Carespring Plots Skilled Nursing Expansion — But Only If It’s a Drive Away

In a skilled nursing landscape short on new development and populated with many options for outsourcing components of care, Carespring has made a point of keeping its rehabilitation services in-house — and only expanding through new construction.

With 11 total SNFs in Ohio and Kentucky, Carespring is looking to maintain its local presence while growing strategically, even as a massive change to Medicare reimbursement in the form of the Patient-Driven Payment Model (PDPM) looms later this year.

The Loveland, Ohio-based operator got its start in 1985 with one facility, administered by the founder Barry Bortz, and has grown ever since; all of the buildings are designed and developed by Carespring, which sets it apart in an industry filled with older SNFs.

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In the past year, Carespring was part of a $182.5 million deal last year with Northwind Group, in which the real estate firm purchased seven SNFs and an assisted-living facility operated by Carespring; the two companies also formed a joint venture aimed at further development. In addition, this past spring, Carespring opened a $25 million SNF in Boone County, Kentucky.

Skilled Nursing News sat down with Carespring CEO Chris Chirumbolo at the LTC 100 conference in Naples, Fla. earlier this month to talk about the company’s approach to development — and specifically how it can grow while still keeping its management team within a few hours’ drive of all of its properties.

Why do you only build your own facilities? It’s an interesting approach, given the lack of new development generally in the SNF world.

It’s exactly that — it’s to be different. It’s also to have the ability to cater to what our market needs and what our patients want. But also it goes back to [Bortz]. He was very much a hands-on, designer, developer, so he as an administrator wanted to make sure that the patient had enough space, that it was home-like and had all those amenities. So it kind of bucked the trend of a traditional nursing home. He wanted it to be transitional care before it was transitional care. We developed our first rehab wing in 2001, way ahead of a lot of other providers in the markets.

Can you talk about how you’ve navigated the challenges of being in the skilled nursing business in Kentucky?

We’re in northern Kentucky, and I think that is still challenging, but it’s not as challenging as some of the other rural parts of the state. For whatever reason, the providers up there generally are good providers. Not to say that the ones in the other parts of the state aren’t, but I think unfortunately in some of the other parts of the state, in some of the more distressed areas of the state, there’s a lot of attorneys who spend a lot of advertising dollars getting on the air — whereas in Cincinnati, the advertising dollar’s probably more expensive. So they’re not able to penetrate as much. But the provider outcomes, I think, are better in northern Kentucky, as compared to what is seen in the state [generally].

But just as a provider, it is harder. We pay five times more for liability insurance in Kentucky than we do in Ohio: We pay about $1,000 per bed in Kentucky compared to about $200 to $300 a bed in Ohio. So what’s that mean? A thousand dollars sounds like a lot per bed, but the crazy thing is there are some providers in the state that pay $5,000 per bed. So that liability chunk can be half a million dollars for some of these operators, which is why a lot of them struggle.

In American Health Care Association (AHCA) reports on liability, Kentucky’s near the top.

Yes, and we’re big proponents with the legislature trying to get some sort of tort reform. They’ve had medical review panels, but that kind of went to the wayside; the state found it unconstitutional. Then from there, they were trying to push different types of reform. There are some things that they’ve put in place, but it’s kind of watered down.

I think at some point, it’s going to take people like AHCA, national vendors, providers, the Kentucky Chamber of Commerce. Not just health care — it’s any type of tort. There’s a lot of lawsuits, frivolous lawsuits in the state that they’re trying to get taken away.

[But] we feel like we’ve got great community relationships in northern Kentucky, and that’s why we are in northern Kentucky — because we’re part of the community.

One thing I wanted to ask was about challenges that aren’t related to the major change in reimbursement coming with PDPM. What are you working on and prioritizing that isn’t related to PDPM?

Reinforcing our culture and staff retention. That’s probably one of the top ones. If we can continually improve our team member experience and have less team member turnover, that helps manage the issue with unemployment being at an all-time, or 50-year low going on right now.

So we’re really working on onboarding our team members right, making sure they have an outlet if they’re having issues or need further training, making sure we have robust programs to keep our team members within the organization. It’s trying to get the next generation of caregivers, of millennials and other people coming into our buildings. We want people to make it not just a job, but a career, and trying to give them a pathway.

Because we’re geographically concentrated between northern Kentucky, Cincinnati, and Dayton, we have a lot of growth opportunity for people who can move from one building to another without having to travel long distances.

This is going to sound cliche, but making sure we’re providing great quality care that correlates to good Five Star ratings. The goalposts keep changing, so staying on top of all those changes before they happen, making sure we’re optimizing what we can. But I think also making sure that at the end of the day, we’re doing the right thing.

But you can’t get done all the great things you want to get done unless you have the right people doing the job.

And the challenge is that everyone is in the same boat.

Correct. I grew up in our company as a physical therapist, managed a therapy entity for a while, but even with that, people would say, “Well, therapists don’t want to go work in a SNF.” My response to that was: “That’s not true. We have to give them an experience that they feel like it’s a job that challenges them, makes them use their brains, but also gives them a wide variety of patients.”

We developed relationships with schools, and now we have 40 to 50 full-time clinical internship therapists come through our buildings a year. Now we’re trying to get the next generation of nurses doing their clinical internships with us. We now have about 20 to 30 full-time clinical internships with nursing programs from our area coming in to our buildings. The goal is to get some of those people to stay with us as team members when they graduate.

You mentioned rehab. Were you doing rehab with Carespring?

Yeah, we’re in-house. We don’t contract it out, so we’ve done all our programming internally pretty much since the inception of the company — that was one of our founder’s guiding lights. But I do believe there’s a benefit for certain contract companies for certain facilities, because some facilities don’t have the bandwidth to understand all the changes coming down.

[Since] we treat 40 to 60 skilled patients per building per day, we’re pretty cutting-edge with dealing with the high-skill volume, and from a therapy standpoint — productivity and efficiency — we’ve managed that very well throughout the years. I’m sure we can always do better, but with PDPM coming down specifically, it’s just learning the rules and understanding rules and teaching everyone.

How does that portion of short-term skilled patients compare with the portion of long-term ones? For many operators, the trend has been to increase short-term.

Our first rehab wing in 2001 and 2002, in one of the buildings — it was just 16 beds at the time. And it worked really well, so then we transitioned all of our buildings to 16-, 20-bed units and then from there, we expanded them based upon the needs of each individual building.

So now we’re up to about 40 to 60 skilled patients per building per day, so what does that mean? It’s about 30% to 35% of our mix is skilled, and then 10% private pay, which is long-term care. And then the remaining 50%, 55% is Medicaid so I would say: 30%, 35% skilled, 65% long-term care/custodial.

That’s interesting that you have 10% private pay; for most SNFs, private pay’s pretty negligible.

Yeah, we have one building that’s closer to 20%. We have other buildings on average that’s closer to 3% or 4% so as a whole, about 10%. And we have a freestanding assisted living building, which is 100% [private pay].

Can you go into the challenges of Medicaid, especially given that it’s the primary payer and it varies from state to state?

Medicaid as a whole, as we understand it, doesn’t pay all of our costs. Since we’ve built a nicer facility, our buildings cost more — we’re $50 below our costs per patient day for a Medicaid resident. But again, part of our mission is we serve the community and that’s who we serve, and that’s why 50%, sometimes 60% of our population is Medicaid.

What we do is make sure in both our case-mix based states, in Kentucky and Ohio, we make sure we’re capturing the care as much as possible, so we’re getting reimbursed to minimize those losses as much as possible. Ohio has a quality payment component of their rate, so making sure we’re capturing the quality components.

But also advocating with the state legislature about changes in payment reform. When Kentucky’s rate was flat for several years, [we really pushed] on them and educated them. This year I think we’re getting a market basket increase similar to Medicare, 2.4%, 2.5%, somewhere around that. So we’re going to get that in Kentucky, I believe, this year. Then in Ohio, they’re still finalizing the state budget, but there’s going to be some sort of increase.

You’ve mentioned the need to capture the care as much as possible; that sounds like something that would translate to getting ready for PDPM.

It’s exactly the same thing. People are like, “Oh, well, skilled is primarily driven by therapy and your [activities of daily living] scoring.” Well, our case mix is always driven by patient characteristics, by what’s wrong with them, what are their needs and capturing the care. It’s just now applying, slightly differently, to the skilled patient population.

Therapy’s not the main driver. It’s a portion of the care, and we have to figure out now, get really good at coding, make sure we’re capturing everything wrong with them — because again, that will dictate how you get reimbursed. We believe, because we’ve done a lot of training, we know we will probably do well. It’s a matter of getting the benchmark of how well we will do, and then making some of those adjustments for the first three to six months after going live in October.

Can you talk about some of the things Carespring looks at when it’s considering expansion?

We look at accessibility of the site, so is it easy for staff, family, and residents to get there? So is it close to a major highway? All of our buildings are within a mile of a major highway. Is it close to decent-sized hospital entities? And then just looking at the geography in general — how many from a demographic fit that age group that we generally see at our other buildings? And looking at what our competition is in the area.

Are you going to add buildings in Kentucky or focus on Ohio?

I think our next step is taking over projects that might be a renovation. We still might do construction, but it’s a two-year turnaround from start to finish probably. But with PDPM coming around, there’s going to be opportunities, where if it’s something within a two-hour footprint of our current buildings, where we’re still regional, we’ll look at them.

I think as a company, we do feel the need to grow, but we have to grow smart. You see providers who buy a couple buildings here, a couple buildings there — five states away. We’ll never do that. It just doesn’t make sense because we want to be able to get to the building right now, with just an easy drive of maybe one to two hours. It’s one hour from our corporate office to every one of our buildings. So if we want to go two hours, that’s fine; it’s just got to be the right building and building type. It can’t be a complete turnaround.

At the same time, we’ve been working on trying to do some partnerships with hospitals who own some SNFs to see if might there be an opportunity. There’s a couple in markets who have freestanding SNFs that they operate where we’ve talked to them about maybe letting us do a management agreement, or letting us help operate their SNFs.

What’s been the reaction?

With one, we’re actually doing some [kind of] management agreement with one of them. The other ones are trying to decide; it’s early in the managing the downstream for them.

I think those opportunities will come, because ultimately someone’s going to make the decision that this doesn’t make financial sense to do this like this any more. Last year, we talked with a hospital provider, and we’ve been doing some management agreement over their billing, accounts receivable, part of their therapy operations, and optimizing their PointClickCare software, so their nurses can work smarter not harder.

For us, we view it as an opportunity of branching out and working at a facility that wasn’t built by us, wasn’t managed by us, that’s got a lot of challenges. But they do provide good care; financially, they’re having some challenges, and [so we’re] trying to help them get their heads out of the water or above water.

We said, “We know we can help you with at least this much money on your bottom line. Let us just come in and help you. If anything, it just makes your building better.”

So we signed a two-year contract to help with that. Now there might be preliminary discussions about us actually doing a full management agreement, where we take over their SNF, and they’ll just be the landlord. So that would help expand our Carepsring footprint.

This interview has been condensed and edited.

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