The Bottom Line: Good Samaritan Stays Nimble to Meet Covid-19 Financial Challenges

After affiliating with Sanford Health in 2019, the Evangelical Good Samaritan Society entered 2020 on stable footing and with access to ample financial resources as part of a larger health system.

This improved financial position and the flexibility it brings is being put to the test during the Sioux Falls, North Dakota-based nonprofit provider response to the global coronavirus outbreak, Vice President of Finance Eric Vanden Hull told Senior Housing News.

Agency staffing costs are one of the biggest concerns for Vanden Hull, and rates have soared — two times higher than usual in some cases, since the virus spread across the country. In response, Good Samaritan implemented a one-time “stability payment” bonus ranging between $50 and $300 to all non-exempt, hourly employees. Additionally, Good Samaritan is paying their health insurance premiums for the next several months.

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Good Samaritan was in the process of overhauling its HR teams and recruitment efforts when the virus spread, forcing it to extend agency contract in order to retain staffing levels. Vanden Hull sees opportunities to scale back the reliance on agency help during the crisis in a fast-growing labor pool, and has seen new hires increase in some communities.

“Anytime in health care, as crises occur within certain facilities, you’ve got to be nimble with how you’re compensating and how you’re accounting for work, to ensure that you’re keeping an adequate workforce where it’s needed,” he said.

The pandemic is the latest challenge in a busy 18 months for Vanden Hull since he joined Good Samaritan after it closed on an affiliation with Sanford Health in early 2019. The newly merged company identified a three-part strategy with a goal of putting Good Samaritan on stronger financial footing. The first leg involved finding operational and supply chain efficiencies which netted the provider a $4 million savings last year.

Good Samaritan ranked as the second-largest nonprofit provider in the country last year, with 153 communities across 24 states. The Sanford Health affiliation, with more than 44 hospitals and 28,000 employees, gave the provider a shot in the arm in terms of cash on hand and revenue cycle management.

This interview has been edited for length and clarity.

Senior living has gotten more operationally and financially complex over the last few years, and coronavirus is compounding matters. How has that placed new demands on you?

We’ve had a lot of movement towards tracking costs and lost revenues. How do we account for this [is important] because most of the state grants, FEMA grants, and federal stimulus have stipulations tied to it. [Agencies] want to make sure that the dollars are being spent on legitimate Covid-related activities, and we want to make sure that we’re tracking them accordingly. We’ve never had anything quite like this where we have expenses in so many different areas and revenue loss in different areas.

We’re in 24 different states depending on what service lines you’re looking at, and we’re a billion dollar company. There are a lot of people we have to work with. Communication has been really key: We started out with daily meetings with all of our regional leadership. We’ve gone now to having Monday, Wednesday, and Friday meetings. We’ve got a daily meeting with our Sanford Health corporate office. We do a weekly town hall with pretty much all of our local leaders and so there’s hundreds of people on the [calls] every week, and we do a high level presentation and allow for q&a to all of our locations all around the country. I’d say [communication] is the biggest thing that’s changed.

What were the pre-Covid pressures you were addressing?

I look back to the last year and a half and the biggest issues we were dealing with were a couple of pretty large changes in how CMS reimburses us. In skilled nursing, PDPM was a pretty large scale payer change [last October]. And then PDGM for home health [took effect in] January.

We had just gotten those programs implemented and [started a] good retrospective review of how it was working, just in time for Covid to come along.

When you started with Good Samaritan, where was the company at and what were your main priorities?

It was last January when Good Samaritan and Sanford health combined together as one organization. My major priority was integrating the two companies. I had been with Sanford for about six years prior to the merger. There’s a lot to that from both a company perspective and a financial perspective.

What are some of the advantages with having an integrated health system in place?

We [secured Good Samaritan communities] in Kissimmee and Deland, Florida [during] Hurricane Dorian last year and we saw a lot of advantages of the [affiliation] even then, having additional emergency response teams, and different resources from a supply chain perspective.

With [Covid], we’ve seen even more advantages, whether it be a bigger supply chain department that can better contract to get PPE, and more clinical expertise. Sanford has thousands of physicians and the clinical expertise at our disposal is something we never would have had without the affiliation.

We’ve got centralized groups that can look at [costs]. We’ve got a centralized enterprise grant team that’s pretty robust. Tracking down what 24 states are doing with grants can be really tedious. [It’s an advantage having a] robust grants team to help us out, making sure we’re applying for the opportunities that are out there.

The revenue cycle is another example. We’ve combined two teams from the front end all the way back to the billing collection, and we’ve seen so many improvements over the last year and a half, it’s really set us up so we’re in a better spot to absorb some of these [pressures].

Is there a number or percentage that you can share with regards to the assistance that Good Samaritan is receiving from federal and state authorities?

We’re still processing how much is being received and what it means to the organization. We’re trying to be proactive with grants. We feel like we’ve got good criteria and are making sure that we’re setting ourselves up to be successful in tracking these costs.

How are you thinking about costs/expenses for 2020?

The biggest area that has changed a lot since Covid-19 is our agency costs. As you’re probably aware, most companies have a fair amount of agency staffing in long-term care; we’re no different. We had a goal of building our retention of employees, centralizing our HR team and doing a better job of recruiting and keeping people. [This involved] combining with Sanford HR more to provide a more data-driven focused recruiting team and better aid in employee retention. [We are also] building a more nursing focused culture with a dedicated nursing structure headed up by a new vice president of nursing — [this is a] new position to Good Samaritan after the affiliation. Sanford has always had a strong nursing structure and dedicated leadership, and saw the value in investment to build up this structure.

In the short term, it’s gotten a little bit more difficult, [between] peoples’ childcare needs and other needs that they have around the country. It’s been harder to keep our facilities staffed. [Coronavirus] forced us to look at increasing some agency contracts right away, to combat some of the staffing issues.

[More] recently, with some of the economic [fallout], there are a lot of people looking for work and we’ve been able to increase our hires in the last couple weeks. We’re hoping that we can get back to a point where we can actually benefit from some of the things going on right now and keep hiring.

Are there other balance sheet items that concern you, or areas where you expect to make significant investments, or achieve any cost reductions?

The biggest ones are PPE and supplies — the quantity that we have compared to our historical run rate, as well as the [immediate] costs.

We’re starting to see some availability of certain [PPE] items with manufacturing plants and other things that have switched over to producing, if it’s gowns or different equipment. We found alternative sources [for PPE]. The big thing with our supply chain integration with Sanford is we’ve been able to find sources of getting materials we never have in the past, but there has been increased cost and increased quantity, obviously, for those items. That and staffing are our two biggest expense items that we do anticipate over the next couple months at least to be higher throughout this year.

We’ve made some investments in technology. We bought quite a few iPads for all of our residents across the country so that they can stay connected with their families. We believe that it’s hard to have a good [engagement] experience in this environment, so we’re trying to use technology — telehealth or otherwise — to do fun things within the sites to get the best experience we can because in the end, providing high quality resident care and protecting our residents [is] best thing long-term for the company.

How are wage pressures during Covid-19?

We did a program — a “stability payment,” we call it — where we we paid out a one-time bonus to all non-exempt employees, as they are the people that are mostly being impacted by this, whether it be taking care of a patient on the front line or census driven areas. We’re paying their health insurance premiums if they’re on our group health plan for the next several months.

Anytime in health care, as crises occur within certain facilities, you’ve got to be nimble with how you’re compensating and how you’re accounting for work, to ensure that you’re keeping an adequate workforce where it’s needed.

How’s the availability and cost of capital at the moment, do you expect any tightening of the debt or equity markets in the near term?

We have a separate treasury department within Sanford. I’ve worked with them on [issues] but I’m not going to pretend to be a debt or equity expert by any means. From an overall capital purchasing standpoint, we’ve shifted some of our focus. We’re not spending as much on [capital expenditures] right now, because we don’t want people in our facilities. We’ve put those on pause right now, out of an abundance of caution. That’s temporary in nature, but we’ll see how this all plays out.

We are hearing that investors are gradually returning to the space, with a lot of private equity chasing deals. How is Good Samaritan thinking about growth in the next 3-5 years, and how is Covid affecting those plans?

We’re always looking at how do we grow and mission and provide a better experience to our residents through growth. In the last couple months at least, it’s been more about making sure we’re preparing for Covid. Internally, [we’ve placed] more emphasis on that than anything else. And we’ve spent a lot of time as an executive team and as an administrative body, making sure that we’re doing the best things in this pandemic.

With the Sanford Health affiliation complete, how are you positioned in the Medicare Advantage space?

About three years ago, Good Samaritan started the Great Plains Medicare Advantage and they operate in Nebraska, South Dakota and North Dakota. We started looking at capitated base payment and what that looks like.

Sanford has its own health plan, where we’ve brought leadership together in those areas to enhance and continue to build [MA] and look at what the future of that [holds]. It’s exciting from that standpoint.

Mission vs. margin is a theme in senior living and maybe a challenge. Do you ever feel like you’re fighting to protect margin while others in the organization are freer to focus on mission? How do you define a healthy margin in this business and ensure that you’re striking the right mission/margin balance?

When we combined our organizations, we established some new mission statements. We’ve got a great mission and it’s a large part of what we do every day. We’ve been able to keep that emphasis on mission.

The margin side of it is also very important to the organization. Most of the leaders around here recognize that we need to push for both. You can’t have one without the other. We’ve been adamant about kind of pushing both sides of it and making sure we’re not lessening the mission, but making sure we’ve got our eye on the margin.

We want to be able to give back to our employees consistently, through raises and bonuses. We want to be able to give our communities the facilities that they’re proud of. That’s the real measure of if margins are adequate or not, if you’re satisfying your employees and communities. We do quite a bit of planning around that on an annual basis.

Did you ever envision yourself in the senior living industry back at the start of your career?

I started out in public accounting for six and a half years. If you would have told me 12 years ago that I’d be working in long term care, it wouldn’t have been one of the industries I thought I would be in. It’s been a natural evolution.

I moved to Sioux Falls and we have some really good health [systems]. Sanford Health is obviously a well known and respected company. My sister-in-law actually works at Stanford. We talked about me coming over and I decided to look at health care, and there’s never been a boring day. When I came from public accounting, I questioned whether it was going to be fast paced enough for me, and I’ve been just surprised every year at how many things evolve and how fast the industry moves. It’s been a great industry.

I’m glad I ended up where I ended up. It’s been really good for me personally and professionally.

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