Senior Living Business: Strategic Planning To Meet Your Capital Needs--
One Valuable Tool: Going Through A Facility Condition Assessment
As in any other industry, planning for capital needs is all about the consumer. The inability to formulate a strategic capital plan implies that the facility today will meetthe consumer wants or needs of tomorrow. But if health-care reform moves the senior careindustry towards accountable care organizations—and as the market shifts to, say, more household models, more (or fewer) private pay or Medicaid consumers, more focus on short-term or rehab units, more focus on home care—organizations will have to think about aligning their spaces to meet future consumer needs. And that requires strategic capital planning.
Strategic capital planning is defined as the process of linking capital financing to an organization’s strategic, operational, and repositioning plans, according to Mario Mckenzie, Principal at LarsonAllen LLP in Charlotte, North Carolina. It is performed by understanding the organization’s strategic initiatives, clarifying key issues required to build performance targets, driving change throughout the organization, and preparing a financial analysis of goals and outcomes.
Tackling strategic capital planning
“We’ve seen many organizations undertake strategic reviews to find ways to bridge gaps and position themselves for the future,” said Mckenzie. “If you don’t know how the bricks and mortar support your strategies, then you won’t have a sense of what needs to be accomplished in the organization. And for every program or strategy, you must know its financial impact.”
Going through an effective strategic capital planning process is critical to knowing where the organization is headed. “In the short term, we advise organizations to focus on operations,” Mckenzie added. “This is a time to be diligent about reviewing every expense and trying to gain financial strength through operational efficiencies. In the long term, make sure those short-term strategies position the organization to access capital at anticipated rates.”
From a strategic perspective, the idea is to understand the capability of the organization to resolve issues, access capital, and remain competitive. But for either plan, short- or long-term, the depth of reserves is likely to be one of the biggest constraints. Many organizations don’t even have reserve funds.
The cornerstone of strategic planning is how you view your organization relative to the marketplace, both now and in future years. If you feel that the consumer will continue to look for bricks and mortar, you may plan an expansion. If you think the market will be different—perhaps more rehab, home care, or day care—you may deploy your capital differently or prioritize your strategies differently.
“You can’t have an effective plan if you don’t know your role in the marketplace,” Mckenzie stressed. “And while organizations may understand that notion, their practices and governance don’t always reflect it at a meaningful enough level. Often, they’re more focused on putting out fires.” For some of the smaller single-site not-for-profits, though, it’s simply a lack of resources. They may not have a planning department or can just barely get the annual budget together or deal with census problems let alone think about whether to get into home health, the capabilities that would entail, how do go about it, etc...Want to read more? Click here for a free trial and download the current issue today