Macro Trends, Technology, & Linkage Funds with Ziegler CEO Dan Hermann
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Lucas: Welcome to Bridge the Gap Podcast with Josh and Lucas. Today we are continuing our pursuit of thought leadership in San Diego at the NIC Conference and Josh, we know that this conference brings in the industry giants and today we have one.
Lucas: The CEO of Ziegler, we have Dan Hermann. Welcome to the show.
Dan: Thank you! Glad to be here.
Lucas: You have been to at least one or two NIC conferences before?
Dan: Probably 20 plus.
Lucas: So, what keeps you coming back?
Dan: NIC is just a wonderful organization that brings together thought leaders from the senior living market place around the country, both providers and all the service providers to them. It keeps you right at the forefront of what’s playing out in senior living and the senior living market place.
Lucas: Awesome. Well, that’s the experience that we have is well. Ziegler is a very well-known name in the space, not only for profit but not for profit healthcare technology, physicians. I mean you guys are in just about every avenue of influence in the market space for healthcare. Let’s talk about some macro trends that you are seeing in senior living and healthcare.
Dan: Absolutely. So, you’re correct. We work with health systems, physician groups, every form of healthcare providers as well as senior living providers, post-acute, home health, hospice, etc. that are across the whole health care and senior living landscape. It’s many, many, many trends playing out as we speak but some of the biggest are around the payer space and reimbursement pressure, which is then leading to what we heard about this morning about Medicare Advantage plans and ISNP, ESNP, CSNP plans. That’s a major trend around reimbursement and our providers gaining control of their ability to get higher reimbursement.
As part of and hand-in-hand with that then is technology. So you have numerous technology-enabled and technology-driven companies playing out in every form and fashion in healthcare for macro-solutions to point solutions. So, another major conference was last week, which was HIMSS down in Orlando. 40,000 attendees, over 1,800 tech-related vendors from giant EMR companies down to every innovative, emerging company you can think of. That’s all intertwining here in the healthcare marketplace and senior living post-acute marketplace.
With the other major trend and that’s demographics booming. So, you’ve got major trends playing out with boomers as we know and they’re demanding wellness, hospitality choices. That’s what you’re seeing play out in the real estate settings and all the offers into the home.
Josh: Wow. So, Dan, so much going on, so much to talk about. You have hit a couple of the high points, but let’s dive in.
What an opportunity, you know, when you start spouting off all the things, some of our listeners are like, woah, my head is spinning. What am I going to do about this? I just need to take care of my residents or the operators are experiencing so many challenges. But let’s talk about the positive. So, there’s so much going on. You talked about the demographic. You know, our industry is rapidly changing. It really will over the next few years. So let’s talk about some of those opportunities.
I know one of the things I’ve heard you talk about is how many people and how the industry is growing every single day. So, tell us some of what you think are some of the greatest opportunities ahead and let’s put a positive spin on that.
Dan: Plain out everyday, one of our observations at Ziegler has been on the real estate setting side. Every day is a new record day for the number of real estate settings- IL, AL, memory care, post-acute SNF, available settings in the country every single day. And every day there’s probably a new provider. Some people view that as a negative and they’ll say the mom and pops. but those new providers have grown into many of the folks that are here that go from two locations to five locations to 10 locations to 20 to 50. How many of the folks in this room today didn’t exist in the year 2000? So, that’s playing out as we speak.
So, wonderful opportunities for those providers to position themselves in the market for tomorrow’s consumer, bringing very new, proactive, high-quality, significant choice wellness hospitality, tech-enabled settings. It’s plain as we speak.
At the same time, we see a dynamic between the two broad marketplace of what we’ll call the not-for-profit marketplace and the for-profit marketplace, both of which are consolidating at the top into larger organizations with greater sophistication. So, what they’re doing is building their management teams and adding specialists in numerous areas, whether it’s steeper financial departments, deeper technology departments, deeper clinical departments, deeper hospitality departments. As they get larger, they can afford those layers of expertise not unlike major health systems, which have gone through their consolidation phase over the last three decades.
If you didn’t know this, there’s 250 multi-facility health systems over a billion dollars in revenue.
Dan: If you went back 30 years, it was probably a quarter of that. So, that same trend’s going to play out in senior living as demographics double, 65 and up over the next forty years.
Josh: Wow. So, you touched on the nonprofit and for-profit sector. So, me an operator, you know, I continue to learn about all the things that you guys are involved with at Ziegler that I had no idea. We’ll talk about some of those in just a minute but I had traditionally known Ziegler as like, hey, non-profit, that’s where you go.
But tell us a little bit about your emphasis on the for-profit sector and the why behind that and what you guys are investing in.
Dan: Absolutely. So, the firm grew up; we go back to 1902 in West Bend, Wisconsin. Grew up financing hospitals, churches, schools, religious orders and that led into senior living where we’re the leader of the market and finance about 50% of the providers in the not-for-profit market. We produce a publication called the Leading Age Ziegler 200, which is essentially The Fortune 500 of the not-for-profit space and that highlights the leaders in the not-for-profit senior living space.
We have a very substantial team that serves them well around the country. As part of that, we kicked off two funds called them Ziegler Linkage Funds. That’s got over 120 not-for-profit providers, 5 for-profit providers, 5 health systems and about 20 industry strategics. As part of that, as well as a demographic boom and as well the independent living, memory care, assisted living, private-pay, high-quality, high service market, our observation was those providers are a lot like our not-for-profit providers. They’re growing out the senior living space in a dramatic way, parallel to our not-for-profit peers.
Many of those not-for-profit folks are here at NIC and they didn’t used to be here 10 and 20 years ago, as you know. So, we see the same attributes, the same high-quality resident care orientation of the newer and generally the overall current for-profit market, the type that attends NIC. And now we get great synergy then among our teams on understanding not-for-profit and for-profit and healthcare systems and then the technology and service provider marketplace. We tie all of that together internally in a very synergist way of focus by bringing a substantial array of financial products to our clients to serve their needs for financing their locations around the country, whether they be large multi- facility systems or single site, single-purpose organizations.
Josh: You guys are investing in a lot of technology. Lucas, correct me if I’m wrong on this but we had Bob Kramer on, which was a great show. He talked a lot about technology. Correct me if I’m wrong on this, I think he said it was his overall view was high-tech, high-touch is how he referred to it. He gave us his impression on, you know, how technology will be applied, how it’s going to solve potentially some labor challenges and things like that.
So, you know with you guys investing in so much technology, tell us, you know, your view on technology. Some people are very much, you know, almost anti-technology that you know, it’s a it’s a human capital world. We’ve got to keep the high touch and others are like all-in trying everything. Where are you guys on that?
Dan: So, it clearly is going. It’s here. It’s been here for 20 years. I mean what am I saying, 40 years. You just heard me comment on HIMSS. I suggest that everyone to go to HIMSS once and walk the floor. It’s at least ten football fields with 1,800 companies from Cerner and Epic and Microsoft down to 200 that have just emerged in the last two years. If that doesn’t tell you the mega-trend, I don’t know what would.
As we sit here in our not-for-profit, or I’m sorry, in our senior living sector today, it’s playing out across the board. So, first, you’ve got the infrastructure and the new buildings. There’s a number of companies that are bringing fiber-optic infrastructure and other forms of high-tech infrastructure says everyone builds a new building are positioned to have all of these other tech solutions layered in.
There’s one company out there that we’re interacting with that’s working on smart homes. You’ve probably seen those written up that puts the home in a position to have 17 different devices brought in for the senior consumer to control their environment in their home all the way down two sensors, as you might imagine. That’s what the future consumer is going to be looking for as we know what the amount of technology we have run the country.
So you name the area, Enterprise with EMR platforms down to residents-centered, care-coordination for residents so that we all can see what our parents are doing, our grandparents in assisted living right on the phone that you have in front of you. That’s here and now. It’s one of the company’s we’ve invested in.
Then you get to the hospitality side. That’s every day there’s a new solution. There’s no question that Echo and Alexa are driving a lot of innovation there. Literally, there’s a new company about once a week bringing that tool into the independent living arena.
Then you get out to the outside world on labor. We know there’s going to be- there is a shortage of labor. So, technology’s going to be an extension of labor in numerous ways. There’s major companies out there and they attack an enabled side around time and attendance, as we know There’s a company we’ve invested in that’s artificial intelligence for recruiting retention and appropriate placement. There’s a company out there that gives you automatic access to your wages on a daily basis that didn’t exist two years ago. That’s now sweeping through senior living.
So, you name the area of senior living and technology is going to play out along with its sister industry, bigger industry of healthcare. It plays out every day.
Lucas: So interesting. I mean, I think we could sit and talk for probably three hours about all of these things. But, to round out the show, moving off the topic of technology, Josh and I talk a lot about recruiting and culture. I think the high tech, high touch also applies to how you build an organization. So, didn’t want to miss the opportunity, you as such a leader not only in your company, but a thought leader in the space, what are you doing to drive culture and recruit people into your own company, even from the outside the market that may not even really have any experience in senior housing?
Dan: Exactly or healthcare or not-for-profit or real estate. We’ve been growing our team at about 10% a year for the last number of years. We’re headquartered in Chicago with wonderful new offices that alone set a nice tone for culture. The people that are attracted to Ziegler and to really enjoy the spaces they’re in, whether it’s healthcare, senior living, we also have a large education practice around Charter School and higher ed. And then our corporate finance team is over 35 folks now, so that’s the team working with the company either raising capital or doing MNA. This is above the fund. By the way on the capital side, we’ve invested in over, or in the fund in our Ziegler proprietary investment platform, we’ve invested in over 30 companies.
Our ability to work in teams and stitch that story together where everyone is expected to communicate openly, broadly, bringing the best ideas and solutions to our client is attracting the type of people that want to be in that team-oriented, high-energy thought leader space. There’s not many firms doing that in this space today, which makes it a lot of fun.
Josh: So, a couple quick things here and I know we’re going to have to let you get on. We appreciate your time with us. But we talked on technology, some trends. We talked about a little bit of labor. For the operators out there, it can be a little bit daunting because you just spouted off like you tons of technology platforms, and now there’s so much emerging technology. It’s hard to know what to implement when to implement it, what’s the best. And then there’s also this challenge of this group that we keep referring to as the boomer generation that you’re not quite our customer yet, but they’re coming and we see all these rising costs and quite honestly this technology that if implemented properly can help us maybe be a little bit more efficient, but it’s pretty costly. And we’re seeing wow, you know this market where we’ve been trying to go after the top segment, the people that- and I’m speaking of the private sector- that are the high-end market. Now, we’re all kind of shaking our heads like man, if we want to meet the real needs we’ve got to find out how to do this more affordably. How do we do that with all this technology that’s costly, that’s demanded? How do we also, you know, with the labor that we’re having recruiting issues and retention issues and wage issues? I’m throwing a lot at you here, but what are you seeing, trends at the high-level where organizational thought leaders are positioning themselves for success in meeting the needs of the boomer generation not only from a references and services but hitting a price point that is palatable for them? Are you seeing anything?
Dan: You just asked about 10 questions.
Josh: Yeah, I threw a lot at you.
Dan: We answer that all the time. We challenge people to think this way because there’s a tendency to make sweeping comments. Like, nursing homes are going to go away forever. Well, there’s 15,000 nursing homes. Clearly we’re not building new but they’re evolving into heavy rehab-centric where they might be more custodial with higher Medicaid mix as an example.
Here’s what I challenge people to think about. Look at the numbers. Bethinking about the age level. You can kick in at 65, 70, 75, 80- the high hospitality group. You’ve got to have a spectrum. It’s a 3D analysis because then you take age, health at that age and frailty at that age. It’s not every 85-year-old is the same and then you’ve got to add in the income levels and you have to add in all of their wants and desires. So, these tenants tendencies for people to say everyone’s going to want to live in their home. Well, that’s not true. Everyone’s going to want to live in a Life Plan Community or everyone’s going to want to live where they have 100 choices or nobody wants to live in a CCRC separated from the neighborhoods. Or everyone wants to live in an integrated neighborhood one. There’s going to be choices, choices, choices across the board, which is what these folks are developing here in different types of real estate settings, in organized ways under organized high quality management teams. That’s what we’re going to see is growing multi-facility organizations that keep building expertise and find their niches around all the areas you described.
Then you go from the bell curve, this is income. Clearly it’s easy to address the high-end. As you push back to the middle, there’s a number of people working on solutions, technology-enabled around a cheaper construction, modular construction, ways to drive down cost for a lot of technology to get into the middle to do what? To offer people in the middle a chance to live in a setting other than their home.
But we still have if you take the entire population, 90% that are living in their home. We haven’t spent a lot of time here on that but there is an enormous amount of activity in the home market, home health and home care is booming. Managed risk bearing settings into the home are booming.
And to answer your question on technology, it’s going to come into play, how’s it going to help us get the cost down? The payer market is booming. So, keep your eye on all the insurance platforms and how they’re weeding in technology into their risk bearing offerings that are going into obviously the hospital, back into senior living settings for post-acute and then into the home. There’s an enormous number of technologies work. There’s dozens and dozens of care coordination platforms. We have integrated care teams using technology following the individual from the house or from their home if they’re part of a plan; into the hospital, into skilled nursing, back into their home or back into an AL community under a managed care plan.
Keep your eye on that. That’s what’s going to help keep costs down and drive people towards settings that work favorably with that particular managed care plan.
Josh: Man, wealth of information. Wealth of points. I wish our listeners that are not watching could see. You came in on two wheels, sweating and you working hard here at NIC. We appreciate your hustle and appreciate you taking time with us today. (I) know you’re extremely busy and also about to lose your voice. So, thank you for all that you’re doing. Thanks for providing our listeners with some thought leadership.
Dan: Mind if I add one more thing on the tip of that analogy?
Josh: Yes, absolutely.
Dan: You were asking how do we vet out technology. What we’re doing for our clients, and this is not a commercial for the fund because we frankly run out of spots in the funds, but our team has vetted seen over 1,200, vetted over 600 and then we do webinar demos for the people, for the companies that are investors in the fund. They have typically at four to six, or maybe eight people in their management team on the demo list. We always hold him on Thursdays. We call them cool and interesting companies. We do about 40 a year at 35 year, probably do another 40 this year. We’ve demoed 80 that we’ve curated down to be what we think are the best of the breed or uniquely disruptive. They’re never best-of-breed nationally.
The other comment is they’re coming out of regions of the country. Somebody out of Baltimore, somebody out of Fort Lauderdale. They might get up to be three -state but then they’re big enough to attract venture capital and private equity. We’re usually one of those. We’ve invested in 23, probably do another seven this year be at 30 at the end of the year and have done 140 demos.
What I’m recommending is be part of some group. Leading Age has casts. There’s other groups. Come up with some systematic way to vet and curate all these offerings, that they’re being inundated with so you can figure out how to then direct your team to the right choices. There’s a number of consultants out there now doing the same thing.
Josh: That’s huge because I can tell you, being an operator, there’s not a day that goes by that I don’t get contacted by the latest, coolest technology company. You’re thinking, you know, how is this different than what I have? You know, is this better than what I have? And it just makes your head spin and if we’re not careful you might takes away from the team building and from what you’re trying to do. So, thank you for that advice. That’s huge our listeners.
Lucas: Fascinating conversation and I can say that these topics for our listeners out there that walking their dog. They’re traveling. They are exercising like Dan did this morning. They’re thinking wow, this is really good and for our listeners more and more of these topics are going to come up. We’re going to talk about middle-market technology all year long. Bridge the Gap has got their eye on Ziegler. We are looking for forward to future, more thought leadership and discussions like this. Dan, we can’t thank you enough. We’re going to let you get back to your meetings here at the NIC and thank you for listening to another great episode of Bridge the Gap.