How a Nursing Home Developer Made Green Houses Work: ‘It’s Not Hard to Pencil Out’

COVID-19 has prompted the media and general public to consider the state of the standard nursing home more closely than ever, and many national outlets have turned to the Green House model as the prime example of the way forward.

These “small-house” style developments eschew the traditional institutional nursing home structure for multiple cottages with limited numbers of residents — living in private rooms — served by a central kitchen and a dedicated team of staffers who usually work only within each cottage.

The model’s proponents have always asserted that Green House-style nursing campuses represent the closest approximation of home life for seniors who require around-the-clock care, but the COVID-19 pandemic has also underscored serious clinical benefits.

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Through May 31, of the 229 facilities that responded to a survey performed by the non-profit Green House Project, 95% reported having zero COVID-19 infections; all told, small-house campuses had 32 cases and just one death, senior director Susan Ryan told SNN.

As with all innovations, developers and providers have faced challenges bringing Green House communities from theory to reality — both in terms of navigating a radically different operational model, and working with regulators who may raise objections to design aspects that seem radically different from the traditional concept of a nursing home.

But John Ponthie, managing member of Southern Administrative Services, made the math work on four separate occasions, after just one tour of a Green House project more than a decade ago turned him into a believer.

SNN called Ponthie, whose company provides administrative support services to a network of 30 skilled nursing facilities, to learn how the Arkansas-based firm turned its small-house dreams into a reality — and find out how operators across the country can learn from its pioneering work.

Tell me about what first attracted you to the Green House model.

Alex, have you ever been to a Green House?

I’ve seen multiple renderings, and interviewed a developer of a new project on Martha’s Vineyard in Massachusetts, but no, I haven’t. I certainly want to — hopefully once it’s safe to visit nursing facilities again.

All I can tell you is that seeing is believing, and I believe. We’ll call it fate.

Many years ago, maybe 2007 or 2008, we were developing new long-term care projects in Arkansas, and someone mentioned to me Green House. I gathered my partners, and we went and actually saw a Green House — and were stunned. We were absolutely stunned.

I’m very proudly affiliated with 30 skilled nursing facilities, four of which are in the Green House model, and one of which is transitioning to the Green House in October, and I can’t begin to tell you the wonderful activities and care and compassion and service that’s rendered throughout that.

That said, I would be misguided if I didn’t tell you that I didn’t think the Green House was better. It presents more opportunity to have a closer, integrated relationship between caregivers, elders, and those elders’ families. If you can create that linkage, that connectivity, those relationships, then you can develop and grow a culture.

Culture — I don’t care what anyone says, as far as I’m concerned — is the backbone of success. If you can develop the right culture of caring and service quality, then you can do it in a tent village; it doesn’t matter at that point. I just think the Green House gives a better opportunity to develop that culture because of its intentionally small frame.

It is a very difficult industry, and you’re dealing with a lot of despair — sick, frail, elderly patients, families who have tremendous anxiety, and all the difficulty that that brings. Then you talk about turnover in the industry, which is perhaps one of the greatest challenges that all operators face. I’ve got to believe what every provider out there wants is to create the next best thing to home.

No one gets up in the morning and says, “Oh, God, I hope today’s the day I get to go to the nursing home!” I used to be offended, I suppose, when someone said it’s a place of last resort. Well, perhaps it is, in some respects. But it’s a necessary safety net for a compassionate society. With that backdrop, how do you create the next-best place if someone is not able to live in their home with their family? What can we do that represents the next-best place?

It just seemed like a very simple equation for us. A building with 100-plus people being attended to and cared for in an institutional-type model — perhaps that is the most scalable. Someone recently shared with me that the number of people who are going to turn 80 and older in the next 10 years is going to increase by 70-something percent, almost double, effectively.

Informal caregiving represents 80% of the care that’s offered in the United States, and that’s friends and family and so forth. The number of informal caregivers goes from seven to one right now to less than three to one in 10 years, and the number of elders needing care almost doubles. So when you do the math on it — I know that everyone wants to stay home — but let’s face it, it’s just not scalable. It’s not possible for everyone to be able to receive care in their home.

So perhaps 100 [beds] isn’t the right number. But what is the happy medium, creating the next-best place to home with an intentionally small, home-like environment? I think it’s the Green House model, and I think it is what consumers will want going forward.

We went and looked, and came back to Arkansas and said: By God, if this is the future of long term care … this was unlike anything we’ve seen before, and it gave us a comfort and it gave us an optimism, a hope that we could develop something where we could do well and do good.

So we came back to Arkansas and we applied our efforts, working with the state and working with regulators, to amend regulations to allow for a small house presence — a Green House, as it were.

One of the things that I would dearly appreciate if you could offer in your consideration is the work that the state of Arkansas has done — in particular Gov. Asa Hutchinson and DHS — in championing opportunities for progressive senior living, like small house. Instead of finding every reason they could to say, “no, it’s not the norm,” they look for reasons to say yes — and, “What can we do different and better?”

I think for a bureaucrat, “no” is the easiest word in the English language. “No” brings about no consequences; only when you say yes to new and innovative things does it offer more complexity. But with that comes, I think, opportunity and, and the execution of your obligation to your constituents. Gov. Hutchinson has been just fantastic, and has a real vision for progressive senior care, and his Department of Health Services has been great to work with.

Here’s what we know: We know that the model is exceptionally attractive to consumers. Occupancy at Green House is essentially 100%. We know that academicians have studied the model and [found] much lower percentages of antipsychotics and unexplained weight loss and wounds and hospitalizations — and oh, by the way, infections.

I think that’s been a very nice byproduct of being in a Green House-type thing. When you look at COVID and you look at small spaces, small caregiving spaces, it’s hard in an institutional setting to prevent the spread. We’ve got 360 people in Arkansas living in Green House cottages, and we’ve had two people come down with COVID in the Green House; both of them recovered with great outcomes. We were able to hermetically seal that environment and stop any spread on that campus.

Does that mean that we’re never going to get any more infected elders in any of those campuses? Not necessarily. But I can tell you, as we sit here today, three and a half months into it, we’ve had an enormously successful delivery of service without having COVID creep into that environment.

So if it’s more attractive to consumers, and it’s arguably clinically better — and I think most people arguably would say there’s nothing better — having this small-house presence, the Green House, is a trump card because it has the best opportunity to be the provider of choice in a marketplace, and you can’t distinguish it from being an employer of choice. The satisfaction level amongst staff and their involvement and their fulfillment in their careers in their jobs is greater — and that’s been my personal experience in Green House. Our Green House campuses lead our network in turnover percentage, obviously lower turnover percentage.

Staff like the model more. I would offer to every provider out there: I can’t imagine a more professionally fulfilling circumstance than building a Green House-type environment in terms of laying your head on the pillow at night and knowing that you did the best thing, and you invested in something that was progressive — and that works.

Now, I will tell you that it’s not easy. And if you hear nothing more from me, any successful long-term care environment is about the culture that we talked about earlier, and that affinity between the staff and the elders and their families and in the Green House. Does that mean it can’t exist in another environment? Absolutely not. It’s just easier to facilitate in a Green House-type environment.

When you talk about concerns that providers have, you hit the nail on the head: Any opportunity to naysay this, people take it. The first thing is: “Well, it’s just not economically feasible, from an operating point of view or a capital point of view.” And then the second thing I’ve heard is: “It’s just too hard to operate decentralized skilled nursing.”

On a campus that we just opened in Little Rock, we’ve got 12 buildings; we’ve got ten 12-person cottages, we’ve got a rehabilitation pavilion that offers a higher scope and breadth of rehabilitation services, and we’ve got an administrative building. In effect, some could argue: “John, you’re operating 10 nursing homes. You’re operating 10 kitchens, and that’s exponentially harder than it is to operate one centralized skilled nursing facility.”

And they’re right! But when you get it right, it’s exponentially easier. Operationally, there is a higher level of staffing in a Green House. But I would argue that’s partially neutralized by having the universal workers, when a caregiving team in a cottage provides care, and they cook and they clean. You don’t have everyone working at cross purposes, and there’s a level of efficiency in that.

But I would also offer to operators who are considering this: You can pencil this out. It’s not hard to pencil out. There are no costs of care in a Green House that are any higher, other than the capital costs on the front end, and perhaps food, and perhaps staffing. But when you look at the flip side of it, if you’ve got a much higher level of occupancy and demand for your product, and you can offer a more attractive payer mix — the right mix of Medicaid, private pay, and Medicare — and your revenues go up proportionate or greater than a traditional facility, then I think it’s easy to justify the additional costs.

Then I would offer from a capital point of view … it’s going to cost you more to build a Green House. But if you amortize that cost over the useful life of that building, it’s nothing. I mean, I say it’s nothing; it’s immaterial when you start to factor that out over the period of time that you’re going to operate, and factor in all the beneficial elements of this, whether it be better payer mix and lower turnover and higher degree of satisfaction.

How do you put a value to all of that? It’s a pretty substantial return when you look at the entire package, and what it might offer to you. We found that if you’re building a really upscale skilled nursing facility, and you were going to do all private beds, the difference between that and building a Green House campus is marginal. If you’re just doing a standard, wagon-wheel design with double-loaded corridors and semi-private rooms, then yeah, you’re talking about perhaps considerably more to build a Green House. But it falls under the mantra that you get what you pay for.

In the end, Arkansas’s Medicaid rate is about average for the United States; it’s higher than you might find in some states, but it’s a lot lower than what you might find in others. I would say it’s in the middle of the pack, so to speak.

One of the things I would offer to you and anyone is that building a Green House — if you create a differentiation in the environment of care, in the scope and level of service and satisfaction — you may not need a piece of land that is on the corner of right and perfect. You might be able to find a less expensive piece of land and economize there, because people will seek that environment of care out. There have been Green Houses that have done a vertical model, and they built up. Ours are one-story buildings on a campus; in Arkansas, land is plentiful. It’s specific, I think, to where you are.

Were all of the Green Houses in your network built from the ground up, or were some conversions of existing physical plants?

Ours were all from the ground up. Our philosophy was: What do you get when you renovate an old building? You get a renovated old building.

It’s just really hard to do that, and when you look at the cost of building, it really wasn’t a whole lot [different]. I mean, if you’re going to take something down to its studs and start over, you might as well have a clean sheet of paper and do it right.

In Arkansas, we have the advantage to do that; if you’re in California, you might not have that advantage. You might be looking at: How do I take this older building that’s already licensed and certified, and modify it to adhere to a Green House-type model, where I can do it within the purview of the guidelines — construction, zoning, and so forth that you might face.

But I think at the end of the day, everyone is making a bet on the future. If you’re in this business, you’re making a bet on the future — what do consumers want, and what can society afford? Trying to find that intersection is not easy. Our bet is consumers want this, and we see all over the country, there are people voting with their feet.

Green Houses have near-100% occupancy levels, and that’s not by accident. People are evaluating and making that specific determination, that that’s the environment of care that they want to live in, and they want their families to live in. So the next question is, can you operationalize it?

With the Green House, they offer the toolkit from start to finish, and take you along every step of the way — here’s the best practices, here are the landmines that you need to avoid. Here’s how you can operationalize this decentralized model.

You can take a pro forma, and you can pencil this out. You’ve got to make some assumptions about your revenue and your payer mix and your reimbursement rates. But you’re doing that no matter what kind of project you’re building. And you know all the other costs — the cost of supplies don’t change. The costs related to most room and board don’t change; the food costs might change a little bit, but that’s an immaterial amount in the grand scheme of things.

The biggest thing is penciling out the staffing. In this model, you’re not going to have the capacity to have everyone under one roof and economize on staffing. Again, the universal worker helps to kind of neutralize some of that, but your staffing costs are going to be a little higher. But with that comes a greater degree, perhaps, of care. Certainly the academicians have found that, but certainly the levels of satisfaction are significant, and they are a differentiation.

I do hope the COVID-19 crisis creates the opportunity to have more discussions about how we can update regulations around nursing home construction and design to meet modern needs — it’s been interesting to talk to people involved in Green House projects and hear about resistance from local health departments, largely because they just don’t look like our conception of a “nursing home.”

Had it not been for the state of Arkansas — their director of the office of long-term care had just come back, six months before my conversation with her, from seeing a Green House and was struck.

Every regulator who throws up a stop sign hasn’t had an opportunity to experience it in person, and perhaps should, because it has an opportunity to be the standard-bearer in terms of environment of care going forward — in terms of the enhancements to clinical care, and the reduction in the potential for infections and so forth.

The quality of life in a Green House by the nature of it, and the richness of the relationships — that alone validates it as far as I’m concerned. But you throw everything else on top of it — the entire package is just undeniable.

This interview has been condensed and edited for clarity.

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