. Now let’s take Atasha’s story and multiply it thousands and millions of times. Atasha is just one woman, but is the story that repeats itself over and over almost exponentially every day, every year. Now, while we struggle with how to keep Atasha and her peers connected to the care industry, as long as possible, we must understand that we can’t ignore the fact that as a society, we are aging at a rapid pace.
So over the next decade, as we add more and more senior seniors to our care system, we’re removing more and more caregivers from that very same system. Currently in the United States, there are 2.9 million personal caregivers, 1.6 million CNA’S, and about 725,000 frontline LVNs or LPNs, depending on the state where you live. This does not even include registered nurses. If you don’t think that is a lot. Consider this, if you add up all the shifts completed by these people in equations, it’s about 1.1 billion shifts a year, which has an economic impact that is roughly five times the personal transportation market; that includes taxis, limousines, Uber, and Lyft. So while we spent a lot of time thinking about driverless cars, know that this market is much, much larger, and it is only growing from here. According to a recent MIT study, by 2030, we will need an additional 151,000 direct care workers that we don’t have a pipeline for. And while that number seems like a lot, this only accounts for the incremental amount of people we need, it does not count the folks currently in the labor pool that will be exiting the labor pool. According to an article recently published by McKnight’s and Senior Housing News. Now, let me stop here and make a stupid joke. If I were to go back to my 18 year old self and say, Hey, Charles, you’re gonna, you’re going to get really excited about reading something called Senior Housing News. My 18 year old self would have punched me in the face, but here we are, and I get kind of jazzed about this stuff. So let’s keep going. So, anyway, according to this report, then this never actually balloons at the number of this debt. This deficit balloons about 1.2 million people that will be needed once we factor in the number of people that we must replace by 2028.
Oh, look, someone’s at my door when I’m recording this that’s okay. I’m going to keep going. Anyway, so at 1.2 million people that will be needed once we factor in the number of people that we must replace by 2028, but there’s actually more. We also have to factor in the 4.7 million people that will be needed just for the home care industry. Even now, there are 360,000 open positions nationwide on indeed.com. So you start to see the scope of the problem. I’m going to do my best to be not nonpolitical in this because I have no real political agenda here, but this discrepancy only assumes a steady state. What happens when we factor in a policy that may be unfriendly toward immigration, the problem gets worse. But what happens when we also factor in a different school of thought that seeks to make labor more expensive and limits the ability to bring in gig workers into this space, it gets even worse from there.
So our economics are compounded by our policies, no matter how well-intentioned they may be. Oh, and we have not even factored the potential amount of workers who may have exited the industry during COVID and may never come back. Politics aside the implication is that if we don’t figure something out by the year 2030, we will have to figure out how we fill approximately 312 million unfilled shifts, which equates to roughly half the shifts being filled today. But enough about that, we don’t have to look to 2030 to stress ourselves out. We’re pretty good about doing that today. Let’s look at some of the stressors that are already affecting this workforce, if you have not already done so, I highly recommend y’all download the recent report published by on-chip, where they surveyed approximately 1500 senior housing and post acute care leaders about what they’re already seeing. When asked what the biggest workforce stressors they face, or they say the number one two answers by far were around employee turnover and finding qualified job candidates. There’s no surprise there, but when asked what the impact of all that turnover is, it is clear that our caring communities are already struggling to keep up staffing levels, which drives up overtime, agency use, employee burnout and reduces quality of care. Is it any wonder that Brookdale and five star living just report year over year, labor costs of about 6.9% year of year. While we can’t dig into those numbers, our bet is that this increase was not due to a base wage increase, but rather due to the amount of staffing agency and overtime they must spend to maintain staffing levels. When we look at it from the caregiver’s point of view, we see that they too have stressors that lead to an unpredictable workforce. The number one reason, of course, being that they have to work multiple jobs to make ends meet. So, okay you say, can’t this just be solved by raising the minimum wage to $15 an hour and nationwide? Yeah maybe, but again, I’m not trying to be political here, but let’s do a little math homework shall we. Now this is just a heads up, if you’re not a math person or the math makes your head spin and makes you a little dizzy, I recommend closing your eyes for about the next two minutes or fast forwarding, and this sensation will pass. Okay. But for those of you who are sticking with me, let’s play with a few numbers. So I looked at the numbers from the latest industry data from American Senior Housing Association Publication called The State of Seniors Housing. Let’s make the assumption that the average current of frontline caregivers in the United States makes about $11 an hour, which is about a $3.75 premium to the currently federally mandated minimum wage of $7.25. Let’s then carry that premium assumption forward to a world where the minimum wage is $15. Taking the median data for a typical assisted living and memory care community, and only isolating for frontline caregivers and med-aids. I got the following math. Currently, the average assisted living and memory care community, when decently run, spits off between a 30 to 35% operating margin. If we take that $3.75 premium and add it to a $15 minimum wage and only focus on caregivers, and I’m talking just like CNA med techs and that’s it, we’re ignoring housekeeping, dining activities, kitchen staff, and anybody else who’s making an hourly wage and just focusing on care labor. We find that the average margin drops from the mid 30% to the low 20% operating margin. When you get to this level, you are starting to only approach a very, very skinny, like a 1.0 debt coverage ratio on a ground up development building, meaning that you can barely pay your mortgage, right?
This also means that the value of your asset just declined 27%. So let’s talk about a $15 hourly wage with that premium and what the impact does to say; Welltower, Aventus, Health Peak, etc. You can see the implications to the capital markets are significant. I presented these same numbers to an audience not long ago, and the question arose from the audience. They said, well, can’t we just pass these costs onto the consumer? Yeah maybe. But right now, as an industry, we were only penetrating about 10% of the qualified senior care market that the income qualified senior care market. And we want to make it more expensive? There are lots of conversations on how we can go after this middle market, but with rising labor costs, this may prove difficult.
Now, part two, now let’s go from macro to micro right now, let’s talk about some of the sociological and psychological factors affecting our frontline workforce. Now I’m going to stop and disclose, I am not a psychologist, nor am I a sociologist. I’m only reporting what I read and reporting what I see from my own experience. And a lot from the data that we get from our own system, with the thousands and thousands of caregivers that work in our platform. So because I’m unencumbered by facts and expertise, please take everything I say with a massive grain of salt. But with that said, let’s take a look at this following description based on me reading it, what do you think I am describing? Someone who has one, an unfavorable self-image,two; lacks self-confidence, three; has an inferiority complex, four; has a rebellious attitude and may have periods of withdrawal, five; is self-destructive and six; and this is the dead giveaway, this person is depressed when they’re there not using leading to inertia. Now you listened to that, you said, Oh, Charles, that sounds like a drug addict. You’d be correct. This is, generally speaking, a clear description of the behavior of a typical drug addict. Several months ago, as we were starting up my company KARE, I had the pleasure of meeting with a social psychologist who had built a pretty interesting applicant tracking system. One of the things he told me, he said, Charles, the psychology of a frontline healthcare worker is almost no different than that of a drug addict. And of course I was a little taken aback and I’m frankly, I was a little offended.But he was, he was not saying that a caregiver is a drug addict. And actually in some ways, in most ways it’s quite the opposite. But he said, take a look at those descriptors again, instead of using the word using in the last bullet, let’s replace the word using with the word caring. So saying that someone is depressed when they’re not caring, leading to inertia. And as you think about our frontline workforce, we often see the same characteristics. You have a group of people who often have a very low self-image, low and little self-confidence and inferiority complex, a rebellious attitude and self destructive behavior. But when they get to care for a senior, it is like their drug. It validates them. It makes them feel good about themselves and it gives them self-confidence. And maybe the one thing in their life where they feel they have some degree of respect and control. Now let’s take another hero on our KARE platform. Her name, let’s call her Jacqueline. Jackie is one of our more active heroes. She’s worked a lot of shifts for us and has about up a 4.2 star rating out of five. So think of your Uber rating, a five star rating for your Uber driver. Same thing with us. She has a 4.2 star rating, which is not that great. Jackie is a perfect example of our labor force. She works to put gas in her car and she puts gas in her car so that she can work. So you think Jackie would do everything possible, not to make it miss a shift and you’d be wrong. The reason she has an okay rating is that she is notorious about showing up late for shifts, getting into an altercation with the community staff and supervisor. And on occasion, she has canceled a shift on the same day because of supposing car trouble. But when we asked the communities why they keep choosing your forest shift, the response is always, gosh, Charles, the residents love her and she’s so good with him. See when Jackie gets to care for people, it fuels her. It validates her.
Our platform is such that if you cancel a shift the same day, you automatically become suspended from the platform for a week. Meaning all your future shifts are canceled. So when she says she has to cancel and we ask her to perhaps take an Uber, her response is, well, if I take a $15 Uber, I’ll make less on my shift. Yes, that is true, you will make less than your shift, but isn’t that a small price to pay for not having to miss out on your next 10 shifts. It would be extremely irresponsible for me to try to mentally diagnose Jackie. So please do not take what I’m saying as such, rather I’m just describing some of the frequent behavior of our caregivers. The National Institute of Mental Health estimates that low wage earners, especially frontline healthcare workers, are two to five times more likely to suffer from a diagnosable mental disorder. Now let’s not confuse correlation with causation here. It’s not always clear what causes the other, but the belief is that. And in this cohort, there’s a high prevalence of paranoid personality disorder, avoidant personality disorder, and borderline personality disorder. Now let’s focus on borderline personality disorder. This disorder manifests itself in many different ways, but one of the traits that has almost always been prevalent is the inability to make the right decision for your own self-interest. We often see this behavior repeatedly in our KARE workforce, a decision or behavior that is self detrimental or self-destructed is played out repeatedly. People can make decisions that seem counter to their long-term self-interest. Take our Jackie example, when her car broke down. We see that behavior repeated almost on a daily basis, but I’m going to stop playing armchair psychologist now before I get myself in trouble.
As we are going to turn our attention to the workplace and start to examine why we see turnover rates that are greater than 50% across our industry, there is a modern adage that seems to be floating around LinkedIn these days that says people don’t leave bad companies they leave bad bosses. I think generally speaking, this is true, especially for white collar workers. We also often talk about improving culture to drive staff retention, but when it comes to frontline caregivers, I think it gets a little more complex. In some ways, culture is a luxury that a lot of our staff can’t afford. A recent study performed by, I think it was the department of labor, broke jobs down into two categories; good jobs and bad jobs. That’s simple, good jobs and bad jobs. By every conceivable definition, being a frontline caregiver, if not managed well, can fall into the category of a bad job. Based on these six characteristics; one low wages, the obvious. Okay, sidebar, if you think not getting paid is not the first thing on our heroes minds consider that 90% of our inbound questions to our operations center involve some sort of question about payment. Number two, no advancement. This one seems obvious, but let’s look at it perhaps in a different way. Say you get your CNA license, great, that license allows you to be a CNA. So you go to work for an assisted living community and you work as a caregiver, but then what? What is next? You think and realize that as a CNA, you are nothing more than a commodity. And what happens to other commodities? Take, say corn, for instance, let’s say you are a kernel of corn. Everyone closes their eyes and imagines that they are a kernel of corn. I have no idea how to picture this in my head, but as a commodity, the greatest economic hope for a kernel of corn is to be sold to the highest bidder. Now, imagine you are a CNA with no chance to be something else, at least professionally, what is the only choice you have to improve your situation? To sell yourself to the highest bidder, you can give care anyway, anywhere. But if the building down the street is paying 50 cents more an hour, where are you more likely to go? Number three, the third characteristic of a bad job, few and expensive benefits. You may provide decent benefits, but if I can’t afford the premium, what’s the point. Number four, heavy workloads. I think this one’s pretty obvious. Number five, a job that is physically and emotionally draining. Now I want to tell you a story that talks about this point a little bit. When we started KARE, the team we interviewed hundreds of applicants a day, actually. And I personally interviewed 150 applicants on our platform for KARE. And I asked all 150 this exact same question. I say, when you go to work, what is the one thing that sets you off? And I always ask other people what they think are the most popular responses. And everyone says the same things like, Oh, I’m sure everyone hates the most, the one thing that sets them off the most is when their boss doesn’t respect them. And the weird thing is that that’s actually the number two reason. The number one reason is actually way more specific than that. They all gave the exact same answer. They said the number one thing that sets me off when I go to work is when the previous shift did not complete their tasks. And I have to quote unquote, clean up their crap, maybe literally. Now that’s not a staff problem, that’s a management problem. Most of us have electronic healthcare records that manage this kind of stuff, that manage it, that report how many ADLs have been completed. If you’re not doing this, you’re actually creating a morale problem by not managing your workforces ADL management. We’ll get to that a little bit more in a second. So the last characteristic that the department of labor categorizes as a bad job is, is a boss with a low EQ, low emotional intelligence. Now we love our nurses don’t we. We rely on them to care for our residents, manage their care plans and make sure we abide by state regulations. Nurses are usually very good because they are very black and white. We’d like them that way. They know the care and they know the regs and then keep us out of trouble. What are nurses often bad at, managing other nurses. Because of their black and white nature, they often have a little sympathy or empathy for staff who may need the softer side of management. Now note, that none of those six circles of bad jobs contain the phrase employee left because we had a crappy break room. I promise you some of our best clients have magnificent break rooms. However, the reason a customer uses us, uses KARE is because we can help fill open shifts. But if you use KARE too much, I promise it is not because you have a bad break room. It’s usually because of one of these six factors we just talked about.
So it’s based on these six influencers of employee turnover. What are some of the possible solutions to reduce this employee turnover? Well, the first thing we can do is increase wages. Well, duh, right? That’s obviously more difficult than It sounds, as we mentioned before. Number two, is maybe you don’t have your nurses manage your frontline staff, or if you’re going to promote a nurse to be a manager, you give them training on how to be an effective manager and be an empathetic manager. Number three, maybe use your EHR the way God intended it. Of all my buildings, the one that had the lowest staff turnover was the one where the nurse made sure that every ADL was complete and checked up by the end of each shift. Number four, think about micro promotions. I wrote a story about a barbecue restaurant, maybe a small chain of barbecue restaurants in and around Nashville, where the owner only hires ex-convicts and everybody starts off the same. They all start off as a dishwasher and they start off with a relatively low wage, but they get micro promotions. Every like two weeks, they get a like a microscopic increase in pay and an increase in title. They have a very intricate ladder system, but it’s very immediate. It’s every few weeks they actually get promoted. And his job satisfaction as retention is through the roof because they always have something to strive for, which leads me to my fifth one of actually having more fine job demarcation and internal credentials. So you think about, you know, okay, great you hired a CNA, but are there certain internal training that they can achieve, which separate them out for maybe their peer group.
So let’s find out, let’s go back and talk about the labor force, let’s talk about millennials. Yay. Millennials. Another talk about millennials, which we seem to talk about too much. What do we know about millennials? Well, one, they learn quickly and they want to make a positive impact. Also, they believe that a job that has purpose, they want the work in a company to have a greater purpose than just money. Three, they love culture. Millennials want to join the right culture and we’ll hunt around until they do. Four, flexibility. The idea of a typical nine to five is not always appealing to a millennial. Five, they want real responsibility. Every job posting for a nurse ever created will always say, must have one year work experience. We are in the middle of a massive labor shortage, and we won’t take a risk on a younger worker. Six, innovation. I think this has been self-explanatory, but millennials want companies that are innovative and are not just doing the same thing over and over again, that they’ve done for a hundred years. Seven, they want room to fail. Millennials want to work for companies that are willing to take bets on them as they learn new skills. Eight, they want human connection. They want to have an impact on not only the world and world in an abstract way, but they want true impact on a one-on-one relationship. And nine, apparently they want puppies. And there’s not much I can say about this. So we thought, what if we could get the needs of millennials with the more pragmatic needs of the older caregiving workforce, such as needing greater access to additional income, greater job flexibility, and the ability to find their next job and let’s average those needs and together out. And let’s build this marketplace where we can solve the staffing crisis of our senior care communities across the U.S who, as we’ve already established, are facing an increasingly chronic workforce shortage rising overtime and agency expenses and long drawn out hiring cycles.
So we built KARE. I’ve talked around it a little bit, but let’s describe what it really is. Simply put, we have built an app base labor marketplace that matches pre-qualified and pre-screened caregivers and nurses with senior care communities that have open shifts that can’t be filled internally. If you look at our investors and our advisor base, you will see that this is very much an industry driven initiative to help solve the mounting labor challenge in our industry. Simply put, if a community is struggling with overtime and staffing agency expenses, they can post open shifts in our platform where thousands of heroes can apply to work in their spare time. If selected, that hero will then get a five star view after the shift, just like Uber drivers does. And in most cases will get paid the next business day. For our heroes, it’s helped solve several issues. One, income insecurity by providing a way to make extra income in their spare time. Two, the ability to possibly find their next full-time job. And three, for millennials, it gives them the precious purpose filled flexible and innovative work experience that they crave. Sorry, we still have not solved the puppy problem yet. So sorry about that. For communities, we have solved a lot of their issues as well. One, we give them immediate access to new labor, a really large pool of labor and two at a price that it’s much less expensive than paying agency and overtime. You essentially pay our here is about the same with what you would pay your fully burdened W2 employee.
And the beautiful thing is if you like our hero, you can hire our hero. We won’t charge you a cent. In our industry, the average time to hire is 49 days and we cut that down to a matter of days. And knowing what we know about the psychological and sociological need of caregivers combined with the generational needs of millennials. You will see that our narrative is all about being purpose-driven. It is about wanting to be part of something bigger than yourself, to be able to swoop in and save the day. It’s not about working a job, making money. It’s about focusing on the empowerment of this workforce to take control of your own career and not being beholden to a facility you may not love, or a boss that has low EQ. Well, I’m not about to assert we have solved all of our variable labor challenges with our app. I do believe we have built a platform that reduces the ink income insecurity of low wage workers and improves the bottom line of our caring communities all while at the same time, keeping Atasha who we met early on in our discussion, committed to this industry.
I’m Charles Turner. This is my sixth and final Contributor Wednesday podcast. I hope you enjoyed listening as much as I have enjoyed putting this together. I can’t thank Josh, Lucas and Sara enough for giving me the opportunity to do this, but it is now time for me to pass the torch to the next set of contributors. But if you want to talk about this topic or any other, you can find me on LinkedIn, or if you can’t you can connect with me at BTGvoice.com and that’s BTGvoice.com. And thank you very much for listening.