Developers See Opportunity as Old Nursing Homes Become Obsolete

The design elements for post-acute care facilities of the 1960s, such as shared rooms and cafeteria-style dining, have become dinosaurs of the industry. In their stead are upscale, hotel-style models that are redefining post-acute care communities, industry experts agree.

“The transitional and long-term care facilities of 40 years ago are functionally obsolete,” said Zeke Turner, CEO of private North American development company Mainstreet, during the third annual Senior Housing News Summit Thursday in Chicago, Ill. “Our goal was to redesign the nursing home. Newer facilities are more desirable with a big host of social amenities, theaters, pubs, restaurants, private rooms — we’re focusing on consumer-first. They’re looking a lot like boutique hotels.”

Carmel, Ind.-based Mainstreet specializes in post-acute care facility development, with 17 properties under construction and 35 in the pipeline across seven different states. Total development by 2015 amounts to $500-600 million.

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Given the relative aging of post-acute care facilities, some providers are finding it’s more cost effective to develop new facilities rather than redesign multiple decades-old properties.

“It’s difficult to renovate for a number that makes sense,” said John F. Taylor, president and CEO of StoneGate Senior Living.

The Lewisville, Texas-based provider has 34 assets in operation, with 355 skilled nursing beds in development.

“We prefer to build new,” Taylor said. “Whether you’re in an acute-care setting, rehab or hospital, [consumers] want nice finishes, TVs, wireless Internet. In skilled nursing facilities physician exam rooms are built into the design.”

The average age of the skilled nursing facilities in Avamere Health Services LLP’s portfolio, for example, is 20 to 25 years old, said John W. Morgan, CEO of the Wilsonville, Ore.-based network of providers, adding that the company is adept at taking an old product and transitioning it into something desirable. The provider has two transitional rehab and memory care facilities in the pipeline.

The right product in the right market ignites demand, Morgan said, pointing to Avamere Health Services’ recent opening of a transitional care facility in Bend, Oregon, which reached 95% occupancy within 40 days of opening.

“That’s basically the same occupancy we’ve seen throughout the year with our acute care counterparts,” Morgan said. “These buildings do bring new patients and new clients to the market for that product.”

At the heart of modern post-acute care design is technology.

All of Avamere Health Services’ facilities are wireless and feature electronic data filing and sharing systems.

“[Our facilities] are technology based, surrounded by walls,” Morgan said, adding that the provider has invested $9 million in technology at its properties over the last two years. “We’re positioning for the future — technology is an absolute requirement for the industry.”

StoneGate partners with LG CNS for its electronic health record system (EHR], a handheld device that allows nurse aides to document residents’ activities of daily living and more. The handheld device is currently deployed at 90% of StoneGate’s communities, Taylor said.

Real estate investment trust (REIT) LTC Properties, an investor in assisted living, memory care, and skilled nursing communities evaluates providers by examining whether they are making the right investments.

“[Technology] is a critical investment for someone to make,” said Clint Malin, EVP/CIO with LTC Properties. “Providers are going to need to change and adapt to thrive.”

Written by Cassandra Dowell

Editors note: a prior version of the article stated that LTC Properties invested in acute care, which is incorrect. The article has been updated.

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