Operators looking to stay in the skilled nursing space long-term see the need for private rooms moving forward post-COVID but for one skilled nursing wing in Chicago that modernization started back in 2017.

Smith Village recently completed a $23 million renovation of its skilled nursing wing with infrastructure improvements that include a new roof, all new electrical, HVAC systems and new windows.

The three-story building also has a therapy gym on the first floor with dining rooms on the second and third floors.

Since its inception the skilled nursing care wing of Smith Village housed 100 licensed beds, mostly designed for double-room occupancy, as well as common areas on each of three floors. But research, focus groups and discussions with residents led the leadership team of Smith Senior Living to see the need to convert double-occupancy rooms to private suites.

“The days of semi-private rooms or more than two in a room are well over,” said Kevin McGee, Smith Senior Living president and CEO. “I wish I had something creative to say, but you’ve got to figure out a path to private rooms, otherwise, you’re not part of the game anymore.”

He spoke with Skilled Nursing News this week to discuss what led the continuing care retirement community — which includes independent and assisted living services, memory care, short-term stay rehab and skilled nursing — to make such a significant investment in its skilled nursing wing, how he was able to secure the funds for the renovation project and what advice he has for other operators looking to modernize.

What led you to decide to move to private rooms for skilled nursing residents back in 2017?

We always had state-of-the-art independent assisted living, but with our health care, which we always had a good reputation as a provider, the amenities weren’t what the consumers were looking for.

Over time, we heard from residents and families that they wanted private rooms, to the point where sometimes we would have an independent living resident who was hospitalized that wouldn’t come to us. They would go to a competitor with a less desirable reputation because the private room was important to them.

We conducted focus groups as to what the desired needs were and out of the focus groups, it was clear there was a desire for more private rooms, and even more community space.

Now private rooms are more than just a preference, it’s a need coming out of the pandemic.

Can you tell me how you were able to fund such a significant investment in the facility?

We have privately placed bonds with First Midwest Bank and Huntington Bank.

Our developer took into consideration construction costs, operational costs and revenue and we were able to come up with a feasible plan to take our beds down from 100 to 78, of which 66 are private with 12 semi-private rooms.

The Illinois Department of Public Health and the Certificate of Need Board were very supportive because a lot of skilled nursing facilities haven’t put capital back into their skilled care.

When we went through the CON process, they were very supportive of us going to private rooms and also upgrading our amenities, which include new windows, new HVAC and all kinds of structural upgrades as well.

How open were banking investors to working with you on this project?

We’ve had long-term relationships with First Midwest and Huntington.

They are very familiar with Smith Village and the bankers know us and how we operate. They know our reputation in the community and they were great partners in the process and continue to be to this day.

What were the priorities in the overall construction project?

The first floor is where we will have 22 private rooms, all designated to rehab. The rooms, which were at one time semi-private rooms, were converted into private rooms. We’ve also put in a larger bathroom and a shower.

When you go to hospitals, they have private rooms and they have showers within the room. We’ve mirrored what the experience is at a hospital to our first floor at Smith Village.

We’ve added a 10,000 square foot addition, of which on the first floor is going to be just a complete therapy gym, for the residents receiving therapy.

Any other important features you want to mention?

First and foremost, availability of private rooms.

We wanted to have upgraded community space. The existing dining rooms on the second, third floors were converted into community space located in the center of the first floor.

The second and third floors have brand new dining space rather than being a therapy space.

What were some of the challenges in being a nonprofit organization and securing a $23 million investment to modernize the facility?

We have the financial strength of Smith Senior Living and have always operated with fiduciary responsibility so securing the loans from the bank, I wouldn’t say it was easy, but it wasn’t as challenging as perhaps it would be for some.

We’ve always operated responsibly and the backing of Smith Senior Village I’m sure was part of the reason for the bank financing the debt of the Smith Village project.

What makes Smith Village different from other senior care communities in Chicago?

We’ve been five-star rated since the Center for Medicare & Medicaid Services came out with the ratings.

We tend to have better staffing ratios.

We also encourage people to move into Smith Village while they’re independent so they have a plan in place. A lot of skilled nursing facilities accept people into their facility based on an emergency, which we do on occasion, but a lot of our residents in skilled care are residents from our community so they’ve already put a plan in place. They know us and we know the families.

The transition to skilled care is obviously never easy but when the families and the residents are familiar with the community, I think it makes it a little bit easier than for a free standing skilled care facility.

How do you think the push to private rooms will impact the skilled nursing industry moving forward?

COVID is obviously going to have an impact on skilled nursing and that remains to be seen.

Those who haven’t moved to private rooms really need to push to do it, or they’re really going to be left behind.

I do see skilled care beds continue to be discontinued as there’s other alternatives to assisted living or potential care at home but in my opinion, there will always be a need for skilled care, and probably just be less providers in the future.

Why was moving from 100 to 78 beds important for this project? Aren’t you essentially forfeiting profits?

Our Medicare census was probably on average 15 [patients]. Now that we’ve taken it to 22, that’s really helped the ratios that we needed in terms of reimbursement to service our debt.

Then we’ve transferred from semi-private rooms to private rooms and so obviously the private pay rate goes up. But again, we’re responding to market demand so it all lines up with one another.

How fast is the facility filling up?

We have been getting a lot of referrals from the hospitals that we cannot accommodate because half of our beds have been out of service.

We’ll see the 22 Medicare beds probably fill up by the end of December.

The one outlier is staffing, [especially for] CNAs. Depending on how many CNAs we can hire is going to have an impact on how many residents we can accommodate.

How is the staffing shortage hurting you the most?

At our Smith Village campus for the most part we’re doing very well.

It’s having a greater impact in our community in Orland Park. It’s much more challenging in the suburbs.

Where are you at with the vaccine mandate?

Our residents are about 97% vaccinated.

We mandated our staff to be vaccinated by Nov. 1. As of today our staff is 75% vaccinated and we’ve had people sign up to take the vaccine so it’s all encouraging but you may want to call me Nov. 1 to see how it all shakes out.

How do you think some of the renovations will help with building back hospital referrals for the skilled nursing wing?

We’ll have state-of-the-art amenities. We’re a five-star facility with CMS and the acute care providers are looking for quality providers, not only with new amenities but are providing good care so they are not bouncing back to the ER. I think we have a nice case to make with not only a nice looking building but also the quality of care we are able to provide.

I think that organizations like us are going to continue to watch our five star rating as well as length of stay if we want to be competitive in the hospital referral, Medicare business.

Have you had to use agency staffing at your facilities?

Very minimally.

What were some of the challenges in getting this facility up and running?

We were fortunate that we had locked in the pricing before the pandemic hit so the skyrocketing prices didn’t really have an impact.

The biggest challenge was, how do you renovate a skilled care building that’s currently in operation? What units are you going to take down that are out of service and how are you going to have construction going on with residents in the building?

It was more of working in an existing skilled care facility rather than a brand new building that was our biggest challenge of trying to work around giving care to people.

Is there anything you’d like to see from state or federal reimbursement to help operators out with these kinds of projects?

The state of Illinois has a very low Medicaid reimbursement rate.

In order for these facilities to have a high Medicaid census to get to private rooms, the state of Illinois is going to have to figure out a way to increase reimbursement or do some type of grant or some sort of government loan to help upgrade the amenities to offer for residents who are primarily in Medicaid census buildings.