With a ‘Shrink to Grow’ Plan Complete, a Strengthened Consulate Eyes Skilled Nursing Expansion

Stabilizing and turning around a single skilled nursing facility can take up considerable time and resources for any one provider.

Turning around an operating company with more than 200 buildings and a multitude of internal systems takes even longer.

Consulate Health Care needed multiple years. Chris Bryson who joined the Maitland, Fla.-based operator in September 2015 and quickly rose to CEO the next year, was the one to lead the charge in turning the company around.

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The resulting process saw Consulate trim its portfolio and focus on its core markets, embark on new partnerships for data and clinical capabilities, and use technology to prepare for the future of skilled nursing’s new payment landscape.

But it had to overcome significant challenges, both financial and regulatory, along the way. The efforts have paid off — the company was recently a major part of a $735 million deal that saw Omega Healthcare Investors NYSE:OHI) take ownership of 57 Consulate-operated SNFs, and it’s zeroed in on technology as a way to prepare for skilled nursing’s future.

But the company does not want to be content to stabilize — Consulate is looking to grow.

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Bryson joined SNN’s “Rethink” podcast to talk about the company’s journey, why he believes scale is still a plus in the regionally-focused SNF world, and what he sees as the company’s goals for the future.

Excerpts from the conversation are presented below, condensed and edited for clarity.

And if you like what you read, be sure to subscribe to Rethink on the podcast service of your choice, whether that’s SoundCloud, Apple Podcasts, or Google Play.

What was the state of Consulate when you joined it? And what is some of the work that you’ve done to get it where it is today?

When I joined in 2015, the organization was a product of a lot of mergers and acquisitions that were happening around 2011, 2012. Consulate doubled in size overnight due to one of those mergers in 2012. When I arrived in 2015, the company was 208 buildings, operating across 21 different states.

It quickly became apparent that we had to streamline the company. We had a lot of states that the company operated in: two in Idaho and one in Montana and one in New Mexico and two in Kansas. Then we had 140 buildings that were in six states. As a product of those mergers that happened, the company was operating on two different platforms, two different clinical systems, two different financial systems. And there never really was a complete integration of the two companies.

That created a lot of regulatory problems. It created a lot of clinical outcome problems. And it created a lot of policy issues, quite frankly, at a building level — not knowing which sort of policies to follow. So one of the first things I did was hit the road, and I met face to face with 170 of our executive directors, with a pad of paper and a pen and said, ”Tell me what’s going on here. What are our barriers and what’s what’s preventing us from being excellent?”

I had a lot of really good feedback, and I brought that back in and sat down with our management teams, and we came up with a plan for Consulate. It was a multi-year plan of how to completely retool the organization, both from the breadth of the organization; from how many buildings we serve, to how we were structured internally and how we operated; to how we did business at our local markets. That was the beginning of our journey.

What was the landscape at the time, that M&A was such a trend? How did Consulate reach a point where it was doubling in size overnight, and what had to change from that point?

We were an operating company, we were a management company, and there were a lot of real estate transactions going on during that time where real estate portfolios were being sold — and new buyers were coming in that wanted a good operator and one that they trusted and respected. I think that was an opportunity for Consulate, at the time in 2012, to take over a significantly larger portion from a real estate transaction, and that’s that’s why they doubled.

My philosophy, we’ll say, is this: I think the big companies can do really well. But I think that you have to change the way you operate. In other words, I think the best thing for for our industry is a big company with local market autonomy and big-company resources. There’s a lot of advantages to a larger company. Scale is good, from purchasing power to education and development of employees and career paths. I think that’s one of the reasons why you saw a lot of these mergers.

But at the same time, you have to blend local market autonomy with that large-scale platform, and you need to figure out a way to give your local leaders running buildings in their communities the autonomy and the authority to do what they need to do to properly care for their patients, and meet the needs of their families and their referral sources and stakeholders. That became our mantra: How do we transition into a local-market company with big-company resources?

Can you talk about how you pulled that off?

Very carefully. First thing you have to do is you have to have a plan. Before we even did one thing, we spent a long time laying out a three-year strategic plan of how we wanted to make this shift. And there were several major themes. One was that I didn’t want to accomplish that in in 21 states and 208 properties. I wanted to streamline our portfolio to 140 buildings in six geographically clustered states.

So the first thing we did was lay out a plan to divest 68 of those properties, all the ones that were in states where we didn’t have a significant volume. We completed that in in the fourth quarter of 2018. So it took us a couple years to get through that process.

Simultaneously, we needed to restructure the way that we operate at the company. We were two management teams put together; we were pretty heavy on overhead. And we needed to retool ourselves so that we pushed resources out of a corporate management company and closer to the bedside.

So we restructured ourselves to where we created little mini-companies. And those mini-companies could stand on their own, and they operated just like a facility. That was the kind of the theme that we use.

We say: Listen, all of us have sat in a seat one place or another in a nursing home or a health care center. We’ve either been an executive director or director of nursing or MDS coordinator or an admissions person. We know what a high-functioning health care center is like. It’s a strong executive director or administrator and department heads. They’re interdisciplinary. Just because you’ve got promoted up through an organization doesn’t mean you’ve lost what it was like to be successful in a building.

We just recreated that same model in a small company. So we had little mini-companies that ran multiple buildings in the same fashion a nursing home ran, with a director of operations, clinical nurses, MDS, admissions and so on and so forth. And they were able to operate independent of a large management company. They have full autonomy to do what they needed to do, running their little local business. But they could access the bigger company platform for purchasing, IT, infrastructure, accounting and finance.

The last piece of that I think is really most important. When you’re in a SNF, you’re focused on taking care of patients, taking care of families, and meeting the needs of your stakeholders. You don’t want to be bothered with computer systems and accounting, and finance and IT infrastructure. We could take all of that off of their minds and allow them to just focus on patient care and running their businesses. And I think that was a real key strategy for us. It became real key to us going through that divestiture process.

Obviously there’s been progress on your multi-year plan. What are your goals next in terms of quality, retention, staffing — all the things connected to providing better care at the bedside?

We actually have several things. And listen, I would be remiss if I didn’t say: It wasn’t all peaches and cream. It wasn’t rose petals. We had some tough, tough times. We were trying to pull off this restructuring, in — and I will say, I’ve been doing this 25 years — probably the toughest time in the skilled nursing industry that I’ve seen over the last several years.

But we had really great partners in this whole thing, and we had to go through some financial restructuring as well. We needed to make sure we had appropriate resources at the building level, so we had to renegotiate leases with our landlord partners. We had to renegotiate contracts with our vendor partners. We had to renegotiate with our banks.

That’s put us in a place now where I think we can set our sights on the future. And, you know, it was never my intention to shrink down from 208 to 140 and stay at 140. There’s an old adage of a “shrink to grow” mentality, and that’s what it was. I think we’re now at that place where we are looking to continue to expand our company, but we’re going to do it strategically. And we’re going to be smart about it.

We look for strategic opportunities in the core states we’re in: Florida, North Carolina, Virginia, Pennsylvania, Mississippi, Louisiana. Or even contiguous states that we’d like to be in, but with enough mass that we can create another little company to run those buildings that knows that market, that’s invested in that market, and understands that state’s reimbursement and the state’s regulatory process and the local communities they’re serving.

So what are some of the top priorities for Consulate in terms of external factors like the Patient-Driven Payment Model (PDPM)? What are some of the top internal priorities?

People and quality — my biggest concerns externally are around those two things. It’s the labor market and the ability to attract and retain staff to take care of our patients. I have never seen this business so depleted from the standpoint of certified nursing assistants and nurses. In our management team, a lot of time is spent on: How do we attract these folks? And I don’t mean from other skilled nursing providers. I mean how we attract these folks from, in Florida, the the tourist attractions that are employing everybody, to come work in skilled nursing — from the retail settings to come work in skilled nursing?

The next one is quality — not from what I control, but from a regulatory standpoint. The overburdensome regulations that I see being handed down through CMS, that continues to be a stress on us. It stresses our employees from a from a satisfaction standpoint, I think it makes it tough for us to recruit. I hope that our leaders in Washington and our states and CMS and our regulatory bodies can find their way to help us somehow change the lens from — I’ll call it Big Brother — to a collaborative approach, because I think we all need to be invested.

I know that sounds kind of pie-in-the-sky. But, you know, having been around a lot of years, we used to have a collaborative approach with our regulatory agencies. It was all about improving care. And I feel like we’ve lost that over over the years with our regulatory agencies.

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