Inside One Hospital System’s Decision to Partner with Skilled Nursing Instead of Going It Alone

Officials at the University of Kansas Health System recently found themselves facing a familiar issue for hospital groups: To bolster their post-acute presence, and reduce costly readmissions, should they partner with an external operator or do it themselves?

Each option comes with its own pros and cons. Some major health systems have gone all in on a sort of middle path with the vertical integration route.

ProMedica’s blockbuster acquisition of skilled nursing giant HCR ManorCare out of bankruptcy heralded — at least by executives involved in the deal — as a transformational shift toward developing a full continuum of care. Sanford Health’s merger with The Evangelical Lutheran Good Samaritan Society followed a similar logic, with the two non-profits pairing up to develop an all-in-one platform that could theoretically follow patients from hospital to post-acute under a single umbrella.

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But implicit in those mergers is the idea that launching an internal skilled nursing platform might be too much of a risk; instead, ProMedica and Sanford opted to absorb well-established skilled nursing providers into their networks.

That was the conclusion that Jason Grundstrom, executive director of continuum of care at the University of Kansas Health System, eventually made when evaluating its skilled nursing strategy.

“We haven’t been in this field ever,” Grundstrom told SNN. “Going into the skilled nursing facilities and thinking that we could do this — and do this well, right off the bat — is probably a little too much for us to bite.”

The system, which maintains a flagship hospital in Kansas City, Kan. and multiple satellite campuses across the state, also partnered with a consulting firm to evaluate its post-acute options. The result: The best outcomes across the country, at least according to the firm, came from hospital partnerships with existing operators.

“Ultimately, our goal is for our patients to transition from this very intense level of care to the next level of care, and to transition well — safely — so they don’t return,” Grundstrom said.

University of Kansas Health also had a fairly obvious target for collaboration in the Kansas City Transitional Care Center, a skilled nursing facility directly across the street. The building featured a 29-bed acute rehabilitation unit under UK’s control, as well as two floors of skilled nursing beds operated by a third party.

Many of the University of Kansas Hospital’s patients already migrated the property for post-acute care due to its proximity. But while it had only been open for about five years, the SNF portion had undergone several leadership changes, and Grundstrom’s team saw an opportunity to bring a measure of stability to its adjacent skilled nursing provider.

“A lot of our patients were choosing to go across the street,” he said. “We felt that we had a duty to those patients, as they went across the street, to receive the best care.”

With the strategy set, Grundstrom and UK Health sent out a request for information to multiple skilled nursing facility operators to learn about their outcomes data and quality metrics.

Eventually, Ignite Medical Resorts of Niles, Ill. emerged as the winning partner — in something of a departure for the growing operator, which has generally specialized in developing new facilities with higher-end touches.

The operator recently opened a new skilled nursing facility in neighboring Kansas City, Mo., with another under development in Blue Springs, Mo. Avenue Development of Indianapolis served as the developer for both projects, which recently received $38 million in backing from real estate investment trust (REIT) LTC Properties, Inc. (NYSE: LTC).

That transaction came on the heels of a $25 million investment from National Health Investors (NYSE: NHI) to develop a new 144-bed Ignite skilled nursing facility in the Milwaukee area.

Still, Ignite already operates a building it didn’t initially develop — a 167-bed SNF in the Chicago suburb of Niles — and the University of Kansas building’s recent vintage helped sweeten its appeal for Ignite CEO and co-founder Tim Fields.

“We have done some development, but this building is only a couple of years old,” Fields told SNN. “It’s a beautiful facility.”

Fields additionally pointed to the SNF’s proximity to the University of Kansas Hospital, providing a natural resident pipeline as well as additional clinical support from the university’s nursing school and medical residency programs.

Ignite also plans to retain the property’s existing medical director, Jessica Kalendar-Rich, a UK physician with a strong team of nurse practitioners, Fields said.

“It fit our brand and our mold,” Fields said.

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