Scott Middleton, CEO of Agape Senior Community

MidlandsBiz:
What is your educational background?

Scott Middleton:
I completed an undergraduate degree in accounting at Winthrop before going to seminary and doing a Masters of Divinity at Emory.  I preached at a variety of churches for 10 years before responding to a very strong calling to do some type of pastoral work with senior adults. 

On the advice of a friend, I decided to pursue a Masters degree in Healthcare Administration at the University of South Carolina, an MBA for healthcare professionals, an excellent program for learning about the social and business sides of healthcare.  I worked for 4 years Lutheran Homes of South Carolina as the administrator at the Lowman home, at the time the largest assisted living facility in the state. 

When I left Lowman, I was running 6 facilities for them.

MidlandsBiz:
Discuss the vision behind Agape. 

Scott Middleton:
What I had envisioned from the beginning was a coordination of systems to look after the elderly.  Entrepreneurs, have a strong sense of purpose and a feeling that they can do things better, and often frustration about working within a large bureaucracy.   I bought an assisted living facility on Leaphart Road called Agape House and decided keep a similar name, Agape Assisted Living.  We are having our 10 year anniversary this year.

MidlandsBiz:
How has your business grown over these 10 years?

Scott Middleton:
We had 15 employees and 40 patients, or beds in 1999.  Today, we have 1,000 employees (75% of whom work right here in Columbia) and we run about 650 beds.  We now also have hospice with another 300 patients in it.  When I bought the facility we were billing out about $600,000 a year; this year, it will be closer to $40M. 

Our growth has come in spurts.  2008 and 2009 have been years of significant expansion because we built 4 new facilities.

MidlandsBiz
You have vertically diversified out of just assisted living into other lines of business in the delivery of care for seniors.  Why?

Scott Middleton:
When I first started out on my own, I asked this question: What is the best model to provide care for people when they get older, to keep them as independent as possible, and to do so at a reasonable price. 

The answer to that question was assisted living, and when I left Lutheran Homes, I swore that I would never again get in the nursing home business. The term “assisted living” was not even a legal term in South Carolina until 2001; it used to be called “residential homes.  According to South Carolina law, you must have a 24 hour licensed nursing care available in a nursing home.  Only a licensed nurse can hand out your pills, for example.   With assisted living, you help with bathing and dressing, and medication administration, but you do not provide licensed nursing services.  Assisted living is also about 60% of the cost of a nursing home. 

The problem inevitably becomes that you can’t look after some patients because they need a higher level of care.  A trend we saw happening was that our residents who needed extra care would be sent to a hospital, then to a nursing home, and we’d never see them again.  The mentality of nursing homes has typically been that once you go there, then that is where you will stay.   

We envisioned a different model and sought to redefine care at this level. We started by building a nursing home for short-term rehabilitation, Agape Nursing and Rehabilitation, on the Leaphart campus, with a goal of returning our residents to assisted living as quickly as possible.  Today, of the people who are admitted to our nursing home, less than 1% of them stay.  Ten years ago, that number was around 90%!   

We expanded our nursing home operations when we purchased the Kathwood facility here in town.  In 2004, we bought a 100 bed nursing home in Rock Hill.   Our nursing homes do not look like nursing homes.  Our new building in Conway, for example, has been described as “walking into a 5 star hotel.” 

In 2004, to better coordinate continuity of care, we started Agape Hospice to offer terminal care. 

Today, we also have our own full-time doctor on staff as well as our own nurses.  Therapy is available to our customers six days a week.

MidlandsBiz:
You have also horizontally diversified into other areas, have you not?

Scott Middleton:
We started a durable medical equipment division (adjustable hospital beds, walkers etc) in 2003.  With as many as 5 or 6 strangers walking around our buildings making deliveries, it wasn’t a particularly safe environment, and it was complicated from a business point of view.  This centralized division now does all the purchasing for our facilities. 

In 2004, we started our pharmacy for similar reasons.  With so many vendors, our nurses were spending all day on the fax machine sending orders all over the state.  We were not 100% certain that we were always receiving the best rates or even the correct number of medications that our patients needed.  More than just a system to sell drugs, we wanted a sure fire way to ensure that we had an effective drug administration operation.  We have come up with an internal system where the nurses do all of the ordering for medications at the beginning of the month.  It has dramatically reduced our cost and improved our efficiency in this critical area. 

In order to better meet the needs of our customers in a more timely and a friendlier manner, we started our own ambulance service, AMS ambulance. We also have started our own real estate division, Agape Property and also our own insurance division, GMM Insurance.

MidlandsBiz:
This is a growth industry, but it is also extremely competitive?  What trends have you seen in the industry over the past 10 years? 

Scott Middleton:
The assisted living industry really gave rise to a whole new way of thinking about caring for aging parents. People started to realize that they could take Mom to an assisted living facility and it would be cheaper than a nursing home.  In 1999 when I started Agape, assisted living in this town was overbuilt – 7 assisted living places had been built and opened in Columbia in the previous two years. 

Around this time, a group of local providers, myself included, came together to form the Columbia Assisted Living Marketers Association with a goal of sharing information and helping each other in the local industry.  It has been a great way to tone down the rhetoric that quite frankly had become cutthroat and nasty.

MidlandsBiz:
Are there aspects of the health care for seniors that you don’t do?

Scott Middleton:
The only thing that Agape does not do is home care – it is just an area that we have decided is not a good fit within our model.  Sitter services are a great way to help supplement what a family member can do, but home care is expensive, especially if you want to have someone in the house for up to 12 hours a day.  There are lots of great providers of home care in Columbia, and as the large church based institutions are entering into the market, it also is becoming very competitive. 

We try to educate people about the financial ramifications of home care versus assisted living.  When you factor in annual taxes and upkeep on a home (and often a mortgage), it makes more sense to sell your mother’s $200,000 home and have her move into an assisted living facility.

You also have to factor in the social dimension.&n
bsp; The last place I want to leave my 90 year old mother is at home where she can’t drive, and where someone spends 3 hours with her and then leaves her alone for the rest of the day.  Under that scenario, she will become socially isolated and depressed. 

In an assisted living facility, the companionship and the availability of activities are critical.  Assisted living will give you all of your food and the peace of mind of supervised care at your finger tips.   

MidlandsBiz:
When do families need to start thinking about looking after an aging parent?

Scott Middleton:
Unfortunately, most families are introduced to our industry after a crisis has occurred: a fall, a stroke.  They come to the realization that they have to do something with mom or dad, and in most instances, the first decision involves some form of short term rehabilitation.  Whereas most nursing homes will not take you unless you stay for at least a month, Agape will take you for short term rehabilitation periods of less than a week.  Our goal is to get you out of the nursing home and into an independent lifestyle, in assisted living, or at home. 

I can tell the people who come into our offices and have long-term care insurance . At some point in your journey of looking after mom and dad, you will come to the realization that you are exhausting all of the resources that you thought you would one day inherit and money will become the driving force for all your decisions.  Everybody over 40 should have long term care insurance. 

MidlandsBiz:
If you don’t have the money, what sources are available to you in South Carolina?

Scott Middleton
Medicaid is the only source for funds for indigent care in South Carolina, but it only pays for skilled nursing, not for assisted living, and Medicaid is strapped for cash.  The state started an optional state supplement program for assisted living where they pay up to $1,000 a month for a person.  But if you are receiving an $800 a month social security check, the state will kick in only the additional $200.  Try to put someone in a home and to provide all the care that they need plus all their food for $1,000 a month.  You can’t do it.  The average cost of assisted living in South Carolina is probably around $3,500 a month. 

Agape has set up a private foundation where customers who run out of money can apply to supplement. 

MidlandsBiz:
How do you plan to expand in the future?

Scott Middleton:
The regulatory environment varies drastically from state to state, so we do not have any plans on expanding outside of South Carolina.  We have a 15,000 square foot building in West Columbia where 40-50 people work exclusively in corporate and regulatory compliance.  There are economies of scale that apply to this industry so we will continue to look for opportunities to expand our footprint in South Carolina. 

We are not seeing a lot of growth in the nursing home industry right now because the certificate of need process for Medicaid beds in this state is complicated and time-consuming.

MidlandsBiz:
What has been the biggest challenge that you have faced as you have built your business?

Scott Middleton:
The biggest challenge is dealing with government regulation.  We have hired a full-time dedicated health care attorney to keep up with the ever-changing laws governing Medicaid.  When you have Medicaid beds, the risk is that they can come into your facilities and do an audit of your books.  If you are not in compliance, they can ask for money back!  In fact, Medicare just completed audits of all of the hospitals.

Assisted living is easier because for the most part you are not taking government money regulated by health licensing.  

MidlandsBiz:
Do you have any independent homes or cottages for assisted living?

Scott Middleton:
We do have independent apartments under a development here on Leaphart Road that we call Agape Village.  It is a gated community that has 1,100 square feet patio homes that we sell to people 55 or older for $121,500.  26 our 36 units have been sold and if we continue to be successful with this style of independent living, we envision 4 or 5 Agape Villages around town fed by support services from our assisted living in those areas. 

MidlandsBiz:
What is your ownership structure?

Scott Middleton:
We are a closely held, for-profit company.  In order to limit the liability risk, there are probably 35 separate companies. 

I am not a fan of the corporate structure where you have a board who hires an Executive Director or President to run the operations.  In most instances, the Board has no idea how to run the company, rotates on and off every five years and the President is there for a paycheck.  No one person feels 100% responsible for what happens in the same way that I do.

I expect integrity and quality from all of the employees and do not tolerate a compromise quality of care.  I want the best nurses and the highest quality of care. 

MidlandsBiz:
Define your leadership style.

Scott Middleton:
I read a lot of leadership books.  I subscribe to a great online service that provides a weekly 8-page overview of the most recent business books – www.summaries.com.  This allows me to learn about the best new ideas and to buy the books that I am most interested in. 

Leadership is about embracing and encouraging people around you to take responsibility. 

MidlandsBiz:
How do you do that?

Scott Middleton:
Much of that has to do with your ability to connect with people, but one of the toughest things for business owners is to align incentives with company strategy.  If you put in a financial incentive, an employee will race towards it, so you have to be careful. 

I do not offer equity positions in the company; ownership involves a whole different legal level of responsibility.  I do offer profit sharing, because I want a culture where employees understand that the better that the company does, the better everybody does.  We have incentives for bottom-line success not only of individual entities, but also the entire company. 

MidlandsBiz:
Great name – “agape” – it means godly love, does it not?

Scott Middleton:
In our logo you will find a nine-pointed star, each of which represents one of nine fruits of the spirit from Galatians 5: 22: love, joy, peace, patience, kindness, goodness, faithfulness, gentleness and self-control. 

The Greeks had three words for love – agape, philia and eros.  Generally these have been broken down into divine or unconditional love, brotherly love, and sexual love. Our mission springs from the idea that if you look after “agape” in your life, then the rest will look after itself.