Operators Can Do More To Adopt Costco-style Senior Living Models

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In 2025, senior living operators are looking to strategies from companies like Costco (NASDAQ: COST) to improve staffing and quality. I think there’s still more the industry can learn.

Senior living operators have embraced staffing models that emulate the retail giant’s practice of rewarding high-quality workers with good pay and benefits, while REITs such as Welltower (NYSE: WELL) are building Costco-quality break rooms with new amenities and perks for staff.

But I don’t think it’s enough for senior living companies to simply emulate Costco’s method of paying people well and growing in-house brands. Instead, they have to truly live and embrace their espoused values and culture. That was what I took away from a Wall Street Journal interview with Costco Co-founder James Sinegal earlier this week, anyway.

“You can’t say people are our most important product, and hang signs all over the place that say people are our most important product, and then treat them like sh-t,” Sinegal said in the interview. “If you don’t mean it, it’s reflected very quickly.”

As blunt as Sinegal’s message is, I think he’s right that companies have to back up those kinds of statements with substance, or risk alienating workers and customers with failed promises.

To be fair, senior living operators often say that the industry is a “people business” at heart and reflect that by focusing on their staffers and residents. Operators have grown wages by over 30% from 2019 to 2023 and added benefits to attract and retain staff while evolving their services to stay competitive with incoming residents. I think that’s all definitely a step in the right direction, but that there is more operators can do to heed Sinegal’s message.

In this members-only SHN+ Update, I analyze these recent comments by Sinegal and offer the following takeaways:

– How and why senior living operators are taking cues from Costco

– What recent actions by senior living companies show about employee support

– Why greater employee support will be needed in 2025

‘Green ink approach’ and other cues from Costco

Costco’s model is based on providing workers better pay, benefits and career paths, a strategy that has increased sales while lowering turnover, according to an analysis by MIT’s Sloan School of Management published by the Harvard Business School.

At the same time, Costco has built up a loyal following of customers by providing high-quality services under affordable in-house brands.

To maintain the quality of a private brand, Sinegal told the Wall Street Journal he took a hands-on approach to quality control. He called it the “green ink process,” where he would initial product approvals with a green pen.

I see variations of the “green ink process” playing out in the senior living industry, primarily through the increasing focus on quality and consistency of service delivery rather than competing on price.

Anthem Memory Care Vice President of Sales and Marketing Nichole Bartecki told me last year that she believes residents will increasingly look for the value of the services they are buying, and that marketing teams should shift accordingly.

“The focus will likely shift toward delivering consistent value and service quality, rather than relying heavily on discounting as a primary tool for occupancy,” she said.

I also see the shift towards value-based care models as a potential way operators can take a “green ink process” to their operations. These arrangements are ultimately “designed to pay for quality,” Juniper Communities CEO Lynne Katzmann told me earlier this month. In a sense, they also can align residents with a “private brand” of care that is largely unique to the senior living community where they reside, enabled by their access to Medicare Advantage special needs plans that might even share a brand with the senior living provider – for example, the “Erickson Advantage” plans associated with Erickson Living, or Frontier Senior Living’s “Frontier Advantage” plan.

These long-term shifts in strategy for operators align with what Sinegal noted was “work on a continual basis” when asked about maintaining quality of a private brand.

As I look out across the senior living industry, the most direct way operators are taking cues from Costco is through their staffing models.

Sonida Senior Living (NYSE: SNDA) is one of the senior living companies taking cues from Costco. According to Sonida’s Chief People Officer Michael Karicher, the company is adopting the Costco model by developing employees’ careers and offering them pathways for promotion.

“If we have people that are doing really great things, don’t be afraid to pay them very well and then put them on that career path,” Karicher said during an SHN webinar last month.

Welltower also took a page out of Costco’s playbook by renovating employee break rooms across 90 senior living communities to include stainless steel appliances, cabinets and furniture. 

I hear this common refrain that operators bring a “people first” philosophy to their companies, but I think there’s a difference between paying lip service and actually doing it.

Last year, I spoke with Benchmark Senior Living CEO Tom Grape and he told me that the Waltham, Massachusetts-based provider invested in increasing employee benefits, adding additional paid time-off and increasing 401K matches and tuition reimbursement for continuing education by employees.  

“We chose to take those savings we had realized through budgeting on expenses and reinvested that into our associates,” Grape told me. “We got great feedback, and it was much appreciated.”

I think senior living operators can take other similar cues from Costco in supporting employees, and this reminds me of what The Springs Living CEO Fee Stubblefield wrote about in his 2024 book “A Culture of Promise,” noting that workforce issues have to be solved with “more than just salary.”

To me, wage growth needs to be the baseline in which these other ancillary benefits build from to tangibly create this “people first” environment coveted and much-talked about at industry conferences.

Recent examples include operators pivoting to flexible scheduling, including Arrow Senior Living and Sinceri Senior Living; or operators like Trinity Health Services reporting a direct connection between improved retention and clear career pathways for entry-level employees.

What median wages tell us about senior living staffing

Although senior living operators say they are all about their people, a look at public wage data tells me there’s more they can do on that front. I think that this should be a big priority for operators, as quality ultimately hinges on the staff who provide the service.

According to the U.S. Bureau of Labor Statistics, the annual mean wage of continuing care retirement communities (CCRCs) and assisted living communities was $44,510 in May 2024, the year most recent data was available.

That median is fairly close to what workers need to make a living wage, but with little room for error. For example, a single adult with no children in Chicago must earn a salary of $42,115 after taxes, or $50,790 before taxes, in order to pay for their basic needs, according to the Living Wage Calculator by MIT.

On the wage front, I believe that many operators are between a rock and a hard place, with a need to balance both staff retention and making a decent margin. That tells me senior living operators need to get more creative in their efforts to improve working conditions for their employees. Maybe that means providing employees more direct profit-sharing arrangements. Costco, for instance, offers an employee stock purchase plan.

Pete Stavros, founder of nonprofit Ownership Works, an organization that helps companies create employee-ownership programs, presented at the NIC 2024 Fall Conference in Washington, D.C., where he highlighted a case study of CHI Overhead Doors.

The manufacturing company had flat profit margins and low employee engagement before pivoting to an employee ownership model. After the company was sold, employees received payments of $70,000, and some netted a payout 6.5-times their annual salary.

“If you could give employees a share of value that was created, you could simultaneously enhance company performance, but also transform lives,” Stavros said during his NIC presentation.

To me, this is a step senior living operators could take to get higher retention and promote buy-in to the “people first” culture sought after by companies. These profit sharing arrangements are not anything new, but could reward the productivity created daily by frontline workers in communities nationwide.

To that end, worker productivity has increased 86% since 1979 while hourly wages have increased 31.7%, according to the Economic Policy Institute, showing that productivity has grown nearly three times as much as employee pay in the last 45 years.

Profit sharing could be a powerful option for bridging the gap between productivity and pay, but it can’t be the only way to invest in staff. And whatever strategy they opt for, providers must take action urgently in order to create a more stable workforce. Turnover rates, while improving recently, remain high.

According to the latest Assisted Living Salary and Benefits report by the Hospital & Healthcare Compensation Service (HCS) and LeadingAge, turnover for resident assistants decreased from 68% in 2021 to 44% last year, and certified nursing assistant (CNA) positions saw a 6% decrease in turnover to 40% in 2024.

While there have been improvements in employee turnover since 2021 in the senior living industry, these near-50% turnover rates shows just how difficult the senior living operating environment is in 2025. And it’s not just senior living employers that are having to raise their games–and employee wages and benefits–given current market conditions. Costco itself faced a strike action early this year, which was only narrowly averted when the company struck a deal with the Teamsters.

If the senior living industry wants to meet the needs of the next generation of customers, operators must first invest in a stable and supported workforce because it isn’t just the right thing to do, it’s essential to the long-term profitability of the sector in the years to come. The alternative, I fear, is that finding the “people first” workplace will elude the industry.

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