The world of skilled nursing (and senior care in general) is changing, and operators might need to reposition their models for the future if they want to keep up, said a panel of experts during a session at the recent NIC Skilled Nursing Investment Forum.
“We need to rethink how we do business ‘horizontally’ and ‘vertically’ to continue to thrive as health care reform unfolds,” said Peter Longo, the Principal and Managing Director of Cantex Continuing Care Network, based in Carrollton, Tex.
With health care reform in full swing, there’s a “triple aim” that everyone should shoot for: improving the experience of care; improving the health of populations; and reducing per capita costs of health care.
On the vertical side, operators should consider ancillary business lines and partnerships that can enhance seamless transitions for patients throughout the continuum of care.
Integrating post-acute care between hospital, skilled nursing, and home- and community-based services advances the “triple aim,” Longo said.
“Adding home health agencies is a natural extension of the skilled nursing business,” he said, going on to talk about the growing importance of forming partnerships with providers along the continuum of care.
Partnerships can range from joining an accountable care organization (ACO) and working on care transition management, to starting a joint venture project and building a program with local hospitals and post-acute care facilities to serve their populations, Longo said.
There are also moves to make for retooling core business, according to Longo. Operators need to consider what might be better for a specific facility: repositioning, or replacing altogether. Factors important to this decision include performance, market dynamics, available capital, and offered programs.
Longo gave an example of what his network looks and plans for when thinking about either repositioning or replacing a facility.
For repositioning, at least in Texas where Cantex is based, Longo said he plans to spend about $10,000 to $15,000 per bed. For replacement, the range is between $60,000 to $100,000 a bed.
“You want to spend enough to add traction to the life of that investment,” he said, adding that Cantex generally has goals of getting a 20% return on investment (ROI) and 20% NOI.
He adds that when a facility seeks to reposition its core business, it’s vital to consider the population it will be serving. Can a facility comfortably handle serving both transitional and chronic patients? Will it have adequate and appropriate staffing and clinical programming for these two distinct populations?
Six Rules for Repositioning
There are several important rules to follow when repositioning a facility, according to Alex Fraser, Managing Director at equity investor GI Partners. His firm specializes in buying asset-based operating companies with “actionable, value-adding strategies” and room for fundamental improvements.
Here’s Fraser’s advice for communities considering repositioning their models:
- “Know your core competencies. Leverage your strengths as key differentiators, and stay true to your primary value proposition. Be aware of your weaknesses and invest in them.
- Invest for the long run, and expect the unexpected. Although it’s important to have a long-term vision, operators also need to stay flexible and open to re-thinking plans.
- Make your target your central focus. If you’re serving a short-term population, make your rehabilitation center the facility’s main focus, and plan its position within your facility accordingly (i.e., near the entrance, where a dining room might be found in a long-term care facility).
- Unlock the potential of your team, and invest time in finding great leaders.
- Create an aligned investment in the physical plant, because it’s going to have to support the long-term vision of the facility.
- Don’t forget the surrounding community—you’re not on an island. Acknowledge you live in a complex eco system. Partner with others and appreciate the problems and challenges they might bring forward. Know what’s going on around you.”
It’s important for facilities to realize that one size does not fit all, said Vincent Myers, the Principal/Director of the Senior Living Design Studio at DIGroup Architecture.
“A successful repositioning model is achieved through a process that creates a product that is specific to your needs” along with the needs of the clients and the community, he said.
Written by Alyssa Gerace