After nearly three years of discussion, North Carolina-based CCRCs Friends Homes, Inc. and The Presbyterian Homes, Inc. have announced their plan to consider affiliation with one another.
“This isn’t about status of any managment or manager,” said Tim Webster, president and CEO of The Presbyterian Homes, Inc. “It isn’t about the success of the boards. It’s about the long-term success of our residents for both organizations. We think this affiliation will help us weather the storms that are out there and ensure that our residents can succeed far into the future.”
For the past year and a half, the leadership of the Board of Trustees of Friends Homes and the Board of Governors of The Presbyterian Homes have met periodically to talk about any potential issues, as well as the benefits and threats of coming together with an affiliation, Webster said.
Friends Homes operates two communities in Greensboro, N.C., with about 600 residents. The Presbyterian Homes operates three communities — in Cary, High Point and Laurinburg — and serves about 1,100 residents. The resulting affiliation would form a five-community organization. It would make it the leading system in North Carolina, ranking as the 41st largest not-for-profit multi-site CCRC, according to the Ziegler 100 national listing.
While unstable financial conditions may be reason for some organizations to affiliate, both communities maintain that they are “financially strong from an operating standpoint,” according to a May 19 press release. In addition, affiliating may slightly increase occupancy, but both CCRCs boast high numbers: Friends Homes’ occupancy sits at about 94% and at The Presbyterian Homes it’s 95%, according to Webster.
Instead, the communities hope to ward off future costs relating to staff retirements at Friends Homes, share resources and keep up with the evolving health care environment.
Webster said one reason for the affiliation came out of strategic succession planning due to expected leadership changes at Friends Homes.
“The acknowledgment that most of the leadership team would approach retirement simultaneously and that to replace the intellectual and experiential capital residing in that leadership team would be a significant cost to [Friends Homes] was a consideration for affiliation,” the press release states.
In addition, the affiliation would allow the communities to share resources and cut costs.
“Two organizations that are strong [are] coming together to provide greater strength. [This will help] to combine intellectual capital to create a stronger organization, to be able to leverage our size to control costs and maybe even reduce costs, the ability to share resources and also to leverage the use of technology throughout our communities,” Webster said.
He added that the communities would experience increased buying power since the cost of buying technology — including purchase costs, training costs and implementation costs — would go down when operating five communities as opposed to two or three.
Although the communities would share resources, each would maintain their own branding, Webster said.
“Our plan is to maintain each organization’s identity through this affiliation. We don’t plan on a major name change,” he said.
In addition, the affiliation isn’t expected to compromise any staff positions.
“There is no planned change in employees as employees are central to the positive reputation and care of each organization,” Christine McCarthy, head of communications at Ziegler, wrote in an email statement to Senior Housing News. Investment bank and full-service brokerage firm Ziegler advised the communities on the affiliation. “As new practices are considered in the future there may be opportunities for different roles.”
Finally, another reason for the possible affiliation is “the changing healthcare [and] regulatory environment,” the press release states.
The communities released their letter of intent in mid-May with the expectation of finalizing the affiliation by Sept. 30. However, Webster says it’s likely the agreement won’t be set in stone until the end of the year.
“We have had conversations since both boards met. This has been a process in which we respected one another’s goals and it could be the end of the year before we finalize the affiliation,” he said.
Written by Emily Study