Reliant CEO Talks Strategy, Behavioral Health Potential After $88M Sale

Reliant Care Management Group, based in Maryland Heights, Mo., had a busy summer.

The company, which has 20 skilled nursing facilities and five assisted living facilities in Missouri and Illinois, recently executed a deal to sell the real estate of eight SNFs to Griffin-American Healthcare REIT IV, Inc. for $88.2 million. Reliant is staying on as operator in the deal, which was announced in June.

At the time of the announcement, Griffin-American indicated in a Securities and Exchange Commission filing that the SNFs were expected to be 100% occupied at the time of the acquisition — a striking number given that the National Investment Center for Seniors Housing & Care (NIC) pegged SNF occupancy at 81.7% in the second quarter of this year.

But Reliant is bucking the national trend, with occupancy in the high 90% range. Skilled Nursing News caught up with Reliant Care Management CEO Rick Destefane for a discussion that covered the patients Reliant serves, the Griffin-American deal, and the need for better regulations at the intersection of long-term and behavioral care.

How many buildings does Reliant have, and what are the occupancy numbers?

We have 20 SNFs and five assisted living. These are round numbers, but we’re getting pretty large and we have large facilities overall; I think we have around 2,500 total beds, and we’re close to being 98% occupied.

The reason why is we have a religious tone within our company, and we believe that everyone deserves to be loved. We take most of the residents in the state of Missouri that no one wants, regardless of their diagnosis of being mentally ill or physically [ill].  We take anywhere from Axis I to Axis IV patients.

Can you explain those terms?

Basically, Axis I are people that suffer from mental illness. Axis II people suffer from behavioral issues such as addictions. Axis III is what you call the general geriatric in most nursing homes, or even people that are not geriatric that suffer from physical problems such as heart ailments and kidney failure and hypothalamus issues and hip fractures. And Axis IV are people that have serious side effects mentally from conditions that happened in life, such as divorce or moving or getting kicked out of school, and trying to deal with those types of anxieties and those issues.

What you find in most nursing home facilities is a concentration on the Axis III, which are the general physical issues. But we take care of all four. We take traumatic brain injury, that’s an Axis III. Most people don’t. We take care of people that suffer from mental illness. And that alone brings a lot of problems, because the regulations both from the state and the federal side are geared toward the general geriatric population. So we have to walk a fine line with the surveying process.

Now our mission has been: We take these residents. We find that about 35% of them actually go back into the community, go to a lower level of care. That’s our goal.

You mentioned a religious tone; do you have a specific affiliation?

We’re Christian-based. I mean we don’t put that out there, because some people don’t like that, you know? I don’t want to use the wrong terminology here, but we’re not far-right on the side, we’re not far-left either. We’re just religious-based. That’s kind of our foundation, and then the blessing is, we’re full. The average occupancy, I don’t know what it is in the country, but in the state of Missouri, it’s 71%.

[Now] when you take over a facility, you have to look at the actual process of growth. For example, I bought Portageville [Health Care Center] — and it’s a 60-bed facility, one of our smaller ones. We had to start out with 18 residents. Now we’ve got 55 out of 60. Ridgewood, when we bought it, it was an empty building; it’s now full, 165 residents for five years.

But it didn’t start out that way. I’m looking at buying a facility right now. It’s a 90-bed facility, it’s got 34 beds full. When we take that, it takes our average down, because we have 60 beds that are vacant, right? Well, in two years, that 60 beds vacant will be two or three.

Can you break down the facilities you own and the ones you operate? 

We own and operate everything. Twenty-three [facilities] I own personally. The other two, I’m going to be buying into shortly. But everything else is owned outright.

Then can you explain the connection between Reliant and Griffin-American Healthcare REIT IV in the recent deal?

It’s a very complicated structure we have. If you look at a structure any time in business, it’s always better to separate the building owner from the operator.

So we have that structure here. We took eight of the 20 skilled [facilities], and we put them in a separate ownership structure, sold them to the REIT, and the operating entity has a lease with each one of the building owners, with the owner of the building, which is now Griffin. Then you have a contract with the management company, to manage the operator. So you got three separate entities in one building. You have the building owner. You have the operator, which I own, and then you have a management company that contracts with the operator — that I own. That make sense?

It does. When it comes to Reliant’s plans, do you intend to expand in just Missouri?

I was with the lieutenant governor of South Carolina and he heard about us and wants us to go there. The problem is they don’t understand the intensity of the process. We can’t just go into another state. It would be a huge undertaking. Having these regulations that are not geared for this type of population makes it really hard, because we’re getting scrutinized so unfairly, if you will.

We’ll be adding more facilities in Missouri. We’re looking to add two more by the end of the year.

When it comes to the patients you’ve described, it sounds as if you’ve been focused on behavioral health — which is something I hear about SNFs looking to add — from the beginning.

You’re exactly right. It’s a really under-serviced population that the demographics are crystal clear that it’s on the increase. It was on the increase when I started researching this in 1995. That’s why I started it; I started it in 1997 and everyone fought me, I mean everybody.

And people can say they can take care of them — they can’t. You can’t go to school and get this knowledge; this has been trial and error for 20 years. Every time we figure out something, what we can do better, we document it and put it in our policy. This is an accumulation, over a 20-year period, of how to take care of this type of resident effectively, efficiently, with the goal of reducing the level of care they’re in to a lower level of care, if not being out on their own.

Does Missouri offer any Medicaid add-ons or extra reimbursement?

None. Missouri does not have a case-mix system, and we’re $19 [per day] underfunded, as of today. We have to get properly funded because these residents that we take care of — where are they going to go? The alternative is the street, and you don’t want them there. Some are pedophiles; they’ve had crimes … burglary, rape. The only other place is hospitals, [which] costs the state about $2,000 a day. Or prison or jail — check out what that costs the taxpayer.

The demand just keeps on increasing. Depression is going through the roof, anxiety is going through the roof; all types of depression, traumatic depression, schizophrenia is on the increase. I can go on and on and on. It’s not slowing down. So this need is going to continue. We are the only people that I know if in this country that can do what we’re doing. All we need is the regulation to allow us to take care of them.

Can you talk about the current state of regulations in long-term care and what’s needed for behavioral health?

You’ve got the federal regulations for long-term care and you’ve got the state regulations. That’s what we’re bounded by. There’s nothing out there for mental illness in the long-term care industry, nothing. We’re getting $155 a day to take care of a resident … We’re working with nothing. We’re the cheapest game in town.

They should put regulations. They should come together and solve this problem, but they don’t. But they’re getting there. It just takes time, and we’ve been talking for the past two years with the Centers for Medicare & Medicaid Services. You can’t blame the state regulators; the surveyors have to go by what their rules are, and their rules are what the federal regulators and state regulators say. But they’re working with us more.

What are your thoughts on the future for skilled nursing and behavioral health?

I think Medicare is dying. The last 30 years, Medicare was the way to go. [But] it’s a bankrupt institution. If you look at the numbers, there’s no way they’re going to be able to fund it in the future, none. Now you have to take care of these people, so the government’s really got to get their act together.

If they want to keep cutting rehab for example, rehab is a preventive measure. The problem is that things don’t go wrong, they start wrong. There are so many preventive things you can do to stop this problem; that’s what they should be focused on and they’re not. [Though] the government is starting to look at this now.

And for providers?

You have three levels [of behavior], you have mild, medium, and heavy. At a facility, we start off with mild behaviors, and then we go to medium and then eventually we go to heavy. That’s over a four-to-five-year period. Our organization is all high-energy. they’re all committed and we all work together as a team. You’ve got to find that type of common denominator in an employee, and not every employee is that way.  You might have a group that wants to try this but you’ve got to have a whole organization that wants to implement it, because you can’t do it by yourself.

This interview has been condensed and edited.

Written by Maggie Flynn