Like many nonprofit providers, United Church Homes offset operational and occupancy pressures stemming from Covid-19 by diversifying its service offerings.
The Marion, Ohio-based provider is in the midst of a concerted effort to expand its independent living and assisted living offerings, including a sustained push into middle-market senior housing through acquisitions, Senior Vice President of Finance and Strategy John Renner told Senior Housing News.
Last November, UCH acquired two age-restricted senior apartment communities in the Ohio markets of Brunswick and Niles, and is bringing a la carte services to residents. As residents identify needs, issues, and health care concerns, service coordinators start to address and connect residents to the services as they need them.
This is the latest step in a strategic plan Renner and United Church Homes leadership has developed almost from the moment he joined the company in 2014.
In addition to affordable housing, UCH has 75 different communities in 14 states and two Native American nations, and ranked as the 51st-largest nonprofit, multisite senior living organization, according to the most recent LeadingAge Ziegler 200.
This interview has been edited for clarity.
Senior living has become more operationally and financially complex over the last few years. How has that placed new demands on you?
One of the dynamics that is of absolute importance is recognizing the change in demand and the types of services to be delivered to seniors. A few years ago, the focus was residents coming out of the hospital or with [serious] health conditions being placed into long-term care facilities and nursing homes. That process has changed.
Today, we are seeing just a fraction of the number of referrals from hospitals for rehab services and post-acute care planning, because home health services have improved. It’s more cost effective to [provide] home care, rehab and health care services to the residents [in their homes]. We’ve had to look at what service lines we provide for that. We continue to develop our programs here — what we call personal care — and our tagline is, “Engage.” It’s a program where we meet with [seniors] in their homes or in any location where they may be, versus the expectation of having the resident come to our facilities. We still expand our [services].
At this time, United Church homes is basically sustaining its long-term care and nursing home programs. But our future is in what we call older adult residential communities and care planning, outside the walls of a community structure. We’re [implementing this in] two fronts: We’re expanding our independent living or residential programs for seniors. We’re also expanding programs to service their personal as well as health care needs, while they’re still in home, aging in place.
When you started at United Church Homes, where was the company at and what were your main priorities?
When I joined seven years ago, over 70% of our business was nursing home and long-term care services, and the focus at that point was cost control. The lack of increase in reimbursement to cover rising costs of health care service has been recognized for a long time. Back in 2014, that juncture was getting more and more critical. States were decreasing their reimbursement programs under the Medicaid program. Fewer residents could afford private institutional care. Our focus is a strategic change to how do we [make] this more cost effective and change that tenor, coming into long-term care. How do we better care for seniors?
What were some challenges earlier in your career at United Church Homes, and how did you work through them?
I came from the acute care industry: I was CFO of a large health care system in and around Ohio. Coming over to the senior living industry, [I] recognized the population growth in the [baby boomer] age group. We had to come up with a solution for caring for that increased population of seniors. That goes back to our discussions of cost controls.
We talk about our federal budget potentially being upside-down because of more seniors than wage earners to keep all the programs in check. Back in 2014 and 2015, we made the formal decision in our strategic planning to start expanding into senior residential programs. That’s when we formally focused on switching from being health care intensive to senior residential and independent living programs. Making those changes, recognizing the differences in revenue streams [and] cost structures, took a lot of team effort.
How is Covid-19 compounding these challenges, and what new pressures have the pandemic brought?
Almost immediately, we saw a decline in our census volumes and revenue streams. At this point, we’re down a little over 20% in total service volume. It could have been worse because our health care [revenue] is down about 25%-30%. But through the course of the last couple years, we’ve increased our dependence and service delivery to senior residential programs. Those programs have remained solid; we’ve not seen any decline in service volumes.
Those areas, in fact, continue to increase in volume with new capacity. But the [total] decrease in revenue stream [was] about $7 million in 2020, as well as the increase in operating costs for staff. We’re grateful for the stimulus funds that we received from the federal government today. We’re looking into 2021 with continued decreased census and looking at cost cutting initiatives to remain fiscally healthy.
How much in CARES Act relief has United Church Homes received to date?
We received around $7.5 million.
One trend that has gathered momentum last year among nonprofit providers has been diversifying service lines — bring care to seniors outside of a community. What other service lines has United Church Homes launched, or is the organization exploring?
The program I previously mentioned, Engage, is a service coordination [platform]. It identifies the needs of residents and facilitates getting those services provided to them. Engage covers everything from getting transportation to physician visits, grocery store needs, and retail, to assistance with daily living activities.
We’ve created those programs that are provided within our residential communities and long-term care facilities, and even into our affordable communities. We’ve got a pilot project starting up in the Dayton market — we will be working out of a fire station, believe it or not, to [bring] our care coordination program and facilitate those needs on a person-by-person basis.
We also joint ventured with Ohio Hospice, one of the larger hospice programs in the state. There will always be [a need for] end-of-life care planning. And we’re really pleased and proud of the quality program we have in place.
How has serving affordable seniors become more challenging in the past year?
One of the biggest issues we face is identifying those persons in our various communities that are in need of residential care. Quite literally, they could be a couple hundred dollars off from being eligible. What do you do? We’re required by federal regulations that they have to be income qualified. That, to me, is the most exasperating issue that we face.
The reality from a business perspective is that it is a fairly regulated business through HUD programs. We’d like to provide additional services, but our hands are tied on being able to do creative programs with the affordable community. While we believe we can make them work within the budgets of the communities, it’s not approved and so we can’t do it.
What is your goal for reining in United Church Homes’ expenses in 2021?
The optimist in me says we’re going to see some alleviation. But the crux of the matter is that, with these ongoing [challenges], we’re seeing fewer referrals coming into our long-term care facilities.
We have to continue to change how we deliver [services]. It’s a costly process — there are mandatory staffing levels, there is that health care need for many residents. The overall cost structure of operating long-term care is there and continues to increase our challenges and where we’ve been forced, because of the declining census, into looking at how can we change and put more residents in the proper setting where we meet their health care needs, their social needs, their emotional needs, but doing it in a more cost effective manner.
In 2021, we’re on our way to changing our model.
How is United Church Homes looking at mergers and acquisitions in the new year?
In the last three to four months, we have gone under contract [to acquire] two [single-site] communities. We’re in the planning stage of bringing them in under the United Church Homes platform.
We’re going to see a consolidation in the industry for sure. Most importantly, those of us that plan to continue to be successful will be because we’re changing the delivery models to meet the needs of seniors.
On the development side, it’s very capital intensive. We have a brand new, not yet occupied project in the Columbus market, that we’ll be starting, hopefully, mid-March. We’ve got two other communities [coming online] in the next two to three years. But quite frankly, our biggest limitation is access to capital to be able to get them started.
Like anything else, there is a ramp up phase, typically about two to three years long. We have to be very cautious about overextending ourselves. But we continue to look and we’ve been finding equity partners to join with us. Each new opportunity brings a bit of equity to the table and that will help us continue to grow.
How is United Church Homes’ access to capital?
[Lenders] tend to look at the big picture, and they see this big decrease in revenue streams and profit margins. That scares them. I continue to communicate with the creditors and show them that we’ve got separate [business lines] of what we provide. I can say, “Yes, our long-term care service line has shown a significant loss of business, but look at our [overall] strategic growth. More importantly, that’s what seniors are looking for. Our affordable communities are in great shape. We’ve sustained that quite well.
Are you expanding your network of debt providers?
Definitely. The project opening in March has brand new debt [attached]. For other projects, we’re bringing in larger developers and contractors as partners, to assist in underwriting the debt service.
Medicare Advantage plans have made inroads during the pandemic. Is United Church Homes looking at MA plans?
Absolutely. My vice president of finance’s forte is in the reimbursement world. I have him constantly tracking new opportunities for us to expand the various Medicare alternative programs.
How do you define a healthy balance between mission and margin?
When we look at our success story, it is about our focus on mission. But, as they say, no margin, no mission, and our board is very direct as to their expectation of this leadership
We have to have healthy margins across the board where everything we [spent] in the past is turned back into future operational growth. One of the things I track, year in and year out, day in and day out is our expenditures. Where are our investments in new growth strategies? Looking toward the future, the list is quite long as to the new service delivery model that we [implement].
Did you envision yourself in the senior housing industry at the start of your career?
No. I spent over 40 years with various health care systems, including two of the largest in Ohio. I got to a point where I just said, “What is the future?” I was at a point where I could retire. I could make a lot of life choices.
One day, I got a call from a headhunter talking about this opportunity. I’m thinking, “I don’t want to run a bunch of nursing homes.” But I came to United Church Homes and interviewed with the team here. And I realized what I didn’t know about the senior care industry was a game changer for me.
During my interview process, they asked me what keeps me up at night. I said, what keeps me up at night is, in the acute care industry, we struggle with what we are going to do with our patients. We need to discharge them, to get them out of the hospital. We never had a place to put them.
I said, “I am going to change that process.” And with the team here, we rewrote all our books on accepting transfers and discharges from hospitals. Our stats tell the story of the growth in the number of admissions and census volumes that our communities — we addressed that need. Now the [opposite] is happening: they’re not coming from the hospitals. That’s what we’re working on: to be a downstream service provider.