Pat Mulloy, 3x Senior Housing Founder and CEO

Episode Transcript

David Pardo (00:01)
Pat Malloy, welcome to the show.

Pat Mulloy (00:03)
Thank you David. Good to be with you.

David Pardo (00:05)
All right, can you tell us a little bit about yourself and how you got here? Your background.

Pat Mulloy (00:12)
Yeah, sure. I always tell people I’m an accidental senior housing person. And I’ll give you that some color and some context in a second. I am born and raised in Louisville, Kentucky, and went off to college and law school in Nashville, Tennessee. And had every intention of practicing law for most of my life and my professional career.

I’m the son of a lawyer and I two brothers who are lawyers. I’m the oldest of the three boys. I did go to law school, graduated, clerked in New York, came back to Kentucky to a family law firm. And I worked there for 10 or 12 years. And then in that timeframe, I was primarily a litigator.

not plaintiffs work or anything like that, but dispute resolution, business litigation, families with estate issues and money disputes. Spent a lot of time living that and learning how to become a lawyer and very much enjoyed it. Was licensed in New York and Kentucky and oddly enough, I kept both licenses even though I haven’t practiced law in a long time. And I’ve always had a public policy itch.

And in early 90s, I got a call out of the blue in 1992 from a friend of mine who was a lawyer who’d gone to work for a fellow who was then governor of Kentucky. And they had an opening in a cabinet position for the governor as his secretary of finance. And I’m not a finance guy by training. I’m a self-taught finance guy.

The finance cabinet was a position in state government. I had an itch to do some public service. You didn’t do it for the money. It had nothing to do with financial gain. this, not supposed to be now, but occasionally it lapses, but it didn’t then. This was a pure public policy thing. And I loved it. I told the governor he’s now deceased. He died about a year ago. He was a good guy, thoughtful fella. And

David Pardo (02:14)
Not then and not now, yeah.

Pat Mulloy (02:30)
honest and I told him I said I’m not gonna stay four years with you but I’ll stay two years I’ll give you two years and I did I stayed two years to the day and learned a bunch of stuff about legislative policy running of the state budget got exposed to you know the largest component of every state budget in the country is Medicaid and and it’s expenditure it’s health care expenditures not Medicare but Medicaid is a

blended federal and state dollar and depending on how wealthier or poorer your state is in Kentucky where I’m from is a relatively poor state you get a higher percentage of federal dollars into the system that you match with state dollars and they provide all kinds of health care services.

David Pardo (03:15)
Sorry, so you said Medicaid is bigger

than Medicare specifically in Kentucky or that’s true in different states? okay.

Pat Mulloy (03:20)
No, no, they’re just different buckets of money. They are

in terms of the biggest expenditure in most state government budgets. You’ll have a huge road fund that’s typically funded with a gasoline tax, but you’ll be in the core budget. Everything from workforce development to higher education, the largest expenditures for Medicaid, which is the program set up back in the early.

the mid-60s that’s a federal state program that largely is healthcare. It does all kinds of things, but it’s largely healthcare related. And so, I managed that. I learned that, learned a ton. And when I went back, I left there in November of 94. And I had gotten an offer to go back to a larger corporate-type law firm. And so, I went there and…

did lot of the same work I’d done before, business litigation, complex litigation. And I got a call in April of 96. And this little vignette is a bit of an insight into the beginnings of what I call the private pay senior housing business. I spent most of my career, David,

on the private pay side. I’ve been exposed to skilled nursing, but I’m not an index and we operated a few nursing homes here and there. But the great proponents of the work I did for 25 plus years was building, operating, running for various investment groups, private pay assisted living, independent living assisted, and a lot of private paid dementia care. And a buddy of mine in Louisville who had built a large healthcare company

Also was a lawyer like me called me. I’m going through, we went a little bit through politics and our kids went to the same school. And Bruce is about, he’s probably 10 years older than me. And he built a large specialty hospital company and trying to grow that company, it was called Vincore, was the name of it, V-E-N-C-O-R. And trying to grow that company, they moved into the post-acute space and they bought

the second largest nursing home company in the country, company called Hill Haven out of Tacoma, Washington. And he called me, I didn’t know what he wanted. And he said, meet me for supper. I’ve got an idea. So we met at an Italian restaurant in Louisville. And he said, buried inside this platform, 300 nursing homes, there were 19 private pay assisted living communities.

And he said an investment banker had called on him and said, you can take that entity, that small piece of business. It was about a $50 million revenue platform. I remember it was 92 % occupied. Those 19 homes were thrown off about $50 million of revenue as a freestanding company or entity. And all private paid. were geographically all over the country. There was Boston, New Hampshire.

David Pardo (06:09)
That was 19 homes.

Pat Mulloy (06:26)
Tacoma, Washington, Kansas City, Denver, San Diego, blah, blah, blah, blah, blah. can’t remember if there’s anything in Texas or not. Palm Beach, West Palm, there was a building there and it was an established cash flowing entity and it was all assisted living and independent living. And the banker had told my friend Bruce, he said, we’re getting ready to take a company public. The public markets are opening up to

private pay assisted living. And there was a company, I think it was then called Altera out of Milwaukee. There was a brand new company called Sunrise Senior Living out of Falls Church near there, Virginia. And a guy named Paul Claussen is sort of the guru of this notion of building a residential setting for the elderly. And so he said,

Would you take a meeting with the investment bankers? He said, I think you might be good at being the CEO of the company. And I said, Bruce, I’ve never been inside of senior housing community except to see my grandmother. And I said, don’t really know anything about it. I had exposure through my family to a lot of real estate development. My father, in addition to being a lawyer, a bunch of multi-family stuff over his career. So I knew enough about.

acquiring real estate and zoning and a little bit of the regulatory stuff that goes with that. But he was not a healthcare expert at all. And he said, go see two or three of the buildings. And I think I flew off to see them. And he said, let’s take a meeting. The bank was then called Alex Brown. It merged its way out of existence, Big Baltimore Investment Bank. And long story short, in May of 96, Sunrise Senior Living went public. And on my wife’s birthday, August 20 of 96,

We took Atria Senior Living public and that’s Atria still alive today. It’s a big Louisville based company and it was run for years by a friend of mine, John Moore, who I think has recently retired and now run by Holly Belter Chesser out of Louisville, but it’s one of the private pay platforms for senior living in the country. And so that’s a long-winded way of saying I’m accidentally here. got…

The more I learned about the business, and I used to tell our employees this all the time, I found a real passion for it because it’s a business. You’re not making cigarettes for a living and you’re not chasing ambulances. You’re doing something that’s worthy. You’re your best to care for people in the last chapter of their life. And other than both in children, that’s about as important a work as you can do. And it’s a high touch business. It’s an interesting mix of care,

I always talk to our employees, a lot of folks doing a lot of the work that you and I won’t do for a living every day, caring for grandmothers, getting them in the bathroom and toileting and bathing and dealing with incontinence issues and memory issues. It’s hard, tough work, but it’s rich, rewarding work and it’s all wrapped up.

in this real estate platform where you have to deliver the services inside a piece of real estate and inside a building. So it’s got a lot of sides and facets to it. that’s maybe more than you wanted to know, but I got into it and yeah, and we got lucky. We caught the market in 96. The market was rich and frothy. And we went to the public markets three times. I said, I had a partner, still one of my closest friends, Tim Wesley.

David Pardo (09:50)
That’s exactly the amount I wanted to know actually.

Pat Mulloy (10:05)
I’m still in the business today, but I’m still in the business because I sit on two or three boards that work in this post-acute care space for seniors. But Tim was always my CFO, eventually became the chief operating officer, and we were partners through three different platforms and loved it. We had some successes. We had our share of failures and mistakes, screw-ups like everybody does, but we learned it and learned the business.

and learned how to become, I think, successful managers and leaders. You have to be able to lead teams of people because this is very much a, as I said a minute ago, you’ve got to have all kinds of technicians to do the financial work and the legal work and regulatory work, but where you meet the customer, that’s an interesting conversation about who the customer is. The customer is not really the elderly grandmother. It’s really the, most times it’s the daughter. Yeah, it’s the daughter.

David Pardo (10:59)
It’s who’s the payer?

Pat Mulloy (11:02)
And it’s an interesting business. Could be a daughter-in-law, or like my poor mother, she had three sons. And so she didn’t have a daughter, so we all watched over her care. But there’s interesting gender issues in it. Women are better in some ways. And I don’t mean this in any sexist way, but there’s an empathy quotient that you see in daughters. And typically, our customer was the adult daughter.

David Pardo (11:04)
or daughter-in-law.

Pat Mulloy (11:30)
and she’s called on to make a bunch of tough decisions about grandmother as she’s entering another chapter and phase of her life.

David Pardo (11:39)
That’s fast.

I have daughters and sons and no one’s going to convince me that they’re interchangeable. Yeah. Yeah. you came into the business really from the, got pulled in because of the regulatory, you, and

Pat Mulloy (11:43)
They’re not interchangeable. I have a daughter and a son. They’re both different.

No,

I was hired to be the CEO. I was never the general counsel. I’m a lawyer and I understand all that stuff. And I knew when we got sued, yeah, yeah, I get all that. I’ve got pretty good fingertips on that stuff. But no, I’ve been the CEO of three different chief executive officer of three different senior housing companies.

David Pardo (12:04)
Right, and relationships in City Hall and…

I know that you talk a lot about innovation. I knew that your background is law and then government before senior housing. I didn’t realize, only as recent as 96. What would you say your favorite accomplishments or accomplishments is in your time in senior care?

Pat Mulloy (12:20)
Mm-hmm.

I was always proud of

the culture that we built at three companies. there’s a, I don’t mean this bragging, there’s, have a rich, there’s a rich legacy that Tim and I have left of people who today are recognized leaders in the senior housing space across the country and having the skill sets and learning the skill sets to grow leaders.

and have them stay with you in organizations, follow you from company to company, because business goes through cycles, know, and businesses get sold and we were never the primary capital. We always had capital partners, which you have to have because these are capital intensive businesses. I would say that was a huge legacy reputation for service, building a culture of service, a culture of responsiveness.

And then watching all, particular, lot of these young people, I think of two women, there’s a woman from outside of Chattanooga, she has the best name I’ve ever heard of in senior housing. Her name, so helped me, is Summer Blizzard. That’s her name, their parents gave her. And credit to her parents. She’s funny and smart, and she came to Tim and me as a techie. She was a tech person, hired in our tech group.

David Pardo (13:57)
Okay. Credits are our parents, really. Right.

Pat Mulloy (14:11)
in, gosh, I don’t know, 15 plus years ago, didn’t know anything about senior housing, and she might have been 25, six years old, and today she’s a operations leader at a substantial senior housing company that’s in Atlanta, but she works remotely out of Chattanooga. I think of her. There’s a woman named Melissa Owens. Melissa was an assistant executive director while a student at Western Kentucky University in Bowling Green, Kentucky.

She went on to begin, she learned under Lou Mooney and maybe the best, one of the five best executive directors I ever met. And Lou trained her, Marissa became, became the executive director, then she became a regional director of operations for us. Then she became head of all marketing and sales and our last company and life comes full circle. I’m now helping her and another colleague of hers with a startup independent living business, trying to get legs under a

brand new startup but watching her grow from I don’t know a 20 year old kid that knew nothing to a 40 something year old grown-up woman who’s a leader in the space been through the Nick Future Leaders program and I mean I could go on and on that’s that’s for me the richest thing is watching leaders grow I mean we’ve been involved in you know the business

I could go on and on. It has evolved so much. We all thought, back when I got into it in 96, we’d go to these big conferences and Paul Klassen, who I have an enormous amount of respect for, really one of the two or three godfathers of the industry that founded Sunrise, but he used to talk about the ability for someone to age in place and to live in a residential setting with all kinds of healthcare services up to the end of their life.

back then, now he was assisted living, but he would say that you’ve got a right to, that you ought to be able to have the same kind of services that are delivered in skilled setting into a residential assisted setting. And I found myself on the other side of that argument years ago, and frankly, time proved me wrong and he’s more right than I was, because we would talk in terms of social models, that Iris was a social model, and what you were trying to do was stay

David Pardo (16:06)
call that independent living now, right?

Pat Mulloy (16:34)
inside an acuity line into a lower acuity model to not be required to deliver more complex care. And over the 25 plus years I was in the business, what you learn is to the extent families resources will allow it, people do want to stay where they are. Now they may need for safety reasons to go into a secure dementia unit so they’re not wandering off.

4, 30 or 5 in the afternoon and hurting themselves or they may need to live in a unit where they’re not cooktops, ranges where they can burn themselves and so on and so forth. But the business today has evolved. It’s very much a medical model. A, people are living longer than what and we’ll get off into a COVID sidebar, but COVID changed the entire world because all of a sudden you had

You had this strange disease that nobody knew anything about in 20 and on into 21, maybe in late 19, depending on what part of the country you were in. But then you had to have the ability to begin to be able to deliver services. And then all the cost intended that came with COVID and the labor issues, I think they have helped accelerate. think the things we’re living through right now is an acceleration where technology

I’ve watched a lot of blue to nudge technology over 25 plus years stuff where you really had to fight your instincts and say we’re not wasting our time on this because nobody’s proved that this thing works and you know, I remember a very large company years ago put out a motion detector system that would

You could install it in a room. This is 15 plus years ago. You could install it in a room and it would tell, would move. You got all kinds of HIPAA complex issues. You couldn’t just put a camera in the room because you couldn’t afford the staffing to watch the camera, but it would, it would detect motion and you was trying to detect falls. It was trying to detect urinary and UTIs, frequent use of the bathroom, those sorts of things. And we tried it in the building or two, but it was so bleeding edge.

And we were also capital constrained. We didn’t have the money to invest in it. I think we’re now getting to a place where that curve is going to, because labor is short and labor is expensive, you’re going to have to have technology to deliver some of these services going forward. And so think we’re at an interesting, yeah, the next 10 years, I think they’re going to be fascinating in the industry.

David Pardo (19:03)
Sure, when labor gets too expensive, capital comes in. Right.

Not to mention the capital is getting cheaper. Like the cost of these devices is not a… When did it start? You were talking about the cameras?

Pat Mulloy (19:14)
Yes.

Yeah, and that’s cameras is another whole debate. We tried everything in the world and what do you do with cameras and you got a whole lot. It’s a hippie issue. It’s also a liability issue. How long do you keep the videos? And I really finally learned best practice was less recorded technology was probably better because frankly, that’s another that brings another thought to mind. We all collected with our care systems that we began to implement.

David Pardo (19:23)
Is that a hip issue?

Pat Mulloy (19:47)
And I’m blank on the name over our last company Elmcroft. We used a server based care system There’s quite good and it collected enormous amounts of data But that’s the other problem in the industry is okay. You got all this data sitting in servers One night because you couldn’t afford the analysts to go into man the data that that’s going to change over the next 10 years people are going to be able to

David Pardo (20:01)
wasn’t able to process it.

Right. Correct. Because now you’re not you’re not paying a person

now you’re paying a service.

Pat Mulloy (20:13)
Yeah, and AI will make a difference because there’ll be algorithms they can run and I’ll be able to tell grandfather Pardo I’ve got a staff up extra because he lives on, you he lives on X-Ring of the building because he’s a higher risk of fall than grandfather Malloy. A lot of that stuff has been guesswork over the years or frankly feedback from the frontline caregivers, but that’s changing. There will be miracle answers out there, but AI will be real predictive data that tells us

David Pardo (20:15)
Right.

Right.

Pat Mulloy (20:43)
patterns and how folks are aging.

David Pardo (20:46)
Do

you think that’s going to take away from? So I’m a futurist, I’m younger, I’m a technologist, I’m all over this stuff. I never need to be convinced that this is the direction. The counter argument is the more, you know, less we invest in labor, more into capital, you’re killing human relationships, and you can’t replace frontline workers. So what do think about that?

Pat Mulloy (21:06)
That’s right. don’t think that. Yeah, I

don’t think I don’t think the industry is in crisis over that. We’re not going to have I’ve watched, you know, you’re not going to have robotic care in these buildings. You know, I have seen not robot.

David Pardo (21:24)
I actually have a conversation

later today with a guy in robotics who wants to talk to me about breaking into.

Pat Mulloy (21:27)
Well, there are

robotic companions in these buildings and I have seen success and failure in not robotic but bedside computerized medication delivery. That’s another area where the technology will actually help and reduce medication errors. But it’s such a high touch business. I’m not losing sleep over the industry losing that touch. What we’ve got to find is workers that were

eight, nine years ago were $12 and $13 an hour workers are today $20 an hour workers. So you’ve to find the supply. You’ve got a rates have gone up. It’s one of the ways people have helped ameliorate solve some of the margin compression that has occurred. But real margin compression has occurred. You haven’t been able to pass through all of the cost changes to people. then there’s still back to the Medicaid comment I made earlier. My home state is a perfect example of it.

in most states in the country. There are about 30 states, 30 plus, that have what are called Medicaid waiver programs. But how are we going to provide in the next 20 years or next 10 years, how are you going to provide a residential setting for a, I’m not talking about, well I am talking about the very poor, but even the modestly sort of lower middle class folks, like in Kentucky, there’s no Medicaid waiver for a residential setting.

Their choice is to either access some sort of home care. You go to the federal government, you get a waiver to be able to use Medicaid dollars to pay for private pay care, what would be private pay care. There were some early states that were pioneers, North Carolina, notably one, Ohio’s got a nice program for dementia care. And there are states around, but then there lot of states that will pass a Medicaid waiver program, but they don’t fund it enough.

David Pardo (22:58)
I’m sorry. What’s a Medicare waiver? I apologize.

Okay.

Pat Mulloy (23:25)
They want to pay you, know, a thousand dollars a month for care of that. You’re upside down. You can’t deliver the service. You can’t derive the real estate and the food and the care that those kinds of dollars. how you that’s a huge

David Pardo (23:36)
This is a person says,

I want to spend my Medicare Medicaid money on private pay as opposed to someone who accepts Medicaid.

Pat Mulloy (23:43)
I

want to spend those dollars in a residential setting. A lot of states don’t have, in Kentucky, your choice is either find some home care or you go to a nursing home. You’re in a quasi-institutional setting.

David Pardo (23:56)
Got it.

Got it. Otherwise

Medicaid can only be spent on medical services as opposed to…

Pat Mulloy (24:03)
Yeah, typically

it’s spent for skilled nursing, what we call nursing homes. And there’s a place for that in the marketplace because there are a of people that are critically ill for all kinds of life reasons or disease state reasons. But it’s how you meet that. I’ll give you an example. In North Carolina, we had a building in Raleigh where we had a nice dementia unit and you could double occupy as long as we didn’t have agitation issues. The room was big enough to have a

David Pardo (24:06)
Okay.

Pat Mulloy (24:32)
Jack and Jill suite or two beds for unrelated people that they could sleep in, share a bath. And the state’s Medicaid payment was sufficient that you could run it profitably. And you weren’t making an exorbitant amount of money, but you weren’t losing, you know, in business you have to make profit or there’s no margin, there’s no mission as they say, and you’ve got to, or you go out of business. Some states have figured out how to do that.

historically has been fought by the nursing home industry because they want to hold as much Medicaid dollars as they can for their industry. that’s a debate that’s going on around the country.

David Pardo (25:08)
Would you say this is akin to like school vouchers taking?

Pat Mulloy (25:12)
Yeah,

yeah, Claussen, go back to Paul, he used to talk about this 30 years ago. He’d say, Rihanna, they call it the Medicaid where it follows the recipient. you know, grandfather Pardo would have a bucket of money that would be his voucher that he could apply it wherever he wanted to go live. Yeah.

David Pardo (25:31)
fascinating. So, issue du jour, what do you say the issue du jour right now? You mentioned staffing as a big issue, labor, I can’t afford it. Would you say that that’s the primary issue in assisted living right now?

Pat Mulloy (25:33)
Yeah.

David Pardo (25:49)
Are there bigger ones? I’m also curious how that’s changed over time.

Pat Mulloy (25:50)
Well, if you put it

Well, it has changed over time. When we got in the industry, when I got in the industry in the mid to late 90s, we talked all the time about turnover. We didn’t talk so much about labor shortages. You didn’t see that terribly much. There was always a band of workers that would be employed, mostly women.

80 plus percent of workforce would be female. And they would work as caregivers if they wanted to go get a certification. Some states offer a CNA certification. Some states it’s called LPN or LVN. It’s typically a two year associate nursing degree. And the buildings would employ one, two, three registered nurses, four-word degree nurses.

And for years, I don’t remember significant shortages. You were always managing costs. But the issue was the work was so difficult because it is not terribly glamorous work. It’s a mix of hospitality, health care services, and frankly, just a bunch of personal care services, assistance with activities of daily living. That’s where the assisted living term comes from. That you would get.

you get high turnover and I used to chuckle. I tried to not be guilty of this sin, because we would cat and you can measure turnover in all kinds of different ways you can and you can frankly gain the numbers. And I always chuckle at some of my competitors at conferences that would claim that they had, you know, 20 % turnover or 30 % turnover and I just knew it was BS frankly, because we were

you we were a top quartile operator in most all of our markets. We always wanted to be top 25 % or top 10 % in terms of reputation and service. And it was just really around the culture and the leadership skills of the local executive director and the regional team of women and men that are supporting her in that role and that staff and in our best buildings. We would turn over 40, 50, sometimes 60%.

the buildings in a year. But that was typical of the industry. I used to laugh and I would say publicly at conferences, operators that tell you that they’re doing something different than that. They’re not I challenge the veracity. You’re gonna bridge this a lot challenge the veracity of the nose, but it’s because you’re asking people to do

David Pardo (28:11)
Wow, that’s a lot.

They got a bridge to sell.

Pat Mulloy (28:34)
significant work and it difficult work. I’ve talked about that a bunch. Today then, COVID comes along and you’ve got buildings on lockdown and occupancies fall to the floor because while on regulation, you can’t move them in and statistically, X percentage of your customer base is passing away every year.

And so if you’re not bringing in new grandmothers and grandfathers to live with you, your building will empty out over time. That coupled with the economics that went through the economy during COVID, all of a sudden we found ourselves with inflation running through the system and a shortage of folks. so

You there David? Yeah, I lost your picture for a second. And so that’s been, I think we’re out of the backside of that, you’re not, rages are not, they didn’t peak and they’re not going to fall back down here. They’re going to, they may not be growing at a four, four and a half percent rate a year or 8%, which is what they did in some of the early COVID years, but they will, they’ll moderate to a normal cost of living increase over time. Are you there David or did I lose you?

You’re back. Can you hear me? Yeah, okay. That’s all right. So we’re coming out, on the backside of a shortage issue. Interesting, the policy walk in me, it won’t go down this rabbit hole, but our industry is the perfect example of why we need comprehensive immigration reform in the country because they’re for the labor issues and for it’s an entree to the middle class. It’s an entree to

David Pardo (30:04)
Yeah, sorry.

saying for the labor issues.

Pat Mulloy (30:33)
all kinds of folks that won’t have access to jobs for educational background reasons or socioeconomic reasons, but coming into these buildings and learning and having a steady paycheck, whether you’re a chef or a maintenance director or whatever the issue happens to be, a pathway to a better economic life. And the shortages are real. And so, you know, just an artificial slamming on the brakes of…

as I said, I go down the rabbit hole of immigration reform, but it’s, we’ve got to get back to a more secure border and we’ve also got to get back to a rational system of immigration and we’ve strayed from that for a of reasons. Yeah. Yeah.

David Pardo (31:09)
there’s got to there’s got to be a way to get in. It’s got to be a pipeline.

Okay, we talked about how the issue the issue de jour has changed was retention is labor. What finding people What do think it will be like what’s your what are the issues five to 10 years from now we should get ahead of

Pat Mulloy (31:24)
Now it’s finding people.

you

Well, one issue is one I’ve talked about is that finding a model that works for all of the areas of the economy, the socioeconomic strata. Oddly enough, the industry was, before COVID, was pretty radically overbuilt. I’m talking now about the private pay side, substantially overbuilt. My partner Tim and I tried to buy two or three platforms and I think of one really

beautifully constructed company had built 15 or two platforms we chased, one in the Midwest and one in Texas, gorgeous real estate, but because the markets, whether it was San Antonio or Houston or St. Louis or wherever, Cincinnati, Indianapolis, and Louisville is a perfect example. On the east side of Louisville, which is the more upper middle class, middle class, upper middle class side of my town, there’s still

hell, they’re 10 buildings that are probably less than 10 years old. when all that supply gets dumped on the market, all of a sudden, everybody’s sitting at 70 % occupancy instead of six buildings that are running at 95 % occupancy. And so there’s an oversupply. And I think some of that is correcting, because if you read the data, I’m 71 years old. I’m a boomer. I’m way too young, knock on wood, go into assisted living. But as my crowd over the next decade gets to 80,

these buildings will fill and you’ll see another construction cycle again. And the product, one of the other things, you the product that we built, I was talking to Tim Weschley about this yesterday, there is some truly obsolete stuff out there. If you watch what some of the operators are doing with some of the REITs that have aggregated large real estate platforms, sometimes they’re just saying, no more, I’m not going to lease these assets anymore for whatever reasons.

lease rates are too high or a lot of it. And we had some of this too, we’re just at obsolete real estate. You know, I saw buildings where they would build 30, 40 % of the spaces were studio apartments and small studios, know, 300 square foot studios. And there’s just not a lot of market for that. People want space. want, they don’t need 800 square feet of space, but they need, they need, you know, 350 to 800 square feet of living space.

And if you’re lucid and able to ambulate, you want something that looks like a kitchen that gives you privacy and you want a sitting and living area separate and apart from where you eat and sleep and bathe. So, and I think technology will, whether it’s technology on the human resource side, we don’t have to get off on an employer conversation, but one of the things that I think about a lot is

We had staffing models for years that were driven off spreadsheets. I would know, I could pull up a tab on a spreadsheet and I could feed into the spreadsheet. I got so many residents and that would tell me how I staffed, which was a great way to use Excel. And we would manage to that as best we could. And we did time motion studies, trying to figure out the right ways to staff the community so that people were safe and the service was delivered.

David Pardo (34:54)
Time motion out of Excel. It’s very impressive

actually.

Pat Mulloy (34:57)
No, not out of Excel, in

real life. actually, I had a woman, Kimberley Severance Jones, that part of her job was to go to the buildings and she’d spend two weeks there and work all the shifts and map out the care that had to be delivered. But there was this gap between the spreadsheet and it didn’t talk to the care delivery software. And there was no real time flash reports moving back and forth.

And so there was no real-time tool for the operator to actually And I used to always you know people tell about you can flex schedule these well met in today’s people are so Short there’s a there’s so much shortage. You’ve got to figure out a way to staff and give people 40 hours a week of work Because they don’t you know they don’t want to be sent home This isn’t a you know a flex shift business particular you can do a little bit of that, but it’s very difficult to do

David Pardo (35:47)
Yeah.

Okay, so just recap, the baby boomer population is going to end up needing senior care in the next 10 years, much larger generation, you’re saying there’s going to be a big construction from his mouth. The interesting thing is that the problem in 30 years is going to be

Pat Mulloy (36:03)
And my crowd is a very needy, demanding crowd.

They are.

David Pardo (36:15)
We have too many buildings because the population shr-

Pat Mulloy (36:18)
Well, that’ll

happen again. As long as it’s private pay, they’re not good breaks on the market in that sense. If interest rates are low, and the business has always been one that’s attracted some apartment builder who thinks that he or she can go out, and this is what Klassen was right 30 years ago, you’ve got to build a healthcare delivery model. you’ve got to have relationships with, you’ve got to have access to the technology and the tools and the people to deliver the care in the buildings so the people can age in place.

David Pardo (36:37)
What’s that mean?

Pat Mulloy (36:48)
Because they don’t people don’t want they don’t want to be you know people move around enough as it is in these buildings they slip they fall and that gets into another whole conversation we don’t have a good system you know we have this over litigious industry and there’s a lot of reasons for that why it makes a lot of sense to have thoughtful comprehensive reform of how you litigate claims for care delivery.

And that’s a huge problem and the plaintiffs bark and complain it’s not, but they’re wrong. And it robs and diverts all kinds of dollars away from the system. But you’re going to have to figure out how to deliver care. The technology is going to have to make a difference and you’re going to have to find the people. And by the time my crowd gets there, I was joking a minute ago, but there will be, you know, we’re seeing it now that people are going to want different types of real estate.

Leanne Barney, there was an interview she did the other day, very talented. She succeeded Randy Buffard at Trilogy, which is a great global based company. And Leanne was talking about, they’re seeing it now in their assisted living customer. They’re not interested in a giant board like we all had with a whole parade of activities every week. They’re not interested in one set set of menus. They want choice, which means you got to have technology to be able to deliver the choice. You have to be able to price the choices.

that people want but that’s going to accelerate. I just know what my cohorts the kind of lifestyle they’re going to want when they get to age 80. People are still living healthier, they’re living longer. More choices about food, they’re going to want more venues in which to eat. They’re not going to want to eat at 4 30 in the afternoon. They’re not going to want to see the same menus week after week. Now the industry’s coming along, that’s an overstatement of the case. And they’re going to want more entertainment.

David Pardo (38:22)
I mean, they’re going to want more choices, you’re saying.

and the one more entertainment too.

what you were talking about ambulating and moving about and

we’re gonna want that. Okay, so we’ll get there when we get there. I really, wanted to pick your brain about regulatory challenges. The incoming president, very anti-regulation. I think his last administration, he said he was gonna knock out.

Pat Mulloy (38:43)
Yeah. Yep.

Mm-hmm.

David Pardo (39:01)
two for every new one that was proposed. And I think he did 10 instead. That was the actual number for every new regulation that was introduced, he got rid of 10. What are your thoughts about how the industry is regulated? should it more less? What are the upcoming challenges?

Pat Mulloy (39:18)
I wouldn’t put it in a more or less, it needs to be smarter regulation. There is still a gotcha mentality in lots of states. It’s still in the private pay side. It’s largely a state regulated matter and there often is a failure and this does get over into the litigation area in a state like Manitowoc, Kentucky.

or in lot of other states because all the grandmothers are high risk of fall. When they fall and they hit their head without fail, it’s less than it was but generally still without fail they’re sent out to hospital for examination. And the reason they are is because you can’t see a brain bleed. Sometimes behavior doesn’t show itself. You can’t observe something. But if something goes wrong and they’re not sent to the hospital, you’re gonna get

yourself sued. And I followed litigation. We were fortunate enough, knock on wood, I had one or two what I’ll call sentinel issues in almost 30 years. And we had in every, we would get sued, we had 5,000 residents in our last company, four to 5,000 in that range. And we’d get sued 20 plus times a year, almost like clockwork. And the problem is that deductibles are high, so you’re paying

David Pardo (40:16)
Right.

Pat Mulloy (40:46)
Everybody wants a settlement and the deductibles are $250,000. So you’ve got a bunch of dead cash going out the door and there’s no, there are some systems around the country. Indiana’s got a nice system where they require everybody to go to a mediation first and have conversations with the family so that you’re not ending up in a two or three year litigation thing and a jury trial with the court and all that stuff. And I can argue with my legal brothers and sisters about.

the efficacy of all of that, but we need a recognition that we’re caring for people in the frailest part of their lives. Accidents happen even when care is delivered well. So I think there are some fresher regulatory models that recognize that, that make room for, that don’t rush everything to a litigation, hand-slapping mentality.

David Pardo (41:38)
So just what does litigation has to do with

regulations? Meaning you could deregulate that, Americans will still sue.

Pat Mulloy (41:45)
They’re tight.

I think you need a reform in the regulatory model and I think you need a reform in how litigation is handled in healthcare settings.

David Pardo (41:57)
So this is less about regulation,

more about what you can sue over and maybe some indemnification for the senior care industry.

Pat Mulloy (42:02)
Yes,

I’ll give an example and people don’t ever think about this is if I’m working for if I’m a an accountant and a ploy in the home office and I slip at work I have a workers compensation claim that pays wages and some time off and my health care bills.

Until 100 years ago, to the late 1800s in this country, you could sue your employer. Workers’ comp laws only came into existence because of the recognition that we can’t have every employee, you’re bankrupt, every business in America if you don’t have some sort of first party insurance. That’s what I’m saying needs to happen in the healthcare world.

It’s a reform that would change the mentality. It would end all the advertising by all the array of lawyers that are scaring people, out of people trying to hustle up ambulances, trying to hustle up lawsuits.

David Pardo (42:54)
and Bills Tracers.

So is this about regulations or is

this an opportunity for young enterprising insurance guy to package an insurance specifically around falls?

Pat Mulloy (43:08)
Well, I don’t know. The problem is with the litigation, until you change the litigation system, you can’t make the product work. So it’s really about you need a regulatory model, a fresh look at a regulatory model, and you need a fresh look at how we pay for claims where people get hurt because people are going to get hurt in senior housing. It’s the nature of aging.

David Pardo (43:27)
What’s to stop someone from saying I’m going

to offer an insurance specifically to when you get sued?

Pat Mulloy (43:33)
could cause a cause you couldn’t afford the premium. Yeah, it doesn’t work under the current business model. It just doesn’t work. So

David Pardo (43:35)
Okay. Okay. There you go. Okay, that’s an answer. right. I hear.

So regulations there needs to be okay. For those looking to make an impact in senior housing. I know you take a lot of pride in mentoring some of the future leaders are watching the show. What advice would you offer?

Pat Mulloy (43:59)
Your emotional intelligence is way more important than your intellectual intelligence. So my best leaders were intact adults. They were grownups that knew how to lead. So work on yourself. This is my own personal reflection. I spent a lot of years working on myself trying to grow up. so your emotional intelligence is way important.

And you can’t stop learning. I’m 71 years old and I’ve sat on the board of three post acute health care companies today. One company, some guys with Shore Capital in Chicago. I tell my wife every time I come home, it’s like going to graduate school for a day. I mean, I learn more stuff and it keeps me engaged and it keeps me able to contribute. I mean, I bring some gray hair and a little bit of wisdom after 25, 30 years of knocking around in this industry, but learning from others.

David Pardo (44:54)
Right.

Pat Mulloy (44:57)
continuing to learn from others.

David Pardo (44:58)
Okay, we do some fun questions at the end of our segments. So first one, this should be interesting. First one is, what is the most life-changing purchase that you’ve made under $150?

Pat Mulloy (45:04)
Yeah.

Life-changing purp- purchase.

David Pardo (45:19)
Yeah, can’t be a house or a senior living.

Pat Mulloy (45:24)
under 150 bucks

I was gonna say my Garmin golf watch, but I think that cost over 150 bucks. It gives me the distance though. Yeah. Yeah. Yeah. I’m not a tech nut, but I like really kind of interesting tech stuff. I do. Yeah, I do. I do. No, man. I gotta go take lessons for that. I’m a mediocre. I’m a mediocre golfer. My partner, Tim Weston, he’s quite a good golfer and he gives me feedback, but I,

David Pardo (45:35)
They do now. Yeah, the nice ones.

You like the Garmin golf watches? Do they give you feedback on your swing?

Okay, that’s next.

All right, we’re talking about AI

and sensors and remote patient monitoring. There’s no reason why you can’t strap something to your wrist, I could tell you.

Pat Mulloy (46:08)
yeah, I was looking at, was watching, looking at something on the internet this morning. There’s a product called Fusion. It’s a little thing about the size of my AirPods and you can set it down behind you. I’m gonna map out, you know, the swing. It’ll tell you whether you’re drawing the ball or fading the ball or, you know. So anyway, I’m still…

David Pardo (46:22)
Yeah. Yeah, it’s popular in tennis now also

they have some of the courts have little cameras that just watch you and give you feedback on your yeah, world’s changing. Okay. If you had a billboard, and I could promise you the 300 million eyeballs would see it. What would you put on that billboard?

Pat Mulloy (46:30)
Yeah.

Yeah, it is.

I put something, I worry about the division in the country right now. Sorry to get off on a serious note. We gotta find a way to, and not all agree. I I’ve been politically active over the years and I got, my regular golf group at home, they always laugh. There’s probably 25 of us in the group. I think there are three of us that are Democrats and most of them are what I call them.

David Pardo (47:04)
That’s what we do.

Pat Mulloy (47:24)
Peter Malar Republicans and we laugh good naturedly with each other, but we argue issues. nobody leaves any blood on the floor and the country is so divided right now and so angry. We’ve got to figure out a way to heal. And there’s a lot of reasons for all that. But if I had access to 300 million eyeballs, I would urge us to examine our own. And I’ve got friends on the left that are just as guilty as friends on the right.

But we’ve got to find a way to find common ground among people.

David Pardo (47:58)
Yeah, I agree. There’s an existential crisis. Where do you get your healthcare news?

Pat Mulloy (48:05)
Where do I my health care news? everywhere. I’m vice chairman of the University of Louisville hospital system. So I read Becker’s every day. I read modern health care every day. I read senior housing news every day. I read the OSHA emails every day. I read the Argentum emails every day.

David Pardo (48:06)
Yeah.

we didn’t get a chance to talk about our

gents. All right. So we stuck it in.

Pat Mulloy (48:26)
Yeah, yeah,

so I, yeah, I, yeah, I, you four or five sources, I know, Stephen Rowe, he always makes me laugh. He had a Christmas jingle this week, senior housing investor, it’s the best piece for comes out once a month. And it’s the deal piece that tells you who’s selling what nursing homes or who’s selling what’s going on with Ventos or Well Tower, this read or that read. it’s

David Pardo (48:51)
that’s interesting. Is that

online? can subscribe.

Pat Mulloy (48:54)
Well, you can subscribe. it’s Senior Care Investor. Steve’s been the editor of it. He’s got about my age. And he’s funny. He’s tongue-in-cheek. And he and I have laughed over the years. He’s taken a jab or two at me, and I take a jab or two at him. But I like him. He’s good. He’s smart. And it’s a good resource if you want to understand the deal side of the business. are a lot of smart people on the deal side of the business that I’ve gotten to know and work with over the years.

David Pardo (49:24)
Pat, it’s been a pleasure chatting with and learning from you. Thanks for coming on the show.

Pat Mulloy (49:29)
My pleasure. Thank you. You take care. Have a great holiday season. All right, David. Take care.

David Pardo (49:32)
Thank you.