Futurist Jason Schenker speaks at the NIC Fall 2022 Conference. Photo credit: NIC
WASHINGTON, DC — Whether or not they believe the US is in a recession, providers must brace for “hard inflation,” rising interest rates and layoffs that could hurt the broader economy without the kind of workers shake off those interested in healthcare.
That was the warning from business futurist Jason Schenker, who opened day two of the NIC Fall 2022 conference here with a decidedly mixed message. The bottom line: Owners and operators must keep the long-term game in mind as they navigate what appears to be an ongoing economic downturn.
“The next two to three years will be tough: you will go on scavenger hunts for your workforce. Labor costs are high,” said Schenker, founder of Prestige Economics and chairman of the Futurist Institute, ranked among the top financial forecasters in 46 categories by Bloomberg News. “You’re going to have some of the highest electricity and natural gas facilities to heat and run your facilities that you’ve ever had in your history, and you’re going to face other inflationary pressures, and some of you are still struggling with lower occupancy.”
But being a cash-flow company, whose services will be in high demand when baby boomers born in 1945 begin to turn 80, offers promising prospects for those who can maintain their operational and financial standards in the meantime.
“If we look at the next 24 to 36 months, I would be much more optimistic, especially because of the higher interest rates, which prevent overbuilding of plants,” said Schenker.
Consecutive quarters of falling gross domestic product are often associated with a recession, but Schenker noted that many economists are still reluctant to call a recession, largely because unemployment remains so low.
That’s not good news for skilled caregivers or senior housing operators, who Schenker said are unlikely to find good prospects if a recession deepens. After terminations by technology companies, he predicts job losses, which will primarily affect white-collar workers.
“You don’t want to work in assisted living or memory maintenance, do you?” he asked. “That’s not going to help you in terms of manpower. These aren’t people with blue collar jobs, people who work with their hands, people in medicine. … These sectors are seeing more demand than ever and we just don’t have enough people.”
Move for “real” wage gains
The Bureau of Labor Statistics estimates that the healthcare sector will need a total of 1.1 million new health workers between 2020 and 2030, and skilled nursing has yet to hire more than 200,000 to fill the gaps created by COVID conditions.
Along with nursing assistants, therapists and nursing practitioners will be among the 10 most needed workers in the next decade, he added. As most vendors know, finding them and keeping them doesn’t get any easier.
Schenker pointed to recent PEW data that showed that 60% of workers who left a company for another employer saw real wage gains, meaning they were earning enough extra to more than cover inflation. But only 47% of those who accept a new job at their existing company can say the same.
“If you want to get paid, you have to go somewhere else. That’s the message people take with them,” said Schenker. “If you just want to beat inflation, you have to go somewhere else. That’s pretty scary when you think about the staffing requirements.”
We rely on ourselves and our services.
Leigh Ann Barney
In addition to the staffing challenges, Schenker said providers are likely to be impacted by unusually high natural gas prices, which typically fall at this time of year. But “Cold War 2” is straining international gas supplies, and the associated rate hikes will continue to drive up the cost of everything else.
He noted that as long as the international conflict between Russia, Ukraine and the US persists, no rate hikes by the US Federal Reserve will keep inflation in check.
So it’s up to operators to find ways to weather the storm until the economy calms down or demand begins to pick up.
Don’t let the revenue go down
Many gathered here this week appear to still be interested in growth despite mounting headwinds such as rising capital costs and forecasts of another rate hike on September 21st.
In an afternoon session on scaling operations, Leigh Ann Barney, President and CEO of Trilogy Health Services, outlined her company’s ongoing growth strategy. It starts with building services and the staff to run them, before moving on to recruiting residents.
She cautioned other providers in skilled care and senior living to ensure they can deliver on their promises in any market they enter, regardless of the economy.
Leigh Ann Barney
“That allowed us to become a leader in our market and build a census,” she said. “I have a feeling if you try to sell something and you don’t actually sell it, you’re going to get into some kind of doom loop where you lose population or tarnish your reputation a little bit. Then you have to recover from it because it will reduce your earnings.”
Barney and others on the panel spoke of synergizing strategy and opportunity while adhering to a number of key principles even as the excitement of upcoming demographics and potential needs draw closer.
Trilogy, for example, has offices in four states and has no plans to expand beyond the Midwest, Barney said. However, within this market, she looks for opportunities to build and take risks when and where it makes sense.
“We’re doing a thorough study of the demographics of these markets to make sure they’re a fit for what we’re doing because we’re looking for the high private wages and bringing the services and amenities to these markets,” she said. “Of course we rely on ourselves and our services. So if you trust that and have done your due diligence, then you feel good.”
Approximately 2,800 lenders, operators and other senior housing and care professionals gathered for this year’s DC conference. According to Brian Jurutka, President and CEO of NIC, this is about 15% more than last year. The conference ends on Wednesday.
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