Plum Healthcare Eyes Higher-Acuity Residents with $22.5M Skilled Nursing Development

Building a new skilled nursing facility from the ground up poses some challenges in an industry with ultra-thin margins. But for Plum Healthcare Group in California, it’s an opportunity to address the needs of its current patients, in a way that an older building doesn’t allow.

That’s especially true given that the average age of facilities in California, where Plum is building a new SNF in the Bay Area city of Walnut Creek. The new facility will be focused on short-term, high-acuity rehabilitation. And though the building is expensive — Plum received $22.5 million in development financing for the project from BMO Harris Healthcare Real Estate Finance, facilitated by Lancaster Pollard — it allows the operator to design with the needs of those patients in mind.

The average Golden State SNF is 46 years old, said Naveed Hakim, the CFO of San Marcos, Calif.-based Plum. And patient needs have shifted drastically since the Nixon administration.

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“What we’re seeing now, with the changes in Medicare, CMS, I would say what is required today is different than when these facilities were first built,” Hakim told Skilled Nursing News.

Built for changing patients

The Centers for Medicare & Medicaid Services (CMS) last year overhauled Medicare reimbursement in the form of the Patient-Driven Payment Model (PDPM), which will pay facilities for the condition and medical complexity of their patients.

But the new property in Walnut Creek came about in response to the changing patient population, rather than from a reimbursement perspective, Hakim noted. The so-called “easy patients” — those coming to a SNF for rehab for joint and knee replacements, or similar conditions — were going directly home from the hospital, rather to the SNF.

“What we were seeing was patients coming in who were not there for long-term care,” Hakim explained. “They were there for short-term rehab. They were more medically complex, they had multiple co-morbidities. The need to have a facility that was aligned to take appropriate care of those patients became an important factor for us.”

Plum designed the new facility to handle isolation cases in which contagion could be a factor, with a lineup of 59 private rooms.

This will be a bonus for doctors because it will let the Walnut Creek SNF take any and all of a physician’s patients, Hakim said. In addition, the facility will have enhanced connectivity to let doctors more easily connect to patient medical records, and a space for physicians to work with the SNF’s care coordinators.

The building should be finished by the end of this year or the start of 2020. The site was chosen because the land, which Plum already owned, filled out a gap in the company’s coverage in the Bay Area, Hakim said.

Changing care landscape

The challenges of building a new facility includes the expenses, and the fact that the facility is being designed as something similar to “a mini hospital unit” — which requires more time and costs for licensing and approvals, according to Hakim.

But the facility isn’t going to compete with hospitals as much as it fulfills a need for them.

“What I see when I talk with hospital executives is they focus on providing the right type of care for the patient as quickly as possible without the risk of rehospitalization,” Hakim told SNN. “They want top-level care, they want it as quickly as they can, and they want minimal or no risk of rehospitalization. That means two things: Care needs to be much more integrated, and it means the facility needs to be better aligned at providing a greater complexity of care for the patient.”

That’s another advantage of building new as opposed to acquiring, he added. New facilities can be constructed close to hospital systems that have expressed a need for more integrated care.

Another advantage Plum has is the fact that transitional care has not really taken hold in California, according to Grant Goodman, who worked on Plum’s development financing for the Columbus, Ohio-based Lancaster Pollard.

For his part, Hakim thinks the high-acuity, short-term model could spread across the U.S., especially given the cost of the hospital setting — joining the ranks of others who have made similar predictions given changing reimbursement incentives and the growing capabilities of home health providers. But that doesn’t mean that long-term care is going to disappear.

“There’ll always be a need for long-term care,” he said. “Our goal for these facilities isn’t to replace long-term care, but to have much more focused care for an emerging part of the population.”

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