Altenheim CEO: More Skilled Nursing Closures Coming Unless Providers ‘Change Their Mindset’

The future of non-profits in the skilled nursing space — and the future of non-profit continuing care retirement communities — has been increasingly uncertain, if not outright bleak.

Not-for-profit skilled nursing facilities were among the most notable casualties of low Medicaid rates in the state of Texas, while in New York, officials went so far as to release guidance governing the sale of non-profit nursing homes to for-profit entities amid a growing wave of such deals. Multiple financial and real estate reports have pointed to the presence of skilled nursing as a ball-and-chain for CCRCs and their potential investors, with some CCRCs moving to cut SNF beds out entirely.

One non-profit CCRC in Wisconsin was even forced to exit the long-term nursing home business in favor of short-term rehab, primarily because of Medicaid shortfalls.

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That makes Altenheim Senior Living, located in Strongsville, Ohio, something of an outlier. The non-profit CCRC, which was founded in 1887, began life as a nursing home and maintains 170 skilled nursing beds.

And though the possibility of reducing that bed count remains open, CEO Paul Psota emphasized that providing long-term care to seniors without resources will be a part of the organization’s mission.

Altenheim hasn’t been immune to the headwinds roiling the SNF and non-profit worlds, and the operator turned to diversification to strengthen its financial base and meet consumer demand. Psota joined Skilled Nursing News’ “Rethink” podcast to talk about the approach Altenheim has taken when branching out of skilled nursing, the changing senior living landscape, and how SNFs can stand out amid an assisted living building spree.

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You can download the full episode at SoundCloud, Apple Podcasts, and
Google Play; excerpts from the interview, condensed and edited for clarity, are below.

If you like what you read and hear, be sure to subscribe to “Rethink” on the podcast service of your choice so you never miss an episode.

Can you talk about the history of Altenheim and the services it’s offered?

It was a nursing home, and it was purely a nursing home. Back in the day, what happened is that folks would give the remainder of whatever assets they had to the nursing home in return for care for life. I don’t think there was a lot of government involvement in the services back then.

But it started off as a nursing home and it stayed that way on Cleveland’s Near West Side for 88 years. Then finally … the volunteers who were members of the board of directors and the [German American Women’s Society] said, “We’ve got to upgrade our facilities.” So they found a nursing home in Strongsville, a suburb of Cleveland, which was newer. We’ve been in Strongsville, Ohio, ever since 1980.

Today, we have 170 skilled nursing beds, which is almost like two nursing homes if you will, because the average nursing home size, at least around here, is probably about 98 beds, 100 beds. So the history of Altenheim has always been as a home for the aged. For about 100 years or so, that was a nursing home and that was the only business we had up until more recently.

When Altenheim began expanding beyond the traditional nursing home setting, what did you add first and why?

When I joined the board back in the 1990s, we were seeing that the industry was starting to change, in that consumer expectations were changing. Back in the day, there were four or more residents living in one room in a nursing home, and it was very institutional, like a hospital setting. That wasn’t cutting the mustard anymore, and people didn’t really want to stay in that type of environment if they didn’t have to. And I don’t blame them — who would?

The advent of assisted living, at least in this area, came to the forefront and even though it was rather slow at the outset, some providers were looking to expand in that arena. Altenheim was one of them. By 2001, we had completed our first assisted living project, which is called Shurmer Place at Altenheim. The way we did that was we bought some neighboring parcels of land. We live in a residential area to a large extent, and so we would — when available — buy parcels of houses that neighbored our property. Eventually we built up our campus to about 16.5 acres, and built Shurmer Place at that time, which was a 60-unit assisted living facility.

That opened in 2001, and thankfully it filled up within the first several months, and that was kind of cool. That was our first venture beyond skilled nursing.

How do you think nursing homes are dealing with changing consumer expectations?

Obviously, if one wants to be in business, one has to provide a service that consumers want. And I think that’s one of the issues that nursing home organizations have been slow to deal with. A lot of nursing homes think that, “Well, we’re just going to keep providing the service that we’ve provided for the last 50 years, and hope for the best.”

But it’s not going to work. Within the next several years, I have a feeling there are going to be a significant amount of skilled nursing providers that are going to go out of business unless they change their mindset.

One of your moves was to purchase a local outpatient therapy provider — what was the reasoning behind that?

The biggest reason is the reduction in private-pay residents at the nursing facility. A pretty startling statistic is that in the past, private-pay patients or residents at the nursing home were here for the long haul. They were long-term residents that were here for two or three years or longer.

About a year ago, we did an internal analysis as to what the average length of stay was for a nursing home resident at the Altenheim, and it was about 47 days for private-pay residents — the average length of stay. What that means is that folks are coming to the nursing home basically when they’ve run out of money and assets.

I’m going to compare 2018 to 2017, because I just saw the audited financial statements: Our private pay revenues at the nursing home went down $1 million. That’s a lot for us. And so we had to make it up somehow.

Another reason for spending a lot of money on building rehab centers and private-pay assisted living facilities is that that’s what the competition is doing. In our immediate market area, which is the five-mile radius from Altenheim and Strongsville, just over the past two years about 400 brand-spanking-new beds have opened — and most of those are assisted living beds. One of those is a SNF down the street. Because of that, that has reduced our private-pay census at the nursing home.

So there’s really no choice in making significant capital investments in the post-acute business, if one wants to remain in business. If you don’t, you’re just going to continue to see a reduction in patients, a reduction in revenues because the competition is springing up everywhere, and the dollars are going away.

We invested over $30 million into our campus — into assisted living, memory assisted living, and short-term rehab business — and we also purchased that outpatient therapy practice. And we also opened a home health care agency, and a private duty agency. All that’s been done in the past five years or so, and it’s because it’s such a rapidly changing business.

Given all those changes, how can skilled nursing stand out?

Some of these developers — I don’t know how much experience they have in our industry, because it’s one thing to build a 55-plus community, but these folks, the Baby Boomers, they’re going to need health care. And that’s a whole different animal.

That’s one thing that I think skilled nursing providers are going to be able to utilize to their advantage. They know how to provide health care. They have nurses, they have attending physicians, they have nurse practitioners, they have state-tested nursing assistants. They’ve dealt with pharmacists, et cetera. They’ve dealt with hospitals. They know how to provide health care. These developers that haven’t been in the health care industry, I think, are going to have a rude awakening to the level of service that’s required to keep these folks satisfied, and the attendant costs of service.

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