Generations Healthcare CEO: Why We Built New SNFs in California, Nevada

Generations Healthcare recently broke ground on a new skilled nursing facility in Temecula, Calif., one that will include 116 skilled nursing and rehab beds and 64 memory care and dementia-focused beds.

That bed ratio in some ways reflects where Generations president and CEO Thomas Olds, Jr. sees the skilled nursing world going: toward sicker patients who stay in the facility for far shorter periods than the patients of a decade or two ago.

The choice to build is a somewhat unusual one, due to a lack of development in the skilled space as a whole. But it’s not the first time Generations has built from the ground up; the Generations facility in Henderson, Nev., near Las Vegas, was also new construction. So when the company saw an opportunity to establish itself in a burgeoning community near San Diego, it took it.

SNN Summit Ad
Advertisement

The groundbreaking ceremony was held February 19, and the Temecula SNF will mark Generations’ 28th facility — a long way from the single building the company had at its inception in 1998.

Skilled Nursing News caught up with Olds to talk about the decision to build a new SNF in a time when relatively few operators are doing so, and how the new facility fits into Generations’ broader footprint — and its vision of the future.

Can you talk about the facilities Generations has and where they’re located? Are all of them SNFs?

We have 25 SNFs and two assisted living facilities, and all of those facilities except for one are in California. We also have one in Las Vegas, and that one was also a ground-up build that we started a year and a half ago.

How does the Temecula facility fit into Generations’ existing geographic footprint?

We have several main clusters. So up in the Bay Area — and it used to be the Bay Area, now it extends all the way to Sacramento — we have two facilities in Sacramento, and then we have one in Modesto, so that’s kind of what we have in the Central Valley.

Then from Pleasanton, around through San Jose and up through San Francisco, then over into Walnut Creek — we kind of circle the Bay Area in that regard. We have 12 facilities that kind of circle around quite a bit of that area. Then we have four facilities that are kind of Orange County-Los Angeles, that area. Then six in San Diego.

Did you have a particular plan for the geographic spread, or was it more opportunistic?

Probably you’d have to say it’s opportunistic initially, but once you get a foothold, then you try to build up your strength and consolidate around areas. So we’re pretty concentrated, relatively speaking, down in San Diego, for example. All of our facilities are probably — worst case — 20 minutes from the closest to the furthest, so that’s a very nice cluster of facilities that we have in San Diego.

Up in the Bay Area …. over on the other side of the hill from Oakland, which is Concord, Walnut Creek, Pleasanton, we have three facilities in that corridor that are all probably within a half hour, forty minutes of one another.

Then on the South Bay we have three facilities that are all relatively close to one another. So they’re probably all 15 to 20 minutes apart. And then in San Francisco, we have four buildings that go down the peninsula that are all relatively close to one another.

We find that is very helpful, and allows us to concentrate our resources into concentrated areas and share resources. When you’re building an infrastructure and you have your senior management and your consultants, then it’s a lot easier for them to be able to serve a group of facilities as opposed to one [on] one day and then have to travel a long distance. Somebody could probably go see two or three facilities in one day, the way we’re positioned.

Of your facilities, how many of them are new builds?

Only the Las Vegas one right now, and then Temecula will be the second one.

Can you talk about why you chose to build a new SNF, instead of purchasing or maybe repurposing one?

Well, in the case of Temecula, there were really no facilities to buy and repurpose. It’s relatively young community; it’s been around for a while, but relatively speaking, it’s relatively young compared to cities like Los Angeles or San Diego or San Francisco. So there is no other SNF in that community, and yet it’s an extremely fast-growing area and community. I think it’s only been five years that they’ve had their own hospital.

And we have a lot of folks working for us that live out in that community, and we had developed relationships. So we saw it as a real unique opportunity in a growing market with very little competition, and then a new hospital. So that’s what was the most compelling to us.

Will the Temecula facility be focused on short-term rehab, or a more custodial, long-term care patient population?

It’ll definitely be short-term rehab. There’s no way to afford to build a new facility — you can’t even acquire a facility that focuses on long-term patients.

Can you elaborate on that a little bit — is it because of reimbursement?

It’s completely reimbursement. The reimbursement is so low that you couldn’t even cover your costs if you concentrated only on long-term care, long-term custodial care.

Are there other referral sources in the area, apart from the new hospital, or is that going to be the primary referral source?

It will be the primary referral source, but there are a couple of other hospitals. There’s a hospital in Murrieta that’s about 20 miles away that’ll probably be a referral source. There’s a hospital that’s also I think within Murrieta, that’s a Loma Linda [University] hospital that will be a referral source, and then I actually think that we’ll be able to get patients from Hemet as well. So if you drew a circle that was 25 miles, we would get patients all within that 25-mile circle.

Since the facility will be short-term focused, will you have any particular specialties or specific populations that you’re focused?

You know, I don’t think the population will be that different from what we’re already taking in most of our buildings. It will be a focus on rehab, there’s probably be a cardio focus, and just a lot of the things that we see already in terms of short-term rehab patients that come to us for a variety of reasons.

Can you talk a bit about the other ground-up build, the Horizon Ridge facility in Nevada, and how that helped with Temecula?

We had actually had started on the Temecula project long before the Nevada project came along. It’s just a lot more difficult to get things done in California than in Nevada, so in the time that we have been working on the one for California, we actually negotiated, acquired, and got built and opened the one in Nevada.

We certainly learned a lot from that experience, and lessons that’ll be very helpful, but we had actually started the process in Temecula at least a couple of years before Nevada.

So what made you go for another state when you had such a concentration in California?

You know, that is a very good question, and one that I’ve asked myself several times. The things that were compelling about Nevada was that it is a very fast-growing market. The population of Nevada is growing at a far greater — particularly for Las Vegas and Henderson — is growing far greater and faster than in California. We had an opportunity that was right next to one of the premier hospitals in Southern Nevada, and we could it get it done quickly. We thought that the dynamics of the market weren’t that different in what we’d find in San Diego, for example.

And we just thought that we had a good chance to be successful and it might just work extremely well for us, and so after a lot of years, we decided to take a chance in another state.

When did you undertake this project?

About two years ago, maybe two and a half years ago. The other thing that was compelling was that for the population of Southern Nevada, they had about half as many skilled nursing beds as San Diego. So it just seemed like the demand was going to continue to grow.

Right now we’re pretty happy with that decision. There were things that took us a lot longer because we were new kids on the block, and there were dynamics that were different than what we completely anticipated. But we’re actually doing quite well there, so it was a good learning experience.

Can you talk a bit about what you learned along the way?

The labor market — there wasn’t as much high-quality nursing staff available in Las Vegas and Henderson, so that was a bit of a surprise to us, and just relationships that we had to build. In California, I think people would pretty readily and widely say that Generations Healthcare is probably the premier regional player in California. We thought that would spill over more easily into Nevada and that people would see that more quickly than they did. So we probably just filled up slower than I thought.

But once we got going, then I think people are pretty happy with us, and pretty happy with our product that we offer.

Would you consider expanding in Nevada?

I will probably continue to operate for a while before I contemplate that. Given a full-year cycle and how things move throughout the year, you have different highs and lows in terms of census throughout the year, so what will the summer months be like, for example? We’ve already been through a winter, so we already have a pretty good idea of what that’ll be like.

You mentioned you don’t think long-term custodial care is sustainable anymore. With that in mind, do you think short-term, high-acuity patients are the way of the future? What do you see ahead for SNFs?

The pressure really is for us to be more hospital-like and much higher acuity, very fast turnaround, very high skill level. And these patients are actually quite a bit sicker than they were 10 years ago — 10 years ago, we would not have seen patients nearly as sick.

Then it’s also becoming more dominated by managed care. So in Nevada, for example, at least two thirds of our admissions are from managed care groups. And 70% of our population is short-term, high-turnover, very sick patients.

This interview has been condensed and edited.

Companies featured in this article: