Before he founded Silverado Senior Living in 1996, Loren Shook observed the level of care available for patients afflicted with Alzheimer’s disease and other forms of severe dementia, and he was dismayed. Far too many people with these illnesses were left to languish without stimulation in dingy, depressing wards, surrounded by apathetic staff. He noted that patients were often kept in a medicated haze, or were otherwise restrained, as a way of dealing with their erratic behavior and mood swings.

Shook had spent many of his teen years working at a psychiatric hospital owned by his uncle. There he had seen the positive impact that patient-focused care could have on the lives of those with mental illness. Years later, Shook knew he could vastly improve on the norm by bringing dignity to those living with dementia. So in 1996, he teamed up with a pair of partners to found Silverado Senior Living as a community of high-end assisted-living facilities serving patients with Alzheimer’s disease and other chronic memory impairments. “The general opinion is, ‘This is a shell of a person, with no purpose in life, and we’re just supporting them until they physically die,’ ” says the 56-year-old president and CEO. “We’ve shown that to be wrong.”

According to Shook, more than 1,600 patients who were unable to walk upon entering Silverado learned to walk again. Shook also notes that at least 1,400 men and women unable to feed themselves learned to do so after they moved in, and he points to 30 patients who regained their speech after neurologists claimed they’d never talk again. The facility boasts a 1 percent “fall and fracture” rate (compared to an industry range of 10–25 percent), an impressive number considering that patients are not restrained or heavily sedated at Silverado. “We’ve shown that people who are at risk will fall less if you don’t restrain them, but instead work on building up their muscle tone,” he says.

Ideas such as this are all part of Shook’s unique “dignity of risk” approach, which suggests that people with memory impairment flourish when allowed to take appropriate risks. And this practice isn’t limited to the mildly afflicted patients. “We take the most difficult cases, those who have been kicked out of different facilities where people say the only way to take care of them is to drug them up and restrain them,” he says. “Even the most challenged ones want a purpose in their lives, and we give them an opportunity to enjoy life, even though it’s different from what they once had.”

To help patients attain that better quality of life, Silverado maintains an impressive staff-to-patient ratio, with one staff member for every seven patients, compared to national averages of one to ten and higher. Patients are engaged with a host of activities, including painting classes, aquatic therapy, baking, and billiards. And thanks to a pet-therapy program (which costs $500,000 annually in upkeep), patients have access to a veritable zoo of animals housed on the various properties, including dogs, cats, rabbits, miniature horses, pigs, and even a kangaroo. In total, there are more than 500 animals. Silverado actively fosters a multigenerational experience (and solves childcare issues for workers) by encouraging staff to bring their children to work. All of these approaches, Shook says, are what inspire patients to regain their abilities against the odds. “We don’t reconnect different parts of the brain or repair damaged areas,” he notes. Instead, Silverado creates an environment with many touch points that enable a sense of human connection — and thus a healthier patient.

Such services don’t come cheap, of course. A double room runs about $5,400 a month, and private rooms cost, on average, $7,400. Of the services Silverado provides, only hospice is covered by Medicare, but Shook says many families are willing to pay a premium for such quality care, a fact borne out by Silverado’s robust balance sheet. Revenues from its 18 communities in California, Texas, and Utah have tripled over the past four years alone and reached the $100 million mark last year. In 2004, Shook expanded Silverado’s scope by adding hospice care and home care.

Compared to its starting point over a decade ago — when Shook and his partners found themselves competing for private-equity financing in a sea of sexier tech startups — Silverado has made a quantum leap. “That was a time when the dot-com boom was in place, and a lot of people had visions of making mega-millions from nothing,” Shook recalls. “And here we were, this capital-intensive, operationally intensive business looking for venture capital. And we had nothing but a business plan. It was fortunate that anybody would talk to us.”

In fact, the private equity firm that first agreed to listen only gave Shook advice on where else to pitch his idea. But hearing about the potential for growth in the assisted-living industry piqued the interest of the venture-capital group, which was impressed with Shook’s background and experience. (After working at his uncle’s psychiatric hospital and then studying business administration, Shook became an administrator at Community Psychiatric Centers. By the time he became president of CPC, it was the most profitable psychiatric hospital operation in the nation. Though managed care put an end to that streak, Shook had learned how to negotiate the financial terrain of an assisted-living operation.)

Shook and his cofounders put in $750,000 of their own money, and the VC firm put up $3.5 million for the effort. Shook purchased and renovated a 90-bed assisted-living home in Escondido, just north of San Diego, and opened the first Silverado Senior Living facility. Over the years, he was able to pull $6 million out of that first property by refinancing several times while maintaining a consistent 60-40 loan-to-value ratio. Other savvy real-estate deals, along with carefully chosen debt, gave Shook the capital for expansion.

The CEO has made a science of finding hidden gems in run-down or underperforming facilities and transforming them into profitable communities. “When we go into a property like that, we’re picking it up for pennies on the dollar,” says Shook. “So we pick it up at, say, $35,000 to $50,000 a bed and we then put anywhere from $1 million to $3 million into the property. Then it’s worth $180,000 a bed once we fill it up.” Shook relies on his contractor-architect team to help him determine which buildings need cosmetic repair and which require costly structural changes. This strategy of buy-and-repair allows the company to expand far more quickly than building from scratch.

Despite the pace of growth, Shook has kept Silverado tightly focused on its founding mission and the measures that have made it a success. Near the top of the list is keeping the company’s 1,800 employees happy. Recognizing that Silverado could not achieve its goals without exceptional staff, Shook has put a premium on employee satisfaction, offering innovative peer-to-peer and professional training as well as flexible schedules and competitive pay. “It’s not an easy job, and we want to create an environment where the staff has a home away from home, where they look forward to work,” says Shook, noting the company’s annual turnover rate of 35 percent after the first 90 days of employment — an enviable figure when contrasted with the soaring industry averages of 80-100 percent.

Shook has plans to expand the company revenue to $250 million with 35 communities by 2011. And there won’t be a shortage of customers; according to a 2007 report by the Alzheimer’s Association, Americans with the disease now number five million, a ten-percent increase over the past five years. That statistic is expected to accelerate as baby boomers age. Shook aims to position Silverado and its innovations in care for dementia patients as a model for assisted-living care on a global scale.

He also hopes to tap the baby-boomer retiree pool for staff and to offer part-time schedules and a second career to seniors who want to keep busy. “There’s a tremendous wealth of labor and resources in that population,” he says. But Shook adds that he has no plans yet for his own retirement. “I’m doing what I love now, and I get a lot of energy out of what I do,” he says. “It’s not really work to me.”