Importance of High Tech & High Touch in Seniors Housing with NIC Founder Bob Kramer
Lucas: Welcome to Bridge the Gap podcast, the senior living podcast. You’re here with Josh and Lucas. We are in San Diego. We are at the Super Bowl of conferences- the NIC conference in the spring and we could not be more excited to have the godfather of NIC, the one and only Bob Kramer. Welcome Bob.
Bob: It’s good to be here. Thanks, thanks for the opportunity Lucas.
Lucas: So excited. Bob, we could probably sit down, pick your brain for hours about the business, about your impact, your influence over it. I’m a huge admirer of you, your career, not only your career but also just you as a man and a human being that’s had a great impact on my life. You may not know, actually, that Josh and I’s friendship and the impedance of the podcast actually sparked by the NIC conference last year, right Josh?
Josh: That’s right! Actually, it was in Chicago. I had been attending for years and Lucas had as well. We’d met earlier that summer and met in the lobby, actually, in Chicago at the conference and that’s when we started brainstorming. We said, how can we add this kind of value, what Lucas and I get to experience with a lot of other operators and partners, how can we share this with our listeners and bring thought leadership to the listeners?
So, you’re exactly right. It’s always been a focal point of my year to be at the NIC conference.
Lucas: Bob, talk to us about the background and the history of NIC. What was the seed that started the inspiration to want to start NIC?
Bob: Well, it came back in 1991. There were four of us- Tony Mullen, fellow based in Atlanta by the name of Bob Orania and another Atlanta native Al Holbrook and myself. We had gotten to know each other in the 80’s in the senior care and health business. We got together in the spring of ‘91. This was in the midst of a mild real estate recession at the time and we said, this is an industry that’s going to grow. There’s no doubt about it because of demographics.
But it has very poor access to capital. Most capital providers at that point in 1991 were either ignorant of the sector or very negative toward it because of bad experiences in the 80’s with the sort of courier care model- they would build it and they wouldn’t come. So, investors remembered that.
Actually, Bob and Al had had a regional conference in Atlanta- a Southeast lenders conference where they had brought lenders together with operators and they realized that it was a good thing and people really enjoyed it. So, we talked in D.C. in April of ‘91- what if we did this on a national level? And what if we had equity, not just debt. And so, I’d put on conferences before, so I offered to put on the first one. I went up to New York to interview for a week different debt and equity sources and I asked them two questions: first one was, what would it take to get you to come to a conference on seniors housing? And the second question was, what would it take to get you to invest in seniors housing? And, the answers have shaped the whole trajectory of NIC.
The answer to the first question they said, well, this is a niche alternative asset class for us, so, we want what one guy called “the business utilitarian conference.” In other words, we’re not coming to do golf and tennis and go to some resort. We want to be able, there’s no asellet. We want to shuttle down in the morning, meet with a C-suite of as many operator companies as possible and have drinks with them at the end of the day and then take the shuttle back. We don’t want a trade show and we want an audience where we know everyone there is a provider at this C-suite level.
So, we’ve always shaped our events to be business networking, deal-making events. We’ve never had a trade show. We charge a premium to vendors because it’s really meant to be an interaction between investors on the one hand and providers of housing and care on the other hand.
So, to the second question they said, what would it take you to invest? They said, data. They said in particular it’s got to be time series data, not snapshot. And they said very seriously, you can’t be a trade association because we can never use your data as a basis for an investment thesis because you might have great research and great data, but as a trade association, you always have to say good things. You always have to say that everything’s doing great whether it is or not because otherwise your members are going to be very upset with you because they’re paying dues for you saying everything is great.
That was formative. That’s why I started as a not for profit because I believe, too, that people would be more willing to give us their data if we had a non-profit mission oriented toward the good of the industry. Ever since then, we’ve been very fortunate. We’ve been able to attract terrific volunteer leaders who really, yes, it’s about business and about transactions but it’s also about feeling good at the end of the day that you’re creating something that’s meeting a real social need and that, in essence, you’re really doing well while doing good.
We’ve attracted, we’ve been able to attract leaders who have this motivation. They have a sense that they really want to leave the industry a better place and that they see NIC as a vehicle for that.
Coming back, data has been key. If you look at NIC, our BHAG, to quote Jim Collins, was our Big Hairy Audacious Goal or idea was we would hold a conference- which would be a networking, deal-making conference as well as educational. We’d use the proceeds to fund research, use the research to do the definitive studies that would define these products- what is senior housing? What is assisted living? What is independent living? What is memory care? So forth.
Then, over time, we would establish a database, a performance database, of time series data and use that performance database to ultimately attract institutional capital, lower cost capital and pension funds, endowments, so on and so forth. That was the plan in ‘91. We didn’t start doing, we didn’t have enough money to do our own research until ‘96. Then we put more than a million dollars a year into research studies. We started to create national data in ‘99 and then in 2004 we started the map data service with the idea that ultimately we knew we had to provide data at the local market level, that that was critical.
With that too, there’s always the sense of you want to not only have data, but you want to be able help folks see what does the data mean? What do I do with the data? And you want to help people. We like to think of NIC conferences as like this one, as places that people come to go not only to get a pulse of where the sector is, but a sense of where it’s going and therefore where they need to go.
And certainly, this conference today about investing in the integration of senior housing and health care is very much about where we see the industry going because we think, you know, at any given day, we are home to more than 2.5 to 3 million frail elders. Most of them have multiple chronic conditions and functional limitations. What that also means is they are the high need, high cost, high risk folks in our health care system. They are the 10 percent of Medicare beneficiaries who account for 60 percent of the Medicare cost.
So, we believe we can play a huge role as we put more focus on management of chronic conditions, as we put more focus on prevention, on keeping out of the hospital, out of the emergency room. We believe the seniors housing setting has enormous potential as we look at the shift in health care to a value-driven and outcomes-driven both payment and delivery model. In that sense, we want our conferences, as I said, it’s both the pulse through our data where the industry is now but it’s also what are the signals about where it’s going.
Josh: Yeah, so, Bob, founded in 1991, roughly 28 years later, it sounds from hearing how this all started, what we see, you guys have stayed pretty core to the mission, but the industry has changed a lot. What’s been most significant about changes here at NIC that you guys have used with technology, adaptation? What are you guys doing a lot differently that you did maybe a little different in the beginning?
Bob: Well, first of all, I think the industry has changed and has become a more sophisticated industry. It’s had to. Operators are much more sophisticated. They use data now.
They didn’t use data before and to their credit, a lot of the sort of founding giants in our industry, you think of Bill Colson with Holiday Retirement with an independent living sort of middle market product. You think of Paul Clauson and Keren Brown Wilson in assisted living. You think of John Erickson in CCRC’s. They didn’t have tons of data. They had, in some senses, a sense of, I can do better than what I see out there. And in some instances, they literally were looking for parents or in-laws and they were entrepreneurs and they said, I think I can create something better. They went out and did it.
Now, we’re in a situation where operators I think are far more sophisticated with their systems. That and we have much more diversity of product. That said, where we’ll be 15 years from now, we’ll look back on 2019 in 2035 and we will look back on the product diversity today and look like boring uniformity. We will look back at the level of employment of technology and use of data and thing, boy, we were in the prehistoric era in 2019. So, that is really, really going to change our future. We’ve made enormous progress, but again that sort of speed of change is just ramping up enormously and I think that’s both exciting but also scary and even threatening to a number of operators, to make that adjustment, to sort of do business and meet the demands of the boomer consumer that we’ll be addressing in the future.
Josh: Well, now, you touched on technology. I know Lucas and I were talking a little bit about this before. We want to pick your brain some on that. But I also want you guys to talk a little bit. So, Lucas has a little bit of the insider’s game here on something that he refers to as the Future Leaders Council. That is personally very exciting to me because it seems like through the years, although I don’t fully understand it, I’d like for you guys to maybe flush that out and what the purpose of that group is. But, it’s been very exciting to me. I’ve gotten to know some of the most energetic, exciting thought provoking young leaders that have all been members of that group and we’ve had several of them on our podcast.
So, could we take a step back and just talk a little bit about when that group was formed, kind of what the mission of that is and the vision for that group?
Bob: Sure! Well, it’s exciting. Lucas is a member of the FLC, the current FLC. You really can look at it from two perspectives. Looked at very selfishly, the FLC was started because of recognition that the products that were serve boomers are not going to be products that will be developed, financed, conceived and marketed by the current leaders of the last 20-25 years of the industry. There’s going to be a new generation that’s going to deliver that product and they will think differently.
At the same time, selfishly for NIC, I was concerned we, as I’ve said earlier, we’ve been incredibly blessed to have really great volunteer leaders who have given enormous time and really engaged in NIC that you wouldn’t expect CEOs to give that much time to a volunteer organization. They’re not just sort of paying their dues so they can say I’ve got this board membership, it’s roll up your sleeves. Basically, every one of our initiatives that we’ve had since the beginning, we’ve usually had at least one, usually two, board members that have sort of been the champions of that. That’s made an enormous difference in the acceptance within the broader industry. That these volunteer leaders so believe in it that they will invest on their own time in it.
But, I looked around in 2008 and said, where is that next generation of board members of NIC going to come from? I’d been incredibly blessed to work with people I had enormous, respect for- Bill Shine, Arnie Litman, Al Holbrook who I mentioned, Telia Bess, Ray Lewis, Ray Braun, Kathy Sweeney- I mean, I could just go down the list of people that have just given so much time and effort to make NIC the organization it is.
So, when I asked each of the former chairs, how will we- where are we going to find the leaders like you for the next 20, 30 years of NIC? The idea actually came from Ray Lewis, one of our former chairs, and it was really his idea that we should create a Future Leaders Council.
So, the idea was also though recognizing, when we started it, we did it to say thank you to companies that had put in so many volunteer hours. So, we want to invest in their rising stars just how they had invested in the C-suite level in us. It was really a thank you to them. But it has become very competitive. We take approximately eight folks a year, we make a 3-year commitment to them. They’re part of the FLC. There’s a class, so we elect a class of eight each year. But the idea is that they’ll learn about NIC, they’ll serve on different board and committees and they’ll really get to understand the organization. So, ultimately we’re investing for 10 to 15 years from now because in 10 to 15 years, we expect these folks to be leaders of the industry and of NIC.
But, we’re making an investment so that they understand, because, I mean, NIC is different. We’re not a trade association. We don’t have members. We’re a 501(c)3. We take our mission serious. Well, what does all that mean? Well, it means, for instance, that we don’t look for board members that see the whole reason to get on the board in order to expand their network so they can do more deals. And if all you’re doing is chasing deals, you don’t really belong on the NIC board. Yes, we have a transactional deal oriented event, no question, but it’s more than that and we’re looking for people who understand the more than that.
But, we want to then with the FLC, create this network and it also was a realization that we need a broader volunteer base. Now, when you look at, for instance, our whole university initiative and our internship initiative, that’s all driven by the FLC. They started it. You look at now our boot camp. The idea of having a practical, hands on day where you can do 1,000 seminars and conferences on say, the water’s fine, come on into seniors housing. What we wanted was something more tangible where people really learned how to assess a deal. They learned how to write. In the future, for instance, they will learn what is it mean, how do you underwrite the health care component of seniors housing and how and why does that add value?
So, the boot camp, the boot camp has been staffed, put together and put on by FLC and graduates. Because you’re always in sense an FLC member because now this is our 10th year. So, now we have 10 years of alumni which is really exciting.
Josh: It’s very impressive, very impressive group that excites me and is very encouraging for the future of NIC, for the future of our industry and I have first hand witness. That group over the last few years (has been) very influential at also attracting talent that’s not currently in our industry which is really encouraging and I know a huge deal.
Bob: That is a key area and that is, since the FLC represents people who are earlier in their careers, just put simply, it’s far more effective to have someone who’s 33 go to a university and say here’s why I’m excited to be in this industry and here’s why I think you ought to consider it as a career versus to have me, we won’t give my age but a little bit older- more than twice that age- go in and say, hey, this is a great field. So, to me, part of the idea is that all the FLC members and alums will all adopt or own schools either where they went or a university or college where they’re based.
Lucas: If we could clone you and put you into every university, we would blow the doors off the internship program. I guarantee you’d run circles around any 33-year-old. But, I’m going to use this for a leverage point, then move on. You’re very collaborative. I noticed that you’re also going to be speaking at Senior Living Innovation forum. There’s a big word that continues to come up and I’ve heard you talk about it and it’s disruption. One of the phrases that you’ve mentioned over time is that, and I hope I get this right, that we overestimate the amount of disruption that would happen within 2 years but we underestimate it within 10 years.
Bob: I’m actually, I’m borrowing a quote from Bill Gates-
Bob: -and Bill Gates said, when talking about change, he said, we overestimate the change that will happen in the next two years and then we underestimate the change that will happen in the next 10. And I love that quote because I think we’re entering what I call the disruptive decade. Disruptive decade for our sector because of the changing customer among other things, but also a disruptive decrease in health care, in post acute care and long term care as well as seniors housing and care.
And so, in entering that decade, it’s important to realize change isn’t going to happen overnight and so this is sort of the first part of the Gates quote is for people to say the sky is falling, you’ve got to change right away. For instance, people have said the boomers are coming ever since I was in this industry and the reality is the boomers are still not yet primarily our customer except as they are decision makers for their parents. But, we will start serving the boomers as a customer in about 10 years. So, if you’re designing for instance a community now, you’ve got to be thinking about the life of that community. If you’re private equity or you’ve got to be thinking, in terms of my exit strategy, what kind of appeal is this property going to have in 2026.
I think that I like to use the phrase of Faith Christenson whose kind of the modern father or leader thinker in innovation and distinguishes between continuous innovation and disruptive innovation. One is not good and one bad. Continuous innovation is what every business should always be doing, every individual. It’s you want to do the things you’ve been doing better. You want to sell better, take care of your customers better, all of those things. But, it’s doing things better.
Disruptive innovation is doing things completely differently. It’s a completely different way of thinking about how to meet the needs of your customer and I think we’re entering such a period. I think that’s really exciting. It will also be unsettling because some people are so used to doing the same old same old, they’re going to find themselves marginalized and out of business. At the same time, there’s going to be huge opportunities in this time of disruption. But, as I like to say, in a period of disruptive innovation, you want to be the disruptor, not the disrupted because the disrupted in business usually go out of business.
So, hence our push on this whole area of the increasing role of an integration of health care in seniors housing because we think that if you’re going to be competitive five years from now and you’re going to be home to frail elders, you’re going to be a center for coordinating their chronic disease management, for coordinating in a preventive way and in a chronic disease management way their health care. And if you’re not, you’re not going to provider. And you’re going to struggle. You’re going to struggle to get residents.
Lucas: Well, and I know that this is something that Josh and I talk about so often. I wish we had more time, but we have one last question. I want to dive into technology here. Josh and I were talking earlier- my question for you Bob is will technology combat or foster isolation in aging adults?
Bob: Technology is a means to an end, it’s not the end itself. It’s not a solution but technology will- for instance, technology applied will allow us to make better use of staff, to make staff work to the limits of their license. In other words, to have more actual, meaningful interaction with their staff and residents, rather than form checking or checking to see if somebody needs to be changed or whatever.
But technology more broadly, I think if you think of the exploding power of computing power of the smartphone and you couple that with sensors and then you couple that with artificial intelligence and you couple that with predicted analytics, just those four things, you have the ability to personalize health care, to personalize elder care and ultimately to create personalized aging plans in a very exciting way.
I think the most important thing about technology in the senior care spaces, get your front line staff on board. It’s most important that they see the value of how it’s going to help them do their job better and feel better about their job and more proud. If that happens, the technology will truly adopted. If it doesn’t, they will undermine. They will totally block it.
But, the second thing is technology as I said it will enable better utilization of staff. Technology is critical- we are increasingly in a data world and so technology means not only having data on performance but it also means shareable data- real time shareable data with all the partners that you’re going to have to have- payers, providers and so forth.
I think that, ultimately, it also means technology can create wonderful opportunities for more interactions between staff and residents and family. Just look at Alexa and other voice technology.
But, I think the thing is, we’ve got to use it again as a means to an end, not the end, because no one want a Brave New World where people are in there 200-foot cubicles with a screen and their human contact is turning the screen on and their ability to get out is all virtual. So, it has to enhance human touch so we have to be both high tech and high touch. If we use the high tech instead of the high touch, we will fail and we’ll ultimately have an epidemic of shut-ins and loneliness rather than using technology to truly help solve the workforce crisis that we have. It’s a part of the solution.
You look at your pan- they’re aging faster than we are. They don’t have some of the plusses we have. They have net-out migration, they have a birth rate that makes ours look robust. But they’re really focused on technology and on repositioning their elder workforce to care for those every older.
Bob: Using folks 55 to 80 to care for those 80 to 120, I think we will see that also in the future. I think we’ll see residents in senior communities in the future who will be helping in different ways, residents that are not able- that need more help.
Josh: Fascinating. So, high touch and the high technology. I love that. High tech and high touch. Well, thanks for being with us today, Bob. I know it’s a busy week ahead. We’re excited to be here at the NIC conference, excited that Lucas is able to serve on the Future Leaders Council, excited to be part of this.
Bob: Well, I just want to thank you all for what you’re doing through the podcast and just getting the word out. It’s the opportunities in our field are so huge today, but they’re opportunities that will reward people that want to do the right thing for the right reason and who also realize in a time of change, just doing the same old thing the same old way isn’t going to work. We’re going to have a different customer, exploding technology, the radical changes in our health care delivery and payment system and all of that are going to create dislocation and enormous opportunity.
Josh: It’s exciting times.
Lucas: Exciting times and what a value back to our audience. This has been an excellent show. There’s going to be ways that we connect with both Bob and the NIC conference in the show notes. The NIC conference has a robust thought leadership platform with a ton of content that comes out from these biannual events both in the spring and in the fall and we encourage you to take a look into it and see if it’s something that you’d like to come out and participate in. And thank you each and everyone for listening to another great episode of Bridge the Gap.