Skilled Nursing Turnaround Artists Focus on Staff First, Finances Second

A distressed skilled nursing facility could have problems on multiple fronts, but when trying to fix it, operators and owners need to concentrate on the people working there.

Any SNF business can be broken down into four major components: physical, operational, clinical, and financial. That’s according to Isaac Dole, founder and managing partner at Chicago-based Birchwood Healthcare Partners, which has 23 nursing homes and senior housing communities.

“Typically the communities we focus on have one or more of those that’s broken,” he told Skilled Nursing News.

Time with people

Mission Health Communities has some experience with turning around distressed facilities. The Tampa, Fla.-based firm manages and operates 34 independent living, assisted living and skilled nursing facilities as of April 1, along with three facilities it manages for another organization. Of those, there were two different turnaround situations, Mission President and CEO Stuart Lindeman told SNN.

One saw Mission take over a pair of distressed facilities in Wisconsin at the request of the real estate investment trust (REIT) Omega Healthcare Investors (NYSE: OHI) in July 2014. The other was March 2015, when Mission took over 15 facilities in Kansas previously operated by Deseret Health Group. Omega was also the landlord in that situation.

In addition, Mission has found itself in the middle of another well-publicized turnaround situation: The company took over 15 facilities that were placed in receivership in Kansas with the collapse of Skyline Healthcare earlier this year. It’s not clear, though, whether it will permanently take over the Skyline facilities in Kansas, Lindeman stressed.

In each case, the current employees were crucial, according to Lindeman. And in any turnaround situation, communicating with them is essential, because no two distressed SNFs will be the same. While physical and medical safety for residents is obviously the very first issue to address, staff and staff training remain a top challenge.

“You have to have a system and be able to step in and know what you’re doing,” he said. “And go right to the staff. Make sure you talk to the staff. They are your best resource and the best people to be working with.”

Melissa Powell, the chief operating officer at Allure Group, agrees. Allure manages six SNFs in New York City and saw its Harlem Center for Nursing and Rehabilitation go from 83% occupancy in 2013 to 97% in 2017. Communicating with the staff of a distressed facility is one of the first steps Allure takes, Powell told SNN.

“I think when you’re going into a building to turn it around, you need to allow the staff to be open and honest and allow them to feel comfortable,” she said. “Tell them: The fact that you’re distressed is not your fault, per se… tell me what you’re doing well, be honest with what you aren’t doing well.”

Winning over the staff is crucial because the clinical and operational aspects of the SNF are the most challenging and time-consuming to turn around, Dole said.

“When you have really poor clinical outcomes, you need a complete overhaul of that department,” he explained. “Not that you necessarily go in there and fire everybody, but you need to go in there and hold people accountable and set new expectations for the people in that department.”

No silver bullets

Mission’s turnaround projects in Wisconsin and Kansas had to address the fact that the facilities didn’t pay their bills — and in the case of the Deseret sites in Kansas, cut frontline staff’s wages while bosses got raises.

An overhaul of the clinical or operational side is complicated by the fact that many distressed SNFs don’t have good processes and systems in place, Lindeman said. These can take a while to fix, and “you can’t teach it over the phone,” he said. Reputation is also a concern; Mission has had to repair relationships with vendors and the community in the case of the Skyline receivership and its other turnarounds.

“In my estimation, it takes a year and a half to completely turn around a community… and get the systems in place,” Lindeman said.

Dole also gave this estimate, at least for turnarounds that involve cultural, clinical, or reputational components. Financial outcomes are more objective, by contrast, and fixing physical issues is fairly straightforward. Cultural and repetitional factors, on the other hand, have a significant effect on clinical and financial outcomes.

“Something I’ve really come to appreciate is a strong culture in a facility,” Dole said. “It’s really hard to turn around clinical performance, it’s really hard to turn around reputational performance, and I think that really stems from the cultural condition of the community.”

Written by Maggie Flynn