In a bid to keep its struggling skilled nursing facility open, Sonoma Valley Hospital (SVH) is looking to outsource operations to The Ensign Group (Nasdaq: ENSG).
A proposal for Ensign to take over operations on July 1 is in the works, with the final approval slated to come at a special board meeting scheduled for May 30, CEO Kelly Mather told Skilled Nursing News via e-mail.
The North Bay Business Journal and the Sonoma Index-Tribune first covered the news that Ensign was in the running to take over operations for the 27-bed facility, which according to a July 2018 report was projected to lose about $879,000 in fiscal 2019.
Under the proposed agreement, the Sonoma, Calif. hospital would receive funds from Ensign as part of a revenue-sharing agreement; SVH would also provide certain medical and operational services to the publicly traded skilled nursing operator, Sonoma Index-Tribune reported.
The term of the agreement is for 10 years, Mather told SNN, and SVH can make up to $180,000 per year — though this isn’t expected to happen until a planned sub-acute unit is in place and filled.
Indeed, Ensign’s capacity to add a sub-acute unit was a plus for SVH, as Sonoma Valley Healthcare District board chair Joshua Rymer told the Sonoma Index-Tribune.
“Specifically, Ensign brings capabilities in post-acute care that we do not possess, including broad expertise operating facilities under ever-changing regulations and significant efficiencies of scale,” he told the Index-Tribune. “Additionally, Ensign’s ability to add a subacute unit, which will bring in new patients — Ensign reports that currently there are only two sub-acute units in the North Bay and both operate near capacity.”
Rymer also pointed to Ensign’s contracts with other health care organizations in the area, which would allow the skilled nursing operator to bring in patients from those outside networks.
Under the new agreement, skilled patient volume would stay the same at approximately 10 patients per day, while long-term patients and sub-acute patients likely would make up the additional 17 beds, Mather said.
The sub-acute unit will likely be in place within a year, which would lead to a significant increase in patient volume, Mather told SNN.
Last year, third-party advisory firms floated various solutions to the issues facing the SNF, including bringing in outside therapy contractors and advertising the hospital’s skilled nursing services to other local acute care facilities that lack in-house SNFs.
Even though closing the facility would have removed some of the costs to SVH, as those firms noted, the focus was on keeping the facility open, Mather told SNN.
“It’s better to keep the hospital license in place for the new sub-acute unit,” she said. “Working with Ensign as a partner meets our goal to keep the SNF unit open at the hospital. We wanted to avoid closure.”