Will residents 'stick it to the man' with their choice of provider?
With Old Man Winter putting his stranglehold on the Midwest, I fled to Los Angeles last weekend. I basked in the sun, ate great sushi and got a caffeine fix from local chain The Coffee Bean & Tea Leaf. So the company name caught my eye when I saw it mentioned in a press release yesterday, and got me to read more carefully. I came away thinking that small long-term care chains and independent owners might be inspired by the coffee purveyor's story.
The press release was about a study on how smaller companies actually can benefit by operating right in the shadow of behemoth chains. For The Coffee Bean & Tea Leaf, that behemoth was — you guessed it — Starbucks:
“When the owner of Los Angeles's Coffee Bean & Tea Leaf could not stop Starbucks from moving in next door, he at first admitted defeat,” wrote the investigators, from Georgetown and Harvard universities. “However, soon after, he was surprised to see his sales shoot up, so much so that he began to proactively locate new stores next to Starbucks.”
It seems that consumers like to “stick it to the man,” as the press release put it. To test the idea, the researchers devised a study. The investigators told people that they could go to Starbucks or an independent competitor called Joe's Java. One study group was told that the two options were equally convenient to get to, but that the two businesses were not close to one another. Another group was told that the coffee shops were located right next to each other.
People were more likely to pick Joe's Java if they were told it was right next door to Starbucks. We apparently like to be able to literally thumb our nose at Corporate Brand X as we walk through the doors of Independent Brand Y.
Independent nursing home operators have been embattled for decades. Prior to 1965 (the year Medicare and Medicaid were created), long-term care was a “cottage industry” dominated by “mom-and-pop shops,” in the words of a 2008 study. The growth of chains was really boosted by the Medicare expansion of 1987, the study authors pointed out. But these were not Starbucks-scale enterprises. By 1997, there were more than 4,700 chains, but about 90% had 10 facilities at the most.
Now we're entering another era. It's the age of “mega health systems,” AARP Chairwoman and long-term care expert Carol Raphael said in a recent webcast. Some of the biggest players in post-acute care have begun consolidating. Raphael name-checked the Genesis Healthcare merger with Skilled Healthcare, which created a $5.5 billion company. There's also the combination of Brookdale and Emeritus; Brookdale explicitly is trying to move long-term care marketing from the local to the national stage, and be a kind of senior living Starbucks (as I wrote shortly after the acquisition was announced in February).
It's not only the presence of these mega-providers that are of concern to smaller shops, of course, but the reasons for their creation. Providers across the whole continuum are partnering in accountable care organizations and similar entities to offer more integrated services, and larger post-acute companies can bring a lot of weight to bear to get aligned with these groups. The increasingly pressing — sometimes government-mandated — need to invest in expensive, cutting-edge technology makes it more advantageous than ever to have economies of scale.
In the current climate, it seems inevitable that M&A activity is booming, and not altogether bad that some smaller chains will be scooped up (while subpar performers might go under entirely).
But owners who dread the encroaching shadow of mega-providers and feel like “admitting defeat” might consider Coffee Bean & Tea Leaf. Obviously, the coffee game and the long-term care industry are not exactly identical. Yet, I suspect “sticking it to the man” is a pleasure that can be felt by consumers even in choosing a care provider (as long as the product, like The Coffee Bean's, is comparable to the competition's). And the impulse might become even more powerful as the silver wave of Baby Boomers crests. After all, this is a generation that came of age rejecting all sorts of authority.
Back in that February blog post, I wrote this in the wake of the Brookdale/Emeritus deal: “Almost certainly, there will be those who balk at the thought of being one more number in the rolls of a huge corporation, and who will seek the senior living equivalent of the independent coffee shop.”
I'd like to think that the Georgetown/Harvard study validates my idea and takes it even further: For small chains and independent facilities that are high quality, business might really start to boom once the mega-provider opens a facility right down the street.
Tim Mullaney is McKnight's Senior Staff Writer. Follow him @TimMullaneyLTC.