Welltower’s DeRosa: ProMedica, ManorCare Deal Financially ‘On Track’

More than a year after Welltower’s (NYSE: WELL) mega-deal to snap up skilled nursing giant HCR ManorCare, the real estate investment trust’s CEO says the partnership is on the right financial footing.

“They’re on track,” Tom DeRosa said of the early financial results in a recent interview with the National Investment Center for Seniors Housing & Care (NIC). “This is a long-term investment for us. We have a master lease with ProMedica for the properties.”

The $4.4 billion deal, which closed in July 2018, saw Welltower acquire the real estate associated with ManorCare’s skilled nursing facilities in an 80-20 joint venture with non-profit hospital system ProMedica. At the time, DeRosa and other leaders touted the transaction as a transformative play to capture an entire continuum of care — and a year or so later, DeRosa is calling the partnership a successful vertical integration of diverse management and health care systems.

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“The integration is multi-leveled and going quite well,” DeRosa told NIC. “One of the things we’ve seen is that ProMedica has done a very good job of assessing the talent pools at both ProMedica and HCR ManorCare and has chosen the best people to run respective functions.”

The upbeat news comes after some choppy seas in the immediate wake of the transaction. ProMedica pointed the finger at its purchase of HCR ManorCare when reporting a heavy annual loss in 2018, and the system was hit with credit downgrades over the debt it assumed to pull off the deal.

More recently, however, ProMedica, credited its new skilled nursing assets for helping offset a difficult first quarter for its insurance business.

Before the partnership, ProMedica offered ambulatory care within their acute care system and also owned Paramount Health Care, an insurance company which offers Medicare Advantage as well as managed Medicaid plans. Despite the recent challenges on the insurance side, DeRosa pointed the potential for the insurance business in his remarks to NIC.

“ProMedica is one of the best examples of a fully vertically integrated health and wellness delivery ecosystem,” he told the group. “Welltower was excited to have a role to demonstrate the viability of our platform to facilitate a landmark healthcare transaction.”

As a result of the transaction, HCR ManorCare is now a non-profit, which may help the firm attain preferred status in certain markets, DeRosa said, and grant more diverse medical services and allow the provider to offer its services to other players in the post-acute skilled nursing sector.

That plays into DeRosa’s repeated descriptions of the deal as a play to capture a full, vertically integrated continuum of care: The merger also allows ProMedica to integrate itself into more care settings, including home health, memory care, and more, DeRosa said.

“That’s exciting,” he told NIC. “We’re looking at new ways to manage the aging population more effectively.”

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