OnPointe CEO Calls for Structural Nursing Home Change: ‘The Model is Fundamentally Broken’

The COVID-19 crisis has broken the cracks in the nation’s long-term care infrastructure wide open, and one CEO in the space says it’s time for industry leaders and lawmakers to reimagine the model for the future.

“We’re seeing it across the United States, across the world: The model is fundamentally broken,” OnPointe Healthh CEO Eric Tanner tells Skilled Nursing News. “If you’re asking residential caregivers to care for the sick, aged, and afflicted in a global pandemic — and do it with the necessity and the medical interventions that you would require at your top-tier hospitals, Cleveland Clinics, Mayo Clinics, Kaiser Permanentes of the world — it just doesn’t work.”

The problem, in Tanner’s view, is that nursing homes have been asked to serve as medically advanced care centers for residents with steadily increasing acuity — while the funding and management models have remained stuck in a bygone era when nursing homes were simply residential real estate designed to house the old and economically disadvantaged.

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Tanner, whose company operates seven nursing facilities in Texas and New Mexico along with home health and population health management services, spoke with SNN on May 14 to describe his vision of the future, with an emphasis on securing government funding and private investment commensurate with the scale of the public health tasks they perform.

“My point is, if you’re going to ask us to do more, you can no longer continue to ask us to do more with less,” Tanner said. “It doesn’t work.”

Tell me about your experience with COVID-19 so far.

At the beginning, across our seven facilities, we had about 720 patients in house.

For me, writing is almost therapeutic; it allows me to distill thoughts that are sort of ping-ponging back and forth between my right and my left brain, and get them on paper and have them out there for the world. In general, it’s more just for me, but I wrote something on it and I put it on Medium.

My main point was: The surgeon general had just come out and said this is sort of like our Pearl Harbor. I think that’s an interesting analogy, because obviously every nursing home in the country has had a bomb go off — or multiple bombs go off. The differentiating factor has been that it didn’t just happen early Sunday morning; it’s been happening for two months, and it continues to happen. Every day is Day Zero, and then you hope that what you do on Day Zero on Day 14 works out.

The midshipmen on what we call Battleship Row — which is where the eight battleships were placed as the bombs were dropping — they were never called out as not following the correct forms and policies and procedures as they pulled bodies from the water. I know that’s a vivid analogy, but it’s sort of how I felt — especially as this significant amount of bad press was coming our way about people dying.

It’s a horrible virus. But Mark Parkinson said at the very beginning: This is the perfect killing machine. And why is it the perfect killing machine for nursing homes? It has nothing to do with nursing homes and the nursing home operators. If you look across the world, nursing homes in Belgium, where they spend three to four times what we spend — or Sweden or others — every single one is dealing with them.

There’s the desire to blame someone. The reality is, the virus hits people who are older with a much greater intensity than people who are younger. Unfortunately, that very true fact is often muddled and sort of missed [as people hear]: Everybody needs to wear a mask, and kids shouldn’t be in school, and nobody go to sporting events or bars or whatever. But the reality is that there’s a targeted population that this virus is particularly lethal for, and that’s 70 or 80-plus.

And, generally, why is that population targeted? Well, because when you’re 70 or 80, you have three or five or eight comorbidities; you have CHF, you have diabetes, you have high blood pressure. I guess maybe one of the frustrations [about] this whole process has been: We’ve known that for about six, eight, 10 weeks, right? We’ve actually known now that the lion’s share of the resources, the lion’s share the attention, the lion’s share of movement should be towards nursing homes — who are congregated living areas, residential-care living areas that house this population.

And even though we’ve gotten the attention as, hey, there’s a lot of deaths here — Minnesota it’s 40%, or Massachusetts, 50% of the deaths; pick your state, pick your number — we felt like we’ve still been sort of rowing with one hand behind our back and missing three out of four paddles.

[It’s] not only unfunded mandates, but differing opinions on the unfunded mandates. You know, the president comes out a couple days ago and says: “We need to test all nursing homes.” Great. I’m all for it. But with the testing of everybody in every nursing home, did that come with additional resources? Did that come with additional personnel to help? Did that come with the actual tests? Did that come with an understanding of what that does to line staff at the facility level? Does that come with hazard pay? Honestly, the answer is: Nope.

I think we have an understanding of what this virus is. I think it’s a brave new world here for the next 12 to 18 months as we get to develop a vaccine. I think there’ll be a restructuring of residential care models in the United States. But I still believe that we’re missing the mark a bit as it relates to getting the people with the greatest need the most support.

If you look at the virility of this particular virus, the people with the greatest need are those in residential and congregate living areas that are 70, 80-plus, and as a nursing home operator that has seven buildings of the 15,000 the United States, those 15,000 are where the targeted intervention should go.

If COVID-19 is going to change the residential care model, what do you think the new model should look like?

The truth of the matter is the model comes out of an army-barracks mentality, coming out of 1945. It begins to exist in the early to late ’50s, early ’60s for sure — that we are going to quote-unquote house our poor, aged populations in homes. That was new; in the early 1960s, that was a new concept.

But it’s stayed for 60, 70-plus years now. It’s been the model specifically for the United States, but it’s been exported to other countries. This is the way that we do it; a lot of other cultures, the parents and the grandparents age with the children and the grandchildren. That’s not the case anymore.

Again, it began as a residential care model for the poor. Medicaid was the first to cover services, and then it moves up into Medicare, obviously, as the needs become a little bit more developed. And the reason I bring that to the forefront is because the dirty little secret for state governments and for the federal government and for operators and everybody else is that out of all the models that existed — and you can fast forward to 2020 … home health and hospital at home and all these other models that existed, the cheapest for this particular population was nursing homes. That has actually been the cheapest for chronically ill patients that that need care on a day-in, day-out basis.

Here’s the story there. My 720 patients, it tends to be a 35%, 40% [quality] mix, where those are the short-term patient populations that are in our facilities on a day-in and day-out basis. In early March, we offered to our people and to the families: If you feel more comfortable taking your loved ones out, take them out. That’s okay. We’ll help with the transition; we understand the need, and we understand what’s coming.

Why am I not sitting at 50% occupied today? It’s because they couldn’t take them home. It’s because it’s an essential health care service. That’s where I think the model needs to go — we have to move away from the real estate, residential care financing and understanding of this patient population.

We have to have an upgraded version of that, because there’s 15,000 nursing homes — maybe after this there’s 12,000. I think 2 [thousand] or 3 thousand] or 4,000 of those have to be — you call it a super SNF or you call it a SNU, which is a skilled nursing unit, which we have.

But it has to be more focused on medical resources, because face shields and goggles and infection control preventionists and infection control physicians, that was not something that we were thinking about four months ago, let alone four years ago. But it’s something that we’re thinking about now. We’re thinking about it every day.

As it relates to where the model’s going, I really think as an industry, we have to continue to prove out not only the necessity of what we do, but that we’re a medical resource industry. We’re not a residential care industry. There’s got to be a differentiating factor there between what it means to have medical resources and what it means to have residential care — because the only real variable in our industry is labor, right? Everything else is pretty staid — maybe food, maybe your rent costs, and some of the other things — but everything else is not as variable. But labor is variable.

Remember, it’s been the cheapest for a long, long time, so these patients that require it — we have to put our money where our mouth is and say, okay, we recognize that while it’s the cheapest, it’s not the most effective when it comes to either managing epidemics or, I think, managing a booming population that will continue to age, that will continue have chronic illnesses, and will continue to have issues that require medical attention.

I think there’s going to be this hybrid that sits in between maybe the more traditional residential care model, and ultimately the hospital. The hospital’s about saving lives, and delivering babies and trauma-IV brain surgeries and stuff. I think we need to have an additional hybrid right in the middle of that.

What does that hybrid look like in practice?

I think it’s private rooms. I think it’s capacity for respiratory care. I think it’s a greater nurse-to-patient ratio, with aides and nurses that maybe are — and I want to be cautious here because I don’t want what I’m about to say to sound like I’m denigrating our people at all. I’m not.

I’m saying I would love it for our people to have the same type of — prestige maybe is not the right word, but it’s the word that comes to mind — prestige as some of their hospital counterparts in working in these centers, where they can get paid $40, $45 an hour. You’re going have to pay for it.

Organizations, federal, state governments are going to have to recognize that this is a need if I’m going to have qualified aides that can deliver trach care, if I have nurses that are able to gown and glove and mask and deliver care as necessary.

From a building perspective, you’re going have to think about airflow, and negative air pressure, and some of the things that a lot of us who are operating buildings from the ’70s, ’80s, and ’90s — that wasn’t the model then, and so we’re trying to retrofit the necessary model in there now.

I think when we built those two units inside of hospitals, that was where we were going.

I love the Mainstreet model. I thought that the buildings were beautiful. I think a lot of people have seen that was emerging in 2013, ’14, ’15, ’16 and thought: “Hey, that’s a beautiful building. My patients can rehab there.” I think for some people, it’s done really well.

The differentiating factor for us in the Mainstreet model is: Can you have piped-in oxygen? Because I think that’s going to continue to be an issue. And can you have the medical resources, can you have the physicians, the cardiologists, the not just the orthopedic surgeons [but] the hospital intensivist — can you have them on site to deliver care as required and as needed?

So we sort of moved away from the 70-bed, beautiful rehab suite model to: Hey, how can we partner with hospitals and quite frankly payers, because it all goes back to the payer. This is a song I’ve been singing for a long time. It all goes back to the person paying the bill.

The federal government who’s subsidizing Medicare Advantage — not subsidizing, the federal government funds the Uniteds, the Humanas, the BlueCross BlueShields, the Cignas of the world — if they feel like it’s worth it to have 2 [thousand], 3 [thousand], 4,000 super SNFs that sit as a bridge between — and real bridge, not just a lipstick-on-pig bridge, but a real bridge between the high-touch, high-need patient populations in a hospital, in a step-down — then you’ll be able to get it done.

This is a tangent, but UnitedHealthcare is getting back into the Affordable Care [Act] markets, the Obamacare markets in different states. Part of me rolls my eyes, just because they’re not doing it out of the goodness of their heart — and I know there are a lot of good people that work at United and I know everybody there has a mission — but they’re doing it because it’s now viable, right? It’s functionally viable, whereas eight, 10 years ago, when they were introduced, it wasn’t.

You have a lot of payers right now that are, I think, a little bit nervous, because the reality is COVID-19 procedures, COVID-19 labs are, in many ways, funded by the government directly. And you have everybody putting off medical care.

We use United just because they’re the biggest, but you’ve got United sitting there and their medical loss ratio is probably really low right now, because nobody’s using their services. They’re getting a lot of money from the federal government to care for people, and then not necessarily having to care for people because people aren’t going to hospital. People aren’t going to physicians’ offices. People aren’t going to SNFs. What are they going to do with that? Well, they have to demonstrate viability, and how do you demonstrate viability? By being a part of the solution.

I think coming out of this, you’ll have maybe even additional willingness from some of these large players to play ball and help us reimagine what’s been a difficult sector.

Did you read the [unemployment] numbers today?

Yep. It just keeps going up.

Probably a lot of those people had employer-based health insurance. I mean, I’m a capitalist too, but the reality is: You can’t be individually capitalist on the up, and then “we’re all in this together” on the down. Bailout’s always a word that people worry about using, but if you’re in the airline industry or the hotel industry or the SNF industry or any other industry that has had their revenue go to zero or nil or 50% of what it was — we’re not all in this together if people can’t get health insurance.

This is maybe an additional bit of context to say, you know, if United and Humana and BlueCross BlueShield and others don’t want to just essentially get taken over by single-payer, they’re going to be really flexible in terms of meeting an evolving need of health care — both in the SNF world, but I think in other places, in hospitals, physician visits, and other things

I’ve been asking leaders in the space for years about how we get people excited investing in new long-term care models — in Massachusetts, for instance, leaders noted that a law from the early 2000s about private rooms hasn’t done much because all of the existing facilities were grandfathered in, and there’s been shockingly little development in 20 years.

I like what Bill Gates always says. He’s like, if you look at things a year or two out, they’re actually pretty similar. But if you think about things 10 years out, that’s where you get a significant amount of change. I think as it relates to this — listen, we are a real estate finance industry. We came out of real estate finance in the 1950s.

To [Mass.] Gov. Baker’s point, to build a new nursing home in Massachusetts probably costs $20 million at least, if you’re going to do it right. The land, that construction — it’s different in Texas. We could probably do it for $15.5 [million] to $17.5 million just based off the fact that we’re able to get non-union construction there, where it’s maybe a little bit different in Boston.

So okay, $20 million, and then let’s throw a 10 cap on that just for easy money. So it’s $2 million in rent. Well, you and I know the numbers: To get $2 million in rent at $500, $600 a day [in reimbursements], you’ve got to admit 100 patients a month that are staying 15 days, right? If you want your 50 patients in that building to actually cover rent service, labor, and keeping the lights on with food on the table, to make a profit, you’ve got to do 100 admissions.

That’s really hard to do. That’s really hard. It’s hard to get 100 skilled nursing facility patients in one geographic location in your center. So as much as we want to do that, and every operator in the country wants to do that — every operator in the country desires to have beautiful facilities, and some make it work. Some absolutely make it work, but it’s difficult.

It’s certainly more difficult than operating a huge center with two, three beds a room in terms of the underlying finances. The financial model has to change, is my point.

We were able to build a similar type model with 50 beds. But we were able to do it with leasehold improvements and with a friendly lease where it didn’t cost $40 million to do two. It costs, I don’t know, $10 [million] or $11 [million] to go in and entirely gut and renovate a fifth and a sixth floor in the hospital. So that made the numbers work for us.

So then there’s the incentive. That’s the whole thing about the for-profit, not-for-profit. I mean, again, talk about rolling my eyes: We all kneel at the altar of Amazon and Apple and Microsoft. Those companies are hugely profitable. They’re hugely profitable. We like when people make great products. It’s good for the economy. It’s good for jobs, it’s good for all. They cover their employees. They’ll probably bump wages.

My point is that being for-profit is not evil because it creates incentives for people to do it — for people to do 24/7, three months of COVID-19 operations … There needs to be something at the end of the rainbow to get people motivated to do that. I don’t think demonizing organizations for doing it well makes sense. But I do think that the underlying financial model has to change.

My point is, if you’re going to ask us to do more, you can no longer continue to ask us to do more with less. It doesn’t work. We’re seeing it across the United States, across the world: The model is fundamentally broken.

If you’re asking residential caregivers to care for the sick, aging, and afflicted in a global pandemic, and do it with the necessity and the medical interventions that you would require at your top-tier hospitals, Cleveland Clinics, Mayo Clinics, Kaiser Permanentes of the world — it just doesn’t work.

One of the things I try to keep hammering home in our coverage is that the answer needs to be comprehensive — we’re seeing the consequences of decades of policy designed largely by accident or inertia, with no real political will or push to make the necessary structural change.

You can extrapolate that much farther. Why don’t they have the political will? Well, one, it’s cheap. Again, I keep going back to that — it’s the best of the worst options. For state and federal governments that are servicing debt, and want to educate their kids and want to build the new stadium and, you know, XYZ, it’s the cheapest. We literally make Grandma spend all her money to get on Medicaid. I mean, how backwards is that, man? But that’s the system.

It’s a system that is ignored for a couple reasons. One, it’s cheap. Two, culturally, this is what we do with our aging, as much as we don’t want to do it, as much as we sort of fight back against doing it — because people live longer, because there’s more chronic illness in the world than there was 300 years ago, or 200 years ago, or 100 years ago. This is a medical necessity for many families. And so it’s like, well: How do you juxtapose that? This is the jerry-rigged way that we’ve done it.

My whole point is we know we can do better. Leadership aside, as it relates to where we are in the world right now with leadership, but leaders emerge in times of crisis and there are good leaders in this industry. There are good leaders in the regulatory industry, in the federal bureaucracy. There are good leaders in the private investment world. We can come out of this better than we came into it. I firmly believe that, and we’re going to work to do that both in our company and hopefully in this industry.

But we can’t come out of this thinking that we can go back to normal, number one, or number two. — that going back to normal, that if we get things back to the status quo, we’re okay.

You’ve been covering this industry for how long?

Three years now, a little more.

You saw the cracks. You saw the cracks, now you saw it break. So rather than Humpty Dumpty trying to put the egg back together again, build a different egg.

This interview has been condensed and edited for clarity.

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