Welltower CEO: Calling ProMedica Joint Venture a SNF Deal is ‘Pedestrian View’

Welltower (NYSE: WELL) CEO Tom DeRosa touted a big-picture view of his company’s skilled nursing investments this week, describing post-acute services as part of a larger health care ecosystem — one that is vertically integrated and thinks holistically about care.

And because of that, he’s adamant that there’s more to the real estate investment trust’s (REIT) joint venture with the non-profit health system ProMedica than just the acquisition of skilled nursing operator HCR ManorCare last year.

“When we announced ProMedica, people said: ‘Oh, they’re doing a SNF deal.’ That’s a very pedestrian view of what the ProMedica joint venture is,” DeRosa told Skilled Nursing News in a Wednesday interview at the Chicago health technology incubator MATTER. “The ProMedica joint venture was a first-ever joint venture between a not-for-profit health system and a for-profit health care delivery platform like Welltower that enabled this health system to further vertically integrate.”

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The Toledo, Ohio-based Welltower acquired the former landlord of ManorCare, Quality Care Properties; as part of the deal, the REIT entered into a joint venture with ProMedica to own the real estate of the operator. ProMedica, which is also based in Toledo, acquired the operations of ManorCare on its own, with the $4.4 billion transaction closing last July.

DeRosa argued at the time that working with regional health systems to grow their businesses — primarily by driving health care services to other sites and in addition to their acute sites — was how the REIT would expand.

“I want to emphasize that this is the latest example of how the Welltower platform will grow: working with large, investment-grade, super-regional health systems to grow their business by driving health care services to sites other — and in addition to — their acute-care hospitals,” he said at the National Association of Real Estate Investment Trusts’ annual REITweek conference last year.

DeRosa expanded on the idea of Welltower as a health care delivery platform in a fireside chat Wednesday night at MATTER, where he argued that the health care space is “ripe for innovation” as the sector moves from a fee-for-service delivery model to one based on value. This shift is coming as the population ages, with the 80+ demographic projected to become the fastest-growing age cohort in this country over the next 30 years, he said at MATTER.

“We see the Welltower platform as the largest — we’re the largest owner of this built environment,” he said. “I see us as being a vehicle by which new innovation and services can be implemented and delivered in scale. And in order to make change in such a huge sector … you have to be able to deliver innovation in scale, and I see us as being a very effective vehicle to do that.”

When it comes to the joint venture with ProMedica, the health system expanded from having an acute-care presence and a payer to having a presence in acute care, post-acute care, senior living, home health, and hospice, in addition to having a payer, DeRosa told SNN.

The result, at least for ManorCare, has been an influx of capital that it lacked under private equity ownership, and a push to focus on population health. That includes a pilot program from the combined ProMedica-ManorCare in Detroit that provides meals and information on food resources to patients at discharge, ManorCare then-president Steve Cavanaugh told SNN in May, prior to his being named CFO for the entire ProMedica network.

ProMedica and ManorCare also hope to use ProMedica’s in-house insurance plan to explore expanded partnerships and new payment strategies, with ProMedica CEO Randy Oostra noting that the insurance data gives the system a unique window into patients’ needs and claims.

“I think it gives us the ability to target high users, do some research around those users,” he explained. “That’s kind of what we’re doing right now on the social determinants side — we’re targeting high users to try to figure out why.”

That, Welltower believes, is an effective model, and it’s one that can be replicated across the U.S., DeRosa said at MATTER.

He specifically pointed to the Danville, Pa.-based Geisinger Health, a system that includes 13 hospital campuses, two research centers and a health plan with almost 600,000 members, as an example.

“You’ll see that’s a similar type of vertical integration there, and that’s about population health management,” DeRosa told SNN. “That’s where health systems, I believe, have to be focused in the future.”

Building a new ecosystem

But acute care and post-acute care systems have not always had an easy relationship, and the challenges of combining the two into a single ecosystem are steep.

One study published in Annals of Internal Medicine last year found that the world of post-acute care, including SNF and home health settings, is a mystery to many doctors at hospitals. At the LTC 100 conference in Naples, Fla. earlier this year, hospital control of bundled payments was cited as “one of the biggest threats” to the success of post-acute care.

And an executive at Advocate Aurora Health, one of the largest health systems in the U.S., said that almost every type of care, including post-acute recovery, would eventually move to the home setting in a panel discussion at the Health Care Innovation and Investment Conference (HI2) in Chicago earlier this week.

DeRosa admitted freely at MATTER that the issue of acute and post-acute integration is “a hard question.” But he emphasized that the SNF industry, which has had “a bullseye on its back” due to a variety of forces, has something to offer in terms of providing services that will enable patients to go home again.

“At the end of the day, when I go talk to health system CEOs, they say to us: ‘We need a viable skilled nursing option,'” he said in his talk at MATTER. “If we’re going to force people out of these lower cost settings back into homes that are not equipped to meet the needs of that individual … and they bounce back into the acute care bed, that’s not necessarily the problem of the acute care hospital who gets penalized. That’s a government problem, a CMS problem. And I think that needs some fresh thinking.”

Tim Mullaney contributed reporting to this story.

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